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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.
The Asos Beauty section provides a great user experience and a lot of product options. As the Beauty section is built on top of Asus’ marketplace, it stands to offer the same great features and discounts.
Customers worldwide can benefit from Asos’ free shipping policy and the express delivery.
Though Asos lacks the specific concerns or personal filters the likes of Sephora.com or Beauty.com offer, it rocks when it comes to user experience, both on desktop and mobile devices. The filters are easily accessible, the search, shopping bag (cart) and comparison options work seamless and the purchase and registration sections are a pleasure to use.
Even more, the design is elegant and easy to use, in a form follows function kind of way. There are only few design elements that are not absolutely necessary and this makes shopping pleasant.
As an online pure-play, Asos does not have any specific plans to open brick and mortar stores but has been known to use pop-up stores to boost awareness.
The Beauty category from Boots.com is a great example of how an omnichannel experience can be implemented. Though the online store provides great online purchases options, it also provides easy location based options, a great store locator feature and even store information and product availability. Moreover – is a great example of how mass market and prestige brands can be distributed together.
On Boots.com, customers can either purchase online or find the nearest store, get directions and interact with the store assistant, check inventory availability and reserve products.
As L2 shows, Boots is the “ten-ton gorilla” in the UK Beauty retailing industry. Though Sephora has built quite a remarkable loyalty program, Boots has done that 10 years before. Boots registers more than 18 million purchases through its Boots Advantage Card, 60% of which are tied to the loyalty program. Boots’ ecommerce sales have grown 17% year over year in 2013, which is amazing.
One unique use of digital retailing is the brand direct store. While some brands, like Bare Escentuals or Avon have long used their own sales channels, albeit different concepts, others, such as L’Oreal have just started implementing online sales channels.
The L’Oreal Group, world’s largest cosmetics company, has traditionally relied on third parties to distribute its products. Its distribution chains included supermarket retail chains for its mass products or upper scale beauty shops for luxury and professional products. Though the company has been resisted development of its own online sales channel, that all changed in 2014.
One of the main reasons that lead to its change in distribution strategy was China’s increasing beauty market. As a recent report puts it:
“In China – the world’s number one online-purchasing market(1) – e-commerce already accounts for 10% of L’Oréal sales, and more than 15% for brands like VICHY, LA ROCHE-POSAY and MAGIC(2). These promising results are underpinned by partnerships with online distributors like Alibaba and Tmall. On Singles’ Day, a very important day of special offers, L’Oréal’s brands performed well, particularly MAYBELLINE NEW YORK – the number 1 make-up brand in the country(3) – and MAGIC, which sold over 11 million face masks in 24 hours”
So that’s one reason for the company to shift course. Another is the shift in consumer purchasing behavior. The company has invested heavily in social media and can now leverage its influence. As consumer increasingly use social media to get recommendations and share beauty experiences with friends, L’Oreal is in a specifically great place to not only help them do that but also increase sales through digital shopping tools.
One of the tools that connects customers through social media, connects online and offline experience in an omnichannel environment AND offers a great functionality is the Makeup Genius, an wonderful application I’ll discuss in the sections below.
L’Oreal has started pushing ecommerce strongly into its distribution strategy. For example its USA digital presence is ecommerce enabled and customer can purchase online, but they can also find the closest store and purchase there.
One particularly interesting concept they have implemented is an user generated section featuring customers’ looks gathered from the social web, using Olapic. Customers share the products and looks they love on Instagram, Facebook, Pinterest or Twitter and can get featured on the website.
But that’s not the only feature L’Oreal USA uses to engage potential customers. The web site offers a beauty library, focused on beauty trends and advices and a consultations area focused on interactive advices for users. Last but not least, L’Oreal shines the spotlight on Women of Worth, a selection of the women that have impacted their communities the most through their actions.
Lancome, another brand from L’Oreal, is doing just great in its ecommerce efforts. One particular area that stands out is the auto-replenish (a synonym for auto-reorder) feature you may have noticed its starting to catch on.
The web-store interface is gorgeous, with elegant fonts and imagery and offers a carefully curated user shopping experience.
The Elite Rewards membership program offers access to loyalty points, free samples, free shipping, a birthday gift and access to products aimed exclusively at members.
However, not all L’Oreal brands offer purchase options directly from the brand. For example Garnier and Maybelline offer store locator features and a buy from partner online shopping features. The preferred online retail channels are Amazon.com, Drugstore.com and Target.com.
