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One of the best way to connect online and offline purchases is through data provided by payments. With an increase in digital payments omnichannel retail becomes an easier target.
Consumers seem to be adopting digital payment options at a staggering speed, all over the world. Here are the numbers:
The 260 million internet and mobile payment users show a great appetite for change. The number of mobile payments itself increased by over 445% in the past year as numbers from Q2 show.
Across the globe e-payment leader PayPal shows a steady increase in the number of users and has big plans after its separation from eBay. Though the separation has been long debated, it seems it is for the best.
Number of PayPal Users [source]
Europe lags behind with just 51 million mobile payment users expected in 2016. However – that may change in the future as there is lots of potential. For example Iconiq, an investment fund described as "Zuck and friends" backed Dutch payments company Adyen this year.
Adyen alone is expected to process roughly $45 billion this year, so there is still hope for the old continent.
Meanwhile tech giants such as Apple or Google are engaging one another for the mobile payments market, a seemingly enchanted land in the world of future finance.
For a very long time the store associate has been at the heart of brick and mortar stores. Store associates would greet customers, respond to queries, help find products and generally help customers with their purchases.
However, the emergence of digital tools and especially smartphones has rendered store associates almost obsolete.
In a recent study by MillwardBrown that focused on customers purchasing athletic footwear we can see just how useful a store associate is these days.
Of those that chose to shop in store, only 12% listed the sales person as one of the reason to purchase offline. Most (88%) chose to try on the product before purchasing.
It's not just sports shoes. A study by Deloitte Digital shows that customers would rather receive help from an interactive kiosk or their own smartphone rather than a store associate.
As you can see above the willingness to use a smartphone rather than discuss with a sales associate is almost double. Even an impersonal unmanned device such as an interactive kiosk would fare better than a store associate.
So if you were to combine this data with the fact that most of the sales in global retail will be influenced by digital by 2017 the conclusion is simple. The store associate is a soon to be dead job. If you were planning a career in this area, you'd better jump ship.
Is Brick and Mortar commerce dead? Absolutely not. Is eCommerce the most important sales channel in the future? Irrelevant. Neither online or offline sales really matter in the big picture. What matters is how customers shop and how much has digital changed the way retailers do business.
A recent Deloitte study outlines just how much digital is impacting retail.
Over 36% of 2013 overall sales in US have been influenced by digital and the trend continues to grow. By 2017 over 80% of all retail sales will be influenced by digital.
In terms of cash that places the digital influence in the real of trillions of dollars. In US alone, where the study was performed, that meant $1.1 trillion in sales were influenced by digital. If we were to extend this figure to the global retail sales in 2017 as estimated by eMarketer that amounts to a whoopping … wait for it …
However debatable this figure may be, the digital influence is something that is truly amazing and outright revolutionary.
But that's not all. Don't think digital influence means ecommerce. Definitely not. Two facts stand out in the Deloitte study:
Smartphones are the main cause in the increased digital influence. Mobile phones now account for $593 billion in sales (19% of the 36% of all sales influenced by digital).
What's even more interesting is that users are not more mobile-savvy. Only 25% of the increase in smartphone usage is caused by an increase in comfort and sophistication in smartphone usage. 75% of the increase in smartphone usage is due to an increased adoption.
Long story short: there are more smartphones, not smarter users.
94% of all retail sales still happen in the confines of a physical store. Wait, what?
It seems that what's causing retailers problems is failure to engage customers on all channels. Customers are pre-buying (shopping) on ecommerce sites but they pick-up, try on and eventually buy a lot of things in the physical store.
The trick here is getting the big picture right. Use different customer journey points and engage digitally in a relevant way. Customers may shop online and get an assortment ready but they want to get to that assortment in the physical store and than buy. Just placing discounts in the mobile app doesn't work. Each part in the shopping experience has to be customized to that particular medium and need.
In conclusion: digital is not ecommerce and digital influence is definitely not limited to the online store. Those who fail to connect the dots and engage their customers on all channels will not be a part of tomorrow's retail.
