Wednesday Apr 15, 2015

Wicked Fast Delivery

Amazon announced one hour delivery for Austin so I had to give it a try.  My daughter needs a larger camera bag, so I decided that would be a great item to order.  You have to order via the PrimeNow mobile app and its a reduced set of available items, but I had no problem finding what I wanted.  I waited until 8am to start my order, which took six minutes because I used my office address and had to verify my credit card.  Here are some screen shots of the order:

Two hour delivery is free, and one hour is $7.99.  It also recommends a tip of $5.00.  Between the delivery charge and tip, I guess they cover the cost.  It might even be cheaper than two-day shipping according Paula Rosenblum, a retail analyst with RSR.  I chose the one hour delivery and received a text message at 8:11am stating, "Your Amazon Prime Now order will arrive soon."  Then at 8:21am I received a second text message stating, "You Amazon Prime Now order has been delivered."  Yep, it was delivered in 15 minutes.

Now you can see in the map above that the DC is very close to my office, but its still impressive how fast I got my order.  I can definitely say I'll use the service again.

Retailers have the opportunity to offer similar services by partnering with delivery companies.  They key is managing in-store inventory and the picking process.  I expect to see this service from local stores in the next year.

Thursday Apr 09, 2015

Amazon Leading the Charge Again

Free shipping, personalized webpages, Kindle, Prime, Fresh...the list of Amazon innovations is long, and if you watch carefully you can sometimes see what's coming next.  For example, when Amazon suddenly reversed their stance on charging sales tax, it was pretty clear they were doing it to further their 2-day shipping goal.  In exchange for charging sales tax, they would open more local distribution centers so that shipping times could be reduced. 

More recently Amazon released Dash, the wand used to built a grocery list, and Echo, the Siri-like appliance that interprets voice commands including adding items to a shopping list.  And as I predicted last Fall, Amazon has now announced Dash Buttons, a way to easily reorder home products.  These last three innovations are clearly targeting home replenishment through IoT automation.  But wait, there's more.

The Dash Button is a battery-powered, WiFi-enabled button that can be located near where home products, like laundry detergent or paper plates, are used.  When the product-specific button is pressed, that item is added to your Amazon cart for easy reordering.  Its pretty obvious the cost of the buttons is being shared with CPG companies.

We can debate whether Dash Buttons are a good or bad idea, but in the end they are just the first stop on this home replenishment journey enabled by the Internet-of-Things. The underlying trade consumers are making is less choice for more convenience, and the main casualty will be the retailers that aren't Amazon.  The buttons and their future decedents (like reorder buttons built into appliances) are hard-coded to purchase from Amazon -- this should scare retailers.

Perhaps the solution is to create a standard communication protocol for these reorder opportunities that connects to a website where consumers can define their reorder rules.  For example, laundry detergent is always Tide from Kroger, toilet paper is best deal, and light bulbs are GE from Lowes.  At least this way consumers have options, and retailers can compete for business.

Thursday Mar 12, 2015

Pure-play Retail is Doomed

I highly recommend watching NYU professor Scott Galloway discuss the Four Horsemen, but its the first 7 minutes that really interest me.  In that time Scott lays out a case for why pure-play retailers are doomed.  He states that retailers that focus only on e-commerce will either have to open stores or face going out of business.  (And I suppose there's a similar fate for traditional retailers that fail to adopt digital.)  He notes that retailers like Fab, Guilt, and Net-a-Porter are failures while retailers like Warby Parker, Rent-the-Runway, and Bonobos are thriving by opening stores.  "Stores are the new black in the world of e-commerce."

I was with Scott until he turned his attention to the big-kahuna of e-commerce, Amazon.  With $6.6B in transportation costs but only $3.1B in shipping fees collected, Scott claims Amazon's model is not sustainable (see his chart below).  Once the cheap capital dries up, Amazon will be forced to open stores in order to stay competitive.

I disagree.  Not because the logic is flawed, but rather because Amazon is not a typical retailer.  I believe they could be profitable if they wanted to but instead choose to continue investing in widening their competitive moat.  Not only is their retail business state-of-the-art, but their investments in AWS, tablets, payments, IoT, etc. are complementary and help to diversify the business (yes, they can do both).  Amazon is not your typical pure-play.

