Can Belly be an Omnichannel Loyalty Program?

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.

Belly rewards at Doyle's Cafe in Boston

Belly rewards at Doyle’s Cafe in Boston

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.

Belly cards

Belly cards

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.

Why is Apple Pay such a Big Deal?

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.

apple-pay-cook

Tim Cook presents Apple Pay

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)

Pictured here: Not Apple Pay

Pictured here: Not Apple Pay

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?

1. Apple Pay links online and offline shopping

Amazon vs Walmart - 17 years revenue comparison

Amazon vs Walmart – 17 years revenue comparison

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.

2. Mobile Payments are happening, whether you like it or not

29% of Millennials would be willing to bank with Apple.

29% of Millennials would be willing to bank with Apple. Source

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.

3. Everyone expects a revolution

The player that revolutionized the music industry.

The player that revolutionized the music industry.

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.

4. It’s not just about the payments, it’s about the consumer

APPLE-PAY-COMIC

Apple, Pay!

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.

5. It actually works

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.

Top 5 Alternatives to Google Analytics, for Ecommerce

Say you’re running an online store. Chances are you are using or plan on using Google Analytics. It’s free, it’s popular and there are tons of info out there to help you get started and optimize your sales stream.

But there are downsides too. First one – Google already knows a lot about you and your customers. You might want to keep some things discreet, right?

Second – Google Analytics is an one-size-fits-all type of product. Sure, it has plenty of features but chances are you’re likely to get lost in some of those features. Even if you don’t get lost, you’re likely to spend a lot of time digging through somewhat useless data, while at the same time, missing out on very important bits of information.

Third – real time reporting is pretty limited, if you’re running the free version. Once you get over 10 million views you’ll have to switch to the paid version, costing you north of $150 000. But then you can also try some more advanced reporting tools.

Of course, there are plenty of traffic analytics tools out there. Some have really great interfaces and features. But as an online shop owner or manager, you have to look at what works best for your store. Have a look below:

1. Mixpanel

Mixpanel Funels

Mixpanel Funnels

Mixpanel is great choice for small and mid-sized business that sell. Whether we’re talking about an online retailer, a hotel selling reservations or an iPhone game developer selling game upgrades - it is a great tool.

Even the way Mixpanel tracks actions and charges users is a great fit for online retailers. Ecommerce sites don’t really need too much intel on page views. What really matter are actions – the number of times sometimes has clicked the “buy” button, the number of times users download a brochure or the number of Google Ad visitors that turn into customers.

Mixpanel calls these actions data points, and this is a great news for startups and mid-sized businesses.

It’s tailored around five basic functions:

  1. Segmentation – allows for better understanding of user behavior and splits user groups according to actions.
  2. Funnels – you might be familiar with funnels from GA. But once you get to know Mixpanel’s take on the funnels, it seems that something has dramatically changed. Funnels can be added on the fly and viewed retroactively, easily.
  3. Retention – it’s not just how much you sell, but also – who keeps coming back.
  4. People – unlike GA’s confusing take on users, Mixpanel builds profiles ecommerce store owners can understand. The system collects data that can be browsed individually or segmented. One great feature is the notifications option, where you can mail, send SMS or push notifications to users, based on automated or manually segmented profiles.
  5. Notifications – mentioned above, it is a great tool that improves the analytics platform, allowing you to also communicate directly to consumers.

Pricing

Pricing is free for less than 25 000 data points and it can go up to $2000 / month, for companies with more than 20 million data points.

 

2. GoSquared

The redesigned GoSquared app

The redesigned GoSquared app

GoSquared is a great piece of engineering and with its redesigned interface – easy to use. It serves over 40k businesses and it has a special area developed strictly for ecommerce owners.

When it comes to ecommerce, GoSquared packs a lot of power in a simple interface. Just like most other applications on this list, it puts a strong emphasis on the targeting users as potential customers and tracking their actions and behavior.

