E-Commerce Accelerating Due to Personalization, Pinterest and iPad

A sputtering economy isn’t slowing the growth of e-commerce. In fact, new data from comScore shows $44 billion in business now moving through U.S. e-commerce channels, up 17 percent from a year ago. More, the last three quarters show accelerating year-over-year growth.

Of course, e-commerce is a beneficiary of economic belt tightening, but there are much bigger factors at play. Economic pressures are combining with technology-driven disruptions to create a perfect storm of online opportunity. These disruptions are nothing new; what is new is the pace at which they are happening. Big, established retail players are having trouble adapting to this accelerating pace of change, while nimble start-ups feed and thrive on it.

I see three megatrends driving e-commerce change that I call the Three P’s: Personalization, Pinterest and iPad (well, iPad almost starts with a P). Together they ensure that U.S. e-commerce will continue to experience double-digit growth and pass the $100 billion mark in less than five years.

I recently attended D10, the D: All Things Digital conference, and the message from leaders like New York Mayor Michael Bloomberg, Tim Cook, Reid Hoffman and Larry Ellison confirmed enthusiasm on the future of ecommerce.

A lot of the private discussions I had at D10 also focused on the magnitude of this re-invention. Most agree that these three drivers are fundamental, and that the pace of change has never been this aggressive.

P1: Personalization — It’s All About You!

The emergence of the visual web — touchscreens and other new front-end technologies — enables a much easier personalization experience. For the first time, e-tailers can dish up very realistic virtual renderings of personalized SKUs that are then made to order.

Brands like Bonobos, Cafepress, Customink, Gemvara, Modcloth, Nike, Quiksilver and Vans are all revolutionizing online shopping, providing a rich, interactive and even creative experience. At Gemvara, for example, you can customize a piece of jewelry by selecting a design template and filling in your desired metal and stone. In real time, you see a realistic, virtually-rendered representation of your one-of-a-kind piece of jewelry. Gemvara then builds the jewelry to your specifications and delivers it in less than 10 days.

Another way to personalize the shopping experience is through social curation of products. Social technologies are enabling e-tailers to identify and target consumer tastes increasingly accurately.

With social sentiment tools, analytics and “big data” insights, e-tailers today can match products to consumers more scientifically, and on a much more granular level. Modcloth is a great example of an e-tailer applying a synergistic mix of analytics and social technologies to procure the right products for its community of consumers.

Innovative e-tailers are further personalizing the online shopping experience by empowering customer service and creating intelligence concierges. Imagine sales reps armed with answers to frequently asked questions, your purchasing history and your personal tastes. This emerging customer service looks and feels much different from the traditional help desk you have learned to dread. The best e-tailers are leveraging data to deliver a personalized customer experience that is not only better but more cost-effective.

P2: Pinterest — The Power of Eye Candy

Pinterest’s rise has been meteoric, even by social media standards. Launched in March 2010, the image-sharing site hit the 10-million-user mark in record time, and is already the third-largest social media platform behind Facebook and Twitter, driving more referral traffic than Google+, LinkedIn and YouTube combined.

According to a recent Shopify study, much of that referred traffic converts to sales. While Facebook still drives considerably more traffic, Pinterest referrals are 10 percent more likely to lead to a purchase. Some other significant statistics:

  • Pinterest users are older and have more purchasing power.
  • Pinterest-referred purchases are twice as big as those that are Facebook-referred.
  • The most popular retailers on Pinterest are Nordstrom, Williams Sonoma, Barneys, Vera Bradley and Neiman Marcus, indicating a higher-end user base.
  • In the year ended March 31, 2012, Pinterest’s share of social-media-driven revenue for retailers leaped from 1 percent to 17 percent.

Online retailers at the forefront of product customization agree. Gemvara reports that Pinterest referrals are outpacing other customer acquisition channels. Ultimately, I expect Pinterest to do for e-commerce what Facebook did for advertising. I see Pinterest as the platform that helps power the next generation of “lean-back” e-commerce experiences.

P3: iPad — The Ideal “Lean-Back” E-Commerce Device

Don’t get me wrong. If you know exactly what you want, search is still a very good tool. However, if you are in a more casual “gathering” mode, search comes up short. In my mind, iPad + Pinterest enable what Web 1.0 lacked and what physical catalogs have provided for many years: a “lean-back” e-commerce experience. Pinterest and the iPad interact seamlessly, further fueling the e-commerce channel shift toward a more delightful and engaging shopping environment.

According to a 2012 Q1 Mobile Study sponsored by RichRelevance, mobile’s share of e-commerce grew nearly 250 percent in the year ended March 31, 2012 — and the iPad accounts for two-thirds of the shopping, browsing and purchasing in this emerging channel. Compared to other mobile shoppers, iPad users:

  • spend significantly more time and money on retail sites,
  • have much higher conversion rates,
  • spend dramatically more, while buying fewer, more expensive items.

In fact, 90 percent of all mobile revenue is generated via iPads. The iPad’s average order value is even creeping ahead of desktop-based orders.

E-Commerce Roadmap

Disruptive forces, both technological and economic, are driving the retail channel shift inexorably toward e-commerce. This shift is accelerating as customer-facing technologies improve — especially those within the Three P’s described above.

E-commerce players must innovate quickly and continually to succeed under such rapidly changing circumstances. These factors clearly favor nimble start-ups, although companies like Nike are proving that established brands can adapt. Startup or not, companies vying for a piece of the e-commerce pie must innovate around the Three P’s or die.

The winners will be the brands who understand the Personalization, Pinterest, and iPad mega-drivers and leverage them to create rich and delightful customer experiences.

Sergio Monsalve @vcserge is a Partner with Norwest Venture Partners.

Must-Reads from other Websites

Panos Mourdoukoutas

Why Apple Should Buy China’s Xiaomi

Paul Graham

What I Didn’t Say

Benjamin Bratton

We Need to Talk About TED

Mat Honan

I, Glasshole: My Year With Google Glass

Chris Ware

All Together Now

Corey S. Powell and Laurie Gwen Shapiro

The Sculpture on the Moon

About Voices

Along with original content and posts from across the Dow Jones network, this section of AllThingsD includes Must-Reads From Other Websites — pieces we’ve read, discussions we’ve followed, stuff we like. Six posts from external sites are included here each weekday, but we only run the headlines. We link to the original sites for the rest. These posts are explicitly labeled, so it’s clear that the content comes from other websites, and for clarity’s sake, all outside posts run against a pink background.

We also solicit original full-length posts and accept some unsolicited submissions.

Read more »