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Record-busting online holiday sales and the rise of the omnishopper

Record online holiday sales foretell the arrival of conversational commerce, digital humanism and the omnishopper. Also: AWS goes all-out on AI; San Fran Muni metro hacked.

Online sales for U.S. retailers during the first 28 days of the holiday season smashed the record books, rising...

7.4% over last year to nearly $40 billion. For the five-day period between Thanksgiving and Cyber Monday, online buying was up 15% over last year. Sales of $3.4 billion made Cyber Monday the heaviest online-spending day in history, according to Adobe Digital Insights. But, folks, we ain't seen nothing yet.

Lurking behind the record-busting sales is a shape-shifting change in buying habits that will roil merchants and their chief technologists for Christmases to come, say industry experts.

We shoppers are not only becoming more comfortable with digital commerce, we also are exploiting it to suit our immediate shopping needs, leaning on the convenience of online shopping to plow through the demands of holiday gift-giving and using "click and collect" -- order online and pick up at the store -- when we need goods quickly or don't want to pay delivery charges.

When we do go to an actual store, we increasingly want access to the entire inventory, not just what's on the shelves. We also want to be rewarded with a memorable in-store experience -- gait analysis and a pickup basketball game on the half-court at the Nike store, or personalized makeup consultations booked via Facebook Messenger at Sephora.

"There is no such thing as the online shopper and the in-store shopper as separate entities. It's becoming the omnishopper, and the important part is to make those connected experiences seamless for consumers -- and having the right technology to do that," said Brendan Witcher, principal e-business analyst at Forrester Research. "I would say that that's the one thing CIOs need to pay attention to in the retail space is this customer journey."

'Conversational commerce'

Brace yourself, for the customer journey of the omnishopper has just begun. According to Gartner analyst Gene Alvarez, we are at the "dawn of conversational commerce." Already, we have Alexa alerting us to Amazon's Deal of the Day; the billions of messages flying through Facebook pages come with a buy button. Bolstered by advances in machine learning and artificial intelligence (AI), Alvarez said, these rudimentary digital commerce assistants will give way to AI bots that will plan, for example, your child's birthday party -- from scanning your contacts for a suggested guest list to sending out the e-invite, to analyzing the food preferences of attendees and ordering a menu that appeals to their tastes.

"We call it 'commerce that comes to you,'" Alvarez said. It's a phenomenon supported by emerging tech aimed not so much on automating a transaction, he said, but on solving problems for consumers: digital humanism, if you will, as opposed to the automations of the digital machinist.

CIO perspective

Meanwhile, back in Christmas present, Alvarez and others said this year's online sales results already point to the role of technology in determining a sales strategy -- and in shaping human behavior. A decade after its launch, Cyber Monday is not unique anymore.

"It's really just another day of promotion," Alvarez said. Black Friday online sales gave Cyber Monday sales a run for the money. Retailers offered deals post-Thanksgiving shopping spree, through the weekend to Cyber Monday -- and the deals continue.

"The reason this was done, in my opinion, is to spread demand out, so as not to cripple systems on Black Friday or Cyber Monday," he said.

The amount of technology required to support peak online usage is immense and expensive. "You don't want it sitting around all year waiting for this one time," he said. Spreading the demand on those technology systems -- and the costs they incur -- over multiple days takes the pressure off IT resources and off consumers, he said.

From a CIO perspective, the shift in strategy is more evidence of IT's role in shaping business outcomes, Alvarez said. "While it is not the sexiest trend out there, it shows that CIOs need to continue to work on building these closer relationships with the business leaders," he said. "That's so that when business leaders are making decisions that are going to be supported by enabling technology, they are aware of the limits and the tradeoffs."

Figuring out how to spread demand, bolster profit margins and conserve IT resources in a digital environment applies to business events besides Black Friday and Cyber Monday, he added, pointing to enrollment periods for insurers as just one example. "This type of business mindset now has to be part of the IT-CIO mindset: 'Are we getting the business value we want for what we spend on technology?'" Alvarez said.

Inexact science

Developing omnishopper metrics for growing online sales won't be easy, in part, because the science is a work in progress -- do you buy a gazillion servers to cut response time if a three-second wait is just fine with consumers?

And it's partly because online shopping remains a local affair.

"One of the things I've realized is there is no universal success for all retailers," said Forrester Research forecaster Michael O'Grady, who measures online sales in the U.K. and Western Europe.

Many retailers, for example, are trying to crack the online grocery business, he said, but the appetite for online food shopping varies from country to country -- even within Europe. Online grocery shopping has a strong foothold in the densely populated Britain, where delivery fees are circumscribed by geography and click-and-collect options are abundant.

In geographically bigger France, where retailers and customers alike don't like delivery fees -- especially for heavy cargo like food -- online grocery sales have recently taken off with the advent of click-and-collect options. And in Germany, where discount groceries are abundant, he said, online food shopping is minimal, with any convenience gained by online ordering offset by the low cost of in-store shopping.