Scott rightly points out that the future of retail is represented by Macy's omni-channel model.  Using stores as showrooms, distribution centers, and customer service portals where the digital and physical are intertwined is the way forward.  Consumers will continue to shop at stores, but stores will also serve as pick-up points and shipping centers.  The graph below from Scott's presentation helps to show the momentum of click & collect, an important.aspect of this new model.

Traditional retailers that leverage their stores alongside digital can absolutely compete with the likes of Amazon.  Stores are not going away -- they are just transforming to serve customers in new ways.

Tuesday Feb 03, 2015

Happy Birthday Amazon Prime

Has it been 10 years?  During that time Amazon's revenue has increased from $6.9B to $89.0B, and I'm guessing the unique program was a big part of that growth.  It's estimated there are $40M members, which would represent about 45% of Amazon's US customers.  I'm a member (although I only receive the free 2-day shipping because I share my brother's membership).  The student discount trains young shoppers to expect 2-day delivery, and I imagine the program is pretty sticky.  Unfortunately, Amazon is pretty secretive about its successful program.  Clearly they lose money on the actual shipping, but they seem to make it up on the increased number of purchases.

Now there's Prime Fresh for $299/year to deliver fresh groceries in limited cities.  Back in 2005 I could never have imagined how successful this program appears to be, and what's more impressive is the breadth of its offerings. Now Amazon is starting to open stores on college campuses, considering the purchase of existing Radio Shack stores, and there's always PrimeAir hanging out there waiting for regulators to set it free.  I wonder what's next?

Monday Feb 02, 2015

Payments in the Retail Industry

Last week I delivered a webinar for some of our Oracle Retail User Group (ORUG) members on payments in retail.  With NFC, EMV, and the many emerging payment solutions on the market, its important to keep current.  The deck is below, and a brief overview is after that.

Slide 2- The basics of credit card fees.  With a $100 purchase, the merchant actually gets $98 after fees taken by the issuing back, card network, and acquiring bank. Card fees are one of the most expensive costs for retailers.

Slide 3- The big emerging payment solutions are Google Wallet, PayPal, SoftCard, ApplePay, and MCX/CurrentC.  Google and Softcard is straightforward NFC with coupons and loyalty.  ApplePay is focused simply on payment.  PayPal is trying to extend online payments to the offline world, and MCX is trying minimize costs for retailers.

Slide 4- There are tons of smaller, emerging payment schemes including solutions from Final, Plastc, SimplyTapp, and Dwolla among others.

Slide 5- Krebs has a nice list of the types of fraud in the industry.  There are lots of opportunities for thieves.

Slide 6- Data breaches occur in many industries, not just retail.  Its a widespread problem.

Slide 7- Every retailer needs a Response Plan so they are prepared when a breach is discovered.

Slide 8- EMV is a step in the right direction, but it doesn't solve all the issues.  With base EMV, card numbers are still in the clear so memory scraper malware, the cause of several recent breaches, would still capture account numbers.  Also, retailers should be aware the when EMV is rolled out, fraud tends to migrate online.

Slide 9- There are three advanced solutions that help combat online fraud, but none of them is in widespread use due to additional friction and costs.

Slide 10- The liability shift is coming soon, so retailers need to understand what it entails.

Slide 11- The card issuer configures the card to determine the cardholder validation method, which can be online PIN, offline PIN, signature, and none.  Unfortunately, some banks are choosing signature, which isn't the most secure.

Slide 12- The process of using an EMV card is slightly different than magstripe, so lots of training will need required.

Slide 13- Some advice for retailers when they implement EMV.

Keep your eye on this space as it continues to change.

Thursday Dec 18, 2014

Evolution of Image Recognition

Remember the first time you tried Shazam on the iPhone? I was blown away. Even with ambient noise the thing was accurate.  Then I recall John Yopp, our head of research, say we should create a fashion Shazam that identifies clothing for people. When you see a cool tie at lunchtime, snap a picture and buy your own.  Wait a second, songs are one thing but fashion would be impossible.  Patterns, shadows, creases -- it would never work.

