Monday Sep 09, 2013

Apple iBeacons in the Store

There is much anticipation surrounding tomorrow's Apple event.  I'm sure we'll hear about new iPhones and iOS7, and we might even hear a bit about iPads, iWatches, and AppleTV.  But I'm really waiting to hear more about iBeacons, a Bluetooth low energy solution for micro-location detection.  iBeacons are going to bring us one step closer to Minority Report marketing, for better or for worse.  Actually, the combination of iBeacons and wearable tech like the rumored iWatch or Google Glass could take us beyond contextual advertising and into useful engagement.  So why should retailers care?

Location is a key contextual clue for target marketing.  Knowing where a consumer is, especially relative to your store, helps determine when and how to target them.  This has been the approach behind geo-fencing, where consumers are sent marketing messages via their mobile phone based on crossing certain boundaries.  Go near the slopes and I'll send you information on new skis.  Go near my store and I'll entice you in with a coupon.  Go near my competitor and I'll remind you of our price-match guarantee.  You get the point.

Location is determined using several technologies leveraging mobile phones, none of which work that great indoors.  Current technology is good enough to know you're at home but not that you're in the kitchen.  An inexpensive way to better triangulate the position of a mobile phone is to strategically place a few iBeacons in a store.  These battery-operated devices are offered by several vendors.  (The image above shows an Estimote iBeacon attached to the wall.)  The iBeacons send signals that iPhones running iOS7 (and presumably other phones in the near future) receive and then calculate distance.  The iPhones themselves can also act as iBeacons, building a dynamic mesh network.

If you'll recall, the ShopKick app uses a similar concept based on sound instead of bluetooth.  In either case, this enables retailers to engage with consumers via their mobile phones based on their specific indoor location.  Consumers can receive offers based on the department in which they're standing, or based on how long they linger in one place.  If consumers can get past the creep-factor, then there's lots of utility in this approach.

So while you're reviewing the Apple announcements, pay close attention to what's said about iBeacons.  And consider how iBeacons combined with an iWatch might enhance the Passbook experience while shopping.

UPDATE: Looks like Paypal Beacon is similar.

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.

Monday Nov 19, 2012

Selling Solutions, Not Products

When I think about next-generation retailers, the names that come to mind are Apple, Whole Foods, Lulu Lemon, and IKEA.  They may not be the biggest retailers, but they are certainly growing fast. Success is never defined by just one dimension, and these retailers execute well across many dimensions, but the one that stands out for me is customer experience.  These stores feel...approachable...part of the community...local.  Customers are not intimidated to ask questions, and staff seem to go out of their way to help.

What's makes these retailers stand out in the industry?  These retailers aren't selling products -- they're selling solutions.  Think about that.  You think you're going to the Apple store to buy a phone, but you're actually buying a communications solution that handles much, much more.  If you carry an iPhone, your life has changed.  The way you do things is different.  The impacts go much beyond a simple phone.

Solutions start with a problem, which is why these retailers greet customers with "what brought you in today," or "can I answer any questions for you?"  Good retailers establish a relationship, even if it lasts only a few minutes.

You don't walk into Whole Foods looking for cans of soup.  You are looking for meals: healthy snacks, interesting lunches, exotic dinners.  Its a learning experience where you might discover solutions to problems you didn't know you had.  Mention what foods you like, and you'll get a list of similar items you had not considered.  I didn't know I needed a closet organizer until I visited an IKEA and learned about all the options.  They were able to customize the solution to meet my needs, and now I'm much more organized.

One of the differences between selling products and selling solutions is training.  Visit any of these retailers' sites and you'll see a long list of in-store events for the benefit of customers.  You can buy exercise clothing from Lulu Lemon, and also learn new yoga techniques, meet like-minded people, and branch off to other fitness regimes via their ambassadors.  You can visit the Geek Bar at Apple, eat lunch at IKEA, and learn to cook at Whole Foods.

These retailers are making an investment in a relationship with their customers.  They are showing loyalty to their customers before asking for it back.  In the long-run, this strategic approach will outlive any scan-and-bag mentality.

