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As online and offline commerce are getting closer to each other and customers schedules are getting more and more crowded, pick up lockers seem to become more useful and popular.
They are versatile, easy to use and something customers need from omnichannel retailers. So let’s dig in and see how they work and who should use them.
First off – what is a pick up locker? Simply put it is an area of lockers where retailers can drop off merchandise and customers can pick it up. Amazon has been a pioneer in this field, with Amazon Lockers opening up the gates to a new type of fulfillment.
The pick up lockers work by assigning a specific location to packages and sending pick up codes to customers. The customers can than go to their designated pick up location, enter the security code and grab their packages.
After Amazon has built their first experimental pick up lockers, others soon followed.
Some of those that developed their own systems of pick up (and ship) lockers are 3PL companies. For example FedEx and UPS have developed quite advanced pick up and drop off locations. UPS has named theirs “Access Points” and they’re building a network able to sustain growing demand.
FedEx has developed a network of “Ship&Get Self Service Lockers“. With their lockers one can drop off items for shipment or receive packages.
Both are growing really fast and soon others will follow suit. Even startups have ventured in this area with some highlights being Swapbox, an Y Combinator startup and Bufferbox, a company that was recently acquired by Google.
So yes, they are popular but how do they work, especially from a retailer point of view?
One very specific use case for the pick-up locker system would be large retail chains. For example Walmart announced last year their Grab & Go lockers following their Site to Store Self Service Lockers experiment.
Apart from the internal fulfillment challenges, retailers need to focus on some key aspects regarding the development and implementation of such pick up locker systems:
For obvious reasons there needs to be a secure access to shipped goods. To do so each drop off will have to issue a security code that can be decrypted and accessed with the private code the customer will receive.
The systems will also have to have fall-back security systems such as video surveillance and locking systems in case of hacking attempts (there will be some).
Security code should work online but also have a fall-back local solution that can work in case internet connection is off.
The pick-up locker system works with other fulfillment operations and will have to input status data directly into TMS (transport management systems) so shipping personnel could be directed to the correct pick up locker area and the specific pick up locker.
As packages differ in size, specific information regarding the type of lockers that are available should be available in real time so packages are stored correctly.
So far most pick up lockers use alphanumeric codes to help users get accustomed to picking up their packages without any hassle. But these codes pose threats in terms of security. While these codes can always be an option and can be easily sent to any device, with smartphones and smartphone apps on the rise, some other solutions may work even better.
One such option would be QR codes embedded in the retailer’s mobile application. The codes can be generated on the fly based on a secured algorithm that neither exposes the code and can also work within the application the customer already uses, thus improving loyalty.
With so many developing their own pick-up locker systems, a connectivity protocol should become the norm. With such a protocol FedEx could ship to either Amazon, Walmart or even UPS lockers for example, improving cross-retailer experience and creating economies of scale.
That being said, the development of pick-up locker systems is obviously a bit more complex than these few paragraphs but I wanted to give you a starting point and explore some of the challenges.
I’ve put together a slideshare presentation regarding omnichannel retail. It focuses on the events that lead to the adoption of omnichannel, the challenges and several ideas that will help you understand the concept.
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.
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.
Adobe and Econsultancy recently released their 2015 Digital Trends report and data shows some really interesting insights. The report is a result of interviewing almost 6000 marketing, digital and ecommerce professionals. The general consensus is that marketing is moving fast and content, personalization, mobile and omnichannel will be key aspects to maintaining a relevant connection to consumers.
Among other facts, the report shows an emergent need to understand customers journeys across multiple channels and a need to insure consistency across these channels. 97% of all respondents pointed to having a clear understanding of customer journeys across channels as being either very important or quite important. Content consistency across channels is also a key priority for 96% of all respondents. 66% of marketing, digital and ecommerce professionals list content consistency as being very important and 30% list it as quite important.
Because omnichannel success is usually a result of strategy and team effort, the report shows training teams in new techniques, channels and disciplines is very important and quite important for 95% of the professionals surveyed.
As the customer is getting more and more empowered by digital technology, results show that some aspects of marketing and retailing will become highly popular in the next 5 years. The most exciting for those surveyed are:
Overall, the report paints a very optimistic picture for omnichannel followers and professionals. 67% of those surveyed agree that omnichannel personalization will become a reality in 2015.
You can download the full report at here.
For a very long time, retailers used a linear approach to the supply chain. It meant that merchandise flowed in just one direction. Products would move between the manufacturer, the wholesaler, the retailer and onto the sales channel. This sales channel meant the brick and mortar store, in all its variations, for a very long time.