Then I came across GetFugu and Google Goggles, which both made good attempts are recognizing products.  Amazon's Flow was also very good, but it heavily leveraged optical character recognition to get hints about the product.  I suppose that fine when shopping in stores, but it wasn't the real world scenario I was looking for.  (Flow has undergone many upgrades over the years and now it can create a shopping list.)  Pounce was pretty good at marrying traditional advertising with digital, allowing the user to snap a picture of a product in a circular/flyer then see the product on the Website.

In a Customer Advisory Board meeting, one of my customers showed me a very cool app for recognizing sneakers.  NetShoes, a Brazilian e-commerce company, released an app that I found to be very accurate.  (I went around the conference snapping pictures of people's sneakers.  Luckily it was the last day so most were wearing comfortable shoes for the plane ride home.)  I later contacted the engineers and found there was a pretty exhaustive process for training the application to recognize the objects, but it could be used for almost anything given some degree of context.

Five years or so after my first experience with Shazam, I think we're getting closer.  Companies like Slyce are investing heavily in the technology necessary.  But we've still got a ways to go.  I downloaded and tried Neiman Marcus' implementation of Slyce and tested a few handbags.  Close but no cigar.


Monday Nov 10, 2014

Shopping Just Got Easier with Echo

Last Thursday I was in Orlando talking to a group of retailers about the future, and specifically how the internet-of-things might change the way we shop.  I was explaining how companies like Amazon are working on ways to conveniently reorder products, like placing a reorder button in the laundry room so its easy to reorder detergent.  At the same time I was speaking, Amazon was announcing their latest product, Echo, which is even better than I had imagined.

Echo is a device you place in your home that listens for your commands, much like Siri on your iPhone.  It answers your questions and does basic tasks.  What's the weather today?  Set an alarm for 10am tomorrow.  Add paper towels to the shopping list.  When is the next Hokie football game?  Seems like every futuristic TV show or movie has an intelligent voice-response system in the home -- I guess Echo is our first step in that direction.

I'm sure the commands "add to list" and "buy" were the first things Amazon implemented. This product follows the same strategy as the tablet and phone that came before it: make it incredibly easy to buy things from Amazon.  Why bother putting "buy" buttons in strategic places around the house when you can just say what you want out-loud.  Brilliant.


Tuesday May 13, 2014

Dark Stores

Toys"R"Us has been offering omni-channel (I'm so sick of that term) journeys such as buy-online-pick-up-in-store for several years.  Additionally they can use the store to fulfill online orders, which is an important part of their business, especially during the holidays.  Both cases require a store employee to pick product from the floor and move it to the backroom.  I was speaking with someone from Toys that told me a funny story about this.  You can imagine the chaos on the floor during the holidays, so when employees were picking items they were constantly being interrupted to answer questions or retrieve items from high shelves.  To combat the issue, employees assigned picking duty did so without an official uniform.  Yep, they had to wear street clothes to get the job done.

Although online grocery shopping hasn't yet taken off in the US, its quite popular in the UK.  Customers place their order online which is fulfilled at a nearby store and delivered by truck.  Pickers are given a large cart with separate bins for separate orders, and they use a tablet to efficiently navigate the store.  With enough orders, you can imagine those customers slowing down the pickers.  The grocery store layout isn't really conducive to both types of foot-traffic.  Thus the dark store was born.

Just as you might expect, the dark store has no customers and is used strictly for picking and fulfillment.  Its location and layout are similar to traditional stores, but there's no price tags, no endcap advertising, and no checkout lines.  Its a neighborhood warehouse, complete with fresh, frozen, and dry goods.

Sainsbury, Tesco, and Waitrose continue to open dark stores in the UK, filling 4,000 online orders a day per store in some cases. I suppose this makes perfect sense in areas where order volume is high, like in big cities.  Then in the suburbs, it might be acceptable to leverage the existing store, perhaps with an express lane for crowd-sourced deliveries like Instacart.

Although I don't know of any dark stores in the US, it wouldn't surprise me to hear that Amazon Fresh and Fresh Direct are using them.

Image from The Guardian: Waitrose, Aldi and Lidl eat further into major supermarkets' market share.