The Metrics work toward providing clear insights on how revenue is doing. The analytics tool provides info on social media influence on sales and data on best performing products.

One really useful set of tools is what GoSquared calls Predictive Analytics. Previously discussed on Netonomy.NET, predictive analytics can mix past and present data to determine possible outcomes in the future. It can be used to predict traffic, sales or best selling products, to name a few.

GoSquared also mentions their ability to send Differentiated Reports, based on specific team member’s needs. One for the CEO, one for the marketing team, one for the … well, you get the idea.

But if there is something that really sets GoSquared apart – this is the Developer API. Using this, developers can build truly dynamic online stores, that respond to customer behavior and profile. From info on previous purchases, location, language and others, online stores can be set to respond to specific customer needs.

Pricing

Pricing can be configured here and starts at $32 / mo for 100k pageviews and 100 transactions. It can go north of $640 / mo for more than 10 million pageviews and more than 10k transactions. You can test the application in a 14 days trial.

 

3. FoxMetrics

analytics-foxmetrics

Foxmetrics has some nifty features when it comes to ecommerce and online retail related options. It is light and easy to set up, it works on both web and the mobile and it is focused on helping you increase conversions.

Although Foxmetrics is not 100% focused on ecommerce related (they also provide support for online publishers), it does have some great features you can use:

  1. People – using this section you can understand customers and their actions and can sync this data into company CRM software;
  2. Ecommerce – Foxmetrics provides support for useful KPI’s and advanced reporting dashboards. Using customer data, it can build  product relationships, shopping cart reports and can respond with automated actions;
  3. Subscription is an useful tool for companies working with periodic purchases. The product can report user data, conversion and churn rate, as well as detailed info on separate plans;
  4. The Marketing and Triggers options allow for personalized marketing and response, based on referral and user actions.

Pricing

Although Foxmetrics does not provide a free option, it does provide a 14 day trial to test the features. Plans range from $50 to $120 per month and beyond, for enterprise users. However, as an ecommerce user, you’ll be stuck with the $120 plan.

 

4. Woopra

analytics-woopra

Woopra  is a great way to understand your customer and their history browsing your store. You’ll be able to get behavioral insights from customers, run advanced or preset analytics reports.

By tapping into Woopra’s Funnel reporting section you can discover bottlenecks in the conversion path.

The product also promises a good segmentation on best performing customer groups and even build segments based on funnels.

Pricing

The pricing starts with a free version that allows 30 000 actions (similar to Mixpanel’s data points). The small business plans range between $79.95 and $1199.95/mo.

 

5. KISSMetrics

analytics-kissmetrics

KISSmetrics follows a simple assumption: you must get to know your users … ahem … customers. That and the fact you should pay attention to their brand name.

The promise KISSmetrics makes is that all your data will be connected to real people, with real actions. Once setup, you can see where people are, what and why they buy your products and in some unfortunate cases, why they don’t.

Features include funnels, cohorts (groups with similar interests), revenue in real time and the metrics you’re familiar from GA. The things that really set the product apart is the data export feature for further analysis and its A/B testing options, both a great fit for customer profiling.

Pricing

Pricing for the KISSmetrics product starts at $150/mo for up to 500 000 events and goes up to $500/mo, when your webstore reaches more than 1 million events. Once you pass the upper threshold, just like all others, you get to negotiate your pricing.

 

PayPal to Process More Offline Payments

Ebay subsidiary PayPal is dead serious about taking on a $10 trillion market: the Multichannel Payments Market. To do so it will have to prove its worthiness against older companies, especially in offline commerce.

Multichannel Payments

A steady increase in Ebay's Revenue. Biggest cash cow - PayPal, 41% of total revenue.

A steady increase in Ebay’s revenue. Biggest cash cow – PayPal, 41% of total revenue.

With more than 140 million registered users already, PayPal has the sweetest spot in the online payments today. Its acquisition of global payments company Braintree secured an additional 35 million registered users. As President David Marcus puts it – this is a part of an effort to redefine money and payments into what he calls “Money 3.0″ – a new way of looking at payments and how customers use them.

