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What does it take to turn a store visitor into a loyal customer? Any retailer that can answer this question is surely a leader in its respective niche but it is not a simple question.
There are a multitude of factors at play and we thought we might ask the experts. We’ve reached out to George Skaff, CMO of TouchCommerce, the leading company in omnichannel engagement. George has over 25 years of marketing leadership experience in the computer industry. Prior to joining TouchCommerce, he has held marketing leadership positions with SGI, DigitalPersona, Wyse Technology and NEC Computers.
George Skaff: TouchCommerce is the innovative leader in omni-channel engagement solutions. We have been in business since 1999. Our company was built with a results-driven retail perspective to replicate and enhance the in-store customer experience online, with chat technology. We have award-winning technology platform and mobile solution with an emphasis on data, self-service and automation. We are focused on Enterprise Global F1000 eCommerce companies. TouchCommerce real-time customer targeting engine leverages “BIG DATA” to target and engage customers in a personalized digital assistance experience on desktops, tablets and smart phones across the omni-channel environment. TouchCommerce operates in 16 countries across North America, EMEA, and Japan.
With mobile revolution happening right now, the way customers want to interact with retailers is changing fundamentally. There is a shift in customer behavior underway. You can no longer rely on them dialing your number when they have a problem and talking to a customer service agent. There are hundreds of ways they could contact you and they may well try several different ways to get the information they want. However, make no mistake: your customers are not aware that by clicking out of a webchat session and picking up the phone that they are ‘changing contact channel’. They do not care. All they are concerned with is getting their query answered in the easiest, quickest way possible. And they want their experience to be consistent across all these channels.
Combined or stand-alone, the fully-integrated custom solutions we create for customer acquisition and customer care and retention contribute to an enhanced online, mobile or in-store customer experience and increase self-service in the omni-channel environment.
George Skaff: To maintain consistent consumer experience, it’s vital that retailers start thinking in terms of the customer journey and the conversation you are having with them, rather than the platform for that conversation. In order to have a cohesive, joined-up omni-channel offering, it’s essential that the different channels are integrated at the back-end. There should be one view of each individual customer, no matter which channel they have chosen to contact you. Ideally, this view should be presented to the agent in one, single desktop application too, so when a customer calls, the agent has a clear idea of their previous interactions and account details, and can quickly access information to help solve their query.
When choosing a software provider, retailers should consider if the solution:
George Skaff: The Dynamic Targeting Engine is the core of the entire RightTouch platform and underlying technology. It tracks all user behavior and website variables to identify optimal engagement opportunities. This highly flexible tool can be configured in limitless ways to identify any group of users and target their specific needs. All direct consumer engagement activities are managed via this robust engine.
By using Our Dynamic Targeting Engine, you can focus your energy and resources on the customers by presenting them with the products they want most. This targeting tool allows us to identify consumer behavioral attributes in order to launch any one of our products with the right context, including chat, guides, offers, survey invitations or any other rich content offering a targeted engagement experience online.
The Targeting Engine enables:
George Skaff: The retailers should be very specific in selecting the metrics to measure their omni-channel marketing performance, and not to focus on metrics for each individual channel. Engagement metrics should include consumer visits, consumer interactions, conversion ratios, LTV, incrementality in all of the above measurements, as well as customer satisfaction.
George Skaff: Several innovations are happening as we speak, among them ability for the consumer to effortlessly move across the channels, as well as the ability for the retailer to follow consumer journey across the channels. Retailers are starting to pay close attention to consumer’s shopping journey online and offline (in-store.) Products like TouchStore from TouchCommerce are a good indication of the future entails.
George Skaff: Apple Pay improves the ability of the consumer to effortlessly complete the purchase, but it does not change the purchase paradigm in principle. While there has been other payments method (Google, Amazon, etc.), Apple massive outreach in promoting this is helping the fast adoption.
George Skaff: The store of the future will be like a country without borders, where consumer moves effortlessly across different channels executing their intent to purchase. The thing to remember is that customers do not generally have a preferred channel. They will just pick whichever one they think will get them the result they need most quickly with least effort.
Consumers want choice – they will want to use different channels depending on their needs – and the ease with which they can contact a company increasingly forms part of the criteria for choosing one brand over another.
