Ecommerce’s Discovery Problem

In the online retail world today, scale wins. With scale, though, comes an enormous product discovery problem — it is almost impossible to find or be found among hundreds of online storefronts and thousands of product options. Right now, a search for “television” on Amazon yields over 600k results, but that pales in comparison to the 3.2M results for “toy” or 35M results for “shirt”.

Of course, consumers have ways of filtering and prioritizing in order to cope with the proliferation of product choices that they face, but dozens of studies have identified the psychological and inefficiency issues that arise when people are given too many choices. Some consumers spend hours trying to maximize the purchase decision, while others settle for the first acceptable option. Neither of those paths lead to a great shopping experience and outcome.

In response, online retailers have invested millions to try to solve this discovery challenge for consumers. Data scientists have developed sophisticated machine learning algorithms that seek to recommend the perfect product for you based on everything they know about you and your shopping behavior. At the same time, retail marketers have refined their buyer profiles in order to target you with exactly the products they think you and your cohort want to buy. However, those efforts don’t appear to be paying off, as online storefront powerhouses like Amazon and Alibaba have established physical retail presences in order to limit selection and provide a more comfortable and streamlined buying experience.

How does this discovery problem affect the ecommerce value chain?

Vendors

The vendors who offer their products in online storefronts have it the toughest. They have to find a way to stand out among the crowd on an ecommerce site that is optimized to provide massive selection. For most vendors, their marketing choices are limited. They can try to directly reach potential customers but the acquisition economics don’t make sense when those customers are pointed to a storefront like Amazon, where they can easily be sidetracked by a competitor and Amazon’s cut of the purchase is 15% or higher. Alternatively, they can invest in a review program to increase the likelihood that they are found and selected. Finally, on some ecommerce sites like Alibaba, they can pay the site directly to rank higher in search results. Unfortunately, none of these choices offer a great chance of success, especially for smaller vendors who may not have the resources to compete.

Ecommerce Sites

Ecommerce sites are stuck in the proverbial bed of their own making. In the race to offer the largest selection and the lowest prices, they have architected their webpages and their customer experience to be search-centric rather than browse-centric. Customers come to their sites looking for something specific, using categories and filters to narrow it down and make a purchase decision. Customers who aren’t sure what product they want or who simply want to browse are left with few options. This strategy has worked wonders for these sites’ bottom lines, but it has left them unable to replicate the physical retail shopping experience in a way that many customers desire. Furthermore, it’s a challenge that these ecommerce sites cannot solve themselves as scale is their dominant strategy but scale is mutually exclusive with easy product discovery.

Consumers

Consumers simultaneously get everything and nothing in the quest for their money. With unparalleled product choice, they have nearly unlimited options for any purchase they want to make. However, having all these choices frequently leads them into buying behaviors intentionally designed to reduce the cognitive load of a purchase decision. As a result, most consumers do not get the best product for their needs and do not have the best shopping experience in the process. And for those consumers who value the serendipity of window shopping or browsing through a store, that experience is all but impossible at most ecommerce sites.

So what’s the solution for online product discovery?

Most of the product discovery issues originate from the centralized nature of ecommerce today, with consumers and vendors relying on a few large online storefronts. By decentralizing commerce, suppliers will be freed to reach consumers in more locations and to be showcased in the kind of browsing experience that many consumers appreciate. This decentralization doesn’t just entail eliminating the middleman to allow buyers and sellers to transact more easily. It requires the development of a third participant in the market that takes the place of the ecommerce site but is incentivized to offer a better, more curated shopping experience. At SesameOpen, we believe that venues (both physical and virtual) can offer that ecommerce experience, and that recent advances in blockchain technology and token economics provide perfect incentives for marketplace participants. To read more, check out our previous post “Introducing the SesameOpen Network — Decentralizing Ecommerce”

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