Bare Escentuals is a great example of building a beauty brand with the help of a community. Their online store is packed with info, helpful ideas and hints, special options for members and great products. Among the most interesting features and options, some stand out:
You can’t have an online beauty sales list without AVON. Though many things can be said about Avon and its approach to building a representative network and combine this network with online sales, probably one the most important features you should take note when evaluating AVON.com are:
One particular area of digital beauty sales is the Department Store. Probably the best cases are Macy’s and Nordstrom. Macy’s long history with omnichannel retail ensures that customers can bridge the online-offline experiences and skip channels.
A great these companies have is the fact they control the offline experience and they can engage customers in ways that other retailers on this list can’t.
For example Macy’s has implemented interactive kiosks in the past that helped customers discover information on beauty related products and purchase either in the store or online.
In either case, both Macy’s and Nordstrom have outstanding commercial options and their cross-channel activities, as well as customer loyalty are bound to go a long way.
There are two online shops that may not outsell others but they do have their strong points.
First of all, you’ve probably heard about …
Just to get a glimpse of what makes Birchbox so special, have a look at this unboxing video, showing what customers get:So, simply put, Birchbox is a curated product experience. All of the stores we’ve previously studied pack a lot of options but sometimes that is not the best option.
What Birchbox founders envisioned was “a way for customers—just like themselves—to easily and efficiently try, learn about, and purchase beauty products online” (Source). Basically, they’ve mixed editorial, curation and beautiful packaging and ended up with what Birchbox is now.
Ipsy is backed up by strong content marketing efforts from vlogger Michelle Phan (See the Youtuube channel here).
To fend of competition Birchbox has opened a men subscription service as well as a potentially revolutionary type of store that combines shopping, services and product experience and beauty events. Have a look at it.
Make Up Forever is a LVMH owned brand aimed at make-up professionals. Its online presence is filled with beauty information, how-to’s and information regarding the brand’s history, activity and philosophy.
A special area is provided for professionals but visitors can purchase products just as well or they can locate stores where said products are distributed. Make Up Forever is a great example of how online shopping can be applied to brands that were previously impervious to this type of sales channels.
Another great aspect that makes this online property noteworthy is the beautiful and stylish design, aligned with the brand’s care for beauty and elegance.
As Make Up Forever is the last brand that I’ll be featuring on this list, let’s have a look at the main strategies these companies employ to reach their desired audience:
The digital world is filled with information. So much that customers can get lost and sometimes they can appreciate a helping hand and a trustworthy advisor. Birchbox and ipsy are doing just this. A lot of the other brands mentioned above also have a “most wanted” or “new” section but some go a little further and offer insights rather than options.
In a world where information is everywhere, decisions are better left to a knowledgeable professional, able to recommend the right product.
If there is one thing all these examples have in common, that would be content. Beauty brands are not only product manufacturers or retailers. They need to provide customers with relevant information, in its many forms.
Probably the easiest to digest is video.
One particular form of content that seems to work rather well is video. Some of the most engaging YouTube channels feature video showcases of Beauty how to’s, product presentations and unpacking videos. Here are three of the most influential ones:
Her ipsy channel is focused exclusively on beauty and is highly engaged by her audience. The channel has been launched in 2011 and already boasts more than 400 videos and over 500 000 subscribers.
Kandee Johnson’s You Tube channel lists almost 3 million subscribers and over 300 million views. Her videos focus on make-up, how to and style. Kandee has joined YouTube in 2009 and since than her channel has grown steadily.
Her videos showing make-up techniques have become viral and are constantly gathering views and influence.
Her combination of fresh, direct videos and great recommendations has won her 3.6 million subscribers and roughly 260 million video views.
You can also enjoy her style on Instagram, along with other 1.2 million fans.
So video is here to stay as almost 50% of all beauty shoppers view an YouTube vide while shopping for beauty products. Have a look at the slideshare below, a great collection of beauty insights, starting with the one I’ve just mentioned:
Though not many retailers have managed to set up a decent subscription-based model, there is still hope. The craze started by Birchbox and the likes of DollarShaveClub (personal care products for men, delivered monthly) may be a great way to create loyalty in the Beauty retailing area. For the “creatures of habit” that purchase beauty products, replenishment at a great price can go a long way.
As seen above, a great way to implement a pseudo-subscription model is the “auto-reorder” feature for individual or grouped products, used by Beauty.com and the L’Oreal Group online stores.
Mobile has seen an explosive growth in both consumer usage and retailer adoption. As now most retailers and beauty brands have adopted some form of mobile presence, the next step is engaging consumers with rich mobile experiences designed for native apps.
