How the iPhone changed the history of E-commerce

E-commerce before iPhones:

From around 1995 to 2000 at its earliest stage, e-commerce was largely made up of “pure players”. These are made up of firms that allowed customers to buy goods and services over the internet using a website (eBay or Amazon). These firms also did not have yet a physical presence.

Consumers tend to use increasingly more channels within the customer journey, either in the search, purchase, or after-sales phase . Channels are the sum of routes or paths by which a company delivers products, services, or information to recipients (Mehta et al. 2002). Channels represent ‘a customer contact point or a medium through which the firm and the customer interact’ (Neslin et al. 2006, p. 96). Channels are, for example, a store, a hotline, or a website.

Around 2000–2007 firms used multiple online and traditional distribution channels. Many retailers have previously adjusted their channel strategies towards multichannel retailing, i.e., offering a broad range of channels. This strategy has been established as the most significant and most dominant approach for many retailers. In most cases, traditional and online channel operations were kept separate and distinct; referred to as “Bricks and Clicks”. This caused inefficiencies in traditional distribution channel strategies. Still, Classical brick-and-mortar stores offer the uniqueness of consumers’ being able to touch products with immediate satisfaction. However, online channels can lure with more information, price comparisons, and user-generated content such as ratings and reviews

The lunch of iPhones:

The evolution of technology and the constant digitalization strongly influence how consumers behave, how markets develop, and how companies and consumers interact. Technological advancements have driven the proliferation of possible channels with which firms communicate with consumers, sell products, and render services available.

In 2007, Steve Jobs unveiled its life-changing device: The iPhone. This new Phone has eliminated most physical hardware buttons and launched a new way of interacting with the device using a multi-touch screen and smart applications. It also featured quad-band GSM cellular connectivity with GPRS and EDGE support for data transfer and made use of continuous internet access which gave unprecedented access to the internet At that time.

With the expansion of smartphone users (starting with the iPhone users) and consumer ability to use the internet on the phone, e-commerce grew at a faster rate than ever before.

Customers started to change their habit of purchasing since new distribution channels started to appear. Research on customer behavior (McPartlin & Feigen Dugal 2012) showed that Of globally polled customers, 86% shop in various channels and want to use channels simultaneously. This indicates, for example, that consumers use their mobile devices in the physical store, retrieving information during the store visit on their mobile devices to gather more information regarding products or the best prices and offers.on the same context, another research (Krueger 2015) showed that consumers who use their mobile devices in-store for information purposes, 71% of them consider the mobile device to be an important component of their shopping experience. Additionally, consumers desire a seamless and unified experience across all phases of the purchase process and all channels (Nunes & Cespedes 2003; Van Bruggen et al. 2010). Of consumers, 81% want to experience the brand as a whole across all channels, and 54% would consider canceling their relation with a company if personalized content is not available (Mohapatra 2014). So how could retailers handle all this new set of competitiveness and requirements from their clients? The answer is the Omni-Channel distribution strategy.

The rise of Omni-Channel distribution strategy (Omni-channel management) :

An omni-channel retailing experience requires flexible delivery networks. Omni means in “all places”, “all ways”, “without limits”. Omni-channel strategies affect ordering, fulfillment, and returns. Omni-channel management has shown relevance in many areas, but particularly in retailing, marketing, and information systems (IS) research. IS plays an important role in the implementation of the omnichannel approach because obstacles are often technology-related and companies are strongly dependent on information technology (IT)

Verhoef et al. (2015) defined omnichannel management as the synergetic management of the numerous available channels and customer touchpoints, in such a way that the customer experience across channels and the performance over channels are optimized. An Omni-Channel Network Design model formulation is illustrated in the figure below.

An omnichannel strategy enables consumers to use channels seamlessly and interchangeably and experience the channels uniquely. It represents the vision of the ideal strategy to offer various channels with regard to the latest developments and to match today’s consumer behavior. For example, a consumer may be attracted by a promoted product on a billboard that mentions a website. Later, at home, this consumer gathers more information and places the chosen product in the shopping basket but does not complete the purchase. While commuting to work by train, this consumer opens the company’s own shopping app, in which the product is also in the shopping basket. This consumer then completes the purchase via the app and chooses store pick-up. As this example illustrates, consumers can switch from one channel to another without interrupting their transaction stage. If the consumer switches channels during the purchase phase, for example, from an online shop to a mobile app, this shift does not result in the loss of the progress the consumer has made. The omnichannel strategy aims at a seamless and unique experience regardless of the purchase phase the consumer is in or the channel the consumer use.

This distribution strategy helped several retailers to stay in the business and to maintain their competitiveness against the big e-commerce companies. It emphasized also a profitable collaboration between retailers and online services to optimize the customer experience and to better handle returns. A study discussed in an article on Harvard Business Review showed that Omni-channel customers loved using the retailer’s touchpoints, in all sorts of combinations and places. Not only did they use smartphone apps to compare prices or download a coupon, but they were also avid users of in-store digital tools such as an interactive catalog, a price-checker, or a tablet. They bought online and picked up in-store, or bought in the store and got their purchases shipped. They show also that the retailer’s omnichannel customers are more valuable on multiple counts. After controlling for the shopping experience, they spent an average of 4% more on every shopping occasion in the store and 10% more online than single-channel customers. Even more compelling, with every additional channel they used, the shoppers spent more money in the store. For example, customers who used 4+ channels spent 9% more in the store, on average, when compared to those who used just one channel.

In conclusion, shopper behavior primarily changes due to market developments and new consumer demand rather than the result of meticulous channel and strategy planning. In our cases, the rise of smartphones and smart devices that conducted to a new level of connectivity and to information access led to the development of new distribution strategies (primarily Omni-channel management) that relies upon collaboration and a wide range of shared and synchronized data between the different players of distribution channels.

Resources:

• Supply Chain design MITX course (SC2X)
• CHANNEL INTEGRATION TOWARDS OMNICHANNEL MANAGEMENT: A LITERATURE REVIEW; Tobias Mirsch,Christiane Lehrer, Reinhard Jung,
• Harvard Business Review: A Study of 46,000 Shoppers Shows That Omnichannel Retailing Works; January 03, 2017