PayPal owner-company Ebay is at the front of what some would call a commerce revolution led by technology. Its three main branches (The Marketplaces, Ebay Enterprise and PayPal) all work together in this changing landscape.

The Marketplaces (including Ebay.com, Shopping.com and Rent.com) enable C2C Commerce, while Ebay Enterprise caters end-to-end multichannel commerce technology. Ebay Enterprise is the tech, operational management and marketing vendor for the likes of Toys’R’Us, Radioshack, Sony ant many others.

Between these two, the payment processing subsidiary PayPal leads the way in online payments. The company is Ebay’s most promising subsidiary, growing at 20% in 2013. As of 2011, it decided to go offline, allowing customers to handle their money, cards and PayPal wallets in one place.

POS solutions

paypalofflineTo increase offline usage, PayPal now offers point-of-sale solutions, mostly targeted at the new tablet-based counters. Store owners can easily implement its apps and start charging right away.

In an effort to increase adoption, PayPal started integration with third-party store management solutions such as ShopKeep POS, Booker, or Leapset.

Among its benefits for store-owners, Paypal lists security, quick implementation and an all-in-one approach to accepting payments, scanning barcodes, tracking inventory and sending invoices.

Customers willing to take their PayPal Wallet to an offline store account can pay by swiping their PayPal paycard, using their account or by paying online and picking up in store. Having a larger pool of companies accepting PayPal payments allows the company to securely handle all transactions, allow customers to receive loyalty points and handle all personal information.

Ebay and PayPal will stick together

paypal-growthSince Ebay purchased PayPal, both companies listed a successful increase in revenue. Ebay powered PayPal’s adoption to its marketplace users and in turn PayPal grew up to become one of Ebay’s most profitable subsidiaries, amounting to 41% of total revenue in 2013.

With the help from Ebay, PayPal grew from $600 million in mobile payments to $27 billion in just three years. The figures are posted on the 2014 annual shareholder meeting website, in response to Carl Icahn’s demand to spin PayPal off into a separate company.

Carl Icahn, one of the most notorious corporate raiders in the tech industry, demanded PayPal to be split into a separate company and become listed on its on. The board of directors fought his demands showing that even though the company is open to changes in the future, right now the two are working better together.

Luck would have it that shareholders reached an agreement to keep the companies together and handle the incoming commerce revolution as a whole.

“[…] we have moved aggressively to leverage PayPal’s integration with eBay to expand PayPal’s reach to millions of online retailers and to offline transactions. PayPal remains one of the fastest growing elements of the company – which helps explain why others are targeting the payments business but are far behind PayPal.”

John Donahue, Ebay CEO. Source.

 

4 Easy Ways to Better Understand Your Online Customers

understandingAdvances in technology have been revolutionizing the way businesses are conducted. They are also reshaping the landscape on how companies interact with customers. This is a phenomenon that is clearly observed in e-commerce. E-commerce is not only reducing costs but is also increasing efficiency and expanding possible revenues.

Because the Internet is facilitating interaction, it is now possible to instantly and easily understand online customers. A business need not spend much on doing traditional market research. Here are four easy, fast, and less costly ways to better understand the thoughts, behavior, and attitude of online consumers.

  1. Conduct or check out surveys.

Online surveys or polls are designed to determine thoughts and behaviors of online customers. There are many of such studies that cover your sector or industry. If you prefer results and findings that are more specific to your business, you may commission or conduct the surveys. It can be as simple as asking your customers to fill out simple survey forms online. You may also use the free online survey services that are available across the Internet. Survey results can give you an idea of how your online customers think and feel about your business.

  1. Use Web analytics tools.

To date, there are various Web analytics tools that facilitate better understanding of online consumers. The most common are analytics about specific keywords of key phrases that are most commonly used by consumers when using search engines for finding information or products they need. You can use the information to optimize the content of your own online site so that you can take advantage of opportunities brought about by higher search engine rankings.