Wednesday Sep 12, 2012

No NFC for the iPhone, and here's why

I, like many others in the retail industry, was hoping the iPhone 5 would include an NFC chip that enabled a mobile wallet.  In previous postings I've discussed the possible business case and the foreshadowing of Passbook, but it wasn't meant to be.  A few weeks ago I was considering all the rumors, and it suddenly occurred to me that it wasn't in Apple's best interest to support an NFC chip.  Yes they have patents in this area, but perhaps they are more defensive than indicating new development.

Steve Jobs wanted to always win, but more importantly he didn't want others to win at his expense.  It drove him nuts that Windows was more successful than MacOS, and clearly he was bothered by Samsung and other handset manufacturers copying the iPhone.  But he was most angry at Google for their stewardship of Android.

If the iPhone 5 had an NFC chip, who would benefit most?  Google Wallet is far and away the leader in NFC-based payments via mobile phones in the US.  Even without Steve at the helm, Apple isn't going to do anything to help Google.  Plus Apple doesn't like to do things in an open way -- then they lose control.  For example, you don't see iPhones with expandable memory, replaceable batteries, or USB connectors.  Adding a standards-based NFC chip just isn't in their nature.

So I don't think Apple is holding back on the NFC chip for the 5S or 6.  It just isn't going to happen unless they can figure out how to prevent others from benefiting from it.

All the other handset manufacturers will use NFC as a differentiator, which may be enough to keep Google and Isis afloat, and of course Square and PayPal aren't betting on NFC anyway.  This isn't the end of alternative payments, its just a major speed bump.

Friday Jun 15, 2012

The Apple Passbook

In a previous job I worked on smart card systems.  Our vision was to replace the physical wallet with a chip card that contained stored value, credit cards, and loyalty cards.  The technology was up to the task, but the business model never worked out.  When all those things go onto a single card, who owns the card and maintains the applications?  Each bank wanted their own card with branding, so instead of consolidating lots of cards onto one, we ended up with the same number of cards, just more expensive chip cards.  The Costanza wallet would not die.

More recently I've been able to move lots of these cards into iOS apps using products like CardStar, TripIt, and Fandango.  I guess moving from physical to digital is progress, but still no consolidation.  But this week Apple announced its Passbook, an iOS feature that consolidates boarding passes, loyalty cards, and movie tickets.  Another step in the right direction.

We've been waiting for Apple to announce a NFC solution to take advantage of the 400 million credit cards it stores in iTunes for its customers.  Perhaps Passbook is the first step in that direction.  It wouldn't take much to add credit cards to Passbook, then enable secure transfer of the track data using a NFC equipped iPhone.  I've got to think this has to be part of the larger vision, but of course Apple is very secretive.

I think the steps will be loyalty, coupons, and then payment when it comes to the evolving Passbook.  Retailers should keep an eye on Apple, and expect these things to happen in the Apple stores first.

Monday Jun 11, 2012

Comparing Isis, Google, and Paypal

Back in 2010 I was sure NFC would make great strides, but here we are two years later and NFC doesn't seem to be sticking. The obvious reason being the chicken-and-egg problem.  Retailers don't want to install the terminals until the phones support NFC, and vice-versa. So consumers continue to sit on the sidelines waiting for either side to blink and make the necessary investment.  In the meantime, EMV is looking for a way to sneak into the US with the help of the card brands.

There are currently three major solutions that are battling in the marketplace.  All three know that replacing mag-stripe alone is not sufficient to move consumers.  Long-term it's the offers and loyalty programs combined with tendering that make NFC attractive.

NFC solutions cross lots of barriers, so a strong partner system is required.  The solutions need to include the carriers, card brands, banks, handset manufacturers, POS terminals, and most of all lots of merchants.  Lots of coordination is necessary to make the solution seamless to the consumer.

Google Wallet

Google's problem has always been that only the Nexus phone has an NFC chip that supports their wallet.  There are a couple of additional phones out there now, but adoption is still slow.  They acquired Zavers a while back to incorporate digital coupons, but the the bulk of their users continue to be non-NFC.  They have taken an open approach by not specifying particular payment brands.  Google is piloting in San Francisco and New York, supporting both MasterCard PayPass and stored value. I suppose the other card brands may eventually follow.  There's no cost for consumers or merchants -- Google will make money via targeted ads.