Facebook secured a patent for a system that builds credit rating based on social connections. Is this a piece of what could be the Facebook bank?
There are some strong arguments that yes, Facebook is building a peer to peer lending service for its 1.49 billion users.
PayPal president David Marcus resigned from PayPal and joined Facebook a year ago. Reportedly he joined the company to work on the Messaging products. Quite a big change. So the obvious question was why would the president of the biggest online payments company would quit his job to start working on the messaging app?
But then, in March 2015, Facebook announced a new feature in Facebook Messenger: payments. Basically anyone could send their friends a couple of bucks without having to leave the app. Plus – it charged zero fees. Zero. This sounds great but … how would they monetize it?
The credit scoring patent may be the answer. What if Facebook would roll out a general feature that lets anyone lend anyone in the network based on their credit score? Peer-to-peer lending is one of the biggest and yet most underrated innovations in digital finance.
With a stable payments system, a great credit scoring patent and 1.49 billion lenders and borrowers Facebook may be building the largest
bank financial system in the world. All digital, peer to peer, decentralized and ready to come online just as banks are faced with an impending meltdown.
Think that’s crazy? Maybe not. Meet George Soros, “the man who broke the bank of England” when he short-sold $10 billion worth of pounds. He did this during the Black Wednesday Financial Crisis and earned $1 billion in the process.
In 2012, when Facebook stocks were plummeting, Soros bought Facebook stocks. When he bought these stocks, the social network looked like it was in a really bad shape:
Let’s just say things are a bit better now:
But his great investment timing is not what points to Facebook being on the verge of a huge financial change. No. It’s the fact that just as Soros was purchasing his Facebook stocks, he was selling his stakes in financial companies such as Citigroup, JP Morgan, Goldman Sachs and Wells Fargo.
So if it looks like a duck and it quacks like a duck, it’s probably a duck.
Facebook has built a peer-to-peer payment system. It hired the man that helped PayPal grow to its present market share. It secured a credit scoring patent that works within a network. Soros moved his bets from the big banks to the most popular social network. There is a growing need of peer to peer lending across borders and Facebook can deliver.
We’re in for a 1.49 billion customers bank that works across nations and lives inside your mobile phone. I guess this qualifies as a Mega-Bank.
We have a growing industry that builds upon the dreams of small web shop owners thinking they can build the next Amazon. That’s about to change.
But the truth is very few of them will ever become self sustainable. Very few will go beyond small web shops. Even well funded startups can crush and burn (Fab for example burned through more than $300 million until calling it quits).
I find it hard to believe that there is a future for the small web shop. Just like web pages today or the Gopher protocol in the past, one day the small web shop will be gone and something else will take its place.
Here are a few things that will be either causes of reactions to this change in digital commerce:
Think of these increasingly influential outlets as the shopping mall for the next century. The likes of Ebay, Amazon and even Walmart will become larger marketplaces catering for both more consumers AND more suppliers / vendors.
In the (near) future ecommerce entrepreneurs will find that the window of opportunity previously open will close and consumers will increasingly rely on larger marketplaces for better prices and more diversity.
Think of it in offline terms. There are little if any incentives in opening a small store in a mostly un-visited area. A better approach is to open your store in an already trafficked shopping mall. Amazon for example caters to sellers and offers a marketplace, fulfillment services and marketing options.
The takeaway is simple: if you can’t build your shop into a shopping mall, you’d better join one or do something else.
We live in a time where a more educated consumer switched from “buy more” to “buy better” and the advertising agency was replaced by Google and Facebook. Creatives are now replaced by algorithms and data.
There is an abundance of digital tools, digital experts, digital know-how (maybe some can be found on this blog also) providing “support” to small web shop owners. The fact is, very few shops are really going to make it to an actual profitable business. Along the way, however, they will pay developers, designers, marketers, ads, copywriters, SEO experts, content experts, photographers. They will buy subscriptions to dozens of cloud applications that brag about the latest success story and they will try to figure out what the hell the numbers in their analytics app are saying.