For example, a customer might call their mobile provider to find out if they were on the best price plan, but they will go online to see their current balance – and then turn to Twitter to chat with an agent about data limits abroad.
Another example is when a customer is doing their research online on their laptop looking to purchase a new TV, they check with their friends on social media regarding their friends recommendations on their tablet while sitting on the couch at home, then search for best prices using Amazon mobile app, and still will end up in a physical store to touch the product before they buy, and they might get engaged with the brand chat agent while in the store, ending up purchasing the TV of their choice in the store but using the coupon pushed by the chat agent to their mobile device.
They say a picture is worth a thousand words. Add a cool filter in Instagram and it may be worth more. So luxury retailers have taken up on the chance of showcasing offline products in the most popular photo-sharing app in the world.
It’s definitely worth it. With more than 300 million Instagrammers, the social network is a colorful powerhouse, just waiting for fashion retailers to tap into it. And it’s not just the numbers. From Taylor Swift to Robert Downey Jr everyone who’s anyone is walking the red carpet of Instagram.
Along these stars came the most popular and desired luxury brands in the world. With social incentives, aspiring fans can become customers and customers will become brand lovers. So photo sharing on Instagram is a go for brands looking to connect online and offline sales and marketing.
Let’s have a look at these three most effective brands on Instagram:
Hermes is unconventional and creative, focusing on outlining the brand identity without being too pushy. It’s rather “modest” fan base of just over 670k followers shouldn’t be bigger either. After all, Hermes addresses a special kind of audience – the kind that doesn’t come busting doors in look for discounts. They discreetly shop online for $11.300 leisure bicycles and $7.600 bags.
You’ve spotted that special kind of turquoise and the must-have diamond ring that’s globally recognized. 1.8 million Instagrammers are constantly connected to the stylish social media outlet Tiffany’s employs.
The Instagram page is a mix of colorful illustrations, products showcased in glamorous yet simple and stylish photos and fashion advice from models and designers. The whole philosophy is outlined by Francesca Amfitheatrof, Tiffany & Co. design director: “I believe there is great power in simplicity.”
Just like its brick and mortar stores, as well as the online store, the Instagram page is a stylish, simple and elegant work of art.
Burberry is almost unbeatable in terms of using technology to connect to its esteemed audience. Digital retail is so important to Burberry that they’ve designed a flagship store that resembled their website, in 2012. Talk about omnichannel.
Digitally connecting to their customer has been the main ingredient to Burberry’s recent growth and Instagram was not bound to be left behind. The 2.4 million followers can get a glimpse in the lives of the rich and beautiful through Burberry’s Instagram channel.
Models, carefully crafted products and celebrities all mix to give followers, customers and aspiring Burberry product owners, that warm “I’ve got to have this” feeling.
And once that feeling kicks in, the monogramed scarf is just a step away in the online store, ready to be picked up in the closest store. Or sent home. Worry not, there’s free shipping and returns.
Achieving clarity in Omnichannel Retail is no easy task. Retailers, especially large ones, need to get all departments, all sales channels, suppliers and fulfillment operations on the same page.
And that’s just the first step. Then comes the IT integration where legacy systems are connected to a central management tool that handles at least inventory transparency, CRM and order management across channels.
Omnichannel Retail is not mainstream right now. It is still in its infancy. Sure, some are more advanced than others and some companies are building the future faster than others. But the truth is omnichannel is a need to be fulfilled for most retailers.
And here come the knights in shiny digital armor to rescue the day. The following 5 vendors have built omnichannel retail capabilities ready to be plugged into existing retail ecosystems. They are now the go-to elite for large retailers in need of upgrading their IT infrastructure.
Shopatron was founded in September 2000 by Ed Stevens and Sean Collier. Since then, it has evolved into an integrated SaaS platform that connects offline and online orders management, making it easier for customers to purchase from retailers.
The company offers specific omnichannel solutions, most important being:
Shopatron targets midsize retailers and its main benefit is the advanced order routing. The platform combines online and offline sales and claims inventory visibility across channels.
NetSuite was already rocking a great SaaS ERP product and a fully flavored ecommerce solution when it acquired OrderMotion in 2013. Now the company can provide inventory management across channels, a single customer view, business intelligence data and omnichannel order management.