Isis

Not long after Google announced its wallet, AT&T, Verizon, and T-Mobile announced a joint venture called Isis.  They are in the unique position of owning the SIM in the phones they issue.  At first it seemed Isis was a vehicle for the carriers to compete with the existing card brands, but Isis later switched to a generic wallet that supports the major card brands.  Isis reportedly charges issuers a $5 fee per customer per year.  Isis will pilot this summer in Salt Lake City and Austin.


PayPal

PayPal, the clear winner in the online payment space beyond traditional credit cards, is trying to move into physical stores.  After negotiations with Google to provide a wallet broke off, PayPal decided to avoid NFC altogether, at least for now, and focus on payments without any physical card or phone.  By avoiding NFC, consumers don't need an NFC-enabled phone and merchants don't need a new reader.  Consumers must enter their phone number and PIN in the merchant's existing device, or they can enter their PIN in the PayPal inStore app running on their phone, then show the merchant a unique barcode which authorizes payment.

Paypal is free for consumers and charges a fee for merchants.  Its not clear, at least to me, how PayPal handles fraudulent transactions and whether the consumer is protected.


The wildcard is, of course, Apple.  Their mobile technologies set the standard, so incorporating NFC chips would certainly accelerate adoption of many payment solutions.  Their announcement today of the iOS Passbook is a step in the right direction, but stops short of handling payments.

For those retailers that have invested in modern terminals, it seems the best strategy is to support all the emerging solutions and let the consumers choose the winner.

Thursday Jan 26, 2012

JCPenney Starts Their Journey

Ron Johnson's contributions to the Apple stores were many, but it remains to be seen if that experience will translate to JCPenney where he's now CEO. After all, the two companies couldn't be more different.  Apple is a technology company with very few products and a loyal fan base.  JCPenney, on the other hand, is a promotions-driven mass-merchant with many products and large stores anchoring malls.

I doubt the genius bar will fly at Penney's.

Yesterday the journey began when JCPenney revealed its four-year blueprint to bring the brand back from the brink.  The focus is on providing what the American shopper wants.  This includes dropping the plethora of promotions and simplify pricing.  The redesigned logo is clearly influenced by our flag, and the in-store experience is changing to better reflect main street, complete with a town square in the middle of the store.  Susan Reda did a fine job describing the changes, so I'll just refer you to her article for details.

Only time will tell if the changes make a difference, but I must say its impressive that JCPenney is willing to make such sweeping changes.  From what I've seen so far, they are on the right track.

I'll close with a video announcing the changes, which are set to begin on February 1st.

Navigating the Store

Here's an update on my 2010 posting Going Inside the Store.  Has you phone ever displayed a message saying you'd get better map results if you enabled WiFi?  That's because companies like Skyhook, Apple, and Google send people to public places to correlate WiFi signal strength with locations.  Then they use the information to more accurately determine your location, which is especially important when line-of-sight to the GPS satellites is not possible.

Retailers like Home Depot, IKEA, and Macy's have provided store floor plans to Google so that Android maps actually extend from the streets to the aisles, making it easier to navigate big-box stores.  Similar efforts are ongoing for airports, malls, and arenas.  Wouldn't it be nice for the mapping on your phone to take you directly to your seat in the stadium, your gate in the airport, and a product on the shelf?

Here's a short video showing how you can navigate inside an IKEA store using your phone.

Tuesday Dec 06, 2011

2012 Predictions for Retail - Part 2

I think the first four predictions are pretty likely, so let's look at some things that are a bit of a stretch.  These next four predictions are based on emerging technologies making inroads but not widespread adoption.  Let me know if you agree or disagree in the comments.


