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March 28 2013

Commerce Weekly: Reimagining the stages of retail

The basics remain key in our radically changing retail environment

Warby Parker BusWarby Parker BusThis week, PandoDaily’s Sarah Lacy addressed the issue of whether or not brick-and-mortar retail is dead and argued that it’s more “dying as we know it” than dead-dead. Lacy pointed to several ecommerce 2.0 startups — online retailers expanding into brick-and-mortar — who are creating twists, or “tweaks,” in the traditional retail model, eschewing the traditional retail playbook.

Tweaks Lacy highlighted include stores such as Warby Parker and Bonobos employing the showroom model, sort of a reverse-engineered try-before-you-buy — i.e. order online — model; piggybacking on existing retail chains to secure customers and expand reach; and opening pop-up stores or experimenting with physical mobile retail — such as Warby Parker’s experiment driving glasses around the country on a refashioned bus.

Barbara E. Kahn at Harvard Business Review says the strength of these new companies as well as the successful old guard retail chains that remain is their ability to understand how the stages of retail fit into the new and changing retail environment. She looked at Ron Johnson’s grand plan for J. C. Penney and its (thus far) subsequent failure. Kahn described the rise and fall of Johnson’s innovative plan:

“… get rid of nonstop price promotions and introduce boutique ‘stores within the store.’ Surrounding these shops would be wide aisles that Johnson called ‘streets’ that would feature coffee and ice cream bars and places to surf the internet, and all of this would surround a town square for in-store activities and events. Much has been written about the faulty implementation of this strategy. Consumers failed to understand the confusing new pricing, the new stores could not be constructed quickly enough, and sales and stock price declined precipitously.”

Where did Johnson miss the mark? By forgetting that consumers were driven to shop at J. C. Penney by the very prospect of the sales — the “nonstop price promotions” — that Johnson eliminated, Kahn says. “The purchase process is staged,” she wrote. “First, consumers recognize a need, then they search for information about products that might solve that need, they create a consideration set, and finally make a choice. That the purchase process is multi-staged is something we’ve known for years, but in this new age of radical change in retailing and hyper global competition, it is easy to forget the basics.”

Kahn also reviews how several stores, including Best Buy, Warby Parker and Zipcar, are reimagining the various stages of retail to experiment and innovate — and survive — in this new era of retail. You can read her full piece at Harvard Business Review — it’s this week’s recommended read.

Retailers, your desperation is showing

As much as emerging models of ecommerce are branching out into brick and mortar, much of brick and mortar continues to desperately try to keep ecommerce out. In a piece at the Indianapolis Star, Ashley Petry looked at the various ways local store owners are battling the trend of showrooming, such as price matching, offering exclusive products, touting instant gratification, and even peer pressure. Petry reported:

“[Liz Barden, owner of Big Hat Books,] said she occasionally asks customers in her store to stop using their price-comparison apps, arguing that her selection of books represents a kind of intellectual capital. Sometimes, she said, her regular customers step in and chat with fellow shoppers about the importance of supporting local businesses.”

While employing peer pressure and guilt may be misguided attempts to remain relevant in our changing retail environment, a specialty food store in Brisbane, Australia, has taken the showrooming battle a step further, employing a strategy for the what-on-earth-are-you-thinking file: charging customers $5 for shopping without buying. Chris Morran at The Consumerist spotted a link on Reddit to a photo in the store’s window explaining the new browsing toll. The sign reads, “As of the first of February, this store will be charging people a $5 fee per person for ‘just looking.’ The $5 fee will be deducted when goods are purchased.” Morran, Cory Doctorow at Boing Boing and Matt Brownell at Daily Finance have solid outlines of the various ways this strategy is sure to backfire.

Experiments in thrifty retail

It’s looking like online retail is angling to get a foothold in the garage- and thrift-sale markets. Owen Thomas at Business Insider spotted an ad for a new eBay charitable program in the San Francisco area called Sell it Forward, in which a seller signs up to get a postage-paid bag sent to them, sends in their used stuff to eBay, eBay then hands it off to program partner Goodwill, which then tries to sell the items. If the items sell within two weeks, the customer splits the proceeds 50-50 with Goodwill; if not, the customer gets a donation receipt.