Monday Apr 07, 2014

Amazon Dash

Just to once again prove that Amazon is a technology company that happens to do commerce, the Seattle giant has released Amazon Dash, a new tool for shoppers.  Chances are you heard about their recent set-top box, Fire TV, but the Dash didn't get much hoopla.  That's because it complements their Fresh program, which is only available in Seattle, San Francisco, and Los Angeles.

Think of Dash as a remote control for your shopping list that you leave in the kitchen.  When you pour the last of the milk in your coffee, grab dash and scan the carton's barcode.  Or better yet, just say "milk" into Dash's microphone.  Items are added to your online shopping list, then when you're ready to order, you make a few adjustments and checkout.  Amazon Fresh delivers your items the next day.

In a similar vein, I introduced Grocery IQ, a mobile app, to my family to manage our grocery list.  Its nice because we can all add to a centralized shopping list.  When my wife does the shopping (in a physical grocery store), she checks the items off the list as she goes.  We can actually monitor the list in real-time.  (Warning: that also means the kids can add items as you're shopping so the list never shrinks -- real funny kids.)

Amazon has made this process even easier by providing a dedicated device instead of (actually, in addition to) a smartphone.  And of course its hardwired to Amazon's shopping cart.  Brilliant, as usual.

Thursday Jan 30, 2014

Cookies in the Store

Online retailing has many advantages, which companies like Amazon have magnified with great success.  Since the early 1990s, technology has enabled great leaps forward for e-commerce sites while the brick-and-mortar world has remained relatively stagnant.  Yes, there are pockets of in-store innovation that have certainly  improved the customer experience inside stores, but by-and-large the Web world retains a big advantage. 

Tax legislation is finally being passed (on a state-by-state basis for now), which helps level the playing field a bit.  And by the same token, next-day delivery detracts from offline's allure of instant gratification.  Both physical and digital stores continue to up the ante, and consumers are the big beneficiaries.

One huge advantage of e-commerce sites is context awareness -- knowing who's browsing products, along what path, for how long, from what geography, etc.  The nature of the Web allows online retailers to "watch and learn" how customers shop and even to influence their behaviors along the way.  But this notion of context isn't strictly limited to the Web, at least not anymore.  Mobile phones are acting like Web cookies in the physical world, opening up possibilities that retailers only imagined were possible online.

The table below shows some online capabilities alongside some similar offline capabilities.

 Online  Offline
 Cookies  Mobile Phones
 Login  Geo-fence / Check-in
 Visitors Metric
 People counters
 Pageviews Metric
 Heatmaps
 Product info
 QR Codes
 Recommendations  Assisted Selling
 Personalization
 Opt-in + Beacons
 Promo Codes
 Digital Coupons

Assuming the right hardware is installed in the store and the customer has opted-into being tracked via the retailer's mobile app, a world of opportunities are suddenly accessible. We can follow customers on their journey through the store, noting where they dwell and which items they touch.  These data points yield improved store layouts, better assortments, and more localization.  Furthermore, we can make intelligent recommendations, offer personalized offers, and award/redeem digital coupons as they shop, enhancing the overall customer experience.

So much of the same context the online retailers take for granted is now available to brick-and-mortar stores for both analytics as well as real-time engagement.  None of these in-store capabilities are really that new, but the idea of combining them to provide a holistic view is where we're going.  And when you track events across both stores and e-commerce, you have contextual shopping at its best.

Sunday Dec 01, 2013

Amazon Octocopters

Now I've seen it all.  Its already amazing that Amazon expects 300 items per second to be ordered from them on Cyber Monday, many of which will be delivered to Prime customers in two days via their 96 strategically placed fulfillment centers.  But now they are experimenting with 30 minute delivery.  You can't drive across town in 30 minutes let alone pick and pack and order, so how do they plan to do it?  They hope that within a few years, they will be able to deliver small packages via flying drones, more specifically, octocopters.

Jeff Bezos always maintained that Amazon is more a technology company than a retailer.  He takes great pride in pushing technology for the benefit of customers, with examples such as product recommendations, Amazon Web Services, and the Kindle reader.  Their Lab126 (comes from "A to Z"), famous for the Kindle e-reader, is a hotbed of innovation in the valley.