One such example is L’Oreal’s Makeup Genius, a mobile application that lets users test make up products directly on their mobile devices.
Customers can browse products, “try on” make-up and test products before they buy them. With such an app, L’Oreal makes a great case of connecting channels, distributors and improving customer experience.
So the next wave of digital commerce will probably be mobile-enhanced and mobile-driven. With Google improving on its mobile search algorithm, mobile sites will get even more search traffic.
There have been countless debates on what a beauty online store should offer in terms of electronic features.
Bellow you’ll find a proposed must-have list:
Some of the most effective ways to drive ecommerce traffic are Email, Social Media and Paid Search. With a boom in Paid Search for the beauty category, most traffic seems to be coming from the search engines.
However, Email and Social Media still drive relevant traffic and conversions. A recent L2 Report emphasizes the the changes in social media landscape and the type of email marketing techniques beauty brands are using.
With almost 100% social media adoption, few social media outlets are still unused by beauty brands. Facebook has seen near total adoption but with the drop in organic reach, it has turned marketing teams to other more creative solutions and/or optimized media budgets.
The one channel that has seen an increase in both traffic and conversions driven has been Pinterest. The graphic social network is far better suited for digital commerce.
When it comes to emails, most of them are using different incentives to drive traffic and increase sales. Free shipping, commercial discounts, gifts with purchases and samples with purchases are among the most used by beauty brands with ecommerce capabilities:
Consumer demand is the one thing that can decide whether a retailer is successful or not. Of course, there is a whole field of marketing studies to determine how we can influence consumers to purchase. But a really important aspect of how good retailers fare in the market is their ability to “sense” demand, not just influence it.
In a recent study, IHL Group claims Overstocks and Out-of-Stocks cost retailers almost $1.1 trillion world-wide. To put it in perspective, that figure is the size of Australia’s GDP.
What that means is that Overstocks and Out-of-stocks, collectively defined as Inventory Distortion, are a problem that cost retailers world-wide 7.5% of their gross revenue.
The figures translate into poor performance, decreased customer satisfaction, decreased sales and increased costs of inventory warehousing and inventory spoilage. Basically there are two really simple outcomes:
Either way, one thing is for sure: Inventory Distortion leads to poor retail performance.
Demand Sensing is a concept and set of technologies that make use of analytical and prediction models to estimate … well … demand. Imagine a retailer that runs a network of 10 stores, one online store and has a mobile app that drives sales also, along side a call center.
Said retailer probably has an inventory management system, an warehouse management system, a sales reporting tool and probably some type of integration with suppliers and manufacturers.
Let’s imagine this retailer selling a type of red shirts that is available in one of the 10 stores and that inventory is not available online. If a customer will visit 3 of the stores in search of that particular red shirt and then search for it online and still not find it, it will probably consider it to be out of stock and the retailer would lose a sale opportunity.
You probably see where the problem lies: even though the product was available, it was not available to the customer and opportunities were lost. The same thing goes for products that are not exposed to the customers, or they are, say, unreachable on the shelf or unfindable on the web store if the search engine is not fit for the job.
The opposite situation, where demand is not correctly estimated and out-of-stocks become a reality, are just as bad as sales opportunities are lost.
The solution lies in gathering enough data across all sales channels, compiling this data and using models to predict demand. That easier said than done because …
As you are reading a blog on omnichannel retail, the term was bound to appear somewhere along the line. So here it is. You can’t have Demand Sensing without a connected sales operation and inventory transparency. All inventory sources have to be connected and data should be generally available. So should sales data across channels.
The picture below shows an example of omnichannel supply chain, one where all the operational pieces work together and share data. When such a structure is implemented, demand is easily “sensed” and estimated and thus inventory distortion can decrease.
So now we have the data. Implementing omnichannel retail can lead do a better demand sensing and therefore improve inventory distortion, a small glitch in the global retail system costing “only” $1.1 trillion.
Where does a 800 pound gorilla sit? Anywhere it wants to.
That 800 pound gorilla is Apple and today it introduced what is probably the biggest change in music business since 2001, when it launched the other big change in music business, iTunes.
Though some might undermine the impact Apple Music will have, that would be a mistake. Apple Music is a huge change for music and it will by a serious blow to Spotify and other streaming services.
Last year Horace Dedieu of Asymco tweeted this chart, comparing the number of Amazon and Apple accounts:
Compare this to Spotify’s 60 million.
