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Connected Homes September 2020 Viewpoints

Technology Analyst: David Strachan-Olson

Growing Influence of E-Commerce

Why is this topic significant?

The covid-19 pandemic is causing shifts in the way households purchase goods and providing new opportunities for e-commerce and connected-home companies.

Description

Shelter-in-place orders and general concerns about the coronavirus-disease-2019 (covid-19) pandemic have led to a significant shift in the way households buy goods. Brick-and-mortar retailers have had to close or alter business operations. Many individuals are avoiding in-person interactions, including shopping at stores. Because of these factors, e-commerce companies and delivery services have expanded significantly in the past few months. The US Census Bureau estimated that e-commerce sales in the United States increased 32% from the first quarter of 2020 to the second quarter, even as total retail sales decreased by 3.9%. Amazon.com, Walmart, and Target have all reported a significant increase in e-commerce sales in the second quarter of 2020. E-commerce companies and grocery stores have also seen an increase in demand for grocery delivery.

At the same time, the covid-19 pandemic is hitting specialty retail chains and small stores especially hard. During the past few years, some specialty retail chains have already struggled with the transition to e-commerce, and the covid-19 pandemic is leading to a number of bankruptcy filings for specialty retailers. Small stores, many of which do not have e-commerce operations, are also struggling to maintain sales and to adapt to a new way of doing business.

Implications

The growth of e-commerce has been a trend for years, but the covid-19 pandemic is accelerating the transition. Companies with established e-commerce operations seem poised to continue their expansion and gain a strong foothold in the market. In particular, grocery-delivery services have struggled to grow their user base in the past, but the covid-19 pandemic is bringing in many new customers. Nevertheless, stakeholders are still uncertain if rates of e-commerce shopping will change once the pandemic subsides. Some small businesses and specialty retail chains may not survive a drawn-out pandemic and recession; when and if the covid-19 pandemic subsides, customers might be left with much fewer local retail options and may have to take their business to e-commerce and general merchandise retailers.

Impacts/Disruptions

For decades, technology and device companies have envisioned a wide variety of ways for the connected home to become a vital part of the shopping experience. The downfall of physical retail could lead to significant innovation in at-home shopping as retailers look for new ways to attract and retain customers. Potentially, connected devices for e-commerce—including smart refrigerators and smart mirrors—could become more popular than they are today. However, bringing the shopping experience into the home also presents other challenges for companies—in particular, customer lock-in to specific retailers because of platform familiarity, subscriptions, and memberships.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: Medium to High

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: Now to 5 Years

Opportunities in the following industry areas:

E-commerce, retail, logistics, curated commerce, advertising, digital commerce, home automation, smart-appliances manufacturing

Relevant to the following Explorer Technology Areas:

Big Picture: E-Commerce

Why is this topic significant?

The growth of e-commerce provides an opportunity for connected-home companies to become part of new sales channels for in-home shopping.

Household expenditures on food and goods represent a significant market opportunity for companies. Traditionally, the majority of these expenditures occur outside the home in stores, restaurants, and supermarkets. The development of e-commerce and delivery services is challenging traditional sales channels for products, enabling individuals to purchase and receive food and goods without ever leaving their homes. E-commerce and delivery services are poised to expand significantly in the coming decade.

The growth of e-commerce provides an opportunity for new companies to take market shares from existing retail players. Many connected-home companies understand the value of household expenditures and are attempting to position their software, hardware, and web platforms as a place to facilitate e-commerce in the home. Importantly, connected-home companies do not need to have an entire e-commerce and logistics operation, such as Amazon.com, and can instead act as a platform to connect shoppers with sellers and services. Stakeholders are exploring many potential ways to bring e-commerce into the home through both existing pathways (smartphones and computers) and new pathways, including voice assistants and computer-vision-enabled devices.

Today, most e-commerce transactions occur through relatively simple digital storefronts on websites and mobile apps. Although these platforms have had the same general design and function for many years, they do provide customers with important features such as customer reviews and product comparisons. Companies often try new technologies and features to improve the e-shopping experience. For instance, IKEA's mobile app uses an augmented-reality feature to help customers visualize furniture in their homes. A number of start-ups—in particular, fashion start-ups—leverage advanced recommendation algorithms to recommend clothing to an individual on the basis of surveys and previous purchases.

Companies envision use of connected-home devices and appliances as a key way to access e-commerce in the home. As early as 2015, the Amazon Echo enabled users to reorder products from Amazon with their voice. Although voice-based e-commerce remains a niche activity for most owners of smart speakers, many companies are developing voice technologies and platforms. Amazon has attempted to develop other e-commerce hardware, such as the Dash Button (a connected button that orders a specific product when pushed) and the Echo Look (an artificial-intelligence camera that offers clothing suggestions).

Longtime stakeholders have also had a number of visionary products that could improve the way people buy goods. Various companies have envisioned smart refrigerators, which automatically order new food when supplies run low. Early prototypes used radio-frequency-identification tags to track food packages, but more recent concepts leverage advances in computer vision. Companies have also considered smart mirrors, which enable a person to try on clothing virtually by using augmented reality. Potentially, smart refrigerators, smart mirrors, and other advanced connected-home technologies could change the nature of shopping at home.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: Medium to High

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: Now to 15 Years

Opportunities in the following industry areas:

E-commerce, retail, logistics, curated commerce, advertising, digital commerce, home automation, smart-appliances manufacturing, voice-assistant-technology development

Relevant to the following Explorer Technology Areas: