Online Shopping: The Complete Wired Guide – WIRED

11/19/18

Type “cheesecloth” into Google shopping. Hundreds of online shopping options pop up, in more than a dozen shades, at a range of price points. Many of the packages can be shipped to you in two days or less. In other words, shoppers live in a golden age of convenience. We’ve got more access to more stuff than ever before, at cheaper prices and ever-more-instant speeds. And the businesses who hawk us that stuff? They’ve got unprecedented levels of data on us, and they’re using it to target us in ever-more personalized ways.

As Americans, shopping’s in our bones. Patriotic fervor practically elevated consumerism to a religion after World War II, and today, we blur Jesus and Santa, ditch Thanksgiving for Black Friday, and mint new holidays (Cyber Monday) that give way to copycat holidays (Prime Day), all dedicated to buying stuff. Consumer spending on the “goods” portion of goods and services powers roughly one quarter of the economy, so it follows that retail is uber-susceptible to the technological, political, and economic forces that shape our society. Long ago, traveling peddlers were displaced by local merchants, who were supplanted by downtown department stores, which were upended by shopping malls, then big box chains, and now, the internet. And technology has armed today’s retailers with powerful tracking tools: We accept user agreements and pop-ups, trading gobs of valuable personal data in exchange for convenience—a commodity almost as prized as shopping itself.

The History of Online Shopping

The age of internet commerce really kicked off with Sting. Back in 1994, a band of coders led by a 21-year-old Swarthmore grad named Dan Kohn lived together in a two-story Nashua, New Hampshire, house. Fueled by ambition and a roaring Coca-Cola habit, they launched an online marketplace called NetMarket. The site let users make secure purchases by downloading encryption software named PGP, for “Pretty Good Privacy.” At noon on August 11, a Philadelphia man named Phil Brandenberger logged on. Typing in his address and credit card number, he bought a CD of Sting’s “Ten Summoners’ Tales” for $12.48 plus shipping. Champagne corks flew. The New York Times called it the first secure purchase of its kind. “Attention Shoppers,” a headline announced. “The Internet Is Open.”

Years later, Randy Adams, CEO of another online store called the Internet Shopping Network, claimed to have beaten out Kohn’s group by a month. In either case, the ecommerce floodgates didn’t quite fly open. The Unix-based programs required some tech know-how, and computers were a lot slower back then.

While we wait for modem speeds to rev up from bits to megabits, then, let’s review some retail history. Back in the ’80s, shopping largely centered around malls. Post–World War II migration to the ‘burbs had gutted downtown shopping centers and the sprawling department stores that served as their nuclei. Tax breaks and car culture spurred mass development of new big box stores and suburban shopping malls, and these parking-flush spaces recreated sanitized versions of urban retail corridors, writes Vicki Howard in From Main Street to Mall. Giant discount shops devoured local mom and pops. By 1990, Walmart had become the nation’s largest retailer.

Consumers were spoiled for choice, and they could get it on the cheap. But big box shops were laid out to maximize in-store time, turning shopping into a time-gobbling, endurance event. In the 2003 comedy Old School, Will Ferrell’s character Frank the Tank played this suburban ritual for laughs: “Pretty nice little Saturday, actually, We’re going to go to Home Depot…Maybe Bed, Bath, & Beyond, I don’t know. I don’t know if we’ll have enough time!”

Online shopping, by contrast, offered the promise of near-limitless choice at relatively snappy speeds. One of the earliest pre-Internet shopping ventures to test the online waters, CompuServe’s “Electronic Mall,” opened in 1984, offering stuff from more than 100 merchants, from JC Penney to Pepperidge Farms. Next to today’s sleek web pages, CompuServe’s command line interface looks positively primitive. But it worked, and it saved a trip to the mall. (As one early adopter told his local newscaster: “I just don’t like crowds.”) When it opened, only eight percent of US households had a computer, and at dial-up rates starting at around $5 an hour, the mall enjoyed limited success. E-shopping was still a decade away from going mainstream.

In 1988, a CompuServe competitor named Prodigy sprung up, the product of a partnership between Sears and IBM. Alongside news, weather, email, banking, and bulletin boards, the service included a store. Jaunty illustrations accompanied item descriptions, but as Wired noted in 1993, “the service’s cartoon-like graphics proved far less useful to purveyors of items that consumers wanted to see before buying, such as clothing and home furnishings.” A short-lived grocery service folded “because consumers were uncomfortable using a PC to select food.”

Until the World Wide Web debuted publicly in 1991, online shopping remained the province of services like Prodigy. That year, the National Science Foundation, which funded the networks that made up the backbone of the Internet, lifted its ban on commercial activity. Merchants were free to register domains and set up cybershop, but a problem lingered: Shoppers were—rightly—suspicious of handing over credit card data to remote, faceless webmasters. No mechanism existed to verify the sites’ authenticity.

In December 1994, a 23-year-old University of Illinois grad named Marc Andreessen released Netscape 1.0. The web browser featured a protocol called Secure Sockets Layer (SSL), which let both sides of a transaction encrypt personal information. From there, ecommerce began to take off.

Without the cost of maintaining physical stores, online retailers could offer lower prices and larger assortments than their brick and mortar counterparts, and people could by them in less time than it took to gas up the minivan. A “nice little Saturday” no longer had to entail epic marathons to warehouse-style superstores. If Sting knocked on the floodgates, Amazon was the wave that was about to burst them open.

In July 1995, a hedge fund VP named Jeff Bezos opened an online bookstore. He named it after the world’s largest river, after deciding against Relentless.com. (The domain still redirects to Amazon.) The site carried a million titles, and Bezos billed it “Earth’s Biggest Bookstore.” Within a month, Amazon.com had sold books to buyers in every US state, plus 45 countries.

Bezos recognized that shopping online at the time carried so-called pain points. Gauging quality could be difficult. Shoppers had to manually enter lines and lines of payment and shipping info each time they wanted to buy a nut sampler. High shipping costs could cancel out savings. Such headaches led shoppers to abandon their carts at distressing rates.

Amazon knew these minor irritations could add up, spelling major revenue losses. From the beginning, “Bezos was maniacally focused on the customer experience,” says retail expert and Wharton professor Barbara Kahn. No more cartoonlike graphics: Books were fully digitized, and shoppers could flip through the pages like they could in a physical store. Books were searchable by title, browsable by category, and readers could post reviews. In 1999, Amazon famously patented one-click ordering. This seemingly minor innovation slashed shopping cart abandonment, convinced customers to fork over their data, and helped cement Amazon as the go-to one-stop-shop for hassle-free shopping. Shipping got faster and cheaper, becoming free for orders above $99 in 2002, then for all Prime members in 2005.

Sites like Amazon and eBay, which also opened in 1995 as “AuctionWeb,” proved you didn’t need a physical store to give customers what they wanted. A lot of what they wanted. In 1999, Zappos (since acquired by Amazon) opened one of the first online-only shoe stores, enticing shoppers with free shipping, a generous (and free) return policy, and legendary customer service (one call famously lasted ten hours). The internet promised riches, and investors exuberantly, sometimes irrationally, supplied the funding.

Not every digital store survived that first boom. Cash-flush e-tailers like pets.com and grocery deliverer WebVan poured millions into ad campaigns, expanding rapidly before realizing that customers didn’t always want what they offered. Less than a year after the pets.com mascot soared over Macy’s Thanksgiving Day parade, the company learned that plenty of pet owners in the already crowded space didn’t mind picking up dog food and kitty litter from the grocery store, especially if that meant avoiding shipping costs and long waits. The company closed in 2000. Not long after erecting state-of-the-art fulfillment centers in ten cities, WebVan discovered that the cost-conscious shoppers they targeted weren’t ready for what amounted to an upmarket service: Customers didn’t spend enough to subsidize the trips; they preferred coupons and economy sizes, which WebVan didn’t offer; they often weren’t home during the short delivery windows. The grocery business’s paper-thin margins provided little room for error, and the company declared bankruptcy in 2001, near the height of the dot-com crash. These failures, however, would become instructive for the next generation. “Get Big Fast” gave way to “Minimum Viable Product.”