In the end they will see the problem and the solution lies within one aspect. Size. You may write the best content, have the best designed Magento or Shopify theme. In the end you can’t compete with Amazon. Size does matter.
As the small web shop will start fading away, a new breed of entrepreneurs will show up. The manufacturers. With so many options for cheap production, distribution and marketing the only thing that’s missing is but the great product one passionate entrepreneur can come up with.
There will be little place for small commerce entrepreneurship. But that doesn’t mean consumers will buy less. They will buy better and they will buy from more. We are witnessing a rising trend of small manufacturers popping up with amazing models. A very fun example is the the Dollar Shave Club, a startup that’s manufacturing personal care products for men. The Dollar Shave Club takes on the large companies such as Gillette in a very straightforward way.
So about the death of the small web shop… It’s coming but don’t hold your breath. There are many vested interests in the small webshop industry.
First there are the startup owners that still believe their small web shop has a future in its present form. Then there are the billions of dollars that have been poured by VC’s in web shop apps and marketing tools.
Plus there is a (still) growing literature that tells anyone with a few bucks and a dream that they can be the next Jeff Bezos. What they don’t tell them is that the world has place for only one Jeff Bezos but plenty of open slots for other success stories. Just not one involving a small web shop.
As online and offline commerce are getting closer to each other and customers schedules are getting more and more crowded, pick up lockers seem to become more useful and popular.
They are versatile, easy to use and something customers need from omnichannel retailers. So let’s dig in and see how they work and who should use them.
First off – what is a pick up locker? Simply put it is an area of lockers where retailers can drop off merchandise and customers can pick it up. Amazon has been a pioneer in this field, with Amazon Lockers opening up the gates to a new type of fulfillment.
The pick up lockers work by assigning a specific location to packages and sending pick up codes to customers. The customers can than go to their designated pick up location, enter the security code and grab their packages.
After Amazon has built their first experimental pick up lockers, others soon followed.
Some of those that developed their own systems of pick up (and ship) lockers are 3PL companies. For example FedEx and UPS have developed quite advanced pick up and drop off locations. UPS has named theirs “Access Points” and they’re building a network able to sustain growing demand.
FedEx has developed a network of “Ship&Get Self Service Lockers“. With their lockers one can drop off items for shipment or receive packages.
Both are growing really fast and soon others will follow suit. Even startups have ventured in this area with some highlights being Swapbox, an Y Combinator startup and Bufferbox, a company that was recently acquired by Google.
So yes, they are popular but how do they work, especially from a retailer point of view?
One very specific use case for the pick-up locker system would be large retail chains. For example Walmart announced last year their Grab & Go lockers following their Site to Store Self Service Lockers experiment.
Apart from the internal fulfillment challenges, retailers need to focus on some key aspects regarding the development and implementation of such pick up locker systems:
For obvious reasons there needs to be a secure access to shipped goods. To do so each drop off will have to issue a security code that can be decrypted and accessed with the private code the customer will receive.
The systems will also have to have fall-back security systems such as video surveillance and locking systems in case of hacking attempts (there will be some).
Security code should work online but also have a fall-back local solution that can work in case internet connection is off.
The pick-up locker system works with other fulfillment operations and will have to input status data directly into TMS (transport management systems) so shipping personnel could be directed to the correct pick up locker area and the specific pick up locker.
As packages differ in size, specific information regarding the type of lockers that are available should be available in real time so packages are stored correctly.
So far most pick up lockers use alphanumeric codes to help users get accustomed to picking up their packages without any hassle. But these codes pose threats in terms of security. While these codes can always be an option and can be easily sent to any device, with smartphones and smartphone apps on the rise, some other solutions may work even better.
One such option would be QR codes embedded in the retailer’s mobile application. The codes can be generated on the fly based on a secured algorithm that neither exposes the code and can also work within the application the customer already uses, thus improving loyalty.
