How IoT and Social Media are Influencing Commerce
It is well known that IoT is on the verge of an explosion, with brands beginning to understand the untapped resource available if they can execute on their IoT strategy effectively with the right technology in place. Unlike other technology trends though, the effectiveness of IoT isn’t waiting for consumers to purchase a certain IoT device en masse like mobile phones, laptops or voice assistants, many of the devices we will see become internet enabled are quite commonplace. In fact, the number of internet connected devices are set to double in the next two years to a staggering 24 billion, giving brands the opportunity to connect with their consumers on more than a few devices they own.
The massive impact IoT will have on commerce is just one of the reasons why, back in 2012, Elastic Path became one of the first to market with a headless approach to commerce. Fast forward to 2018, three years in a row of being recognized as a Visionary in the Gartner Magic Quadrant for Digital Commerce and the closing of a $43 million Series B growth investment and you’ll understand why being API-first before its value was widely known was a risk that Elastic Path’s CEO Harry Chemko was willing to take.
Recently I was able to sit down with Harry for an in-person interview in the stunning Elastic Path office perched high above the gorgeous landscape of Vancouver, British Columbia, to hear more about the inspiration behind the leap they took in 2012, how social is changing the commerce game and how he defines the Commerce of Things.
Why Go API-First?
For those who are not risk-averse and can effect change within their market, it is always interesting to ask what the inspiration was behind their push to be leading-edge. For Harry it went back to his interest in the ideas put forth by Ray Kurzweil, Director of Engineering at Google, the well-known futurist and inventor behind many of the advances that have shaped our abilities to interact with technology and the internet at large. While Kurzweil may be best known for his Singularity concept, for Harry it was about taking the notion of thinking linearly versus exponentially and relating that to consumer technology:
“The human mind perceives change linearly, we think the next step, the next step, the next step but consumer technology is changing exponentially and we can’t predict the exponentially of it. The brain can’t really process or at least forward think about that, so my view has always been that technology is going to move exponentially faster so if you’re a brand that's really looking to be relevant and take advantage of all those things when they come up, you need to have a different approach. You need to have an approach that makes you really agile and fast so you’re not having to change up that core technology a lot. Back in 2012 when we first released the platform it was really that thinking that drove us to go that way. In 5 to 10 years from now we’re not going to be able to predict the changes so we asked ‘what's the best way we can build the platform so it doesn't matter what happens, brands be able to adapt to it.’”
Given the fact that the concept of Singularity is synonymous with artificial intelligence and machine learning, two of the most talked about technologies of the past few years, I was interested in Harry’s thoughts since I have discussed with a few others how the newness of those technologies is a bit unfounded since at the core, the capabilities have been in practice for a while:
"Marketing uses AI and machine learning and a lot of it is just talking about data processing and being faster at that. Most of the stuff out there is kind of in the camps of natural language processing, which is a lot of what AI is around right now and image recognition, which is probably one of the bigger use cases right now. The other is sentiment analysis, that's another thing AI and machine learning can do really well so between those three things you can do a lot in the commerce world with the technology that exists today.
With natural language processing, people were doing that in the 90's with software packages you would have on your PC, but the thing with NLP is that it needs to get almost perfect, that last 5% that is going to make it good enough to be useful or not. It has a ways to go still but once it gets there, whether its Amazon Alexa or Google Home, one is going to get it really good and they're going to have such a gigantic leap over the other.”
Social Media’s Influence on Commerce
Social media platforms have been trying to find a way to enhance the commerce experience for brands and consumers by essentially just making buying easier. After some failed attempts by Pinterest to make it happen, unsurprisingly Instagram has pulled ahead in achieving this feat, so much so that we're even seeing the launch of entirely new products created for the sole purpose of shopping from Instagram like RewardStyle’s product LiketoKnow.it.
From the technology side, I asked Harry to explain how Elastic Path ensures their customers are well equipped to take advantage of these and other similar social media touchpoints for commerce:
“I think Instagram is incredible for commerce, my wife and I buy tons of stuff on Instagram, there is a lot in fashion that is really cool, and people are spending so much time on Instagram now. I don’t have the exact stats but I know it’s been completely skyrocketing, and in stores as well it is really taking off in such a big way. It’s actually pretty easy to do the Instagram integrations for the most part, they’ve got pretty good APIs that you can work with and Instagram is something that I know most of our customers are looking at so we tend to be more of the enablement platform that enables a lot of these touchpoints. We’re also starting to develop a lot of these touchpoints ourselves now so you can get up and running really quickly with them.
Some of the conversion rates for what you do on Instagram can be a lot higher, I remember when search conversion rates were really good if you could get 1% of people to your website and a percentage of them converting and now with Instagram, if you’ve got the right influencers, the right messaging and you target it well you can get way higher conversion rates.”