The biggest asset Apple has is its software-hardware platform. And I’m not talking about iTunes only. I’m talking about iPhones, iPods, iPads, Macs, OS, iOS, Watch OS etc. Anyone willing to compete against Apple, has to compete on Apple’s turf, with its hands tied.
Why is this so important? Say Apple decides to optimize its streaming process for certain apps and also decides not to share this info with outside app developers. Such developers may be left in the dark regarding optimum hardware usage for a better sound or longer battery time. By the way – iOS 9 comes with a better battery time. What a coincidence.
Even more, Apple Music will be available on Android too, coming this fall. So there you have it. It’s spreading.
But this is just the cherry on top of more than 14 years of continuous business development with global labels. The fact that Apple Music will be available in 100 countries is an extraordinary business feat. Anyone knowing just how complicated licensing is, knows how hard it is to stream, collect fees and distribute revenue to and from 100 countries.
Apple unveiled more than just a streaming service. Just like when Steve Jobs launched the iPhone, today Apple launched a product that never existed before.
Apple Music is a music streaming service, a video streaming service, a social network, a global radio and most of all, a curated music experience.
Let me just emphasize the “video streaming service” area. If you didn’t know this already, iOS alone dominates online video streaming. So Apple is already king of the hill on lots of user behaviors and now it just collected them all into one big service. Maybe that’s why Google never could pull a decent Youtube streaming experience on iOS.
And it’s not just Youtube Apple is going after. Facebook should be a bit worried also. Artists get a little more reach on their Facebook pages than, say, commercial brands. But if they want to share their news with all their Facebook fans, they still have to pay.
Apple Music makes a point by letting artists and fans connect in a seamless way. And this should send some chills up Mark’s spine. Once the artists are gone, there is also a big gap left within the social network.
Let’s face it. Technology can be boring and frustrating. The best thing Apple has done so far is teach the world that great products happen when technology meets the arts. And its Music service does just that. From curated lists to making sure artists get an way to connect to improving the battery time so users can have a better experience, it all ads up to a human experienced enhanced by technology, rather than the other way around.
This is where most of the recent tech companies have failed to understand their place in the world. Maybe Google can get away with being the Lovable Borg, but Spotify can’t. Facebook can’t. The lesson Apple Music will teach to the tech world is that technology is just not enough anymore.
Say what you will but one thing is for sure. Apple has deep pockets. With more than $194 billion in cash it can survive the end of the world on champagne and cigars (that’s not really a great combination, is it?).
Even more, it just reported it paid out $30 billion to its app developers. I’m not exactly sure how much it paid to record labels, but I can bet it’s a liiiiitle bit more than Spotify’s $3 billion.
Today marks the start of the 10th annual edition of GPeC Summit, one of the most important ecommerce events in Central and Eastern Europe.
With a strong focus on growth, the region sees fast innovation and lots of opportunity.
(Photos courtesy of GPeC Summit / Resp. owners)
The event is held in Bucharest, Romania, a country with a 55% internet penetration and a high ecommerce growth potential. The ecommerce market in Romania grew from EUR 600 million in 2013 (~$668.7 million) to approximately EUR 1.1 billion (~$1.22 billion) in 2014.
With such high growth rate, the event was bound to attract regional and international market leaders and speakers.
Among the speakers at the GPeC Summit you’ll find regional and international entrepreneurs, digital marketing experts and ecommerce professionals.
Among the highlighted conference panels, the audience can tap into insights provided by the likes of:
The full list of speakers on the summit’s website, alongside other data regarding the event.
Whisbi is a tool for the omnichannel customer support. It bridges online, offline and phone-call experiences to provide a type of support fit for today’s and tomorrow’s merchants.
What Whisbi does is create a rich connection with the customer. It does that by streaming a live interactive screen from the sales support and at the same time it synchronizes this screen with a live phone call.
The great thing about the technology is that customers can effectively be “teleported” within the store or a specially designed sales support space. For example, if a retailer were to provide support for big-ticket products, such as cars, high-end electronics or maybe a designer items, the customer should effectively “feel” these products. For now, the general consensus among consumers is that such a feeling can only be attained in a real store. Two of the most important factors for in deciding to visit a brick and mortar store are the sensory experience and human touch.
Whisbi fulfills these two needs quite admirable. First of all it provides a smooth connection between the sales person and the potential customer. This is done either through a “click to call” function where the customer requests a call, or through a direct call to an inbound number. While the phone connection is established, customers also start a digital interaction with the sales consultant. This stream of information can be in the form of co-browsing, assisting in data-filling, showcasing product videos and photos, but most importantly, it can come in the form of a live product demo, from the store.