5. Usable Augmented Reality

The first usable augmented reality app I used was Yelp when they had a semi-secret backdoor to access Monocle.  The concept has been accessible to us since Apple combined the camera, GPS, and accelerometer in the iPhone, but I haven't seen anything I would use on a regular basis.  Amazon's Flow is certainly a step in the right direction as is Tesco's subway store, and I think we'll see some more useful applications of AR next year.

And AR isn't limited to consumers.  It can be helpful for store managers to be able to get information about sales and inventory as they walk the store.  If a manager wants to know how many transaction per hour a checkout associate is doing, she need only point her camera.

6. Accurate Indoor Location

GPS has saved my marriage in several situations, and I can't live without it anymore.  Its perfect for driving, but its not accurate enough to help me navigate my local Lowes and Home Depot.  That's because GPS doesn't work well indoors.  Smartphones typically use a combination of GPS satellites and WiFi access points to triangulate your position.  The WiFi part is getting more accurate, and some systems leverage closed-loop security cameras to help.  This year will be first rollout of accurate in-store directions for a big-box retailer.  Not sure which one will be first, but I think the home improvement chains have the most to gain. 

Imagine standing in an aisle and pressing a "help me" button on your phone, and a clerk walks right to you for assistance.  Or getting turn-by-turn directions to find the garage door openers, for example.  Accurate indoor location also helps with geo-fencing that I mentioned earlier.  You might receive location-specific offers and product information as you walk.

7. Shopping with Siri

Apple's Siri is bringing to light the augmented humanity concept, the collaboration of humans and machines in transparent ways that enhance our everyday lives.  A subset of the concept is using natural user interfaces that are easy to manipulate.  In the case of Siri, voice response systems that understand questions and provide useful answers in context.

As smartphone adoption continues to grow in 2012, so will our dependence on them for providing information.  New mobile application that take advantage of voice response, computer vision, and even eye-tracking (remember, while you're using your iPhone, there's a camera pointed at your face) will begin to emerge.

This means it will be even easier for consumers to get any and all information about products and brands.  Look for Google and Apple to take the technology lead, and Amazon to capitalize on the advancements.

8. Behavior Profiling

When I shop, there are certain things that persuade me to buy: free shipping, good reviews, great price, perceived quality, easy returns, etc.  But those things vary by person and situation.  What if a retailer had a shopping profile on each of its customers and knew how to efficiently market to that customer?  While I don't that we'll get to that point in 2012, I do think significant progress in that direction will occur.

Take myLowes for example.  Lowes is collecting valuable information about each of its customers and will be better able to tailor offers that are more likely to be of interest.  Lowes will sell more, and its customers will have a better experience.

Look for retailers to offer more differentiated loyalty programs and then develop sophisticated marketing plans at more granular levels using all that psychographic big data.


2010 was the year when mobile went mainstream in the retail industry.  2011 marked widespread adoption of Facebook to drive sales and engage consumers.  I think 2012 will be the year that cloud computing gets serious. Look for lots of acquisition in this space, and more retailers to dip their toes in the water.

Monday Dec 05, 2011

2012 Predictions for Retail - Part 1

2012 is less than a month away, so this is the time of year we start seeing annual predictions.Susan Reda at Stores just published her take and I know IDC and Gartner have also released theirs.  Many of last year's predictions could easily move forward to this year's:  we'll continue to see lots of new alternative payment types, more engineered systems, better social analytics, more 2-D barcodes, greater adoption of cloud, and improved f-commerce.

In past years we've seen the rise of Apple, Google, Facebook, and Amazon but 2012 will mark a year of war between these juggernauts on the retail battlefield.  They will fight over NFC, tablets, digital content, and most importantly, trust from consumers.  Retailers must keep a close eye on all four companies.


1. Mobile Loyalty

Often, loyalty cards are just a way for retailers to give away margin in the hopes that consumers will select them as their preferred store.  But strong programs involve a trade-off: consumers get discounts, and in return retailers get to learn more about their customers (and serve them better), and have the opportunity to influence their behavior.  The loyalty card was a blunt instrument that worked well for the consumer, but didn't deliver for most retailers.