In the late 2000s and early 2010s, “digitally native vertical brands” (DNVBs) like Bonobos (menswear) and Warby Parker (eyewear) spun up their own direct-to-consumer models. By controlling the entire process from factory to sale and reaching consumers directly through websites and social media channels, these brands could keep prices down, collect extensive data on their customers, and test new products. Last year, DNVBs grew three times faster than ecommerce as a whole. The more data companies swallowed up, the better they got at personalizing their recommendations. They burrowed their way into our inboxes and onto our social media pages. Their algorithms knew what we wanted and predicted what we were going to want. It started to seem like brick and mortar didn’t stand a chance.

Indeed, by the mid-2010s, tax breaks and a hunger for growth had led US retailers to build stores at rates that eclipsed Europe and Japan by a factor of six. This “over-storing,” combined with ecommerce competition, set the stage for the so-called “retailpocalypse.” In 2017, an estimated 7,800 US stores shuttered, and 3,600 were forecast to close in 2018.

If big box stores were going to survive, they needed to reinvent themselves. Consumers had grown to expect all the convenience, selection, and low prices of online shopping. To compete, brick and mortars had to act a little more like websites. Hardware giant Home Depot saw its stock price shoot up after integrating its desktop, mobile, and physical stores, introducing options like Buy Online, Pick-up In Store. By 2016, 61 percent of retailers offered some version of the service. Curbside pickup flourished, flying in the face of the old ethos of maximizing in-store-time.

For those that adapted, a retail future exists outside of bits and bytes. The web may know your habits better than any store clerk, but that’s starting to change. IRL stores aren’t headed for the deadstock pile. They’re just going to look a bit different, get a bit smarter. Some may ditch cashiers, or cash registers altogether. Others will employ robots. And those cameras—they’re not just for catching shoplifters anymore, either.

The Future of On- (and Off-) Line Shopping

The retailpocalypse, in fact, has come full circle. In 2015, Amazon opened its first physical bookstore, then followed it up with 17 more (then raised that by a Whole Foods acquisition). The shops aren’t particularly high tech. No holograms, no VR, plenty of good old-fashioned paper. The shops occupy modest footprints, carrying only four star-and-above-rated books. Squint, however, and you can see the future: Prices are not on display, and customers must log onto Amazon’s smartphone app to see them. Prime members get lower prices, of course. “They train you when you go in the store to open your app,” says Kahn. This lets them merge your online and in-store data. More data equals better personalized marketing, tighter inventories, and lower costs.

Of course, Amazon isn’t the only one corralling your digital data to optimize your in-store experience. Personalization companies like AgilOne and Qubit have sprung up to vacuum all our clicks, tweets, and e-communiques and merge them into individual profiles that stores like Vans and Under Armour use to better target their marketing. And some are going a step further.

Earlier this year, gourmet confectioner Lolli & Pops installed facial recognition cameras in its stores’ entryways. The cameras alert clerks when VIPs (who’ve opted in) enter, then call up their profiles and generate recommendations. In the future, face-identifying cameras could track shoppers throughout stores, noting where they linger and where they don’t. Retailers could use this to maximize purchasing by, say, rejiggering floor layouts and product displays. But some businesses fail to disclose cameras, inflaming privacy defenders.

When the ACLU asked 21 of the nation’s largest retailers if they were using facial recognition, presumably for theft prevention, all but two refused to answer. (Lowe’s owned up to it.) The organization warned of “an infrastructure for tracking and control that, once constructed, will have enormous potential for abuse.” Meanwhile, other companies have convinced shoppers to knowingly trade privacy for convenience.