Even though Instagram is quickly gaining an unassailable position in social commerce, it is still a possibility for Pinterest to catch up given their 2017 success. The virtual pinboard of ideas has seen an effective monetization of their user base of over 250 million with their advertising sales jumping 58% to $473 million. We may expect to see them take another run at commerce given their sturdy financial position in 2018 however they would have to address some of their pitfalls Harry mentions below:
“Pinterest didn’t always land you on the right product or a lot of times the products were sold out and just the overall emotional experience wasn’t a positive one. With Instagram, because it is focusing on one thing at a time we get this instant gratification almost that you’ve either bought it or they’ve sent you the email link and you click on that link that goes right to the product and you can buy it.”
The Commerce of Things
In the many discussions around the use of IoT within commerce, it was only a matter of time before the statement was consolidating down to the essence of the strategy, the ways in which commerce is enabled on devices by way of internet connectivity. To take it one step further, it can be seen as the ways in which brands can insert themselves into the narrative of their consumers’ lives by existing within the internet connected devices they encounter throughout their day. Given Harry’s long history in the commerce space and seeing consumer technology evolve over time, I was excited to hear him describe the CoT:
“The way we’ve always thought about it is the trend line again, today there is 10 billion internet connected devices out there and most of them are mobile phones, PCs or laptops or something like that that you’re connecting to and in the next few years, that's going to be up to 24 billion and when you think about the population of the world that's multiples per person. Most of those items are not going to be a phone or a computer either so what's really driving this from our perspective is just that its getting cheaper to do hardware, it’s getting cheaper to make things like cameras, sensors, anything that just gives you contact.
As all of these things get rolled out, there are applications all over the place, there are industrial applications for it, machinery that knows when its parts are ready to be replaced, knows when it needs servicing, there are all sorts of different retail examples where people are using digital signage in stores or using things like magic mirrors or just even knowing that you're there because they’ve got contact or location sensing devices so when you walk in it knows who you are. It can all just give the store associate more power to give you better service, so I think this explosion that is happening, even within startups with very little funding, we can actually do some really cool things so for us, it’s just how do we make sure the brands and all the customers we work with can quickly take advantage of those things and use it as a differentiator.
The whole definition around customer experience used to be a good website or a good mobile experience and now it's more of an emotional experience with a brand. It’s like that emotional, emotive connection you have with a brand as you're interacting with that brand and every touchpoint that you have had, and brands need to create that positive experience credibility, put it in the experience bank account and keep building that up with their users through their social touchpoints.
I think it's really important for some of these brands to have an innovation lab, have a safe space to experiment with this stuff and then kind of have to have a bit of a backend that can support that experimentation so they can do it in light ways and have proof of concepts and things like that.”
We then got on the topic of innovation, discussing our ideas on the ways in which brands could use this safe space he mentions to change the commerce process as we know it today, Harry almost intuitively brought up a pain point let’s say, of the modern commerce process, I too am growing weary of and wish more brands would address:
“What seems really archaic and outdated is paying for something in store. That whole thing kind of seems outdated, and I think that people who work in those stores have a tough time because they don’t have the tools a lot of the time to give a good experience. I think the whole point of sale paradigm is really going to be changing. It is just going to be whether or not it's the digital native companies like the Amazons and others that are going to be able to change more than brick and mortar or if the other traditional retailers will be able to evolve fast enough or make the investments they need to do the organizational change to accept that.”
I am always interested in discussing trends in the world of technology, and while the innovation of some deserves to be recognized, often we can get caught up in the flashy newness and forget to evaluate the value for brands especially when it comes to leveraging customer experience they best way they can. The trend of IoT has already shown its value with much more to come as Statista states that 94% of businesses who chose to implement IoT have already seen a return, with $19 trillion being the total estimation for cost-savings and profits businesses could see by 2020 from taking advantage.
For me, the idea of enabling devices to connect into the commerce of things seems never-ending, especially when you think of how much it can elevate the convenience of commerce as we as a society become more and more attuned to devices solving our problems. I recently met a woman who works for a global wellness brand and asked in a conversation about their digital strategy when they might be internet enabling a certain home device in their product portfolio to automate the purchase of its supplies. Turns out they are already in development of exactly that. I knew as a business they already had a great digital strategy but it goes to show brands in a large variety of verticals can find a way to make IoT work for them if they, like this brand, align with an understanding of the personas that make up their consumer base and how they can best facilitate conversions.
I am very excited to see what the soon to be 24 billion internet connected devices will be, will my makeup bag be ordering my cosmetic products at certain monthly intervals once it knows how much use I will get out of a product? Will my shoes have a sensor in the sole to know when to schedule an appointment with my cobbler for a refresh? Or will it just be that my refrigerator knows when I need a restock of almond butter and will call on Alexa to order my favorite brand from Whole Foods? Only time will tell.