The concept of geo-fencing has been around a while, but there are few retailers that have really adopted it. The smartphone, with geo-fencing enabled, needs to become the consumer's loyalty card where retailers can incent, learn from, and communicate with customers.  In 2012, geo-fencing will take off and deliver value for both consumers and retailers.  Look for new loyalty programs built around smartphones.

2. Facebook Levels Off, Google+ Stalls, Groupon Withers, Amazon on Fire

To put Facebook's 800 million users in perspective, that the same number of people that were using the internet in 2004 worldwide, which incidentally is when Facebook got its start.  Only India and China have bigger populations. That kind of growth just can't continue, nor do I think engagement can increase. The novelty is wearing off, so while there are lots of users, I believe the engagement of those users will wane.

Some of those users will feel more at home with Google+, but I seriously doubt many will close their Facebook accounts and make a permanent move.  Google+ may continue to grow is user base, but users will spend more time on Facebook.  Google will continue to dip its toes in retail with more small stores, a possible free-shipping program (similar to Amazon Prime), and of course Google Wallet and Google Offers.  Other than Wallet, these efforts will go nowhere.

The potency of Groupon offers will dilute with all the "me-toos" that pop up, and retailers will learn that their exchange of profits for new, disloyal customers isn't sustainable.  Not taking $5.75 billion from Google will down in history as a huge mistake.

Amazon's success with the Kindle will translate into more Prime customers and greater loyalty.  The trend for shoppers to skip Google searches and go directly to amazon.com will continue, and Amazon will get more aggressive with books, movies, and music. Look for Amazon to acquire in the digital content area.  Also, expect Amazon to have another AWS hiccup that gives retailers pause about using the cloud, but overall AWS usage continues to grow.

3. Apple Payments

With all the news about alternate payments, this isn't a stretch at all.  Apple will finally release the iPhone 5 with NFC support and start to leverage their iTunes customer base for payments in non-Apple stores. I don't see how this will be financially viable with both Apple and credit cards taking a cut of each sale, so look for Apple to push customers toward ACH (debit/checking) as PayPal does.  Look for Apple to start a loyalty program to incent consumers to use the new payment vehicle.

While we're on the subject of Apple, I'm betting they will release a new Apple TV product in 2012.  Retailers should care because it will eventually allow viewers to "click on commercials" to get more details on products and sales.

4. Mobile Self-Checkout

Self-checkout, especially at grocery stores, has been around for a while.  Some love it, and some don't.  Smartphones now make it possible to simulate an e-commerce experience in the physical store.  As you add items to your physical cart, you can scan them into your transaction, then pay and walk out the store.  No need to stand in line at all.

Retailers are already putting mobile POS in the hands of its associates, so its not a huge step to expose that functionality directory to customers.  As Apple leads the way, look for grocery chains to quickly add the capability followed by home improvement stores.



More predictions in my next post.

Monday Nov 14, 2011

Four Emerging Payment Stories

The world of alternate payments has been moving fast of late.  Innovation in this area will help both consumers and retailers, but probably hurt the banks (at least that's the plan).  Here are four recent news items in this area:

Dwolla, a start-up in Iowa, is trying to make credit cards obsolete.  Twelve guys in Des Moines are using $1.3M they raised to allow businesses to skip the credit card networks and avoid the fees.  Today they move about $1M a day across their network with an average transaction size of $500. Instead of charging merchants 2.9% plus $.30 per transaction, Dwolla charges a quarter -- yep, that coin featuring George Washington.

Dwolla (Web + Dollar = Dwolla) avoids the credit networks and connects directly to bank accounts using the bank's ACH network.  They are signing up banks and merchants targeting both B2B and C2B as well as P2P payments.  They leverage social networks to notify people they have a money transfer, and also have a mobile app that uses GPS location.

However, all is not rosy.  There have been complaints about unexpected chargebacks and with debit fees being reduced by the big banks, the need is not as pronounced.  The big banks are working on their own network called clearXchange that could provide stiff competition.

VeriFone just bought European payment processor Point for around $1B.  By itself this would not have caught my attention except for the fact that VeriFone also announced the acquisition of GlobalBay earlier this month.  In addition to their core business of selling stand-beside payment terminals, with GlobalBay they get employee-operated mobile selling tools and with Point they get a very big payment processing platform.

