Topics: How consumer needs drive innovation in retail. Evolution of e-commerce SaaS and opportunities. Social media and on/offline purchase attribution.

1. U.S. E-COMMERCE LANDSCAPE & TRENDS
Carnegie Mellon UniversityAnes Dracic
Haruki Chitani
Steve Musche
Tepper School of Business
Entrepreneurship & Venture Capital Capstone
May 2014

2. Executive Summary: Shifting Consumer Desires are Creating E-Commerce
Opportunities in Last-Mile Logistics and Social Commerce
2
 Re-Urbanization and rising Consumer Desire for Individualization are
driving Innovation in Retail Business Models
 Last-Mile Logistics will enable Retailers to offer a Seamless Shopping
Experience
 Social Media is moving down the Marketing Funnel towards Point of
Purchase

3. Start with the Consumer:
Consumer Desires Shape Innovation in Business Models
3
+ Authenticity - We want to know if products are genuine. We want to trust products, brands, and people.
+ Ex. Is the coach purse that’s for sale on eBay a genuine product? Are there reviews?
+ Association - We want to feel unique, but also want to belong to an emotionally defined group
+ Ex. Mass personalization and sharing of goods
+ Convenience - We want instantaneous gratification. We want groceries delivered and dirty laundry picked up.
+ Ex. Drone delivery for same-day shipping or Instacart for same-day delivery of groceries.
+ Experience - We enjoy culture, sports, concerts, collectibles. We care about atmosphere and presentation.
+ Ex. Disney creates an ecosystem around products through collectibles, amusement parks, films, and more.
+ Variety - We like to try many different things. We enjoy renting everything from clothes to cars.
+ Ex. Bag Borrow or Steal has a plethora of luxury clothing and accessories for rent.
+ Value – We like to shop smart. We ultimately purchase products or services, because they give us utiliy.
+ Ex. Costco shoppers purchase in bulk due to the lower priced goods available in their inventory.
http://blogs.hbr.org/2012/05/what-do-consumer-really-want-s/
https://scripted.com/content-strategy/using-the-consumers-desires-to-your-businesses-advantage/
http://www.forbes.com/sites/patrickspenner/2012/07/02/marketers-have-it-wrong-forget-engagement-consumers-want-simplicity/

4. Urbanization is Shifting Consumer Desire towards Instant Gratification
4
1930 1970 2010 Future
Power Manufacturer Retailer Consumers Individual Consumer
Enabler Mass
Production
Automobile Internet Smartphones/Tablets
/Wearables
Example General Store Department
Store
Mall, Online Mobile
Experience Daily Needs Family
Excursion
Convenience Instant
Gratification/Social
Lifestyle Rural Urban Sub-Urban Urban Renewal
¹http://www.boston.com/lifestyle/specials/2013/02/01/the-growing-culture-impatience-where-instant-gratification-makes-crave-more-instant-gratification/eu5SPWCVTmFp9Nm6dUndhP/story.html
² http://www.groceryheadquarters.com/2014/03/the-re-urbanization-of-america/
3 Netflix 2013 Annual report
US cities out growing suburbs since 2011, according to US Census2
44 million Netflix streaming users (2013)3 Over 20 million Amazon Prime members

5. Mobile Devices are Accelerating Desire for Instant Gratification
5
18% of all retail ecommerce sales is expected to take place via mobile devices in 2014.
By 2017, that percentage will rise to 25%.¹
¹ http://www.emarketer.com/Article/Retail-Ecommerce-Set-Keep-Strong-Pace-Through-2017/1009835

6. Social Media is Amplifying Consumer Desire for Individualization
6
Discovering things that
interest you
Voicing your opinions
Sharing your experiences
Participate in a user-
empowered platform for
fashion
Authentic craft goods direct from
producers
Or through a Personalized Shopping ExperienceBecome your “own hero” by

7. Markets Develop in Three Steps to Meet Consumer Desires
7
1. Formation
• Business Models formed to Fulfill Consumer Desires
• ex) Online Coupons (Value)
2. Support
• Services founded to Support Business Models
• ex) SaaS tools to run online campaigns
3. Evolution
• Opportunities arise to Augment Business Model
• Business Model applied to other Categories
• ex) Integration of coupons to POS