  1. Check out customers’ testimonials.

You can find out how consumers think about products and services. Testimonials posted by businesses through their own sites may not be reliable as those could be biased. The best and most credible testimonials come from actual consumers who ventilate and air their rants and raves through online forums, discussion boards, and reviews. Check those out to find consumers’ actual opinions about businesses and products.

  1. Test the market.

This option can be quite risky and costly. It is advisable to check out the first three ways enumerated before finally testing the market. You may launch a small-scale product or service launch to determine if online consumers are really ready and are open to try out innovations and new offerings. Actual sales can be the best indication of what consumers really think. Testing the market can lead to two types of decisions: first to pursue or go on with your business activity and second, to stop what you are doing because the market is not yet receptive.

Author: Richard Fisher

About the author:

Richard has been involved in the online marketing industry for several years. After spending time working on user experience optimisation, Richard is now a strategist at Infinity Technologies, one of Australia’s leading ecommerce digital agency.

Tracking customers in-store. Where is the Privacy?

Did you know that stores use smartphone WiFi and Bluetooth connections to track your movement? Turns out that’s kind of a growing trend right now. Showrooming is ever on the rise so traditional retailers need to act on understanding customers better. Tracking phones is one way to do it.

privacy

There are some companies out there (their number increasing) that provide tracking technologies. One of them is Shopper Trak and I had the pleasure of meeting one of their representatives this week. The company uses a combination of WiFi and Bluetooth signal detection to count, profile and report on customer behavior. How do they that? By registering the smartphone’s MAC address.

What are MAC addresses? Good thing you asked. These are unique identifiers for your smartphone. Kinda like your IP, except they don’t change. That’s one great feature if you’re going to track returning customers. Of course – all of these informations are anonymized and encrypted, as Bill McCarthy of Shopper Trak convincingly told me a couple when I had the pleasure of chatting with him.

Working in tech for some time now – i’m not really so sure about anonymous data but the technology is pretty interesting and its applications can work wonders for multichannel retailers.

Being a online-first type of guy, I was surprised to see the kind of tracking you get with Google Analytics in brick and mortar stores. The first question that popped into my mind was – “Can you compare store tracking data with online analytics data?”. Apparently most of the companies that provide such a service do provide a form of data export that can be used to understand online-offline behavior.

WiFi / Bluetooth tracking is not that popular, due to privacy concerns.

The second question was “Isn’t this thing a little intrusive?”. Probably.

Comments on Nordstrom's decision to track shoppers behavior.

Comments on Nordstrom’s decision to track shoppers behavior.

Last year Nordstrom decided to find out more about its brick-and-mortar store shoppers. They thought they can get valuable intel by tracking who comes in the shop, which products customers buy more, what’s the return rate and others. You know – the kind of stuff all online shops track so they can improve customer experience and increase sales. Except they did this by tracking customer’s smartphones.

But Nordstrom did something that online stores don’t usually do – they posted a sign announcing shoppers they were being tracked. And the shoppers were not happy at all. You can see in the image on the right the kind of feedback they received.

Fearing increasing frustration with their tactics, Nordstrom discontinued the program.

Tracking in-store traffic with video cameras

Some of Brickstream's graphics are definitely not intended to address privacy concerns

Some of Brickstream’s graphics are definitely not intended to address privacy concerns

Atlanta based Brickstream uses a 2d /3d type of cameras to track shoppers inside stores, reporting on queue length and customers behavior.

Brickstream uses path tracking to understand and report customer routes. It also uses height splitting in order to differentiate between different demographics (male, female, child) and 3D technologies to “see behind obstacles”.

Their video intel is, of course, pretty efficient. Used together with mobile tracking- even more so. It is also a little scary for customers inclined to privacy concerns.

