Wednesday Feb 27, 2013

Amazon Winning the Race

Amazon has been at the forefront of innovation in e-commerce, and that's because they are constantly looking for new ways, not to sell, but to satisfy customers.  That's a key point.  Instead of advertising products, they provide information and advice to customers either directly or via other customers.  This helps people make better decisions about their purchases.  Looking back, we can see Amazon has been a leader in many areas:

  • 1995 - customer reviews
  • 1997 - recommendations & bundles
  • 1997 - 1-click ordering
  • 2001 - look inside the book
  • 2001 - where's my stuff?
  • 2002 - free super saver shipping

The latest feature I've seen is the Customer Questions & Answers. On certain product pages, you can click on "Questions" and pose a question to other customers that have purchased the product.  Apparently Amazon send the question via email to past customers that purchased the product and they are encouraged to reply with an answer.  Shoppers can browse past questions and answers as well.

This emulates the physical world quite nicely.  You see a product, like a digital camera, and want to know how many pictures it can take without a memory card.  A current owner responds with an answer, and you are better positioned to make a decision.  Its just like asking your co-workers and friends, except Amazon knows who already owns the product so they do the "matchmaking."  Amazon claims 96% of the questions get answered, and 40% within two hours.

So what should retailer's take away from this?  Focus less on traditional advertising and selling, and shift to satisfying your customers' needs.  The selling part will eventually follow.

Check out this fantastic presentation on Amazon to learn more:

Wednesday Feb 20, 2013

Shipping Wars

I messed up.  My son wanted Borderlands 2 for his XBox so I ordered it from Amazon, but its taking 8 days to arrive.  That's a long time for a kid.  I'm saving him $15 by using the Free Super Saving Shipping, but he really wants it now.  (I've since discovered that Amazon Prime can be shared with family members, so my brother added me to his account and now I get free 2-day shipping!)  I think he's typical of many shoppers, which is why there's renewed focus on next day shipping.

I'm trying ShopRunner, which is a club that offers free 2-day shipping for several retailers, including one of my favorites, Newegg. It's well integrated with the Newegg site so its very easy to use.  Of course its 2-day shipping from when the order is picked, so it can end up being 3 days.  Several retailers have created their own free-shipping clubs because free shipping is very important to web shoppers, and fast shipping delights.  In fact, shipping charges and shipping time account for 76% of cart abandonment.

Now that Amazon has agreed to charge sales tax in Texas (where I live), they are opening three new fulfillment centers in Texas.  This should make it more cost effective to offer cheaper, faster shipping.  With enough scattered fulfillment centers, they could conceivably offer next day shipping to most major population centers.

Not to be outdone, eBay is testing same-day delivery in limited markets via its eBay Now product.  Basically it tracks inventory at nearby stores, sends a courier to buy the item, then delivers it to your door for a fee.  There are several similar services being tested in limited markets.

This is an area where brick-and-mortar stores might just have an advantage over online, especially if the Marketplace Fairness Act goes through and levels the tax playing field.  Being able to ship items from a local store can be cheaper and faster than fulfilling from some warehouse on the opposite coast.  Retailers that have already mastered "buy online, pickup in the store" need only change the pickup to delivery.  Grocery seems to be focused on this, with Fresh Direct leading the way in New York and AmazonFresh in Seattle, not to mention the many successful offerings in the UK which are projected to double in five years.

I think the lesson here is that fast delivery is becoming a differentiator in some markets, so retailers would be wise to make sure the basics are ready.  Make sure perpetual inventory is accurate and visible, labor scheduling is efficient, and shipping/delivery partners in place.

Monday Feb 18, 2013

Senses for Retail

When we talk about computer innovation, we often talk about how powerful computers have become.  But another aspect of computing is the advancements in the man-machine-interface, or the usability of computers.  We've gone from punch-cards to GUIs to tablets with each step of the progression getting us closer to the goal, which is transparency.  Using computers should be so natural that we don't expend any additional effort to use them.

So I was glad to see that IBM chose the five senses for this year's 5 for 5, five trends that will touch us in five years. From a retail perspective I'm not really interested in the taste and smell senses, although they are important for restaurants and grocers.  But the remaining three (touch, sight, and hearing) make up what I like to call Augmented UX.

In the retail industry there have been some interesting examples of user experiences that have been augmented by the senses.  For example:




The increase in computing power allows these complex technologies to move out of the labs and into stores, helping both consumers and employees.  How long before I'm asking HAL for advice on buying a new tie?

Wednesday Feb 13, 2013

What's Next from Apple?