The sales consultant effectively streams live video to the customer through a mobile app, a laptop camera or even … wait for this … Google Glasses.
So while the two discuss on the phone, the customer can experience touching and discovering the product, as if he or she were in the store. This type of assisted purchases are the perfect fit for omnichannel retail.
The customer sees the sales assistant while they discuss but to insure the customer’s privacy, it doesn’t work the other way around.
The fact that the video stream and the phone call are synchronized may seem trivial but keep in mind that data is streamed through two very different infrastructures. The fact that the customer can see and hear the sales assistant at the same time gives a pleasant sense of human interaction, mimicking the experience one would have in a real store, with a trained store assistant. In fact, one of Whisbi’s four patents, and in my opinion the most important, is a patent to synchronize phone calls to online experiences.
The feeling you get by using Whisbi as a customer is quite impressive. By synchronizing multiple sensorial experiences, the solution works far better than either the phone-call option or the live chat.
In fact, the company claims a 15-30% conversion rate for customers interacting with the brand through this technology. While this might seem outrageously high, I think this might be an accurate figure. The feeling of (almost) complete immersion may be an even better experience than the one customers would get in a real store. The reason is “whisbi-ing” is an experience brought up by the customer’s demand, in the safety and comfort of a familiar place. By taking out stressful elements that brick-and-mortar stores sometimes have (crowds, un-involved sales reps), this omnichannel experiences works as a type of “concierge” service.
If you’ve read this far, you’ve probably noticed that Whisbi sounds too good to be true. The fact is that it actually IS too good to be true. The usage of Whisbi is limited by the potentially high cost of hiring qualified personnel to handle incoming customer demands.
Indeed, forms and chat have a low conversion rate. However they are great for low to median cost products where margins are low and the cost of specially trained sales reps is not justifiable.
But there are some cases where Whisbi can be a great fit:
1. Big Ticket omnichannel sales: Think of cars. A car should be seen, experienced and felt. It is an expensive purchase, one that has a lot to do with the rational but more to do with our emotional decisions. While purchasing and paying for a car is far from mainstream, a sales rep using Whisbi can offer a great display of the car’s features and teleport the customer to the dealership, before a visit is made. One of those using Whisbi is Fiat, and the ad below showcases a potential customer journey:
Its not just cars, either. I think Whisbi can work great as an omnichannel support for other big ticket items such as designer fashion, jewelry or maybe art.
2. High customer acquisition cost: Several industries have high customer acquisition costs. Telco is one of such industries. Voice and data subscriptions, especially for customers switching from one operator to another, as well as those that decide on their first subscription, have a high customer acquisition cost. This is due to increasing competition, large marketing budgets and extensive offers from competitors.
But such high-acquisition cost industries also tend to be profitable because of a certain aspect. That is the large lifetime customer value.
3. High lifetime customer value: The lifetime customer value expresses the long-term value a customer has for the company. Simply put – it means how much will the customer spend on the company products during his lifetime as a customer. For example, due to a high lifetime customer value, Goldman Sachs estimates that Apple’s customer’s base value at $295 billion. The point is that retailers estimating high customer lifetime value should use omnichannel customer service to acquire customers. Even if costs are high.
4. Personalized service for the loyal customers: Maybe not all customers can be served through an Whisbi experience. But such great support can be a great incentive for your loyal pack. Concierge support for loyal customers and high-spenders can go a long way in keeping your friends close.
5. Address to impress: Let’s face it. Whisbi’s technology is awesome. The experience of a live demo convinced me to write this review. The experience is great. Google Glass, mobile apps, live streaming and phone calls – arent these impressive? More so – teleporting users and showcasing products in real time directly in the store and letting customers purchase online and receive at home? This is impressive and impressive is an asset on its own.
In conclusion Whisbi may not be perfect for all ecommerce or omnichannel operations but for some – it is an impressive and must-have technology. The results in conversion rate improvement shows the need for better customer support within omnichannel operations. And Whisbi delivers.
Ever thought what happens behind the curtains before a new product hits the shelf? Or what makes customers decide they love product A but definitely hate product B, although they are almost identical? Or what makes great products … well … great?
Many have and there is no clear answer to these questions. What works when Apple launches a music player may not work when Microsoft does it (Remember Zune?). There are many variables involved and no matter the size of your R&D budget, sometimes things are not going to go right.
But there’s only one way to see if the product is really fit for the market. That way used to be simple and a bit risky. Teams including marketing, product development, engineering and manufacturing experts would dream, design and build products. They would test the products on selected customer groups and if the results would look good, they would push the product to the market.