Are you are one of those customers? Than you may want to scan through info on the 8 major players in this growing market, Brickstream being one of them:

Companies providing in-store customer tracking technologies

In-store traffic traffic tracking is an industry lead by these 8 companies, with other minor companies quickly growing. The list is provided by “Future of Privacy”, a think tank based in Washington DC, focused on “advancing responsible data practices”.

Nomi tracks customers online and offline

Nomi tracks customers online and offline

One of the younger companies providing in-store analytics, Nomi, which recently received a $10 million funding, mentions the length they go to in order to insure customer privacy. The privacy principles they list on their website are:

  1. Collect, use, and share anonymous information only.
  2. Allow you to opt out of Nomi’s services.
  3. Use industry standard security practices to protect the data we collect.

So everything is cool right? Well…

Good thing you can turn of your Bluetooth and WiFi, if you’re concerned about privacy. Oh, wait…

So far there have certainly been some concerns regarding privacy. Retailers usually addressed them as quick as possible. And when that was not the case – customers could just turn off their WiFi and Bluetooth connection so they won’t be tracked.

As mentioned earlier the technology only works when there is some type of WiFi or Btooth connection that beacons can track. Without it – smartphones are basically invisible. But than Apple thought – hey, let’s change that.

One of the often left out features when it comes to Apple’s new iOS 7 is the iBeacon. The iBeacon is Apple’s response to NFC (near field communication). When an iOS 7 device comes within range with an iBeacon it emits a BLE (Bluetooth Low Energy) response. It becomes trackable even when the above mentioned connections are turned off.

And Apple is really committed to using it:

Apple will track iOS users with iBeacons

The Apple Store Visits you

The Apple Store Visits you

The technology laid dormant during the past months since it was announced. Now Apple will instal iBeacon transmitters in its stores. When walking past such a device, iOS users will be notified of additional information they can read and save on their mobile devices.

The technology will offer in-store analytics to Apple, push ads and info to customers, assist in queue lines at the genius bar and of course help with purchases and payments.

Numerous other possible uses come to mind, mostly location based enhancements… Things like door opening for the blind, customized ads, personalized offers and many others will act as an usher in a new age of technology.

This new age, however, does not leave place for privacy.

Selling Office Supplies Online – 2013 Ecommerce Market Report

The second biggest online retailer in the world, Staples.com, made $24.4 billion last year. Apparently the office supplies online market is growing steadily and attracting unwanted attention from Amazon, while its brick-and-mortar counterpart is struggling with recession. Below we’ll have a look at the market overview, main sales drivers, top retailers and marketing.

staples-img

Let’s start with:

Office supplies online – market overview

Staple logo

The US market, as well as the global market for office supplies is heading to a small rebound, mostly due to a small decrease in demand and a  larger decrease in physical store space.

For example, leader Staples.com, is planning on closing 40 underperforming stores this year (out of a total of 1886 stores in the US and Canada), 10 more than previously announced. Challengers Office Max and Office Depot,  some of those late at the ecommerce party, have been blown even harder by reduced sales, as well as online retailers increased competition. The two companies are planning on closing 175 and 150 stores, respectively.

Multichannel experience through interactive kiosks at  Staples.

Multichannel experience through interactive kiosks at Staples.

On the other hand online and multichannel stores are doing great and Staples announced a new type of smaller stores that engage visitors with interactive kiosks and staff aimed at driving more sales to staples.com.

[Read more how retailers connect channels with Omnichannel Retail]

Staples.com is embracing showrooming and engaging customers offline to drive them to buy online. This means that the company is expecting a decrease in offline buying interest. It also means that the age of the behemoth stores is over and now customers will be expecting offline experience that leads them to buy online.

Office Depot also shifted focus towards a multichannel approach. Monica Luechtefeld, who’s been with Office Depot for the past 17 years restructured marketing teams into a single department, to offer a 360 degrees approach, focused on the customer.

 “Instead of looking at you as an online shopper, it’s an attempt to think of you as the customer of Office Depot. The more we look at you horizontally and look at the multiple ways you engage us and the multiple tools that you use to buy − one day a store, one day online, one day a call center − the better we’ll be able to serve you.” said Luechtefeld.

