Digital Commerce

7 predictions on the future of Digital Commerce

E-commerce, Digital Commerce, and NeXT Commerce – online shopping has many names. E-commerce has come a long way. What will happen in the next few years? Here are my 7 predictions.

A short history of e-commerce

Electrical Commerce (or e-commerce in short) has been around for a while. Some say that the first steps were taken in the 1960s with EDI, but I think that most of us relate digital commerce to open internet-based shopping that began with graphical web browsers. One of the first web stores was Books Stack Unlimited predating even Amazon. 

Up until the 2010s, a business could gain an even more significant competitive advantage by opening up a conventional e-com store. By conventional I mean enabling their customers to buy their physical products digitally. Today – thanks to Shopify and others – opening up a stereotypical e-commerce store is so quick and cheap that anyone can do that.

You could make a statement that the stereotypical ecom store is the new website. This has led to two things:

  1. The number of web stores has exploded making it a commodity. 
  2. Because you can buy just about anything online, the competition is fierce.

Hardly anyone thinks that by just opening up a website, you will stay competitive. The same evolution is ongoing with stereotypical e-commerce stores.

Prediction 1: Digital Commerce will reach every business

I must admit that this sounds like a pretty lame prediction, but still important to start with. Do you know the origin story of Shopify? Around 2008 founder of Shopify, Tobias Lutke, pitched his company to a Silicon Valley VC, but would not get funded. The reason was that they estimated the total addressable market to be around 40.000 thousand e-stores. Fifteen years later Shopify is estimated to have over 4.000.000 stores. And that’s just one e-commerce platform.

Just like with websites, online stores are starting to feel so familiar to us that we start to assume that every company must have a way of digitally serving their customers. In fact, McKinsey estimates that markets will almost double by 2026. And it will not stop there. So, if you are still pondering whether you should or shouldn’t invest in digital commerce – now is the time to start experimenting.

Prediction 2: businesses need to continuously adapt faster

The image of an e-commerce store (or any other digital system archetype) is a system that you set up and then focus on digital marketingSEO optimization, product catalog, logistics, and things like that. Technically the evolution is seen more like new plugins, not as a reinvention of how you sell your products online. But this is about to change. The newest results show the effect of acceleration: what for most business practices was considered best-in-class speed in 2018 is now slower than average according to a McKinsey study.

Making your business adaptable requires a lot. A good starting point is to become a more customer-centric organization. You need to embrace a company culture that allows experiences and enables continuous learning and evolvement. You might need to revamp your business models and finally utilize technological paradigms that fasten your learning loops such as low-code and no-code. To do so, you should look into data relevant to your business. That means adopting the capability of measuring meaningful business processes. 

To summarize, an ability to continuously adapt your business faster means that the digital maturity of your business should be raised to at least level four. Digital maturity level four means that your company culture, technological solutions, and business concept are faster micro-pivoting against changing market needs. 

Prediction 3: customer behaviors and channels will get even more fragmented

The first e-commerce experience was pretty simple: a browser-based view for choosing & buying products. Then came mobile and responsive design, but things were still pretty straightforward. Now we are entering an era where a business should be able to serve its customers through any channel that the customer chooses. It can for example mean that in the middle of a support chat, a customer might decide to purchase something. Or if a customer wants to get their house painted (analog service), they want to trigger the offer/purchase process on a Sunday night through a highly customizable and personalized digital shopping experience. 

The first thought might be that stereotypical e-commerce suffices, but it rarely integrates several internal functions (such as customer support and sales consultancy along with their technical solutions) supporting the individual customer journey in a way that feels coherent and whole from the end user perspective. Stereotypical e-commerce stores are more like monolithic one-size-fits-all product catalogs suitable for only some of the customer needs. Customer adaptation is handled mostly by adding plugins that usually do not fit the need perfectly and might even harm the overall performance and usability. 

I believe that omnichannel thinking was only the starting point. Omnichannel typically actually refers more to a technical solution, but the actual challenge is more multi-sided involving suitable company culture and integration of human thinking with AI-powered tools. To crack the fragmentation challenge, businesses need to use multiple information systems integrated at the API level with new design paradigms such as Composable Commerce

Prediction 4: the use of PaaS will rise in Digital Commerce

Currently, businesses are using Software-as-a-Service solutions (SaaS) to solve their digital technology needs. It’s a solid model, but even smaller businesses can now easily have 50-100 separate SaaS solutions. This is not sustainable in the long run without a tightly integrated entirety providing a seamless customer and personnel experience.