8. 1. Business Models are formed to Fulfill Consumer Desires
8
Consumer Desire Business Model Innovation
Authenticity + Leverage exclusive products
+ Multichannel customer relationship building
Association + Rely on stakeholder input
Convenience + Fast fashion model
+ Self-service model
Experience + Innovative shopping experience format
Variety + Leverage complementarities of products
+ Adjacency model
Value + Rely on added value tie-ins
+ “Name your own price” model
+ Group Buying

9. 2. Services are founded to Support Business Models
9
Business
Functions
• Accounting
• Marketing
• Sales
• Inventory
• Staffing
• Support
Solution Provider
• Enterprise Resource
Planning
• Customer Relationship
Management
• Outsourcing
• Consulting
Ex) SaaS CRM
platforms such as
Salesforce support
the market by
enabling multichannel
customer relationship
building, thus
enhancing customer
experience

10. 3. Opportunities arise to Augment Business Models
10
Opportunities
• Stock-outs
• Product Returns
• Show-rooming
• Customer Claims
• Product
Knowledge
Solution Provider
• Product Availability
• Product Fit
• In-store
notifications
• Product
Authentication
• Training
Ex) Certilogo evolves
the market by
providing a product
authentication
platform for fast
fashion and other
business models such
as auction models

11. 3. Business Models are applied to Other Categories: Examples from the Food &
Beverage Industry
11
Subscription Delivery
Innovator Amazon WebVan
Copy Cat Foodzie
LolliHop
Amazon Fresh
FreshDirect
Peapod
Apply to Different
Categories
PaleoPax
Tasting Room
Conscious Box
Instacart
Postmates
Munchery.com
Apply to Innovative
Marketing Strategy
Turntable Kitchen Google Shopping
Express
Aggregator Shutl
Shippify
Evolution
http://www.slideshare.net/joshyang/ecommerce-landscape-2012
http://techcrunch.com/2013/09/27/why-webvan-failed-and-how-home-delivery-2-0-is-addressing-the-problems/
“Of the Month” clubs are gaining
popularity but are difficult to scale.
Same-day grocery delivery will
see an uptick in the future if
companies don’t make the same
mistakes that WebVan and others
have made. Namely, these
companies must simplify and
overcome both logistical and
infrastructure challenges.

12. Apparel & Accessories and Food & Beverage markets seeing
largest growth in E-Commerce
12
“Two of the best-performing online categories—apparel and accessories along with books, music and video—will register high CAGRs of 17.2%
and 16.3%, respectively, according to eMarketer estimates. Meanwhile, food and beverage, with low online sales, is expected to produce the
second-highest CAGR at 17%, a sign of an up-and-coming category.”¹
¹ http://www.emarketer.com/Article/Retail-Ecommerce-Set-Keep-Strong-Pace-Through-2017/1009836

13. A deeper dive into the Food & Beverage industry reveals
opportunities in delivery/warehousing
13
Doorman Shippify
Funding: $10.8M
Offering: Same-day grocery
delivery from Whole Foods, Super
Fresh, etc.
Solving: “Last-Mile” delivery issue
for $14.99 per delivery.
Competition: Peapod (8.7%
market share), Fresh Direct (5.8%
market share)
Funding: $39.9M
Offering: Same-day food delivery
Solving: Provides convenient and
affordable way for consumers to
buy handmade dinners by top
chefs.
Competition: Kitchensurfing
($19.5M raised)
Funding: Unknown
Offering: Amazon web-services
for shipping & logistics
Solving: Route optimization and
fulfillment platform which
aggregates deliveries market.
Competition: UPS, Fedex, Uber,
etc.
Funding: Unknown (Acquired
Useluna)
Offering: Uber for package
delivery
Solving: Micro-warehousing (to a
degree), providing consumers
with a convenient way to receive
parcel without missing deliveries.
Type of Goods Delivery
Micro
Warehousing
Unprocessed
Nondurable¹
Instacart
Google Shopping
Express
Amazon Fresh
Processed
Nondurable¹
Munchery
Kitchensurfing
Pantrylabs
Durable¹ Doorman
Luna
Google Shopping
Express
Doorman
Luna

14. Mapping of E-Commerce SaaS for SMB’s Reveals Opportunities in Social
Commerce and Last-Mile Logistics
Acquired
Opportunity for
Last-Mile
Logistics