The company, among the first to bet on SaaS platforms, is now one of the fastest growing companies in the field, closing 2013 with $414 million in revenue. The revenue is up 34%, which is a big win for the company initially backed by Larry Ellison.
NetSuite started as NetLedger, envisioned as an online accounting tool, that later turned to an wider array of company management tools.
The past two years have been very active for NetSuite in terms of omnichannel related acquisitions. In 2013 it acquired Retail Anywhere, a POS solutions company. In 2014 it acquired both Venda, an ecommerce SaaS company, and eBizNet Solutions, a company focused on WMS (warehouse management system) solutions.
Netsuite has decided omnichannel is a perfect mix when it connects companies focused o separate blocks in the retail chain.
PayPal is not the only jewel in eBay’s pocket as it seems. eBay Enterprise (formerly known as GSI Commerce) is one of the fastest growing and biggest companies providing technology and consultancy for omnichannel retail.
The company delivers four big solutions to its customer base:
Unlike the other companies on the list, eBay Enterprise goes beyond software integration and into marketing and operations. In terms of retail solutions, eBay Enterprise provides support for commerce integration across channels. The company integrates the main sales touch points, with the help of its omnichannel tools:
The omnichannel operations tools cover a lot of ground and can be used in fulfillment operations, customer care and store based fulfillment.
IBM stands for a lot of things and among them it had to be omnichannel retail also. The tech giant offers technology to retailers in need of:
Its Websphere Commerce solution connects both online and offline sales through its different versions. It handles cross-channels inventory visibility, distributed order management and scales as you would expect from IBM.
At the core of IBM’s order management and inventory tools you’ll find components IBM acquired in 2010, when it purchased Sterling commerce. The transaction cost IBM $1.4 billion but brought in 18.000 global customers.
The Websphere commerce is a great fit for large companies and powers some very well known brands, but it is somewhat a not so great fit or midsize retailers.
Hybris, now a part of SAP, is probably the best fit for omnichannel retailing. Hybris is a dynamic company focused on growth and delivers constantly on market needs.
The omnichannel solution is scalable and built on a modern and flexible architecture, that allows interaction with all interfaces. Its order management solution, inventory and commerce application are built to work together seamless and easily connect with other systems.
Hybris’ solutions work both B2B and B2C and can handle inputs from multiple inventory sources and outputs on multiple sales channels. Moreover, the solution features a central content management system that enables retailers to push content across a multitude of interfaces.
As of 2013, Hybris is a part of SAP, making it a global powerhouse connected to the world’s most popular (well, at least used) ERP.
So that’s it – these are the best of breed. Of course, there are more out there that deliver great products and I could name Intershop, Demandware or even Oracle. They, however are less inclined to omnichannel or have a really new found love for omnichannel retail. The vendors mentioned above are leading the pack in omnichannel retail implementation, especially for large customers.
Previously, the company used Commercehub’s marketplace technology to connect its vendors to its Ecommerce sales channels. With this new development there are two big things happening:
The first and most important, Staples moves technology development in house. This is a clear sign the company is shifting from a brick-and-mortar centric strategy to a technology centric strategy.
With its legacy store network already in place, growing online sales and the new marketplace, Staples can compete with Amazon on an omnichannel level. Its vendors can now access its online sales channels but with future improvements, their products will be probably ordered offline as well.
The second biggest change is in Staples’ logistics strategy. So far the company relied heavily on its own fulfillment centers. Now orders are increasingly shipped by vendors through drop shipping. This is the most efficient way for Staples to increase its product count and it seems to be working: Staples increased its product count from 30 000 in 2012 to 200 000 in 2013 to a whooping 1.5 million SKUs in 2014, according to Internet Retailer.
As Internet Retailer reports, Staples is still curating the vendors’ offers but it will soon switch to a fully integrated platform in 2015. Even now the new tool allows vendors to receive orders, see real-time alerts, access analytics data and manage inventory, without the cost Commercehub’s technology implied.
Belly is a startup focused on loyalty. It launched in 2011 and has since grown to be active in 18 markets and more than 6500 locations. It aims to reach 10 000 locations by the end of this year and as things look, it might just do so.
