It took me a long time to understand Kickstarter. I’m going to pledge money for something that doesn’t exist yet, to be delivered at a mostly unknown date, by a team with little to no track record, and, ultimately, this might all just be vaporware. Ummm no thanks.
But, alas, crowdfunding platforms like Kickstarter have become massively popular. Even, in spite of high-profile failed projects, the notion that people are willing to pre-order a loosely-defined product has become…normal. According to the Kickstarter stats page, 12M people have pledged almost $2.8B to 117K projects. Pretty astonishing, really. And that’s not including numerous other platforms such as Indiegogo and to some extent GoFundMe (more cause-focused than products)..
So, how did we get here?
Well, 22 years ago, in 1994, the launch of Amazon sparked an e-commerce revolution that has since fundamentally changed how people discover and buy products. Today, it seems incredibly obvious that one of the killer apps for the Internet is to buy stuff. Back then, though, it was far from obvious. In fact, as Bezos recalled in a Charlie Rose interview, it took 60 meetings for him to raise his first $1M. Most turned him down. In fact, when he told prospective investors that he was going to start an Internet web site to buy books, the most common response he got was “what’s the Internet?!” Remember, this was only 2 decades ago!
Wave One (1995+): We learn to buy online
When Amazon did launch, it sparked Wave One of e-commerce. In Wave One, consumers learned the mechanics of buying online: searching/browsing a web store, managing our virtual checkout cart, entering our credit card # into a web page, email confirmations, etc.
Most importantly, though, for the most part we bought products we knew we wanted. We didn’t go online to discover what to buy; we already knew that. Rather, we went online to buy to save time and money. Back then, the key differentiation really was just price (hence the popularity of price comparison engines like Yahoo! Shopping and Pricegrabber).
By 2005, e-commerce in the US represented over 10% of all retail and was almost $200B in total spend. Americans, in large part, had gotten comfortable buying online.
Wave Two (2006+): We discover new products online
Around 2006 is when we start to see the early proliferation of services aimed at helping you figure out what to buy. And this became critical since e-commerce’s inherently infinite shelf space created a massive long-tail of products. It became no longer feasible for traditional product curators — magazines, consumer guides, etc. — to track and review this scale of product offerings.
First-generation social “web 2.0” sites such as GoodReads, Kaboodle, and ThisNext all were aimed at helping people curate their favorite products. While none of them reached massive scale, future generations of such sites obviously have, most notably Pinterest. You can look across many verticals to find other notable examples such as TripAdvisor (travel).
Furthermore, blogging exploded in popularity which led to microblogging (Twitter) and photomicroblogging (aka Instagram) have catapulted millions of otherwise ordinary people into “influencers” with extraordinary ability to promote a new product to their fans.
Suddenly, we found ourselves buying products online that we discovered online and in many cases have not yet physically experienced. Helping this trend has been: (1) retailers easing the worry of making the wrong decision by making returns easier (buy online, return at B&M or free return shipping) and (2) rich media (photos, videos, 360) product descriptions.
Wave Three (2012+): We buy into stories
In 2012, Kickstarter reached an important milestone: the first million-dollar campaign — an iPhone dock. And with that milestone, the concept of using a crowdfunding campaign to turn an ambitious product idea into reality became undeniable.
So getting back to the first paragraph in this post, why are people willing to take these leaps of faiths and pledge campaigns. I argue that it’s because when someone pledges a campaign, they are buying into a story more so than the actual product. Sure they want the product, but if they just wanted the product, they’d wait for it to launch, then buy. Like consumers have generally done for decades. But instead, people are willing to raise their hand far earlier than that and say “I will join you!” and doing so with their credit card.
So why are people willing to do that today? It’s because the experience of shopping is moving past being just about the products itself. Products are becoming less and less about simply the value of the product itself. Functionality is a commodity. Nobody reads or cares about “specifications” anymore. Numbers like CPUs megahertz and camera megapixel counts used to be the amongst the first question buyers would ask. Now, nobody cares. Great product quality, performance and safety is a given. Consumers are no longer hungry for more specifications.
What consumers are hungry for are stories. The Why behind the product. It’s no surprise that Kickstarer campaign pages are just as much about the team, the mission, the catalyst for the idea, the progress milestones, etc. When we pledge a campaign we want to be a part of that story. We’re literally buying into the story. And that story has value: it’s precisely why we will pay now before the product even exists.
The ultimate expression of this is the story of Tesla compelling well over 300 thousand people to pledge $1,000 each towards a pre-order of the forthcoming Model 3. A car that these pledgers have not seen, touched, or driven in real life. And for the vast majority, won’t actually be able to take delivery of for years. But these 300 thousand people want not just a car but also to be a part of a fascinating story: the story of Tesla crossing the chasm into a mainstream car company by launching an affordable EV for the masses, and by doing so, (potentially) disrupting an entire industry. Amazing.
I think Wave Three has long, long legs. One of my favorite quotes of all-time is the market for something to believe in is infinite. We will always be hungry for great stories to believe in. In fact, our human brains are hard-wired to connect with stories. So a product story will naturally resonate much more so than a bulleted list of product specifications.
Wave Four: ?
So what does the future of e-commerce look like? I’m not sure yet. Wave One, Two and Three still have a lot of runway before they. While e-commerce has crossed the chasm, it still has a long way to go. And, in a global context, a huge chunk of the world is still somewhere in Wave One. In terms of future disruption, I think the most obvious source could be from 3d-printing and other forms of on-the-fly product creation. We go beyond the bounds of products other people have created for us to a place where we can define/customize the products that we bring into our own lives.
Leave a comment and tell me what you think the future of e-commerce might look like!