15. 15
Platforms
Opportunity for
Social Commerce

16. E-Commerce Platforms have Evolved to Empower SMB’s
16
Shopping Cart
• Payment processing
• Basic inventory tracking
Package
• Integrated functions
• App store to expand
functions
Marketplace
• Generate traffic from
social media or network
of content
• E-Commerce platforms enable Small and Medium Businesses (SMB) to operate E-Commerce with minimal
infrastructure
• Integrating e-commerce platforms with social media generates targeted traffic
API’s
Socia
l
Medi
a
http://www.fastcompany.com/3027493/fast-feed/for-shopify-merchants-facebook-is-king-in-driving-sales
~2000 ~ 2010 2014

17. WooCommerce leads in E-Commerce Platform Adoption
17
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
QUANTCASTTOPMILLIONWEBSITES
Magento Go Shopify BigCommerce Volusion WooCommerce
3D Cart Ecwid Amazon WebStore Yahoo Store
Data source: http://www.builtwith.com

18. Fastest Growing Platforms are either Marketplaces, or generate traffic from
Social Media
18
Packages Growth
‘12-’14
Magento Go 92%
Shopify 273%
BigCommerce 61%
Volusion -11%
3D Cart 3%
Amazon
Webstore*
84%
Average 36%
Marketplaces Growth
‘12-’14
Woo Commerce
(WordPress)
1615%
Ecwid
(Facebook,
WordPress)
270%
Yahoo Store -33%
Average 90%
• Marketplaces integrate E-
commerce functions with a social
network or themed content, such
as a WordPress hosted page
• Facebook accounted for 85% of
Shopify’s orders from social
media1
1 http://www.fastcompany.com/3027493/fast-feed/for-shopify-merchants-facebook-is-king-in-driving-sales

19. Last-Mile Logistics will enable SMB’s to deliver a Seamless
Shopping Experience
19
Shopping Cart
• Payment
processing
• Basic inventory
tracking
Package
• Integrated
functions
• App store to
expand functions
Marketplace
• Generate traffic
from social
media or
network of
content
Seamless
• Fulfillment
across channels
• Sell anything
from anywhere
API’s
Socia
l
Medi
a
Last-Mile
Logistics
• A robust last-mile logistics network can fulfill consumer’s desire for instant gratification (convenience)
• Local merchants can become curators of niche markets (variety, experience) to fulfill consumer desire for
individualism

20. Current Shipping Management tools don’t integrate with Last-Mile Delivery
Services
20
App Category Platforms supported
Fedex/UPS
integration
Last-Mile Delivery service
integration
shipping 12 Yes No*
shipping 10 Yes No
inventory 8 - -
shipping 6 Yes No
inventory 5 - -
shipping 5 Yes No
inventory 5 - -
inventory 5 - -
inventory 2 - -
inventory 2 - -
Platforms: Shopify, Magento, Volusion, 3dcart, BigCommerce, WooCommerce, Yahoo! Stores, Amazon Webstore, Etsy, ebay, Storenvy, SquareSpace
Last-Mile Delivery: Zipments, Postmates, Instacart, etc.
*possible via API

21. Social Media is moving down the Marketing Funnel towards Point of
Purchase
21
Awareness
Education
Validation
Close
Delight
+Inform customers about broad solutions to their problem
+Prove to the customers that your solution makes sense
+Convert leads into customers
+Maintain ties with the customer to improve their experience
after the sale
+Introduce product or service to target group of customers
Historical
Social
Commerce
Focus
Current Social
Commerce
Focus
New Social
Commerce
Focus

22. Dominant Social Networks are still at the top of the Marketing Funnel
22
+ Dominant social networks
+ Facebook
+ Pinterest
+ Twitter
+ They have begun to invest in technologies that could facilitate purchases directly through their networks, but progress
towards true social commerce is slow
+ Twitter partners with Amazon4
+ Pinterest’s Gifts Feed
+ Many retailers may not want to sell through these channels because they will want to control the experience
+ Companies that prioritize a consistent brand image could be turned off by the prospect of losing control over order
fulfillment
+ This is a data-rich process that provides merchants with valuable insights
+ Benefits smaller merchants with limited budgets and those selling commodities
+ Many companies working to optimize content distribution through these channels
+ HubSpot
+ Marketo
+ Social is also being used effectively by retailers for customer service
+ Responses through Twitter and Facebook