The product works by allowing customers (aka “Belly Members”) to “Belly” every time they visit a “Belly Business”. That basically means scanning their unique QR codes every time they visit a partner location. In exchange, customers receive loyalty points that can be used to claim rewards.
The system is part old-school loyalty program and part gamification. Belly Businesses can encourage customers to keep coming back by adding increasingly valuable rewards, redeemable with an increased number of points.
The product is free to use for customers. Locations that feel the product is right for their marketing efforts pay a subscription fee and get fitted with the nice iPad used to interact with visitors, belly cards and access to digital features in the app.
Features include data on visitors, social media marketing options, access to reputation management on Yelp and the ability to attract new visitors with the help of Belly Bites. These are special rewards offered by locations targeting new customers. By gathering data on users, Belly can recommend the right customers with special rewards based on previous behavior.
The company has been among the first to be featured in Apple’s Passbook and is also integrated with Google Wallet and Samsung Wallet. With these integration up its sleeve as well as its game-like approach, Belly can become one of the leading solutions in loyalty programs.
But to do that, it will have to connect both offline and online experiences, providing a truly omnichannel loyalty approach, ready for the next of innovation. That is not going to be easy as what may today means payments , tomorrow can include loyalty. Apple, Google and PayPal are hitting each other hard in this market. They can surely tackle smaller companies.
But the other way around is also an option. Loyalty can turn to payments so maybe there’s more than meets the eye for Belly.
Think about this – is there actually such a thing as an online customer? Or an offline customer? Or even a mobile customer? Definitely not. Consumers like to skip sales channels and fulfill their goals in the best way possible. Your customer can research for products online, ask friends for references on social media, test them in the brick and mortar shop and finally purchase in the web store. So it makes no sense treating customers as stuck in a sales channel. The Omnichannel experience, where every consumer can use given sales outlets as she sees fit, is now pretty close to utopia for many retailers.
But others are dedicated to making omnichannel a reality for their customers.
“Our goal remains to help our customers shop whenever, wherever and however they prefer, and to use the entire inventory of the company to satisfy demand,” Terry Lundgren, Macy’s CEO
As other retailers are facing declining sales and decrease in customer loyalty, Macy’s seems to be thriving. The company has seen recent increase in sales overall and a sharp increase in online sales (48% in 2013).
How did they do it?
Macy’s has lots of experience in customer service but the digital revolution took most retailers by surprise. Macy’s has dedicated a large portion of its yearly budget to improving customer experience through technology.
The company’s cost of sales rose to $139 million in 2014 second quarter. This increase was caused by “omnichannel business and the resultant impact of free shipping” which means Macy’s is betting big on its customers’ experience.
The results are great. Just short after Apple Pay was announced, Macy’s announced it will implement the technology in all stores. The company already allowed customers to store their coupons on the Mobile Wallet, that could be accessed anywhere – online, on mobile devices or in store.
Macy’s also partnered with Shopkick to increase brick and mortar traffic in its New York and San Francisco stores and now the company is rolling out the shopBeacon technology. The beacons give retailers the ability to push information directly to the consumer’s mobile device. It can welcome shoppers as they walk inside Macy’s stores, send out specific deals and recommendations and can be used as a way to redeem loyalty rewards.
Interactive kiosks were used to improve customer experience throughout brick and mortar stores. The kiosks vary in size and complexity, ranging from simple browse and order applications to more complex features. The “Beauty spot” kiosk, for example, improves Macy’s cosmetics section with an electronic make-up consultant. The system advises potential buyers on makeup and skin products that are best fitted for their needs.
Even store associates are empowered when answering customer needs. The company is now testing mobile and tablet POS that can connect to real-time inventory and offer quick responses to customer needs.
And if we’re talking about real-time inventory, you should know that Macy’s has been working hard at improving cross-channel operations:
In 2010 Macy’s piloted a store-fulfillment program in 10 stores. The idea was that if the company can connect inventory from individual stores, it can manage inventory better. As merchandise was sold sold online, stores would be able to ship orders directly, depending on their inventory levels or allow for in-store pick-up.