MasterCard and Intel announced a partnership around payments, starting with PayPass, MasterCard's new payment technology.  Intel will lend its expertise to add additional levels of security, which seems to be the biggest barrier for consumer adoption.  Everyone is scrambling to get their piece of cash transactions, which still represents 85% of all transactions.

Apple was awarded another mobile payment patent further cementing the rumors that the iPhone 5 will support NFC payments.  As usual, Apple is upsetting the apple cart (sorry) by moving control of key data from the carriers to Apple.  With Apple's vast number of iTunes accounts, they have a ready-made customer base to use the payment infrastructure, which I bet will slowly transition people away from credit cards and toward cheaper ACH.  Gary Schwartz explains the three step process Apple is taking to become a payment processor.

Below is a picture I drew representing payments in the retail industry. There's certainly a lot of innovation happening.


Thursday Nov 10, 2011

Transparent Technology from Amazon

Amazon has been making some interesting moves again, this time in the augmented humanity area.  Augmented humanity is about helping humans overcome their shortcomings using technology.  Putting a powerful smartphone in your pocket helps you in many ways like navigating streets, communicating with far off friends, and accessing information.  But the interface for smartphones is somewhat limiting and unnatural, so companies have been looking for ways to make the technology more transparent and therefore easier to use.

When Apple helped us drop the stylus, we took a giant leap forward in simplicity.  Using touchscreens with intuitive gestures was part of the iPhone's original appeal.  People don't want to know that technology is there -- they just want the benefits.  So what's the next leap beyond the touchscreen to make smartphones even easier to use?

Two natural ways we interact with the world around us is by using sight and voice.  Google and Apple have been using both in their mobile platforms for limited uses cases.  Nobody actually wants to type a text message, so why not just speak it?  Any if you want more information about a book, why not just snap a picture of the cover?  That's much more accurate than trying to key the title and/or author.

So what's Amazon been doing?  First, Amazon released a new iPhone app called Flow that allows iPhone users to see information about products in context.  Yes, its an augmented reality app that uses the phone's camera to view products, and overlays data about the products on the screen.  For the most part it requires the barcode to be visible to correctly identify the product, but I believe it can also recognize certain logos as well.  Download the app and try it out but don't expect perfection.  Its good enough to demonstrate the concept, but its far from accurate enough.  (MobileBeat did a pretty good review.)  Extrapolate to the future and we might just have a heads-up display in our eyeglasses.

The second interesting area is voice response, for which Siri is getting lots of attention.  Amazon may have purchased a voice recognition company called Yap, although the deal is not confirmed.  But it would make perfect sense, especially with the Kindle Fire in Amazon's lineup.

I believe over the next 3-5 years the way in which we interact with smartphones will mature, and they will become more transparent yet more important to our daily lives.  This will, of course, impact the way we shop, making information more readily accessible than it already is.  Amazon seems to be positioning itself to be at the forefront of this trend, so we should be watching them carefully.

Monday Oct 31, 2011

Self-Checkout at Apple Stores

Back in mid-2010 Apple launched their own iOS application to support their stores, but it was overshadowed by the release of the iPhone 4.  I finally downloaded the app, and it appears to be well-done (no surprise there).  Users can get detailed information about stores and products, and even buy some products via the app.  The app locates the nearest store where you can reserve products, make a genius bar appointment, arrange for training, or see the event schedule.

Now MacRumors is claiming the next version of the app will allow self-checkout in stores for items on the floor.  This makes lots of sense since the high-value items aren't stocked on the floor anyway.  If you'd like an iPad, you still need to talk to an associate, but if your just looking for a case or adapter, then grab one and check yourself out.

Now for the interesting part: self-checkout uses your iTunes account for payment.  I have been predicting that Apple will someday enter the payment field, and this seems like the start.  In theory, Apple could extend the ability to purchase items outside Apple using the iTunes account.  That might be particularly valuable once Apple adds an NFC chip to the iPhone.  Some big hurdles to overcome but still on the path.