Bigger businesses are relying on monolithic e-commerce engines that on paper do it all. These monoliths are integrated into old-school ERPs and product management. This solution used to work when end-customer needs could be fulfilled by adding plugins. Today with every new customer request comes a challenge: does this monolith bend? Technological architecture just does not meet the demands of today’s business adaptability.

One trending solution for this is to employ PaaS (Platform-as-a-Solution). PaaS gives much more flexibility for businesses since front-ends can be implemented freely. Headless commerce is one way of using PaaS. The defining factor in PaaS is that it’s always API-first. This is because no one would (could) use them without really good APIs.

PaaS provides clear and attractive benefits for businesses:

  • Save money. Just hook to the API and use the ready-made functionalities. 
  • Save time. Implement & tailor only business-specific things. 
  • Stop re-inventing the wheel. Increase your business adaptability.
  • Focus on business-specifics. Invest & develop functionalities that build the competitive advantage of your business.
  • Freedom for user interfaces. Implement beautiful and customized interfaces that customers yearn for. 
  • Learn faster. Since PaaS is API-centric, a business can measure just about any data point and learn faster. 
  • Integrate everything. PaaS is always API-first and usually supports the latest and greatest possibilities for secure and reliable integrations. 

Note that using PaaS does not exclude the use of SaaS or current monolithic systems (like ERP). On the contrary – the best businesses integrate several SaaS, monoliths, and PaaS solutions to create a tailored-fit solution that is coherent and comprehensive. This method is called Composable Commerce and it is the way of the digital future. 

Prediction 5: Low-code and No-code use will increase significantly

Tailored software development is expensive, slow, and requires senior talent to be successful in the long run (for the full life cycle management). Like PaaS, LCNC solutions enable tailoring to business needs with a low (or no) amount of coding. PaaS solutions coupled with LCNC tools will arm personnel, partners, customers, or other close parties for your digital development. 

Sounds too good to be true? 

Yes, in a sense that nothing beats senior digital business talent. No, in a sense that with LCNC you get to utilize also the skills of those people that are not professional software developers. By the way, do not confuse no-code capabilities with regular SaaS user interfaces. SaaS interfaces are typically for property configuration only, but LCNC provides actual custom tailoring capabilities to your Digital Commerce systems.

Prediction 6: Focus on the power of loyalty

Earlier in digital commerce, it used to be effective to drive a lot of web traffic and turn it into singular purchases. Now the competition in both paid and organic visibility is steadily on the rise and customers have typically many stores to choose from. This translates to a search for loyal customers – even fans. Luckily there are several tactics to test out in your business such as:

  • Recurring plans. Who says that razors cannot be bought as a monthly service?
  • VIP programs. Reward your recurring customers with more than just coupon codes. It’s a mystery why so many digital stores miss this opportunity (unlike airlines).
  • Group buying. Maybe several people could participate in an offer together? 
  • Value-driven offers. What values are important for your customers? Can you make them more deeply embedded in your digital commerce offering?
  • Build a brand. Oldie, but goldie. It’s easier to stick to the one that feels unique amongst dozen of copycats.

Prediction 7: from Digital Commerce to Digital Hearts

I saved the most impactful for the last. A capability to sell online won’t just be seen as stereotypical e-commerce but as a digital transformation of business processes utilizing several basic internet services such as shopping carts and payment gateways.

Businesses must reinvent (or reboot) some or all of their business models to bolt digitality to every service they are offering for their customers. This evolution of e-commerce is referred to as Digital Commerce (Gartner) or NeXT Commerce(McKinsey). We are calling it Digital Heart.

So if Digital Commerce refers to any commercial digital transaction online, a Digital Heart means refers to the digitalization of every core process of a company. The latter cannot be solved by just setting up a Digital Commerce store, you’ll need a bunch of systems tightly integrated.

Building a Digital Heart equals investing in competitive advantage building:

  • What are your core business processes? How can you digitalize them in a way that 100% matches your customer needs?
  • Does this core business digitalization offer something unique to the market?
  • What possibly valuable data do you already have? How could you use it more efficiently for accelerating your business growth?
  • What is your place in the ecosystem(s)? Can/should you change it? 
  • Once your business design is done, what technologies should you purchase as products, what should you tailor and how should you integrate all of them? 

Once you have answered the above question, you might end up building something like Wolt, AirBnB, or Zoom. They are much more than stereotypical Digital Commerce. The ultimate way of realizing this is the Composable Digital Heart. It is the nerve center of your business designed with business adaptability and ecosystem readiness in mind. A Composable Digital Heart gathers multiple systems together, integrates them at the API level, and provides a 24/7 personalized digital interface to your customers.

Teemu Malinen

Founder & Chief Executive Officer

Teemu writes about digital business trends, modern company culture and startup investments.