In a similar vein, Jessica Leber at MIT Technology Review took a look at a new startup called Yerdle that aims to encourage people to share and reuse items rather than buy new stuff. The startup, founded by former Wal-Mart global strategy exec Andy Ruben and green activist Adam Werback, has a marketplace linked to Facebook, according to Leber’s report, so users can sign in through Facebook to see what their friends have to give away or loan for free. Once an item is found, Yerdle would get paid to ship it between friends.

Leber noted Ruben’s inspiration behind the business model: “Every pound of product corresponds on average with more than 70 pounds in waste, he says, a problem he grew to care about when launching Walmart’s first sustainability initiative in 2005.” Ruben told her, “Just because someone is going to have a Halloween Party, it does not mean that a global supply chain has to be kicked into gear with every item being manufactured, transported and procured.”

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February 28 2013

Commerce Weekly: Visa pursues NFC mobile payments

Visa looks to kick-start NFC

Visa is taking aim at the NFC mobile payment holy grail. On Friday, the company announced the Visa Ready Partner Program. Leena Rao reports at TechCrunch that the initiative “aims to help mobile device manufacturers, technology partners, mobile network operators, and others gain access to Visa IP, licenses and more,” and that Visa “will make APIs and SDKs available to allow mobile point of sale providers to connect to Visa via payments gateways CyberSource and Authorize.Net.”

Rao says the program will serve as a resource for developers and provide a way for financial institutions and retailers to adopt mobile payments solutions. One of the initial program partners announced is Samsung. Ina Fried reports at All Things Digital that per the agreement, future NFC-enabled Samsung phones “will come with Visa’s [PayWave mobile] applet and pre-certified to work with its payment system.” Fried also reports that Visa mobile chief Bill Gadja said that they’re aiming to “turn upstarts into potential allies rather than rivals” with the program.

Marguerite Reardon reports at CNET that while the program may well help kick-start NFC-enabled payments around the world, it may hit a snag in the U.S. She writes:

“Since wireless carriers in the U.S. still have a say in what features are available on devices and which aren’t, there’s a chance that the Visa PayWave technology may only be available on Samsung devices sold internationally and not on most Samsung smartphones sold in the U.S.”

Reardon uses Google Wallet’s uphill battle as an example of potential obstacles Visa may face, noting that “the three major U.S. operators that have already blocked Google Wallet are investors in a joint venture called ISIS, which is building its own NFC-based mobile wallet.” You can read her full report at CNET.

PayPal Here crosses The Pond

PayPal unveiled a version of its PayPal Here mobile payment device that will launch in the U.K. this summer, with other European countries to follow. Rebecca Grant notes at VentureBeat that “PayPal already has a large presence in the U.K. and seeks to capitalize on its existing network as well as name recognition.”

The biggest obstacle PayPal faced in designing the European version of PayPal Here was the complex Chip and PIN system used throughout Europe, technology that Marcus Wohlsen at Wired says “crushes anything available stateside.” Wohlsen explains that the chips in the Chip and PIN cards are more difficult for thieves to copy than the magnetic stripes we have here in the U.S.

Rick Oglesby, a payments industry expert at Aite Group, told Alistair Barr at Reuters that “[t]rying to figure out how to make Chip and PIN work in these devices has been hard” and that the devices thus far have been expensive and “clunky.” Barr also reports that PayPal will charge merchants a “nominal fee” for the European PayPal Here device and that it will charge a per-transaction fee similar to that in the U.S.

Study measures the showrooming effect

Location analytics company Placed released a new study this week, “Aisle to Amazon: How Amazon is impacting brick-and-mortar retailers,” that identifies the retailers that are most at risk from consumers showrooming and then buying from Amazon.

Devindra Hardawar reports at VentureBeat that the study coupled data from nearly one billion location data points measured in January with 14,925 surveyed respondents. The results showed the stores most at risk were Bed Bath & Beyond, PetSmart, Toys “R” Us, Best Buy, Sears, and Barnes & Noble. Hardawar notes that online price matching programs have been launched by Best Buy and Target and says “Placed’s study shows that plenty of other retailers will need to follow in their footsteps.”

In related news, DataPop CEO and co-founder Jason Lehmbeck looked at Google’s recent acquisition of Channel Intelligence and its integration of Google Shopping results into its core search engine in a guest post at GigaOm. Lehmbeck says that Google not only is aiming to “eat Amazon’s lunch” but is also “making a play for all retail” and that “every retailer should be worried about the implications” of Google’s recent actions. He notes that it’s not too late for retailers to position themselves to compete and offers a few strategies marketers can employ to fend off Google’s advances.