However even involving budgets, experts, consumer insights and marketing bucks, sometimes products flop.
Two things changed this: crowd-sourcing and crowd-founding. Together they’ve formed a type of customer experience previously unknown: the pretail.
In the past, teams were involved in trying to guess what customers would want. Now we can just go ahead and ask the them.
Pretailing is a term describing any activity introducing customers to brands or products, before the retail process. It assumes that using crowd-founding sites such as Kickstarter, inventors and innovators can test their concept before involving big budgets. Essentially they are asking potential buyers to invest their dollar-power in their product.
This, in turn, creates an experience previously unknown to the consumer. The consumer is effectively buying into a vision. Pretailing creates a new type of sales channel that works before the product is even manufactured. Unlike traditional retail, this type of commerce can shed light on what the market wants at any given time.
Online stores such as Quirky, Threadless or Japan-based Muji have one thing in common. They use their communities to find the right ideas and products to design and develop. Quirky is focused on inventing cool gadgets, Threadless leverages its designer community to create t-shirts and Muji sells home&deco products designed by the consumers.
They all engage in pretailing. By tapping into the collective minds of their communities they can ask for the type of products most customers would purchase. Before they manufacture and sell, they ask what to manufacture and sell. This in turn creates a sense of belonging to the community for the customer. For the retailer, it decreases the risk of manufacturing and stocking up on lousy products.
Crowd-founding is another way of tapping into the market and pretailing. We all know Kickstarter but other, more product-oriented crowd founding platforms fare even better for this concept.
CrowdSupply and OutGrow.me are just two places where you can see what customers have backed before manufacturing. The products we can see there range from open source toothbrushes to one-wheel skateboards.
The results are amazing. With unlimited creativity comes an unlimited supply of innovation. And by tapping into a large market of early-adopters, only the products that are really fit for distribution get funded and survive.
Big retailers have picked up on the trend and are now using pretailing to test new products and improve their logistics to fit the estimated demand. Apple, for example is one of the companies that showcases products before they are available in retail stores, interacting with developers and customers to improve the experience.
Beyond the crowd-founding and crowd-sourcing, pretailing can come from anything involving large numbers of potential customers. By tapping into online traces, retailers can get insights on potentially succesful products.
Pretailing can start with a simple research with Google Trends. It can be an analysis on the search trends on your own web store.
It can just as well be an overview of the most popular trends on Instagram. For example Crane & Canopy releases new high quality duvets basing their decisions on Pinterest and social media trends.
The conclusion is that in this highly competitive market, retailers need to engage their customers before they start the retail process. Pretailing means tapping into the wisdom of the crowds and extracting the perfect products before competitors do. It is not only a matter of product development but a matter of understanding the customer and providing the best experience on the market.
We expect historic changes to be a bit dramatic. We think of “Evrika!” moments when inventors discover new technologies that make our lives better.
The reality, however, seems to sneak up on us. We now know how important the Internet is but few would have guessed it when it was used to exchange short bits of information between academics. Same for Google – it is now easy to see how important having the global stream of information at your fingertips actually is. But it was a lot harder when the concept was still in its infancy.
Not even Steve Jobs could have predicted the impact the iPhone would have on the world. And I believe Elon Musk will look back on these days and be surprised by the changes Tesla brought to the world.
When Elon Musk announced the Powerwall, the world shook a little bit. Its beautiful design and promise of energy independence seemed almost dreamlike. But the Powerwall shows a far larger vision than just making the home energy independent.
It is a promise that we could harness the virtually unlimited energy of the Sun and store it. Storage, you see, is the real problem. The complex systems we use are powered by energy that is consumed almost instantly. Our cars, our electronics, our planes – they feed on streams of energy as it is formed. Even the best energy storage systems fail after a short while.
The promise that one day a company (could it be Tesla?) can find a way to harness and store the sun’s energy (or any type of green energy for that matter) has an impact we can hardly predict.
The implications range from pollution reduction to geopolitics to economics. Especially economics. To understand how much we could save by switching to green energy, have a look at this estimate for an average Tesla car compared to one running on fossil fuel:
Think that’s a lot? That car “only” logs 120 000 miles. Compare that to the 397.8 billion miles logged by all trucks used for business purposes (excluding government and farm). In the US alone.
Now mix the numbers and add the savings Tesla’s technology can bring.
Add something else: sun-powered electricity. Think of trucks and ships that can move goods around without any need for refueling.
