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.

Friday Oct 07, 2011

Non-Retail Change Agents

During my OpenWorld presentation earlier this week, I pointed out that four men and their associated mega-companies have had a huge impact on the retail industry without being traditional retailers.  Obviously Amazon is a retailer, but when they started they were definitely not considered a traditional retailer.

Arguably Amazon set the standard for pure-play e-commerce and have been a leading innovator for online shopping, including early pushes into user created content, mobile commerce, and personalization.  And don't forget they are putting lockers in malls and on campuses for easy pickup of their products.  Some might call that a small step toward a physical store.

Apple stores have been the king-of-the-hill with the highest sales-per-square-foot, one of the best customer service models, and innovative features such as the genius bar, mobile POS, and iPads with product information.  Their bigger contribution has been moving commerce to mobile devices, which is a channel that will continue to grow.

Now no one will mistake Facebook for a retailer, but they continue to influence how consumers talk about brands and products.  The forthcoming "want" and "own" buttons will make it easier for people to express their relationship to products, and probably spur conversations that result in purchases.

Then there's Google, which has been helping consumers search for products, show them off with haul videos, and more recently introducing a new payment method.  But the big story here is Google's foray into physical stores.  They are starting small with their Chromezone store-within-a-store concept for selling Chrome-based netbooks.  With their purchase of Motorola, I can see them adding mobile phones, GoogleTV boxes, and other consumer devices in the near future. Isn't that exactly how Apple got started in their quest for stores?

Its tough being a retailer, especially when these four companies keep changing the rules.

Thursday Oct 06, 2011

Steve Jobs' lasting legacy for retail

I have written about Apple on many occassions (just click on "Apple" in the tag cloud to the right).  What really amazes me about Steve Jobs is that he created six successful products (Apple ][, Macintosh, iMac, iPod, iPhone, iPad), launched three companies (Apple, NeXT, Pixar), and change three industries (computers, media, retail) forever.  Not during my lifetime has one man had such a positive impact on society.

I was going to write about Steve's impact on the retail industry, but I found that Mike Wittenstein did a fine job in his article Steve Job's lasting legacy for retail, so I'll refer you there.

RIP Steve Jobs.

Tuesday Sep 13, 2011

Mobile POS Momentum in Retail

The idea of mobile POS isn't new.  Back at 360Commerce, we created a web-based mobile POS we called "Unleashed."  At the time, most mobile devices didn't have enough power to render the pages quickly, so it never really took off.  Home Depot deployed it on tablets attached to carts, but most retailers limited mobile devices to inventory processes.  Even Apple's first version of the mobile POS, deployed on Symbol devices running Windows CE, didn't garner much attention.  It wasn't until Infinite Peripherals, working with Apple, created the iPod sled that suddenly the concept caught fire.

I suppose there are a couple reasons mobile POS is now trending up.  First, nowadays many retailers have upgraded their in-store networks to support WiFi.  Retailers need a fast, reliable in-store network for mobile POS to work well.  Second, the cost of the iPod is significantly lower than traditional (hardened) handhelds.  They are cheap enough that when one breaks, nobody has to be fired.  Third, customers carrying smartphones increased the their expectations for mobile checkout.

Below I created a table of tier-1 deployments of mobile POS. The dates are approximate, based on news coverage I found on the Web.  I'm sure I missed some, but if I couldn't find a reliable date, then I skipped it.  I used the earliest date I could find.

 Date  Retailer  Notes
 11/2009  Apple  iPod
 12/2009  Home Depot  Motorola
 11/2010  Disney  iPod
 12/2010  Gap/Old Navy
 01/2011  Guess  iPod
 03/2011  Urban Outfitters
 06/2011  Nordstrom  iPod
 08/2011  Lowes  iPod

Now there are several software vendors writing mobile versions of the POS, usually on the iPod and iPad.  And the solutions range from tier-1 to Mom-and-Pop stores.  One has to wonder if Google, who purchased Motorola, will find a way to get in on the hardware business.  Or whether Microsoft will manage to get its operating system into mobile POS devices.  It just seems like the iPod has all the momentum right now.