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February 14 2013

Commerce Weekly: You can now buy stuff with tweets

American Express turns Twitter into an ecommerce platform

American Express announced an enhancement this week to its Sync with Twitter feature — users can now buy things with a tweet. Tricia Duryee reports at All Things Digital that all users will need to register to participate, even previous users of the sync feature, in order to provide a delivery address for purchased items. Once registration is complete, Duryee says, the purchasing process is pretty straightforward:

“For instance, participants will be able to buy a $25 American Express Gift Card for $15 … by tweeting #BuyAmexGiftCard25. American Express will reply via Twitter, asking the user to confirm the purchase in a tweet. All products will be shipped via free two-day shipping.”

Duryee reports that more items have been added since the launch and deals will be offered for three-week periods.

American Express SVP of digital partnerships and development Leslie Berland told Duryee that Twitter is just the beginning — the service will eventually be offered on other platforms, such as Facebook.

While fun and novel for consumers, Forbes’ B. Bonin Bough notes the value of the ecommerce partnership for participating retailers: “Having customers promote brands while buying them is a win-win situation,” he said, “and could potentially lead to incredible results — that is, if AmEx and Twitter can get this new purchasing behavior to catch on with consumers.”

Purchasing behavior may not end up being the ultimate obstacle, however. Angel Djambazov at GeekWire took a look at the potential security issues of the program, noting that “security has never been Twitter’s strong point. The platform is rife with phishing.”

Could 3D printing bring down retail?

The ForeSee Mobile Satisfaction Index: Holiday Retail Edition was released this week. The survey of more than 6,200 shoppers reviewed the consumer experience during the 2012 holiday shopping season.

One of the highlights of the report addressed the trend of showrooming. Eric Feinberg, senior director of mobile at ForeSee and co-author of the report, said for the press release, “Customers are using their mobile phones as integrated parts of their shopping experience … Mobile is the ultimate companion channel, making showrooming as much of an opportunity as it is a threat.”

But it’s not as big an issue as some retailers may think. Commenting on the report, ForeSee president and CEO Larry Freed told Chantal Tode at Mobile Commerce Daily:

“The idea that everyone is going to be looking at Amazon’s app when they are in Target and Walmart is proving out not to be true, and I think retailers need to continue to focus on providing a great integrated experience between that phone and that retail environment so that there is a value add for a consumer when they are in Target to go to Target’s app or site instead of going to Amazon’s.”

Fretting over showrooming may be a bit shortsighted on the part of retailers, however — the real concern for the future of retail may have more to do with 3D printing. Dalton Caldwell took a look this week at a recent statement by Marc Andreessen that the chain retail model is “a fundamentally implausible economic structure,” arguing that few stores “can survive a decline of 20 to 30 percent in revenues.”

Caldwell says he isn’t sure he agrees with Andreessen’s prediction, but that “[i]f we accept Andreessen’s argument that most retail companies could be put out of business by a 20-30% decline in revenue, 3D printing could be plausibly be the vector by which this scenario is manifested.” He points to items such as toys and sports equipment, and home improvement items such as plastic drywall anchors.

Not everything can or will be replaced by 3D printing, Caldwell notes, but taking the things that can into consideration along with retail stores’ “revenue sensitivity caused by debt” might just lead the future Andreessen predicts. You can read Caldwell’s full piece on his personal blog.

Pay at the pump gets PayPal

PayPal announced this week that through its partnership with retail petroleum company Gilbarco Veeder-Root, it now will offer mobile payments at the gas pump.

“The initial effort will launch the PayPal payment capability to retailers with Passport point-of-sale (POS),” Lucy Sackett, director of outbound marketing for Gilbarco Veeder-Root wrote in a press release. “Future developments will bring PayPal solutions to Gilbarco’s growing suite of media and merchandising applications.”

Sarah Perez at TechCrunch notes the impact of the Gilbarco deal, reporting that “the 150-year old Gilbarco currently works with 19 of the top 20 convenience store operators in the U.S.” and that company “has installed over 30,000 POS systems across North America which will now see PayPal integrations.”

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