Because that’s where the real change comes in. When products are manufactured and shipped at a tiny fraction of what they are today, everything changes.
When we take out the distribution costs, the energy costs and any other costs associated with energy from our current commerce paradigm, everything changes in the world.
The products we buy would have costs that would be driven to the ground. Without costs associated with energy consumption and storage, goods would be manufactured cheaper and faster (instant energy), shipped cheaper and faster and consumed by more. We could have cheaper products, consumed by more and believe it or not, more profitable to sell.
There is only one thing stopping this: the current transportation and energy system. Musk’s vision has already stirred things a bit with car dealers. What happens when the company will go against the global leaders in energy and transport companies, the ones still relying on fossil fuels? These companies would have to change or fight the change. The former is what one might expect.
That’s where the Uber concept comes in. Uber connects, as you know, smaller professionals that provide transportation services. Right now this is limited to personal transportation. Uber, today’s Uber, acts as a glorified cab dispatcher.
But tomorrow’s Uber may have bigger ambitions. Somewhere behind the scenes, investors know that there’s more to Uber than meets the eye. The reason the company landed a $41 billion valuation is that it has the potential to change the global transportation system. Not just personal transportation but all kinds of transportation.
That includes making sure goods are quickly moved from manufacturing to storage to the consumer. Don’t take my word for it. Uber has been experimenting time and again with logistics. And if Uber won’t, there are other companies that will.
So you have virtually unlimited power. You have storage. You have the a system that makes sure goods are sent to the right destination by the optimum freight. This means the kind of change we now can’t fully comprehend.
It means that good is now in motion.
The term “robot” essentially means “worker”. It was coined by Czech author Karel Čapek in his science fiction work R.U.R. and since then it has become the standard term to define semi-autonomous machines.
It really is hard to define what we actually think of when we say robot. It may be an anthropomorphic fun figure such as Honda’s Asimo or a somewhat creepier animal version of it, such as Boston Dynamics’ Big Dog.
But it can also be a simpler and more applied machinery. Robots can be built to handle some of the most menial and repetitive tasks, including those that have to do with ecommerce fulfillment.
In terms of operations, fulfillment means everything that has to do with getting ordered merchandise to the customer. It includes picking and packing and let’s face it – it’s boring and repetitive. The robots below do just these things. Robots, unlike people, require no pay and are available 24/7. Whether using robots is effective or not, moral or not, it’s up to you to decide. But no matter your view on the subject, you have to admit they look awesome.
Not longer than two months ago, Fetch Robotics was non-existent as a company. Than they’ve got $3 million in founding and started working on a mysterious warehouse robotics project.
Today they’ve unveiled not one, but two robots aimed at helping warehouse staff make it through the long corridors. Their names are Fetch and Freight. Below is Freight, my favorite, a little guy following around picking staff and going back to base when orders are finished picking:
You would think that farming and ecommerce fulfillment don’t have too much in common. Maybe they don’t but they do have the Omniveyor robots from Harvest. The company was founded by former iRobot executives, the company that brought you house cleaning wonder-robot Rumba.
The company developed a fulfillment robot, called TM-100, which will be available spring 2016. Here’s TM-100 in action:
In 2012 Amazon paid $775 million for Kiva Systems, a Seattle based company manufacturing warehouse robots.
In just two years Amazon has fully digested the technology and now has 15 000 Kiva robots doing the picking and packing job twice as fast as humans could. Inventory moves twice as fast and products are delivered to packing stations in just under 15 minutes, faster than any human could.
Here are the little Kiva robots plotting to take over the world, while picking orders:
A very important part of retailing is pricing and the most important part of pricing is the cost. To get a complete view of how much a product would cost, retailers think in terms of net landed cost.
The net landed cost is the sum of costs associated with manufacturing and distribution. When thinking in terms of net landed cost you have a better chance of understanding your total cost.
A common fallacy is thinking of costs just in terms of manufacturing, either from a purchase only point of view (how much you pay your supplier for a given product) or a more inclusive manufacturing point of view. The manufacturing point of view assumes that even if you are not manufacturing the product yourself, you still have the liberty to choose another supplier or change merchandising altogether.
The most important advancements in retail, in terms of supply and cost effectiveness, have focused largely on manufacturing costs in the past decades. This has lead to increasingly efficient production lines, a more competitive manufacturing market, shifting manufacturing overseas and many others.
This manufacturing improvement trend has had beneficial results on the customers life through more accessible, more diversified merchandise. It also meant companies managed to sell more, to more people. Companies such as Walmart have grown to their existing magnitude thanks to a wide network of suppliers, providing them with products manufactured at the best possible cost.
