A lot has been said in the press recently about the commoditization of eCommerce software, and software in general.  The video below features Gene Alvarez from Gartner discussing this exact issue and what retailers can do to turn this to their advantage. For some time we at Cactus Commerce have been saying the same thing; that in order to battle commoditization, retailers need to turn to innovation and differentiation to succeed.

Gene Alvarez’s message is that in hard economic times, when most retailers are closing stores, eCommerce remains an opportunity.  The main reason eCommerce is an opportunity is because it is a growth industry, which traditionally do well in slow-downs and recessions compared to other kinds of businesses.  Gene feels that in a time when most IT budgets have been cut, the smart money is being spent on improvements to the user experience, in both B2C and B2B.  His advice in a nutshell is that if it’s not adding value to the customer, don’t do it.

We here at Cactus agree that consumers are increasingly sophisticated, and are more demanding and much less forgiving of poor user experience than they used to be. In the past retailers inadvertently trained online shoppers to treat eCommerce as a commodity. Their focus had been on function over design, and the lack of design focus created a self-fulfilling prophesy where price became the differentiator.

Now that those bread and butter features have generally accepted best-practices, the basics are no longer innovative. Because of commoditization, there is nothing new to learn about a shopping cart, recommendations or a product review, and attempting to create differentiation here will bring no competitive advantage.

Gene goes on to say that highly customized sites, where retailers and CPGs are investing a lot of development resources to create basic features, are a waste of time and money, and that those development resources would be better used by enhancing the experience. Related to this, consumer expectations are pushing change at an increasing rate and this will persist for some time. We expect to see trends like the continued adoption of social networking, enhanced personalization, and a desire for richer UI and UX as driving forces for differentiation.

To battle commoditization, retailers need to avoid investing in re-creating basic features that will have a poor return, because shoppers already have an expectation that these features will perform their function properly, and in ways that are familiar to them. There is no reward simply for meeting these expectations. Retailers should concentrate on what creates additional value for their customers, instead of trying to build a better mousetrap.

Features that can make a difference would be things that are not found on all sites, and that would be able to add value to a retailer’s specific brand-story. Differentiation in the UI and User Experience as well as in unique special features that cannot be obtained Out-of-the-Box and that will enhance the shopping experience for the consumer are some of the most effective ways to improve overall satisfaction, and increase revenue and customer loyalty. Retailers aren’t all keeping pace, and risk irrelevancy if they don’t catch up.

Additional Resources:

Gene Alvarez, Gartner: cutting e-commerce costs on YouTube

eRetail Storms Ahead Through the Recession