With so many developing their own pick-up locker systems, a connectivity protocol should become the norm. With such a protocol FedEx could ship to either Amazon, Walmart or even UPS lockers for example, improving cross-retailer experience and creating economies of scale.
That being said, the development of pick-up locker systems is obviously a bit more complex than these few paragraphs but I wanted to give you a starting point and explore some of the challenges.
We are at the peak of our civilization in terms of economic development, social cooperation and global communication. Though conflicts still arise and will probably exist for the foreseeable future, we are witnessing a historic moment: for good and for bad we are on top of our game.
This change has been made possible by a lot of factors including recent destructive conflicts and potential conflicts (nuclear destruction), improvements in communication technology, improvements in transportation and more.
But if we were to point out a specific factor in the emergence of this globalized society, that must be the fast evolution of organizational management tools and techniques.
Whether we are talking about multinational corporations, governmental or military organizations, they have all evolved due to technological and know-how management advancements.
Companies can now grow bigger than ever and governments extend their influence farther. Military organizations are now stronger and can perform better than ever in terms of logistics and operational management. According to prof. J. Bradford DeLong from UC Berkley, the estimated GWP (Gross World Product) is at its highest and growing the fastest:
So basically we are working better, faster, more productive and yet it seems the world stumbles from one financial crisis to another. Many theories have been put forward regarding as why this happens. These theories range from pure economic theory to sociology, psychology, geopolitics and more. Don’t be fooled – we don’t for sure know why this happens. It’s a paradox that we are more productive, fare better in terms of conflicts and have a more connected world and still we deal with inequity and financial strains in the form of huge debt.
But there is hope. Whenever humankind dealt with seemingly insurmountably issues, we appealed to metaphors to change our perspective. The metaphor I’m proposing today is the computer hardware – software ensemble as a way of thinking of human organizations.
In this metaphor we have the human nature and human nature as the hardware and management acting as the software. With a combination of these two we were able to reach our present position.
Most of management theory and lingo are adapted from military procedures. As the military has been the single most enduring form of human organization throughout history (seconded only by religious organizations), it seemed logical to approach civil management in a similar way. The largest companies known are organized and behave just like armies. Top down command with intel going upstream and orders going downstream. The multinational companies “conquer” markets, “target” customers and “secure” market share.
As companies need effectiveness to stay profitable, strategy is designed by a small group of people (the board of directors) and implemented top-down by an executive staff. To do so – the executive staff uses company process design and procedures that are followed by those lower on the hierarchy.
This same principle was also used in the beginnings of computer programming. Programs were fed into computers to compute differential equations for things such as the trajectory of a shell, a blast radius or weather predictions. These programs were fed into a general purpose machinery (the computer) and based on these instructions computations would be made.
But as the computer industry grew, so did the computers’ capacity to run programs. With the digital revolution computers became more than simplistic machinery built to output specific data. Programs could be now written to answer mathematical questions but also to output imagery, sounds, allow users to play games and more.
To make this possible, a new paradigm in computer programming changed the way programs were written. Instead of the previous functional (procedural) programming, the concept of building a program started working with the concept of “objects”.
Technically, objects are a collection of data and functions. Conceptually they are the bridge between machine processing and human conceptual thinking. We are able to tell a fork from a spoon and still see the resemblance between those because we think in terms of “objects”. Previously programs were working mostly on concepts of functions. Simply put: If this, than that.
That made writing complex programs extremely hard. It also made maintenance even harder. Without becoming too technical, OOP (object oriented programming) allowed for even more complex programs to appear and made it easier for software teams to build, update and maintain these programs.
The difference, if you will, for those programs is the difference between the old DOS versions and today’s Windows OS or Apple’s iOS. It’s worlds apart and today we are in a DOS world trying to build video games.
Though it may seem strange to use software development lingo when it comes to managing organizations – it makes sense in the metaphor proposed earlier. Human organizations (the hardware) may yield a lot more than they do today. As robotics may soon take over menial jobs, they have to.
The problem does not lie in the hardware (human intellect, creativity and production) but rather in software (the ability to manage this creativity and productivity).