The program was a success and the company increased the number of stores that could ship orders. 13 more stores were added to the program in 2011. In 2012, 292 stores were shipping orders. In 2013 – roughly 500. The process will be finally completed in 2014 when all 800 stores will be able to fulfill customer orders.
As these stores began fulfilling orders two things happened. First – orders could be shipped faster, with the ultimate goal of same day delivery, thus improving customer experience. The second big change in Macy’s fulfillment was that using stores meant inventory turnover greatly improved.
With store associates empowered with real-time inventory data, orders began to increase. The store associates could locate items in other stores, and ship that item from that point, directly to the consumer’s requested address.
Macy’s discovered that the nearest store may not always be the best choice to ship the product. Sometimes a product sold in point A could have a really slow turnover so it should be shipped whenever possible. On the other hand, the same product could be in high demand at point B, closer to the customer.
The company didn’t stop here. With stores able to fulfill orders, the Order Online / Pick Up in Store program began in 2013. It was first tested in 10 stores during fall 2013 and began rolling out to all stores in 2014.
It’s not just the stores that improved their fulfillment functions. Macy’s is now expanding its direct-to-consumer fulfillment center in Goodyear to a mega-facility of 960 000 square feet which will be soon followed by an even bigger fulfillment center in Tulsa, in 2015.
So Macy’s is quick to implement omnichannel policies but is it worth it?
It’s worth it, all right. As you can see in the chart below, Macy’s revenue has been steadily rising, as opposed to some of its main competitors. It seems that 2010 was a real turning point for the company. And what year is that? Right, the year the company began to implementing omnichannel retail.
Apple Pay is Apple’s take on mobile payments. It works by storing credit card data and then charging consumers with a simple tap to NFC payment devices. Most important: it’s a huge game changer in payments.
With this product, Apple unveiled its grand vision of a simple, secure payment process. It can store multiple credit cards, it’s linked to the biggest card processors AND big banks such as JP Morgan & Chase or Citigroup. For now, not all Apple devices support Apple Pay but just give Apple a little time. The iPhone 6 and the iPhone 6 Plus come equipped with NFC technology. So will future products.
The big news: Apple is betting big on this product and you know what this means…
The retail industry hates it.
That’s right, even though Apple Pay registered 1 million credit cards in the first week and users love it, some retailers decided they know better.
Retail chains such as Walmart, Rite Aid, Target and many more chose to bet on a different technology, called MCX. The acronym stands for Merchant Customer Exchange and it is a network of retailers offering mobile checkout options through a product called CurrentC.
Seems a bit complicated? Well the short story is that even before Apple Pay was nothing but a rumor, some retailers thought – “hey, why let Apple have so much influence on our sales? Let’s build our very own mobile payment system!” (not an actual quote)
So the MCX people built CurrentC. And by built I mean they have been struggling for years to come up with something that says Mobile Payments. When Apple Pay was announced, they went on and announced their own product.
The product is sliiightlty different from Apple Pay: it works only in the MCX network and works with QR codes. Plus it stores consumer personal info and connects DIRECTLY to the consumer’s bank account. No way that storing consumer data in the cloud and accessing consumer bank accounts could ever go wrong. Just ask Target (among those in the MCX) and Home Depot.
As the public decided they are not going to wait for CurrentC to show up, retailers such as Walmart and Rite Aid went on and blocked the technology that made using Apple Pay possible.
Now why would they do that? Why is Apple Pay such a big thing and why are these retailers so afraid of it?
Ever thought of buying online and picking up in store? Or searching for an item in a physical store and asking store associates if it is available at another store? If you have you’ve probably noticed that service is lousy when it comes to connecting channels. Omnichannel retail is still in its infancy. To make things work companies have to rewire their IT infrastructure and get ready for a future where it doesn’t matter if orders are placed online, offline, in the mobile app or on the phone.
And that’s hard.
Big retailers have a problem adapting to this new landscape where the consumer is at the center of every transaction and operation. Everything is moving faster and the giants are not really that agile. For example have a look at how much faster Amazon is growing when compared to Walmart.
A large part of this change has to do with payments. Consumers now have to pay one way in the Brick-and-Mortar store. Another way in the online shop. Mobile shopping has yet another payment process. It’s frustrating and the challenge to connect all payment systems is a really rewarding area.