Wednesday Oct 26, 2011

Amazon Is Doing it Right

Wall Street is broken.  Yesterday Amazon announced it barely missed top line estimates, but fell far below expectations for the bottom line.  Although revenue was up, net income was down 73% from last year.  This caused investors to dump the stock, sending it down from $240 to $200 as of this writing.  But nothing is wrong at Amazon.  They have simply increased their investments in technology and people in order to position the company for the long-term.

As I pointed out in this post back in April, Amazon has consistently made "investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations."  To that end, they have hired 8,100 people this past quarter at a time when many businesses are sitting on large sums of cash riding out the storm.  They will be well positioned for Christmas this year.

Amazon makes "bold rather than timid investment decisions" like challenging Apple in the tablet market.  Their new Kindle Fire sells for $200 but reportedly costs around $205 to produce.  This is the old Gillette trick of giving the razors away to sell the blades.  They will extend their leadership selling e-book but also break into other media as well.  I have already pre-ordered my Kindle Fire, which will get plenty of use in my house along with my iPad2 and regular Kindle.

Amazon continues to "focus on growth with emphasis on long-term profitability" by doing things like securing media content from the likes of CBS, FOX, PBS, NBC Universal, Sony, and Warner Bros for the Amazon streaming service, which is free to Amazon Prime members.  Customers that pay $79 a year get free 2-day shipping plus all-you-can-eat access to its growing media library.  On average, Amazon Prime members spent $400 the previous year before joining, and $900 after.  Pure genius.

I wish more retailers would open their pocketbooks and make more long-term investments in technology.  Yes, there's risk involved, but there's also reward when its done with passion and conviction.  As I pointed out in this post, the big technology companies are changing the retail industry forever, so its time to get on board.  If you don't have a research/innovation team, get one -- this month.

By the way, Jeff Bezos lost about $2.2 billion in stock value this week and he's probably happier than a tick on a fat dog.  (This Texas living is rubbing off on me.)

Tuesday Oct 25, 2011

Shopping with Siri

Regardless of how sexy Apple and Google make smartphone user interfaces, they will always be limited by their screen size.  That is until you consider some of  the other capabilities of the smartphone, such as image and voice recognition.  Last year Eric Schmidt, the former CEO of Google, announced our entry into the age of augmented humanity and the recent release of of the iPhone 4S has been an incredible example.

Using the Google app on my iPhone 4 (yeah, I'm not looking to upgrade yet), I can search using voice recognition.  For example, when I say "ASICS running shoes" a search is performed which renders lots of results, including where I can buy those shoes nearby.  And that brings up an important concept: the search is contextually aware.  It knew my location and was able to infer "nearby" in my request.

Amazon's Price Check app lets you search for product information by scanning the UPC, snapping a picture, or by saying the product using your iPhone.  Again, saying "ASICS running shoes" returned lots of matching products, albeit without any context.  How easy is that?

So not being one to be left behind, Apple bought a start-up (a spin-off from the Stanford Research Institute) called Siri and the rest is history the future. While Siri is not general purpose, I don't think the day when we have easy access to Watson and Wolfram Alpha is far off.

So what does this mean for retailers?  In the not-too-distant future you can expect to see shoppers asking their phones "is there a better price nearby?" and "what will this blouse look like on me?" and "is this compatible with the camera I bought last year?"  Product information will continue to be easier to access, be of better quality, and be personalized and contextual.  Here are three things retailers must do in order to remain competitive:

1. Make sure you are a trusted provider of information to your customers.  Share pricing, promotions, reviews, origin, content/ingredients, recalls, compatibility, etc. with your customers.  They are going to get this information anyway, so it might as well come from you.

2. You can't win on price anymore.  With perfect access to information, it will be too easy to find the lowest price for any particular item.  Its better to differentiate on convenience, service, and exclusivity.  (And its no accident that's Apple's model.)

3. Get serious about loyalty.  The younger generations are less concerned about privacy and more interested in relevancy.  Every interaction is a chance to provide personalized service.

In this age of augmented humanity, embrace Siri and don't be a HAL.

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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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