We are not fit to deal with this level of complexity in the way we do today. Think about the basic organizational challenges. They are not production or infrastructure related, but rather human complexity related. Someone from the headquarters of Uber may devise an absolutely brilliant software and business model, but they still have to deal in terms of organizational management with the fact that Paris taxi drivers hate competition. And the fact that the french government will not allow the company to function without the right permits.
To make such a global organization work, there have to be some type of new management technique in place. One that can use the managerial basics but still be able to develop specific procedures to handle cultural differences.
That’s exactly what OOP (object oriented programming) works for. Handling complexity through object manipulation.
So how would such an organization look like?
To help you glimpse into the structure of a potential OOO (Object Oriented Organization) I will use the basic characteristics of a software object and translate those into organizational concepts:
The term (data) encapsulation points to objects being self-contained in terms of both data and functions. The object keeps the data and functions protected from outside (potentially harmful) interventions.
If you’d like to think of objects in terms of organizational objects I’d advise you to look beyond the usual “department” paradigm and rather into specific teams. Think of the product design team at Apple. That is an organizational object, that stores both specific data (things such as product specifications and test results) and functions (builds product demos, designs usable products etc.).
The organizational object could, in theory be self sufficient and usable in any part of the organization or even within external organizations.
The idea of polymorphism may seem complicated but it actually solves a lot of complexity issues. Simply put, it allows for contextual responses.
Take the previous Apple design team for example. If the iPhone development team were to ask it for a design it would probably forward the team the specs they are working on and receive a few sets of product designs. If the iMac team would ask for a new design, they would also forward the iMac specs. They will however, receive another type of design, one fit for their product.
The idea of polymorphism, in the organizational sense is that decisions based on context would happen within the design team object. Both the iPhone and the iMac team, or any other product design team could ask for a product design and receive something that’s fit for that specific product.
But let’s take that a little further: what happens if the marketing team needs a specific page covering the new iPhone. Wouldn’t the product design team be the one best fit to output such a page? Probably so, but some upgrades may be needed and this is where the third object oriented organization principle comes in:
This term shows that one object can be the prototype for another object. In our example we need Apple’s product design team “upgraded”. So far they have been doing product design so they may not be able to output iPhone’s webpage so well.
By building on their expertise, we may assign a new member to the team, a member that is specialized in designing web pages. By working with his or her team peers we will have built a new organizational object on top of the previous one. The marketing team will request a specific design, by forwarding some specifications. At this point all three external teams (iPhone product development, iMac product development and marketing) have basically done the same thing: asked for design-related work, by forwarding specifications to the the design organizational object. The work was done within the object and results were output successfully.
Notice also that there is no absolute need for management. Objects interact with one another thus leaving management in charge of developing these organizational objects and the overall purpose of the company.
The one big reason is complexity management. We have not put a man on the moon using the abacus. We have upgraded our tools to reach further. Object oriented organizations can be a new breed of organizations in different sectors where effectiveness rather than hierarchy is important. These areas can range from business to NGO’s to governmental agencies to banking and more.
Basically each organization that deals in large numbers of either employees or “customers” can benefit from a networked object oriented organization approach.
Why do that? Think about how today’s concept of having a job feels. Most employees report their bosses are awful. But it’s not that simple – it’s not that the boss just wakes up one day and thinks … “hey, I’m going to act terrible to my fellow colleagues”. Today’s managerial concepts and techniques are outdated and provide managers with poor tools.
This results in “less than perfect” working conditions, poor performance, organizational ineffectiveness and overall social tensions. With our current management system the world has grown more productive yet more indebted. Productivity has risen yet poverty stayed the same or increased.
The fact is we need a new type of leadership and chances are this too is a human problem with a software solution.
The Beauty and Cosmetics category is one of the fastest moving digital commerce areas. It is a highly competitive and innovative market with large brands quickly adopting digital models and challengers innovating their way to the top.