The mobile payments market is estimated at $90 billion and expected to grow. That’s why Google, Apple, Amazon, PayPal and even AliBaba want a piece of it.
So far Apple has managed to connect online and offline channels best. Apple Pay’s ease of use, integrated payment in Safari through the Keychain and many others make it a reasonable bet for the future.
Mobile Payments may seem like a no-go right now. After all PayPal is available for quite some time on the mobile and Google has already launched and failed once with its Google Wallet. What change the future holds as to make Mobile Payments such a big thing?
The answer is Millennials.
The up and coming generation is now just beginning to earn and spend their cash but soon they will be a driving force in the economy. Unlike elder consumers, they have no problem bridging the gap between sales channels and they definitely don’t have a problem paying with their smartphones. IF it’s easy and secure.
In a recent Accenture study millennials were found to be ready to accept mobile payments. They were, in fact, driving the adoption in mobile payments. Among those surveyed, 60% did NOT use their mobile phones to pay. Their main worries: privacy (45%) and security issues (57%). Apple Pay solves both.
Remember the iPod, the iPhone and iTunes? They are just three of the most disrupting technologies from the past decade. And they were all introduced by Apple.
The scenario is always the same: a large market in need of change. Market leaders were stuck in exploiting existing technologies. Everyone from label records to Nokia and RIM learned a hard lesson. When Apple goes after a large market, it will revolutionize it.
Apple Pay is a revolution and the MCX retailers know it. Right now they are negotiating their place in the future of retail.
Omnichannel payments is all about the consumer. Everything happens around his or her habits. The retailer doesn’t get to dictate what the consumer wants, when it wants it and how the product should be bought.
If you look at Amazon you’ll find that it’s just a very very large store. But is it? In fact, Amazon is a marketplace. An instrument for the consumer to choose from lots and lots of products (240 million in Amazon US), sold by lots of merchants.
At the core you’ll find the consumer account. The preferences, the brand loyalty to Amazon, the saved shipping addresses and others. For each Amazon user, Amazon is a PERSONAL deal.
But for now, those products can only by accessed through Amazon’s infrastructure. The big thing that Apple Pay does is putting your personal account for millions of products and hundreds of merchants where it should be: in your pocket.
By doing this Apple will take out Amazon’s and the likes most precious asset and liberalize it: The personal account. Walmart and the likes have misinterpreted Apple’s message. Their product is not an enemy: it’s the best tool they have right now against Amazon.
Consumers love the fact that Apple Pay feels easy to use and most important – secure. It works online, offline, on the iPhone and on the Apple Watch.
Unlike Apple Pay, previous products were introduced as standalone products, not as part of an ecosystem and seemingly without any clear strategy and vision for the future.
Google failed and now it’s trying again with a new Google Wallet.
PayPal has maybe missed its opportunity to become what Apple Pay will probably be. Internal company battles and unclear strategy made the company lose sight of how the market is shifting.
Amazon too launched Amazon Payments but its focus on online payments makes it a NOW product. It really isn’t future proof.
Apple Pay works great and it works great for a large audience. Apple has a huge user base and this user base trusts Apple. They use the company products and are willing to allow the company to store their credit cards. In turn, Apple has not let them down: Apple Pay just works.
In what is probably the biggest financial error in commerce this year, Tesco announced that it overstated its profits. By a lot. The problem was caused by the company booking payments from suppliers as income. In fact, payments were used by the company to run promotions on the suppliers’ behalf.
Tesco is now under fire as forensic accounting investigators from Deloitte reported the company overstated profits expectations by £263m in the first half of 2014.
Not only that but profits overall are 92% down after a previous write down of £527m caused by the above mentioned error in registering income in previous years.
Nevertheless, Tesco is still the largest supermarket in the UK, leading the pack with a large market share:
Although its market shares have taken a hit, it seems that online sales are growing at 11% and I believe this is just the beginning. Following the unfortunate news eight executives were forced to leave the company, including chairman Sir Richard Broadbent.
Now the company is ready for a fresh start. Ok, scratch that “fresh”. It’s more like it’s forced to improve its omnichannel approach as customers demand better service and improved shopping experience. The company had previously employed several experienced directors to help it become a competitor to Amazon in global retailing. How well this would fare is hard to tell but they should get some award for trying. After all Tesco was the first to ship an online order.
