The Rebirth of E-Commerce in the New Internet
Oct 15, 2010 5:00 AM PT
The new Internet is full of extraordinary companies that looked at the market from a different angle and created entirely new approaches to the changing Web. Zynga, Amazon, Netflix, Facebook and 1-800-Flowers.com have all seen and seized the massive opportunity of a new Internet driven by social networks, applications and mobile devices.
Paradoxically, succeeding in the new Web doesn't mean changing everything. Retailers are finding ways to reinvent their existing capabilities and systems for the new market of influence and commerce, tapping into their assets to create new business models and profit streams. How? By leveraging open APIs to bring their products and services to the multichannel Web.
Wait - What Is an API?
An API, or application programming interface, is a piece of code that allows you to expose data -- like content, store inventory, information about products, etc. -- to partners, applications, affiliate marketers, mobile devices and more. Open APIs let you get your existing data and services to the new Web -- one that relies on applications more than browsers, social connections more than traditional media, and mobile devices more than desktops. APIs let you get to where your customers are, wherever they are.
Think of APIs like garden hoses connected to a retailer's revenue-generating product lines and services. They can be used to make a business grow in new ways by extending the reach of existing assets for a whole new profit stream (no pun intended).
Finding Success with APIs
Retailers including Amazon, Sears and Netflix have opened APIs, allowing their products and services to reach and sell in app stores, websites and connected devices everywhere. Successful companies in the "app economy" will end up seeing over 50 percent of their traffic from APIs, but making the leap requires looking at the market in a new way.
Here are three rules for adjusting your thinking for a multichannel strategy that works in the new Web:
Rule No. 1: Look for the hole in your multichannel strategy by thinking like a customer.
Al Ries wrote an awesome marketing book Positioning: The Battle for Your Mind. He references a French phrase, cherchez le creneau, which loosely translates to "look for the hole." How? Think like a customer.
Customers can be like water -- they usually find the path of least resistance when transacting with a retailer. For example, customers increasingly look up product information and prices on their smartphones while in a store. That's a hole! What's worse is when they not only find information about products, but then transact with the third party right there in the store.
Many retailers have great information about the products and services they offer. If they could only find a way to serve this new breed of mobile, social, connected customer with legacy systems...
Rule No. 2: Embrace the legacy.
Shift your thinking to reinvention. One simple strategy is to leverage your e-commerce platform and supply chain. Extend the number of SKUs available at your brick-and-mortar stores by exposing your online inventories through a new point of sale: APIs. Data from the API can easily be fed into mobile apps and affiliate sites, allowing you to transact in the store channel and fulfill from an online distribution center.
It's a great customer service option and it can lead to multichannel shoppers; customers who transact in multiple channels are the most valuable customers, according to a 2008 Nielsen Study. The customer receives the item in a couple of days, and if it doesn't work out, the item can be returned to a store or via the e-commerce reverse logistics process. Best of all? In most cases, these programs are quick to roll out because 90 percent of the processes and infrastructure are already in place.
Rule No. 3: Focus on Value.
The equation is pretty simple. The difference between what a customer pays for a product or service and the perceived value of said product or service is referred to as "consumer surplus." Companies with a lot of consumer surplus win. Some value trends are convenience (Redbox), customization (Netflix), quality (Starbucks) and brand reputation (Lexus).
Convenience and customization are two opportunities for multichannel retailers that can be enabled by an API strategy. By focusing on the value your API can provide, you can create greater consumer surplus, all by leveraging existing assets to make it easy to access your core services in the new world of e-commerce.
The Web has reinvented itself, and retailers must too. Succeeding means thinking differently about how to innovate quickly, cheaply and with existing resources. The winners will be those who can reach the mobile and application-driven Web with open APIs -- will you be one of them?
Mike Debnar is a member of Apigee's executive team, overseeing business consulting operations.