So I wasn't too surprised when Bezos said they were hoping to deliver packages using drones, but I was floored by the maturity of their demonstration.  Small packages go down conveyer belts to awaiting drones that whisk the items away to GPS coordinates.  Now there are tons of reasons this won't work today, no the least of which is FAA doesn't allow it, but the prototype shows the technology is only a few years away.


Each of the seven generations of fulfillment centers continues to improve, making it really hard for any competition to catch up.  This need to always be investing in the next thing is why Amazon isn't profitable.  They continue to take the long view, looking to build competitive moats now in exchange for future profits.  And their diversification into book publishing, Web Services, video streaming (including original content), grocery, fashion, tablets, etc. allows them to constantly expand their customer base.

I wonder what's next.

If you'd like to see more, checkout the CBS 60 Minutes Overtime video.

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.

Thursday Dec 13, 2012

2013 Predictions for Retail

Its that time of year to roll out the predictions for next year.  I can't say I've really nailed it in the past, but feel free to look back at my 2012, 2011, and 2010 predictions.  I'm not expecting anything earth-shattering this year; just continued maturation of several technologies that are finally taking hold.

1. Next day delivery -- Amazon finally decided it wasn't worth fighting state taxes and instead decided to place distribution centers everywhere so they can potentially offer next-day deliveries.  Not to be outdone, Walmart is looking to leverage its huge physical presence to offer the same.  Clubs like ShopRunner are pushing delivery barriers as well, so the norm is shifting to free shipping in a few days or relatively cheap shipping overnight.  Retailers need be thinking about how to ship from physical stores.

2. Bring your own device -- Earlier this year Intuit bought AisleBuyer, a mobile self-checkout start-up, at least somewhat validating the BYOD approach.  Grocery stores, especially in Europe, have been supporting in-aisle self-scanning for a while and I'm betting it will find a home in certain verticals in the US too.  There's also the BYOD concept for employees.  Some retailers are considering issuing mobile devices at hiring along side the shirt and name-tag.  Employees become responsible for the hardware until they leave.

3. TV shopping -- Will Apple finally release a TV product in 2013?  Who knows?  But the industry isn't standing still. Companies like QVC and HSN are already successfully combining the TV and online experiences for shopping.  Comcast is partnering with Tivo to allow viewers to interact with ads with Paypal handing payment.  This will be a slow maturation, but expect TVs to get smarter and eventually become a new selling channel (pun intended) for retailers.

4. Privacy backlash -- It only takes one big incident to stir the public, and I'm betting we have one in 2013.  Facebook, Google, or Apple will test the boundaries of what the public is willing to accept.  It could involve a retailer using geo-location technology, or possibly video analytics.  And as is always the case, the offender will apologize, temporarily remove the technology, and wait 2-3 years for it to be generally accepted.  Privacy is a moving target.

5. More NFC -- I've come to the conclusion that adoption of any banking technology is going to be slow.  It was slow for credit cards, ATMs, and online billpay so why should it be any different for NFC?  Maybe, just maybe the iPhone 5S will have an NFC chip, but we're not going to see mainstream uptake for years.  Next year we'll continue to see incremental improvements from Isis, Google, and Paypal and a plethora of new startups, but don't toss your magstripe cards just yet.

6. In-store location -- The technologies for tracking people inside stores is really improving.  Retailers can track people using video cameras, infrared, and by the WiFi radios in mobile phones.  We're getting closer to the point where accuracy could be a shelf-facing, which will help retailers understand how people shop, where they spend time, and what displays attract them.  Expect CPG companies to get involved and partner with retailers, since the data benefits both parties.  Consumers will benefit by being directed right to the products they seek.  (In 2013 ARTS is forming a workteam to develop new standards in this area.)

7. M&A -- Looking back at 2012 there were some really big deals involving IBM, Oracle, JDA, and NCR and I expect that trend will likely continue as vendors add assets to bolster their portfolios.  Many retailers are due for an IT transformation to support anywhere, anytime shoppers, and one-stop-vendors can minimize complexity and costs.

Predictions from other sources:

Wednesday Aug 01, 2012

Amazon is Amazing

Regular readers know I'm a big fan of Bezos at Amazon.  In fact, I commented on Amazon over at RetailWire just today.  Well now Amazon has taken the next step, and launched Amazon Yesterday Shipping.  Take a look at the video below:

About


David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.


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