Thursday Aug 25, 2011

What about Apple's Stores?

There's been lots of buzz surrounding Steve Jobs stepping down at Apple, but its not at all unexpected.  Everyone knows that Steve has health problems, and I'm sure Apple has been slowly transitioning responsibilities to Tim Cook over the past year.  Steve will remain involved as Chairman, so I''' bet he'll be involved in major decisions.  But don't forget that Ron Johnson, SVP of Retail at Apple, is also on his way out.  This could be a double-whammy for Apple's stores.

Recall that Ron was hired away from Target by Steve in 2000 to spearhead the creation of the Apple stores.  At the time, Apple had tried selling via independent dealers and large electronics chains, but neither allowed them to control the user experience.  They theory was that customers were not seeing the value of Apple's products and required a more high-touch environment.

To open a chain of stores in the shadow of Gateway's failure was a risky move, but at the time Apple needed to take risks to get back to its past glory.  The stores are unique, that's for sure.  Only half of the space is used for selling products, with a great deal of space used for training, setup, and demonstrations.  Apple's Genius Bar, EasyPay (mobile point-of-sale), and replacement of shelf tags with tablets are all industry firsts.

Jerry McDougal is Ron's heir-apparent, however, Apple has begun an executive search so make no assumptions.  Jerry previously worked for PC Connection and IBM before being hired by Ron at Apple.  We likely won't know until November, when Ron takes the CEO job at JCPenney, who the replacement will be.

Whoever gets the job will have big shoes to fill.  The Apple stores are a key conduit between Apple and its customers, so continued investment and innovation will be key to the company's growth.  As they say, when one door closes, another opens.

UPDATE: If you haven't already seen it, you should view Steve Jobs' 2005 Stanford Commencement Address.  I promise its worth the 15 minute investment in your time.

Wednesday Jun 15, 2011

The A.P.P.L.E. Way

The WSJ just did an interesting deep-dive on the Apple retail stores, interviewing current and past employees and obtaining some of their training manuals.  One of the things that stuck out for me was the fact that they aren't really relying on some technology advantage -- its about carefully controlling the customer experience.  For example, they use the acronym APPLE as follows:

  • A - Approach customers with a personalized warm welcome
  • P- Probe politely to understand all the customer's needs
  • P - Present a solution for the customer to take home today
  • L- Listen for and resolve any issues or concerns
  • E- End with a fond farewell and an invitation to return.

Nothing high-tech about that at all.  Each employee receives at least 40 hours of training to ensure they know the products and understand how to treat customers.  They are not on commission and earn a typical $9-$15/hr or around $30/hr at the Genius Bar.

And the results are an impressive $4406 per square foot.  To put that in context, compare it to Tiffany at $3070, Coach at $1776, and Best Buy at $880.

From what I've read, Steve Jobs is a bit of a control freak, and that definitely extends into the stores.  When he first returned to Apple, he tried the "store within a store" concept with big box retailers like CompUSA and Circuit City.  But he couldn't control the user experience and thus could not adequately differentiate from the Windows offerings.  This led to the eventual hiring of Ron Johnson from Target (who recently announced he's leaving Apple to run JCPenney), and the two collaborated on new store formats to show off Apple's products.

The concept was to create a destination showroom, not a retail  store.  Stores were a place to showcase the products and talk to customers in a very inviting environment.  Apple has always been good at taking care of their zealots, and this was just an extension to the less geeky public.  Back in 2001 they insisted on a point-of-sale that ran on their hardware, which is how we landed the business.  These days, most of the registers have been phased out or hidden in favor of the iPod Touch mobile POS.

Other retailers have tried to emulate the model, but no one has seen success.  Apple is Apple, and they did exactly what worked for their business.  No one else is Apple, so no one else should copy their stores.  But retailers can and should be inspired by Apple's success and strive to find ways to improve their own customers' in-store experience.  And it doesn't take a ton of technology.


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