23. Social Networks have the potential to create a Coherent Experience
from Awareness to Conversion
23
 Opportunities for social networks to expand through the marketing funnel
 53% of active social network users follow a brand¹
 In 2012 20% of Pinterest users purchased an item either in-store or online after pinning it, in 2013
that grew to 40% of users²
 The large networks have been unable to do this effectively yet
 Pinterest gifts has a small presence
 Twitter recently announced a partnership Amazon that lets people use specific tweets to add items to
the cart of their Amazon account³
 This leaves space for smaller companies to come in and innovate
 Chirpify is a platform that allows merchants to convert sales through twitter by using action-tags
¹ http://cn.nielsen.com/documents/Nielsen-Social-Media-Report_FINAL_090911.pdf
² http://www.visioncritical.com/sites/default/files/pdf/whitepaper-social-to-sale.pdf
³ http://mashable.com/2014/05/05/amazon-shopping-cart-twitter/

24. Purchase Attribution (“closing the loop”) will give retailers clear
ROI of marketing
24
+ Advances in customer tracking for online and offline merchants
+ Online retailers have struggled to understand the true cost of acquiring a customer as they have been unable to
accurately measure effectiveness of all media
+ Rely on “last click” attribution methodology
+ Spillover Effect: Cannot accurately ascribe the impact of previously viewed marketing materials
+ Offline retailers have even fewer data points to draw from
+ Difficult to link a customer’s online behavior with their in-store purchases
+ Accurately measuring the impact of traditional media is almost impossible
+ Results in more relevant and personalized messaging which leads to higher ROI
+ With most companies deploying messaging to multiple channels, optimizing distribution of ads is a difficult task
+ Tremendous opportunity for companies to analyze this data and offer targeted marketing solutions
+ Many large firms are attempting to do this in-house, but they still require outside partnerships
+ Facebook partners with Datalogix
+ Has the potential to lower the marginal cost of acquiring a customer for most retailers and to increase revenue for
companies offering ad placement
+ Improved ROI is driven by targeted product/service promotions presented at the right time and place

25. Closing the loop is necessary for a 1:1 customer experience
25
Previous retail models have relied primarily on offline interaction to provide a 1:1 customer
experience
= Direct mail + Trade Shows + E-mail
Current retail models rely on online interaction through social software and some hardware
Future retail models will rely on online/offline interaction through both software and hardware
to provide an intelligent 1:1 customer experience¹
= Previous + Online/Offline Ads + Mobile Devices + Triggers (QR Codes, RFID, etc.) + Social Media
= Previous + Current + POS Integration² + Insightful Data Analytics
¹http://www.forbes.com/sites/lisaarthur/2011/09/14/the-next-big-thing-for-marketing/
²http://marketingland.com/facebook-seeking-to-close-the-loop-on-offline-sales-with-datalogix-data-22435
²http://www.onlineeconomy.org/tag/online-to-offline

26. Opportunities in Purchase Attribution have yet to be realized
26
 Google surveyed 600 marketers and found 1 in 10 still consider “last click” attribution to be effective,
however, over 50% still rely on it1
 Can’t look at purchases decisions in a vacuum, need to consider other influencers besides last
click
 90% of marketers that have adopted attribution report seeing significant benefits1
 Google Ad Executive estimates that the market for tracking the usefulness of digital ads is worth $200
billion2
 Google has a lot to gain and is investing heavily in this space with modifications to its AdWords
platform
 Estimates Total Conversions tool
 In-Store Attribution Reporting
 Technologies coming that allow merchants and advertisers to collect more personal data
 Customer tracking through the store : ex. Customer tracking mannequins3
 Location discovery allows merchants to push targeted promotions
¹ http://www.forbes.com/sites/forbesinsights/2013/07/29/8-trends-driving-marketing-attribution-now/
² http://dailycaller.com/2014/04/14/google-can-now-follow-you-from-the-computer-to-the-store/
³ http://www.businessweek.com/articles/2012-12-06/in-some-stores-the-mannequins-are-watching-you