In order to counterbalance Staples’ and Amazon’s competition, Office Depot is also moving into a merger with Office Max, as WSJ reports. The two companies worth $1.3 billion (Office Depot) and $933 million (Office Max) will probably be trading stocks. With almost 60 000 employees and $17.5 billion in combined sales, the two companies will decrease costs and increase market share, if the deal pulls through. Office Depot also tried a merger with Staples in 1997, but the deal was shut down by the U.S. Federal Trade Commission.

Until the merger goes through the US market is shared by Staples (39% market share, also the largest office supplies company in the world), Office Depot (22%), Office Max (13.5%). These companies control 74.5% of the market so they are really setting the trends, and the trends are:

  1. decreasing brick-and-mortar store space
  2. transforming stores into offline experiences aimed at converting customers to online buyers
  3. increase profitability by increasing online sales
  4. focus on customer centric, multichannel marketing

Product segmentation and best sellers in office supplies

Office supplies are some of the most sought products online, up there with computer hardware and consumer electronics. The online market for office supplies totals $22.8 in US alone but not all office supplies are created equal. When purchasing online customers spend their money on:

  1. Office and school supplies – largest portion of total office supplies category – 45% of total sales. Among these office supplies account for 80%.
  2. Office equipment (fax machines, photocopiers, computers, recorders) amount to 24% of total sales
  3. Last but not least – stationary and computer paper account for 23% of total revenue, as stated by IBIS World.

Among the office supplies the ones that stand out are the ink and toner cartridge supplies. For office supplies retailers the fact that these product sales decreased in the past year meant a hard blow to the market cap.

Ink and toner Cartridge online market – opportunities and threats

ink-marketCartridge supplies make up for a large part of office supplies retailers’ margin. In 2011 the ink market alone was worth $14 billion globally so it’s safe to say that the market is here to stay, although growth has suffered due to global recession. New developments in ink manufacturing, online retailing and customer acquisition have changed the landscape but printer ink is still one of the most needed and expensive products on the planet.

As for the vendors, a recent study by Research and Markets shows top vendors as Brother Industries Ltd., Cannon Inc., Hewlett-Packard Co., and Seiko Epson Corp.

The study also shows that among the key growth drivers there is an increase in demand for cheap, high-speed continuous-feed inkjet printers. Recent changes in technology are making possible for buyers to expect reasonably priced color printing.

Increase in demand for ink in labeling and packaging

Increase in demand for ink in labeling and packaging

Although the overall cartridge supplies market is not doing great, thus affecting leaders like Staples, Office Depot and Office Max, a few trends have really picked up:

  1. Labels and Packaging have increased demands for ink: part due to companies expanding into emerging markets but most important due to a ecommerce growth labels and packaging show increase needs for ink and will probably continue to do so for the foreseeable future. A slower growth can be seen in commercial printing.
  2. There is a growing demand for cartridge refills: the global recession helped increase demand for cartridge refills. Information regarding inflated ink cost and news of printers wasting ink all helped pushing the consumer into finding new ways to decrease print costs.
  3. Companies are helping consumers recycle used cartridges in a move that helps companies retain clients, fight the cartridge refill trend and position themselves as “green”. Staples announced it has recycled over 350 million cartridges through its ink and toner cartridge recycling program. Through this program customers receive $2 back in Staples Rewards points and can be used either online and offline.

As such – companies looking into expanding ink and toner sales need to seriously look into:

  1. cartridge buy back and recycling
  2. refill options for customers
  3. loyalty programs that offer incentives such as buyback points or discounts

Markets and marketing for office supplies online

When it comes to customers, the main targets a office supply retailer has are, according to IBIS World:

  • Households make up the largest share of all sales, with 50% of total revenue
  • Businesses amount to 45% of total revenue
  • Government is just a small part of office supplies sales (5%)

When it comes to marketing and customer care, it seems that most office supplies retailers are moving towards a multichannel approach as to leverage the existing stores and maximize profit. Customer care and retention, location based marketing, mobile marketing, direct marketing and social media also seem to be playing a big role when it comes to customer acquisition and retention.