As retailers improved on the manufacturing, there was one part that has been left mostly untouched. That was the distribution. Distribution costs have decreased but not dropped.
To get a better view of why, get a glimpse of what are the factors that weigh in the distribution costs basket. Here you have costs associated with getting a product from the manufacturer to the customer. This includes freight, stocking, customs, costs associated with store development and maintenance, marketing costs, customer support and others. This is a very large area and a lot of work to be done.
Today, distribution is changing, and it’s changing fast. As a result, the associated costs will follow.
At the forefront of this change we have several factors, one of which is omnichannel, another being technology and the third being data. This is how they weigh in and these are the areas that will be soon transformed:
Logistics have not been fully transformed by technology. For example, freight has been virtually unchanged in the past decades. Think about it this way: cargo ships are still loaded after excel files are checked, faxes are sent and handshakes seal deals. For a large part, the industry is archaic and it’s but a question of time until it will be transformed. There is a lot of room for disruption and companies such as Freightos have challenged the status-quo and promise 10-17x ROI. In weeks.
And it’s not just freight. Fleets of small vans contractors have taken up the Uber model and are now roaming the streets of Hong Kong to deliver goods the likes of DHL and UPS can’t.
Omnichannel makes possible and desirable a few things the previous retail models couldn’t. First of all it allows for a better inventory transparency and improved shipping effectiveness.
Customers that would otherwise expect orders placed online to be shipped at home with the respective costs and operational challenges, can now just pick up orders in store. Or better yet, they can have the closest store ship these items at home, instead of mixing the order in a large, central warehouse.
Omnichannel also makes possible having just a limited number of products in store and keep the most either in the warehouse to be shipped when convenient or with a supplier. By reducing store footprint companies can reduce fixed costs associated with marketing and distribution of products, thus decreasing costs.
And it’s not just these, the many aspects of omnichannel retail all converge to a decrease in distribution costs and more efficient ways to handle product demand.
John Wanamaker was a retail innovator. He is credited with the fixed price and money back guarantee marketing concepts. Wanamaker was one of the pioneers of the department store and loved advertising. He is also credited with the famous saying :
“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
Good thing that was more than a century ago.Marketing is now changing rapidly and unfortunately for some advertising agencies, long gone are the days when the Mad Men of advertising charged millions for concepts that could or could not work.
With the rise of digital commerce and omnichannel retail and the smartphone to bridge the gaps, data is all around. Marketing is now data driven and the half of budget Wanamaker complained about can now be easily tracked. Companies such as Macy’s are investing heavily in omnichannel policies and marketing. The results are clear. While their competition is diving, Macy’s business is on the rise.
Advertising is data driven and marketing costs are constantly improving.
By improving distribution and decreasing distribution costs we have two very important things happening. The first is that companies engaged in improving this area will be more profitable and more inclined to continue on this path.
The second thing is that lower distribution costs mean better prices for the consumers, therefore an improved appetite for consumption. Improved profitability and decreased prices – these are two very strong forces that will shape tomorrow’s retail. And it’s happening today.
Check Point Software Technologies released a media alert regarding online shops running Ebay’s open-source software Magento.
The company discovered a massive vulnerability that allows malicious attackers to execute remote code.
If it’s exploited, this vulnerability can fully compromise the store running Magento. Attackers have the ability to completely bypass the store’s security and access the full database and administrative tools.
“The vulnerability we uncovered represents a significant threat not to just one store, but to all of the retail brands that use the Magento platform for their online stores – which represents about 30% of the ecommerce market.” – Shahar Tal, Malware and Vulnerability Research Manager
Prior to disclosing the findings, Check Point ST announced Ebay’s development team on this issue. As a result, the company posted a patch on February 9, 2015 (SUPEE-5344 available here). If you are running Magento and have not patched your application, now is the time to do it.
With over 240 000 installs, Magento is the most popular open-source solution to ecommerce stores in the world. As you know, with popularity comes a lot of attention and especially attention from digital threats. Some of the fastest growing online retailers are using Magento as the go-to platform. Names like Alex and Ani, Warby Parker or established companies such as Christian Loubutin or Olympus have been subjected to this threat.
It’s not the first time either. This example from HackerNews shows how attackers advertised compromised shops in order to gather credit card information.
Long story short – if you are running one of the popular open-source ecommerce platforms (think Magento, Prestashop, OS commerce) – be on the lookout for security threats.
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