Apple has had a profound impact on the retail industry with its amazing stores, mobile POS, and devices that allow people to shop on-the-go.  So it makes sense to monitor the boys in Cupertino so we don't get blindsided.  This week two big rumors were revealed that might give us some hints of what's to come.  First, Bloomberg is reporting Apple has a team working on a smart-watch, a wearable device that has some of the iPhone's features.  I find it hard to believe they can pack enough battery into a wristwatch for it to be anything iPhone-like, but perhaps its just a conduit for alerts from a bluetooth connected iPhone.

This "iWatch" concept has me thinking about even faster payments at the POS.  No need to whip out that phone, as perhaps the iWatch will  transmit payment credentials.  This could be the second step toward the wearable computer, the first being Google Glass.  The future may bring real-time product previews and offers magically popping up in your field of vision.  (BTW, our Retail Applied Research team has been working on iPad-based augmented reality for delivering contextual reports to store managers as they walk the aisles.)

The second rumor is that Apple is looking to buy a high-end television manufacturer.  The potential for Apple to apply what it learned from the music industry could really change the way in which we consume TV.  And of course, Apple would be well positioned to optimize Second Screen Commerce, allowing viewers to easily buy what they see. PayPal has teamed with Tivo to allow viewers to buy from ads, but a true Apple TV might just allow purchases from sitcoms.  The Big Bang Theory meets QVC.

I just hope the iWatch isn't waterproof, because the shower is my only remaining refuge.

Friday Feb 01, 2013

The Metamorphosis of Retail

This isn't a Kafka knock-off story about a retail associate turning into a giant bug, although the conclusion could be just as hideous.  I have always thought that the airline industry illuminates the way for retailers in some aspects.  I saw kiosks and QRCodes used at airlines before I saw them in stores, for example.  And airlines invented loyalty programs.  I appreciate the customer service and perks I get from my airline, and I wish I would be treated similarly by my retailers. But regardless of how much I spend with a retailer, I'm always treated as any other member of the herd, with the exception of high-end boutiques and possibly departments stores.  An article by Jeff Katz suggested that retail is following the path of airlines, and it gave me pause.

Katz, a former airline industry executive, points out that airlines determined that their customers are driven by price more than any other factor, so they have lowered their prices and stripped down service accordingly.  Then they let their customers pay for the things that matter to them, basically relying on add-on services, like preferred seat and bag fees, for profit.  The retail landscape isn't that much different with today's customers myopically focused on price.  Traditional retailers can't expend the effort and dollars to provide service to customers that whip out their phones and buy from a lower-price competitor (hello Amazon and eBay) that has less overhead.

Marc Andreessen, co-founder of Netscape and venture capitalist, has been trumpeting the coming downfall of brick-and-mortar stores based on the fact that the overhead doesn't allow them to compete with online retailers.  And while I understand where he's coming from, I don't agree at all.  Competition has and will continue to cause retailers to change.  Traditional brick-and-mortar retailers are leveraging new touchpoints (notice I'm staying away from the dreaded "channel" term) and understanding how to provide greater personalization.  (Whenever I receive coupons from Target, I just have to wonder exactly how much they know.)  And while the technology exists for my pre-teen daughter to order clothing and shoes online, she will never do it.  She enjoys shopping too much.

Back to the airline industry... Retailers have the technology to track every interaction with me, and they can even personalize offers based on my patronage, their inventories, and the state of the local economy.  So just like I know my fellow passengers in row 20 (the exit row on MD-80s) each paid a different price for the exact same flight, we could be moving toward personalized pricing in stores.  And why stop there?  Browse the aisles, use a dressing room, make a return -- all might someday have fees associated.  (Remember re-stocking fees?)  Of course those fees will be waived for their most loyal customers, plus we get to use the express checkout as well.

So will consumers put up with the airline-ification of retail?  In some ways they already have. Just look at big-box, rock-bottom price, self-checkout stores.  The associates are about as friendly as TSA agents, and yet we still buy because we are so driven by lowest price.  Do you pay a fee to enter a Costco or Sam's Club?  Yes you do.  This Kafka "monstrous vermin" is starting to look pretty scary.

Fortunately, there's enough room in the retail industry for bare-bones retailers all the way up to personal shoppers and many points in between.  Retail is not going to die, nor is it going to merge with USAirways (although American Airlines might).  It is definitely going through major changes, most of which will benefit consumers. Every retailer has the opportunity to stake a claim to their market, their brand, and their offering. They are differentiated on price, service, and experience.  Some will neatly wrap my purchase in tissue-paper while others will charge me for a shopping bag.  Its all good because I make the choice.

So we'll take some lessons from the airline industry, but we'll also avoid some of their mistakes.  I look forward to the opportunity to tune my shopping experience to fit my needs, both online and in stores.


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