In 2000, MIT professors Erik Brynjolfsson and Michael D. Smith published a paper titled, Frictionless Commerce? A Comparison of Internet and Conventional Retailers.
Their thesis centered around the fact that the World Wide Web had evolved into a platform enabling a “nearly frictionless market” connecting buyers and sellers and providing the ability to instantly find whatever goods or services desired.
Even more powerful, buyers could comparison shop in real time and then purchase these goods and services instantaneously. This evolution from traditional brick-and-mortar shopping gave true control to the consumer.
Fast forward 14 years, and consumers now take for granted the abilities to compare and purchase online nearly anything one can imagine. It’s safe to say that buyers now expect this same capability via their mobile device.
However, in many cases the experience on the desktop, or mobile device, is still far from frictionless.
These days, many sites require registration. And even once registered/signed in, one often needs to walk through several steps to purchase a desired good or service.
While nobody wants to trade security for ease of use, many companies fight a never-ending battle of abandoned shopping carts as some percentage of customers/prospects get cold feet or abort due to frustration with the user experience.
The new “Holy Grail” for any business should be to make it as easy as possible for any customer to buy a product or service whenever and wherever they like, with as few clicks as possible. With the evolution of location-based technologies, mobile payment systems and a continual decrease in technology costs, this concept of true “frictionless commerce” is quickly becoming a reality.
The thinking here is that when a consumer doesn’t have to think about what they are buying or how they are buying it, their willingness to buy something from you and their share of wallet go up.
Most of you reading this post have likely experienced frictionless commerce at some point over the last few years. Via your desktop, if you’ve ever tried Amazon.com’s “1-click” purchasing, you’ve definitely participated in frictionless commerce.
But the real key to making commerce “frictionless” is making the capability ubiquitous. This means moving it off the desktop and onto the one device that we have with us at all times: our smartphone. It also means having the luxury of trusting a service/brand with our credit card — or more importantly, our banking information.
For the sake of this post, let’s break providers of frictionless commerce into three categories:
In most cases of frictionless commerce, there are three essential elements.
It can be done through a downloadable mobile app. The five examples above of companies leading the way in frictionless commerce all meet this criteria.
The level of security provided is such that even if a password is required (as in the case of Apple), confirmation of credit card security codes or zip codes is not. Any time you make your customer take out their credit card, they have to think about how much money they are spending. That works against frictionless commerce.
The good or service is either downloadable or streaming, OR it comes with free shipping (like Amazon with Amazon Prime).
With that background, let’s get into five companies that are leading in frictionless commerce: Uber, Starbucks, Square, Apple and Amazon.
Uber
For anyone that travels or takes cabs regularly, Uber is a godsend. For starters, you can summon a car to almost anywhere with the click of a button. The combination of the location-aware app and the location-tracking technology in the driver’s car makes it easy to not only request the car closest to you, but also to do so without knowing the address of your location.
The real win — and the reason Uber is so “frictionless” — is that when you are done with your ride, you just get out of the car. No cash, no credit cards, no signing receipts (or hassles over requesting receipts). Cab companies in major U.S. cities are adopting some of these “frictionless commerce” type features, but most are still a ways off in completing the end-to-end process.
Starbucks
The way Starbucks goes about frictionless commerce is both brilliant and deeply flawed. However, the brilliance seems to be outweighing the flaws by a long shot. In fact, as of July of 2013, 10% of all of Starbucks transactions were happening via mobile. The flaw comes from the fact that Starbucks requires a two-step process in order to enable mobile commerce (i.e., you have to sign up for an account and attach it to a Starbucks card).
Once the card is attached to the mobile app, however, the process is truly frictionless, especially if a user chooses the auto-renew function. On a personal note, I am a runner and often start or end my run with an iced Americano at Starbucks. Given the fact that I don’t run with anything but my phone (music and MapMyRun), having the ability to buy my drink with my phone is huge.
Square
It may sound like an exaggeration to say that Square is one of the most impactful technologies to come along in years, but in my humble opinion, it is.
No, it isn’t impacting the way most Fortune 500 companies are doing business. However, it has changed the way commerce is conducted by millions of small businesses, not only in the US but around the world.
With this small, square plastic device that plugs into any smartphone or tablet, any business can now set up an account to process credit and debit cards and then sweep the proceeds directly into their bank account. Not only has this technology made the lives of millions of businesses easier, it is also bringing us one step closer to becoming a cashless society, since it enables nearly everyone to take plastic for payment.
A big benefit for merchants is that it’s cheaper than many of the other credit card payment solutions at 2.75% per swipe (versus some that charge closer to 5% per transaction). And as an added bonus for consumers, Square remembers your credit card — so, once you associate an email with that credit card, you can email yourself a receipt anytime you use Square, irrespective of the vendor.
Apple
What Apple is doing in the payments space is fascinating. As a company, it would appear that they became one of the 800-pound gorillas in the payments space almost accidentally. With the ubiquity of iTunes — a store for the hundreds of millions of music, movie and television lovers — Apple quickly learned that making the purchase of this content as frictionless as possible was the best way to ensure regular purchases and greater share of wallet.
Apple is realizing that the payments space could lead to greater revenue streams and, as a result, is now interviewing candidates for a head of mobile payments services division. Apple is also making it easier and easier to buy in-store items at their Apple stores by connecting purchases to iTunes and is also experimenting with Bluetooth low-energy to take frictionless one step further.
Amazon
One of the largest commerce players in the world (which could get larger with an acquisition of Sears), is one of the earliest participants in frictionless commerce. They launched their 1-click buying functionality in 2000 and forever set the bar high for e-tailers. While putting purchases one-click away should theoretically be easy for any online store to pull off, it’s actually much more complicated than one might think.
For starters, there is a heavy reliance on security because customers must implicitly trust that Amazon can keep their credit card information safe yet accessible. Most companies use a second factor verification like requiring a zip code or security code to be entered.
There is also a need to have a transparent, infrequently changing, shipping policy. Enter Amazon Prime where customers can get free shipping on nearly all products for a year for a mere $99.
The last piece of the puzzle for Amazon is their mobile app, which leverages the best of all that Amazon has done on desktops and laptops for the last 15 years — that, and the fact that you can buy nearly anything you can think of on Amazon.
Final Thoughts
What other companies are doing a great job at frictionless commerce? Tweet them to me if leaving comments scare you. Or feel free to include them in the comments. If you make a clear case, maybe I’ll increase this list of 5 examples to 10.
(Stock image via Shutterstock.com. Used under license.)
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