Word’s out that Amazon is planning on opening its first brick and mortar shop. With such news the retail world is now buzzing with questions:
Is Amazon really going head to head with mainly brick-and-mortar retailers? Should the likes of Walmart be paying attention to such tactics? Could this mean a new way of doing business for Amazon?
The answer is no.
First of all Amazon is not opening actual stores. It’s opening pop-up stores. The big difference is pop-up stores are available for just a limited amount of time. They pop-up and then they pop-off. For example the two stores Amazon is now opening will be in San Francisco and Sacramento and will be open just for the holidays.
Amazon will use these stores to showcase its proprietary mobile devices (tablets, ebook readers, the smartphone). Once the holidays are over – puff – they disappear.
There is, however, one report from the Wall Street Journal, not yet confirmed by Amazon, saying the company would actually be looking for more. This report points to a New York location in Midtown Manhattan that would serve as a permanent physical presence. Again, this won’t be your typical store but rather a location designed to respond to specific Amazon needs.
Such needs would include testing Amazon products, order pick-up, returns and local delivery. Maybe even a drone helipad. Who knows?
Seriously now – with the store working as a mini-warehouse, the company could easily offer same-day delivery to near-by customers. That’s a great way to compete with Google’s same day delivery. These type of operations (pop-up shops and drop-shops) could become mainstream in the future as retailers need to bridge the gap in omnichannel retail AND provide faster shipping.
However, Amazon’s offline presence should be scanned from a different perspective:
There are no Amazon stores just yet. Except for a few Amazon lockers and the occasional pop-up stores, the largest online retailer remains a pretty digital presence.
Except for its logistics.
Beneath the magic of Amazon’s online retail presence lays an well-oiled logistics machine. Amazon combines advanced IT systems, human operations, robots, huge warehouses and a complex shipping operation to fulfill its daily orders. And some underpaid workers but that’s another thing.
In 2012 Amazon sold and shipped more than 10 million products each day. The total number of products shipped in the last quarter of 2012 was 1.05 billion. Yes, that is a Billion with a B and it is reportedly the first time in the company’s history when it sold more than 1 billion products in just one quarter.
The number of listed products is also huge. Its top 5 markets all list more than 100 million products, with the US totaling a whooping 253 millions, as reported by Export-X:
You’ve probably guessed that shipping 1 billion products per quarter to more than 200 million customers worldwide requires a bit of work. What you probably don’t know is that such a large-scale operation uses 50 million square feet of storage in the US and 33 million square feet of storage outside US (source).
There is no other ecommerce competitor with such storage and fulfillment potential. Its dominant position allowed for two interesting business models to evolve: The Amazon Marketplace and Fulfillment by Amazon.
To reach sales as those shown above, Amazon lists and sells both its own products and those from 3P (Third Party) merchants. Merchants can join its Fulfillment By Amazon program, ship the product to Amazon’s Fulfillment centers and than leverage Amazon’s Logistics.
This means the company can count on its sales AND influence to shape the future of retail. Its logistics are probably the most useful and under rated tool in expanding globally. While everyone wonders if Amazon will set foot in the offline world, the company has already laid the foundations to what will probably be the future of retail.
Of course, the numbers listed above can only show a small bit of what is required to keep Amazon moving and growing. The operational tools Amazon employs and the processes behind this amazing machine will be uncovered in an upcoming ebook. Until then – check out “Understanding Omnichannel Retail” – a comprehensive report on how online and offline sales are now connecting.
Apple announced its newest products and everybody focused on the much awaited iWatch or the iPhone 6 and 6 Plus. The real news, however, both business-wise and from a consumer point of view is the launch of Apple Pay, an NFC (Near Field Communications) ready payment system. Simply put, Apple’s payment system allows customers to store credit card data on their iPhones and when the time comes, just tap to pay.
The product launch was not unexpected. With the previous operating system launch, Apple packed several features that would allow for better mobile commerce. The iCloud Keychain was introduced to Safari in order to allow both faster logins to known websites as well as, in the future, a faster checkout.