The emergence of the ecommerce sales channel for beauty brands has seen a long wait. The time has come for beauty retailers to align with the customer’s demand and specific requests. For example, a recent AT Kearney study showed 28 percent of online shoppers use the digital media to get informed on products. They carry this information in stores where they are sometimes more knowledgeable than the store assistants, which may pose a real challenge for beauty brands.
The AT Kearney study shows that only 16% of all online shoppers are online enthusiasts. The rest either use the digital media for information or for shopping for products they are already familiar with:
Online shoppers are more inclined to shop for particular products, such as skin, personal and hair care. Products such as beauty tools and nail care are less likely to be purchased online, unless is a very specific product, one the customer is already familiar with:
In this post we’ll get a glimpse of the eight most important type of beauty brands that engage their users through digital commerce (also). We’ll have a look at a selection of global champions with different backgrounds and different models. From digital pure-plays to established brick and mortar brands, let’s have a look at some of the most interesting approaches to beauty and cosmetics digital retailing:
As expected, Amazon leads the way when it comes to online beauty retailing also. Customers are delighted to almost 2 million products, including luxury brands.
Its Beauty category is the go-to place for most of online enthusiastic shoppers, where Amazon is available. And with Amazon’s shipment policies, that’s basically everywhere.
Amazon’s secret weapon lies in its free-shipping policy (for orders above 25$), a great motivator for online shoppers and a better threshold than challengers Sephora and Beauty.com.
Another great asset Amazon will use to gather shoppers around its beauty retailing section is the fact that more customers use Amazon (30%) than Google when doing online product research.
Sephora is generally seen as the actual leader in the digital beauty commerce. Though it lacks Amazon’s ecommerce strength, the company is part of the largest
luxury high quality goods (ahem…ahem) group, LVMH, packing a lot of beauty retailing know-how.
The company has developed a great omnichannel model that focuses on mobile as a bridge between online and offline.
One of the best things Sephora.com has implemented in its web store is the content marketing and digital assistance features. I’ve previously covered the subject and praised Sephora’s efforts to offer quality content, as praised are due.
The curated content customers find is a great choice to build loyalty. So is the Community where customers can browse among the knowledge base or post questions and interact with professionals.
As mentioned, one of the greatest assets Sephora has is its focus on digital rich content. Users are treated to:
Some other touches make Sephora a great choice for beauty products customers, not the least of which are the three free samples with each order (a great way to drive future orders) and the mobile apps that make us of barcode scanning to offer price info and customer reviews.
Beauty.com is an online retailer so it has no apparent need or intention to leverage offline or omnichannel sales. It has developed specific filters and features to cater to customers that either know what they want and want the best price or they can quickly decide.One of the features that really stands out (they have a pop-up to insure it stands out) is “Auto reorder and save” option. Simply put, the online retailer has noticed the habitual purchase beauty customers take and leveraged it.
Customers can set an auto-reorder flag for certain products, which can be shipped each 30, 60 or 90 days. Before the order is shipped, customers receive an email notifying them and they can pause, skip or cancel the auto-orders. The customer incentives are savings and free shipping.
Another great feature that lets customers reach the right product is the filtering option which is set not only for product features but also customer concerns and specific needs. In the Make-up section, the eye category, one can find brand and ingredients options, but also filters such as concerns (acne, dryness or oiliness), benefits (curling, hold or smooth) and skin type. Unfortunately, the filters are not usable on the smartphone version of the web store.
Just like its direct online competitor (Sephora.com), Beauty.com offers free samples, free shipping for orders $35 and above, free returns and 5% back through its loyalty program. It also features great content areas, such as its Beauty Blog, with Romy Soleimani, The Latest Trends section reviewing product news and a Beauty Videos section, ranked according to customer reviews. A great no-no on the video section is the fact that videos embedding is restricted to affiliates only, leaving a lot of marketing potential untapped.
I’ve put together a slideshare presentation regarding omnichannel retail. It focuses on the events that lead to the adoption of omnichannel, the challenges and several ideas that will help you understand the concept.