The future of mobile ecommerce

We’ve been doing a good deal of thinking about the future of ecommerce as the world goes mobile. As we all know people are increasingly accessing the internet and shopping from their smartphones (one of our more recent investments has 81% of it’s traffic from mobile), and within mobile people are spending a larger and larger share of their time in apps at the expense of browsers. That presents a challenge for retailers of occasional purchases whose customers don’t use them often enough to download an app. On the web these retailers found their customers via search, but that doesn’t work as well on mobile.

So how will discovery work on mobile?

In a couple of different ways, I think.

Firstly some apps will aggregate goods from lots of retailers and discovery will happen in app. Amazon is the best example here, but different types of discovery are appropriate for different types of purchase and whilst Amazon works well for commodity goods it doesn’t work so well for higher value goods where the purchase is emotionally driven. That creates space for startups to build discovery experiences focused on specific verticals. Good examples include Houzz in interior design, and Stylect in fashion, and Top10 in travel. We have invested a lot on this theme and the last three examples are partner companies (note Thread is working on their mobile app).

Key to success for these companies is building a loyal customer base with high life time values. The aggregation needs to be broad enough that transactions occur frequently but narrow enough that product discovery is truly engaging. Strong brands will be built on the back of great product ranges and strong discovery experiences.

Secondly, some companies will focus on a small range of their own products. They will be primarily web based (including mobile web) and may not need an app. Strong brands will be built on the back of amazing products and first class marketing. Facebook is the best channel for many of these companies, for now at least. Bonobos in the US is a good example, and amongst our partners I would point to Lost My Name, Big Health, and Spoke.

An interesting question for the first group is whether the aggregation moves from apps into the OS layer, or something similar. There are lots of hints we are headed in this direction:

  • Baidu surfaces recommendations from maps
  • Facebook’s Instant Articles pulls news discovery into Facebook
  • Amazon’s Echo device enables re-ordering via voice command

If aggregation does move to the OS layer then in the short term partnerships will become critical drivers of traffic and custom, and in the long run I hope we will see a meritocratic discovery process emerge.

Update: Benedict Evans argues here that the trend within mobile towards apps is concentrated in a small number of apps (mostly Facebook and YouTube) and hence less significant for ecommerce companies than one would think

  • Elisabeth Ling

    Hi Nick, great article. It’s one of my pet topics (with what will the high street look like when all the poor performing retailers will be gone).

    I very often think of what will be the new paradigm for online commerce replacing the “search marketing & desktop” ecosystem we’ve known for years and which is already obsolete.

    For your second group of amazing products, I notice too that Facebook has become the marketing platform of choice. It seems to me that actually their main marketing channel is initially word of mouth within a small community of targeted users (because they have an amazing product), which then leads them to have an initial great set of customers which they can leverage via Facebook audience lookalike.

    Three questions:
    1) Do you actually think that you can kick off such brands on FB straight away, without lookalike audiences? It seems that some of your portfolio companies have achieved this.
    2) On word of mouth, have you read a book called Contagious by Jonah Berger? I am trying to use it with a couple of start-ups at the moment, great framework on what triggers word of mouth. I’d be curious to know what you think about it, if you have the chance to read it, and then in practice if some of your portfolio companies would try adopting this framework.
    3) Again for the 2nd group of brands, I wonder if some offline presence (eg. own store or initially corner in an excellent multi-brand retailer, or specialist eg. Browns) is going to become necessary to build these brands to scale. It is a large investment, and not so much one that you can AB test like FB ads! Do you think that would fit in a good marketing strategy for these brands, and at which stage of a company can you take bite the bullet and fund this?


  • Thanks Elisabeth. To your questions:

    1) Our companies generally a combination of word of mouth, PR and unprofitable early customer acquisition to get them to the point they can use custom audiences
    2) I haven’t read Contagious – it’s on the list though and the Forward Partners teams are fans. Will maybe read it next now. Thanks.
    3) Offline presence is an increasingly important brand building tool. None of our companies have taken that step yet, but a few are thinking about it. And our partner Appear Here can help them 🙂

  • Elisabeth Ling

    Hi Nick,

    Thanks a lot for answering.

    Really appreciate. Yes I know Appear Here, great option. I’m yet to try with one of the brands I help.