With Apple Pay, the Cupertino company joins the omnichannel payment war as was predicted in this previous post. Google, Amazon, Ebay (through PayPal), AliBaba and even Facebook are trying to get a piece of the $15 trillion payments market. As banks and established financial institutions have failed to meet customer expectations in mobile payments, the gap between needs and available options will probably be filled by one of the tech titans.
Google tried its luck with the Google Wallet, Ebay’s PayPal is now crossing the bridge into offline teritorry and Facebook recruited Paypal’s former CEO David Marcus. Marcus is the man that helped Paypal grow from $750 million in 2010 to $27 billion in 2013, so one can only assume Facebook is also serious about payments.
To help the product take off, Apple signed 220 000 merchants onboard its Apple Pay project. Among them: Mc Donald’s, Babies R Us, Macy’s, Staples, Sephora and of course, all Apple retail stores. The 220 k merchants are just 2.4% of the total 7 to 9 million merchants in the US but it is a great start given the fact that Apple has a habit on pulling seemingly impossible feats, starting with close to nothing.
For example the iTunes Store launched with not more than 200 000 songs and only Mac Users could move the purchased songs to their iPods By September 2012, it was home to more than 37 million songs, 700,000 apps, 190,000 TV episodes and 45,000 films. By February 2013, the iTunes store had sold more than 25 billion songs worldwide.
So yes, there is a pattern here and there is probably a whole lot of room for improvement in the payments area.
Apple Pay’s security
Although recent iCloud security issues clouded the product launch, the security behind the payment technology looks great. First of all it allows customers to save credit card data on their phone without exposing sensible details to potential hackers. It also features the Touch ID identification technique where users sign payments with their biometric input (the fingerprint).
The credit card information is not beemed online but rather stored in a special chip, on the iPhone, a hardware – software combination that Apple named Secure Element. When a transaction is processed, credit card details are not sent to Apple’s servers and the retailer can’t see the data. Instead, a proxy account number is issued that the retailers charges. Each transaction is secured by an unique security code that authenticates it. Apple has laid more layers of security then we came to expect and that should work just great. But take it with a pinch of salt because everything is secure untill it is not anymore.
The company states that it does not store transaction data regarding location, products purchased or the amount the customer has spent. That certainly leaves room to question why exactly would Apple choose not to store these valuable data. The answer lies with data from Bloomberg sources. According to these anonymous sources, Apple has partnered with banks in the system to receive a percentage from each transaction.
The banks involved are JP Morgan Chase & Co, Bank of America and Citigroup Inc. They agreed to integrate their cards into the system and alongside came three of the biggest card networks – Visa Inc., Mastercard Inc. And American Express Co.
So we have a great lineup for Apply Pay and although NFC payments where slow to take off, it seems that Apple’s incredible effort to bring every important player on board will be the push mobile payments needs right now.
As the company promissed it won’t charge users, merchants or developers, one of the biggest issues (the cost issue) seems to be out of the way. With customers using their mobiles more and more, retailers will be forced to adopt some form of omnichannel payment system.
How does Apple Pay benefit retailers?
Retailers and merchants in general receive several incentives to adopt NFC payment compliant technology.
First of all, the Apple Pay system allows a greater connectivity between online and offline sales channels. Customers can order products on the web store, in the brick and mortar stores or within a mobile app. The security and speed allow for greater ease of use.
The second big advantage is payment speed. By just tapping the phone, customers can pay within a 10 second timeframe, improving sales speed. This allows merchants to move customers through almost instantly.
Third big advantage Apple brings is an improvement in mobile purchases and payments. Although customers are so far browsing for products, they rather pay on the web store or order and pick up in a physical store. The biggest bottleneck is the mobile payment experience, one that is just awful for most retailers.
Famously Amazon has solved this issue with its One-Click Payments, where registered customers can use previously stored credit card data to move as fast as possible through the checkout process. Amazon’s patent sits at the heart of Apple’s payment system within iTunes, an extraordinarely usable example of mobile payments.
Actually that’s one of Apple’s strong points when implementing Apple Pay. The company will leverage almost 800 million iTunes accounts, most of them having their cards linked to the account. The magic of paying with a tap will now probably become mainstream.
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