7 trends that will transform SMB e-commerce in 2014

The world of digital commerce continues to evolve at a rapid pace, as retailers ditch legacy systems for emerging technologies organized around a central guiding principle: improving the customer experience.

Just how big is this revolution? Across the entire retail industry, revenue for digital commerce applications is forecast by International Data Corp. (IDC) to grow at an 18.8 percent compound annual growth rate to $4.1 billion through 2017.

"Enterprises are looking to replace aging, custom-developed applications with more modern and nimble applications that allow them to move quickly into new markets with pop-up stores and omnichannel solutions that provide consumers and business buyers with a consistent experience regardless of where they research, shop, buy and return goods and services – online, mobile, in the store, through the call center, and more," said Christine Dover, research director for IDC.

While that big revenue number is clearly a projection across the entire retail industry, much of the innovation is being driven by smaller retailers that aren't saddled with the burden of legacy technology and that are trying to (finally) leave old-fashioned cash registers behind.

With that in mind, here are 7 themes I'll be covering closely over the next 12 months.

1. Tablets redefine point of sale (POS). It seems like barely a week goes by when there isn't a development related to this arena. I expect the rivalry between ShopKeep POS and Revel to heat up, and established vendors such as NCR and Verifone will devote far more energy -- and money -- to protecting their legacy marketshare among retailers, restaurants and food trucks. We'll also hear more from newcomers like Leaf, which snagged $20 million in funding in October 2013 from Heartland Payment Systems (a massive U.S. payment processing company), to advance its Android tablet POS solution. One thing that differentiates Leaf's approach is a heavy emphasize on analytics, and related employee management applications.
2. The acceleration of mobile commerce. According to numbers reported by IBM after the U.S. Thanksgiving holiday, mobile shopping soared to about 32 percent of e-commerce traffic over the mega-shopping weekend -- up 45 percent over 2012. Mobile transactions increased by almost 56 percent year-over-year. Shoppers use their mobile devices very differently depending on the form factor: smartphones are the "browsing device of choice," while tablets drove twice the number of mobile transactions as the smaller gadgets. This is yet another reason for small retailers and restaurants to optimize their Web presence for mobile visitors.
3. Shopping gets social. Referrals from Facebook and Pinterest were also highly influential during the Thanksgiving weekend, according to the IBM data. Shoppers referred from Facebook spent about 9 percent more per order ($97.81) versus those coming in from Pinterest ($92.40.) The fact is, however, that social conversions and referrals remain instrumental. Aside from the influence of Facebook and Pinterest, I'll be keeping tabs on Wanelo.
4. Cash is king, but for how long? Although Square may have irked small businesses with its recent decision to ditch flat-fee pricing, plenty of mobile payments services companies are vying for the attention of small businesses. One convincing argument is the ease with which some of these services can be integrated into a small company's back office: watch, in particular, for the partnerships that Intuit inks for the sake of its QuickBooks application ecosystem. Don't ignore PayPal's ongoing quest to make its widely used digital payment services available in physical stores. And don't underestimate the potential for Bitcoins or other digital currency to play a role, according to Revel Systems cofounder and CEO Lisa Falzone. "Mobile payment options will bridge people's online wallets with their physical ones at checkout," she writes. 
5. Big data for small retailers. One of the most profound advantages of the shift away from cash registers will be the ability of managers to glean more insights about sales trends and customer habits. This information will help owners make better decisions about staffing, inventory, ingredients purchases and so on. The line between POS and customer relationship management systems will continue to blur, offering retailers and restaurants more tools to nurture customer loyalty. Indeed, up to 42 percent of the 640 small businesses responding to a recent ShopKeep POS survey are already using real-time data to adjust business decisions, in some cases in under 24 hours. "They are starting to think big and take advantage of big data, social media and DIY marketing to stay competitive, much more so than we have seen before," said Jason Richelson, founder and CEO of ShopKeep POS.
6. The Internet of things meets retail. You've heard about retailers using the GPS features on smartphones to target geo-sensitive promotions or offers to store visitors (based on whether they are new or existing customers). Revel Systems' Falzone believe the Internet of things will enable other personal gadgets to exchange data with POS solutions. One example she offers is a potential marriage between POS applications and personal data trackers like Fuelband, Fitbit and Up. "As consumers burn calories during your day, these devices will communicate with POS systems during order times to download how many calories you will consume, and recommends meal and menu items based on your daily caloric intake goals," she predicts. Sort of like your personal trainer following you around to watch what you eat. A little creepy but powerful.
7. The local, human touch prevails. Even though online commerce continues to grow, consumers are increasingly seeking the sort of local touch that used to be associated with local retail and specialty stores, according to a survey of about 5,108 people commissioned in September 2013 by Deloitte. Almost two-thirds of the respondents supported the "shop local" concept -- planning to spend up to one-third of their 2013 gift budgets there -- primarily because of benefits such as the perceived convenience and the often unique nature of products that can be found in smaller boutiques. The top reason that consumers return to any shopping outlet (online or brick and mortar), however, is knowledge, according to the Deloitte data.

What one thing do all of these trends have in common? No matter whether a retailer emphasizes online sales or staying firmly rooted in the real world, the central job of its technology should be to offer a personalized experience.

"In the store, retail associates can be engaged to drive loyalty rather than just complete a transaction," said Alison Paul, vice chairman, Deloitte LLP, and retail & distribution sector leader. "The most successful retailers are empowering their associates to become devoted brand advocates who are knowledgeable, connected online, have the authority to price match, and are aware of products available through other channels."

(Photo courtesy of ShopKeep POS)