Customer care and retention – loyalty programs

teacher-programA very important part in Staples.com customer care is their Staples Rewards program. Every purchase offers customers 5% back in online/offline purchases as well as free shipping. Customers can redeem rewards when buying from a physical store, online or on their mobile device, thus ensuring a multichannel experience.

As a very large chunk of the market are households, usually families with one or more children, Staples.com now offers a program targeted at parents and teachers. Parents can offer a teacher of their choice a chance to earn as much as $2000 a year, in reward points.

Office Max also offers a loyalty program – MaxPerks – that allows customers to receive 5% off every purchase in rewards,  rewards on cartridge recycling, and other bonus rewards.

Using mobile to connect multichannel customers

staplesmobileOffice supplies retailers use mobile to leverage increased mobile commerce traffic, drive foot traffic in store, helping customers find product information and help them check rewards quickly.

When it comes to mobile the largest player on the market, Staples.com is using both a scaled-down mobile version of the site, as well as native apps on iOS and Android.

The mobile experience is extremely easy to use and focuses on:

  1. hot deals
  2. store locators
  3. reward points
Office Depot Mobile

Office Depot Mobile

Office Depot also offers a mobile version, as well as iOS / Android native app but it features more information regarding products and a clearly visible “ink finder” section.

It is clear that both companies are really working on providing their customers with a great mobile experience and help them find the best deals and the right products quickly.

Staples.com has really set a target at providing the best mobile approach it can and Brian Tilzer, VP of Global Ecommerce declared:

“More and more shoppers are turning to their mobile devices as a way to research and shop whenever and wherever they want.  Staples is thinking ahead and anticipating customers’ needs, providing an offering that not only serves as an m-commerce tool but listens to, and solves, customers’ pain points.”

 

Social media

When it comes to social media there is no really big winner and tactics and strategies are really similar. Some overall trends seem to be more prevalent though:

  • social media engagement – companies such as Staples, Office Depot and Office Max are all channeling their efforts to discussing new products and  deals, occasionally engaging in social responsibility programs such as Office Depot’s “Stop Bullying”
  • deals apps – wether it’s Staples’ “Weekly Ad” or Office Depot’s “Weekly Deals”, the companies are showcasing their best offers wherever they can. That includes Social Media.
  • companies have a cross-channel social media approach, as seen here.

Direct marketing / customer targeting

Traditionally direct marketing has been one of the best marketing and sales channels before ecommerce started getting traction. Now companies need to face a world where the customer expects real-time, personalized offers.

Amazon is closing in with its beta Amazon Supply, an online store targeting office and home supplies. As such, Staples needed to find a way to fight fire with fire and acquired Runa, a California-based software company that specializes in personalized shopping. The company analyzes browsing history, previous purchases to create a virtual profile for the customer and predict what products would he be interested in.

Profiling is clearly the key to direct marketing as customers are looking into personalized offers and expect companies to provide them with it.

Key take aways:

If you’ve read so far, let’s just assume you’ve probably missed a couple of ideas along the way so let’s just wrap this report with the most important take aways:

  1. office supplies brick-and-mortar stores are struggling and will soon be gone
  2. they will be replaced by multichannel retailers that use physical stores to showcase merchandise and sell online
  3. there are three big players in the office supply market in the US: Staples, Office Depot, Office Max. They make up 74.5% of the market
  4. the office supply market has slightly decreased. So did the ink market.
  5. new trends in the ink market: increased consumption in packaging and labeling, cartridge refills are up, companies need to provide recycling options to customers
  6. mobile is a very important factor in office supplies online retail as it bridges the gap in multichannel shopping
  7. Amazon is moving into office supplies