"The thing that I always come back to is, 'What does it give to the end consumer?'" O'Grady said. "You can come up with endless business cases. But, ultimately, it is all about getting the consumer to understand the value proposition." The bigger the value, the more likely consumers will migrate to it, he added. "The smaller the value, then you don't get the change in consumer behavior."

What's next, buying ice online?

Pushed by mobile use, digital shopping is expanding into new categories. "Amazon has become king at this, bringing the next category online and working out what are the customers' expectations for this online environment," Gartner's Alvarez said.

I offer you a personal testament: On brick-and-mortar Black Friday, my husband for the first time ordered birdseed online at Amazon, a shopping task he hitherto had executed by getting in the car and driving a half-mile to the hardware store.

"That means that from an online buying perspective, [Amazon] has built enough digital trust with him that he feels, 'OK, I can buy this. They're not going to charge me $90 worth of shipping for a 20-pound bag of seed,'" Alvarez said.

By the way, the shift to online is not just a consumer retail challenge, Alvarez warned. B2B companies are not exempt from online shopping. "In fact, CIOs who are in the B2B space should be asking what aspects of the product catalog or services their companies sell should be enabled online. And if they still have faxes coming in, they have to be asking, 'Why haven't we helped them move to this online environment?'"

The omnipresent omnishopper

Of course, at some $376 billion, total online sales still represent a fraction of the $3.4 trillion retail industry, Witcher said.

"The tactile experience and 'I need it today' is still very powerful," he said. That's why CIOs need to focus as much on in-store technology as on the IT that supports digital sales. Which brings us back to the omnishopper, he said -- tech-savvy consumers exploiting all retail channels to buy at the right price with minimal inconvenience.

"People don't want to sit outside Wal-Mart at 4 a.m. with a tent and a cup of coffee, waiting for the doors to open," Witcher said. He could picture himself one day telling his grandchildren about the good old days of waiting for hours outside Best Buy to get a TV. 

TV? What TV, grandpa?

CIO news roundup for week of Nov. 28

Holiday online sales and the rise of the omnishopper weren't the only techie news of the week. Here's what else made headlines:

  • Amazon beefs up AWS with AI and hybrid cloud offerings. Amazon Web Services unveiled three artificial intelligence services for enterprise users at its re:Invent conference Wednesday: Amazon Lex for speech recognition, Amazon Polly for text-speech services and Amazon Rekognition for image recognition. "Amazon AI services are fully managed services, so there are no deep learning algorithms to build, no machine learning models to train and no upfront commitments or infrastructure investments required," the company said in a statement. The company also introduced two new hybrid cloud offerings -- AWS Greengrass and Snowball Edge -- to help enterprise customers extend the AWS cloud to connected devices. Other AWS announcements included bringing PostgreSQL support to its Aurora database engine and the launch of Amazon Athena for running queries on data that's stored in AWS' Simple Storage Service cloud storage service.
  • San Francisco rail system hacked. The San Francisco Municipal Transportation Authority (SFMTA), also known as Muni, was the victim of a ransomware attack Nov. 25, interrupting ticketing services and allowing passengers to ride for free. The attackers allegedly demanded 100 bitcoins -- equal to approximately $73,000 -- in ransom and threatened to release 30 GB of stolen employee and customer data. "The malware used encrypted some systems mainly affecting office computers ... however, the SFMTA network was not breached from the outside, nor did hackers gain entry through our firewalls," Kristen Holland, deputy spokesperson for the SFMTA, wrote in a blog post. Customer payment systems were not compromised, and no data was accessed from the servers, Holland added.
  • Samsung headed for a split? Rumors have been swirling this week about how the South Korean conglomerate may split into a holding unit and an operating company. "Samsung Electronics has taken steps to simplify its business to concentrate on core capabilities in the past several years ... this includes the possibility of creating a holding company structure and the potential benefits and feasibility of listing the company's shares on additional international exchanges," the company said in a statement detailing its roadmap to improve shareholder value. Samsung will bring in external advisers to analyze its corporate structure, a process that is expected to take six months, the company added. Following the Galaxy Note 7 fiasco, investor Elliott Management sent a letter to Samsung in October asking the company to consider a restructuring.
  • Gooligan infects 1 million Android phones. According to a report from Israeli security firm Check Point, a new variant of a malware campaign called Gooligan was discovered in over 1 million Android devices. The malware affects devices on Android 4 (Jelly Bean, KitKat) and 5 (Lollipop), and it's currently compromising 13,000 devices per day. "Our research exposes how the malware roots infected devices and steals authentication tokens that can be used to access data from Google Play, Gmail, Google Photos, Google Docs, G Suite, Google Drive and more," the company's research team wrote in a blog post. In a separate report, Check Point researchers found security flaws in LinkedIn and Facebook that "allow a maliciously coded image file to download itself to a user's computer" and is capable of installing Locky ransomware onto their computers, Ars Technica reported.

Assistant editor Mekhala Roy contributed to this week's news roundup.

Next Steps

Check out our previous Searchlight roundups on how GE's CFO navigates digital transformation, what Trump's win says about data analytics and the Microsoft Teams collaboration tool.

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