This year, Amazon opened its first cashierless stores in the US, followed by a handful of smaller startups. Powered by hundreds of super-smart (but not face-recognizing) cameras and an array of weight and motion sensors, stores like Amazon Go and Zippin let shoppers simply grab what they want and leave. (Once again, Amazon customers must use their app, this time to swipe in.) The surveillance offers unprecedented intel about shoppers’ habits and supposedly prevents theft. Investors see the potential. CB Insights reports that over 150 companies are developing checkout-free technology.

In this new blended, digi-physical landscape, brick and mortar stores will leverage their physical advantages, while rendering unto the web that which is better handled digitally. This might mean smaller stores that act more like showrooms than storehouses. When digital-first brand Bonobos (now Walmart-owned) opened physical “guideshops,” they functioned more like fitting rooms-cum-hangout spots. Shoppers arrived by appointment, were offered a beer, tried on clothes, then had their orders shipped directly to them from an offsite warehouse. Other stores are fashioning themselves into tricked-out lounges and event spaces. Some won’t even sell you a darn thing.

It’s called “experiential retail,” In January, Samsung opened a 21,000-square-foot Experience Store in Toronto. Visitors can test out VR headsets and tablets, chat with tech pros, or partake in autumnal smoothie classes and artist demos. The one thing they can’t do? Buy stuff. Restoration Hardware has begun fusing retail with hospitality, outfitting luxurious furniture showrooms with rooftop restaurants, barista bars, and wine vaults. In a history-is-cyclical turn, Apple’s newest DC flagship will host concerts, coding classes, workshops, and art exhibitions, recalling the multipurpose, live-band- and tea-room-appointed department stores of the early 20th century.

The ultimate fusion of convenience and experience could lie in virtual and augmented reality. As with many things VR, it’s too early to predict the impact. You can imagine it though: endless stores featuring infinite inventory, all for zero rent. Walmart filed two patents this summer for a “virtual retail showroom system.” Headset- and sensor-glove-garbed shoppers would browse digital aisles selecting products, which would be packed and shipped from an automated fulfillment center. Ikea launched an AR app last year, letting shoppers “try” out true-to-scale virtual furniture models at home before buying. And Macy’s is already rolling out VR in 69 furniture departments this year. Shoppers can design their own room on a tablet, then traipse through the space in VR.

Some retailers are going all in on the Star Trek vision of shopping. Lowe’s launched its VR Holoroom last year, leading headset-clad in-store shoppers through DIY home improvement tutorials. A month later, fashion retailer Farfetch unveiled their “Store of Future.” Touchscreen dressing room mirrors let shoppers request new sizes, holograms help them customize garments, and smart clothing racks sense when items are removed, then beam virtual versions to a smartphone wishlist.

But much of the evolution is likely to happen behind the scenes. A lot of innovation will happen in logistics, with robot-staffed fulfillment centers and delivery drones, feeding appetites for ever-faster, cheaper shipment. This year, Walmart rolled out robots in 50 stores; the wheeled automatons scan shelves and notify employees when they need to be restocked.

Stores will seek out shoppers where they spend their time, increasingly cozied up to mobile devices and smart speakers. OC&C Strategy Consultants projects voice shopping in the US will reach $40 billion by 2022, up from $2 billion this year. Given that Echos comprise nearly two-thirds of smart speakers, with Google Home racing to catch up, Amazon is once again poised to dominate. Without infinite pages of cheesecloth to browse, voice shoppers will rely heavily on recommended products (a la “Amazon Choice”). And if the smart speaker company doubles as a private label (a la “AmazonBasics”), you can guess which brand they’ll suggest first.

It all adds up to an unnervingly creepy or fantastically convenient and curated world, depending on your vantage point. Or maybe it’s all the above. On the other end of that cart you casually abandon or that data you impatiently fork over sits a business that translates that behavior into real dollars and cents. Multiply that by thousands of shoppers and you’ve got a make-or-break bottom line. Times that by millions of businesses and you’ve got a fat chunk of the economy. No wonder retailers are doing backflips to make shopping as convenient, pleasurable—and quietly invasive—as possible. It’s up to shoppers to decide where to draw the line.

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Last updated November 19, 2018

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