With the internet revolution came the concept of eCommerce, where customers would place the orders on an internet store front and they would receive it at home. Medium and large retailers used the same method of silo-management to the online store.
The "silo" approach meant that each new sales channel would be treated as a separate silo, independent from the other stores. That worked for the previous concept of brick and mortar stores, so it had to work for the ecommerce approach, too, right?
Not quite. The concept of having an online store work as a separate operation doesn't fit the profile for the new consumer. The fact is that there are very few exclusive online shoppers. People like to spend time in stores, touching merchandise, they spend time on social media, get informed, place calls to ask for info and generally live in a complex world that mixes online and offline experiences.
Customers demand new options from retailers, things such as "buy online, pick-up in store", "order in store, receive at home" – just some of the many challenges retailers face right now, trying to connect with the new consumer.
To go from being a retailer to being an omnichannel retailer, companies need to step up their game. And it's not just marketing or hardly operational shopping programs. Customers demand a real change in the way they are engaged. Companies such as Macy's have invested in creating experiences that handle multiple journey maps for their customers and the results are satisfying.
To achieve this, retailers need to adopt an omnichannel supply chain. The biggest difference between this type of approach and the previous is the fact that it is omni-directional. Whereas the classic supply chain was mostly linear, flowing from one place (manufacturer) to the other (customer), the omnichannel supply chain flows across many boundaries.
To achieve relevance in the omnichannel age, retailers need to be ready to handle:
The omnichannel supply chain is not easy to achieve. Medium and large companies are caught up in a web of systems and processes that may have worked 10 or 20 years ago but they are now obsolete. The linear approach to supply chain management and marketing is really not their best bet. The change in consumer behavior is irreversible and the omnichannel supply chain is one of the most important changes in today's retail.
Previously, the company used Commercehub’s marketplace technology to connect its vendors to its Ecommerce sales channels. With this new development there are two big things happening:
The first and most important, Staples moves technology development in house. This is a clear sign the company is shifting from a brick-and-mortar centric strategy to a technology centric strategy.
With its legacy store network already in place, growing online sales and the new marketplace, Staples can compete with Amazon on an omnichannel level. Its vendors can now access its online sales channels but with future improvements, their products will be probably ordered offline as well.
The second biggest change is in Staples’ logistics strategy. So far the company relied heavily on its own fulfillment centers. Now orders are increasingly shipped by vendors through drop shipping. This is the most efficient way for Staples to increase its product count and it seems to be working: Staples increased its product count from 30 000 in 2012 to 200 000 in 2013 to a whooping 1.5 million SKUs in 2014, according to Internet Retailer.
As Internet Retailer reports, Staples is still curating the vendors’ offers but it will soon switch to a fully integrated platform in 2015. Even now the new tool allows vendors to receive orders, see real-time alerts, access analytics data and manage inventory, without the cost Commercehub’s technology implied.
Could waiting for online orders to arrive actually be a pleasant experience? What about all those next day delivery and in-store pick-up features retailers brag about? What is the point in that?
Apparently not only is it pleasant but it may sometimes be more fun than buying products in store. The anticipation of orders arriving at our doors keep us on our toes. As a recent Razorfish report mentions, 76% of American consumers and 72% of UK consumers are more excited when their order is delivered at home than when they buy it in store.
Let’s stop for a moment and really look at these numbers: 3 out of 4 customers in the US, UK, Brazil and China would rather wait for purchases than receiving them right away.
This are amazing findings. It shows that instant gratification may no longer be the optimum trigger in marketing messages. It also means that what we thought was a liability for online sales is actually an asset, if used properly.
Building anticipation and delivering items on time is making customers happier than receiving it right away.
But don’t think that customers have lost their interest for offline OR online purchases. The channels have started blending with the help of smartphones. The same study reveals that:
1. Digital has a major impact on the retailer’s brand: Almost all those interviewed responded that a bad web store negatively impacts their opinion on the brand. 84% of consumers in Brazil, 92% in China, 73% in US and 79% in the UK are turned off by lousy digital experiences.
2. Customer journeys are not delivering what the customer wants: a cross-channel experience that works. Retailers are not yet delivering on the omnichannel promise. This leads to frustration and a growing gap between what the consumer wants and what the retailer delivers.
3. There is a huge difference between Gen Xers and Millennials, in terms of shopping. That difference lies in how much they rely on their smartphones. Millennials use their phones at least twice as much as Gen Xers when shopping offline (see figure above).
Apple announced its newest products and everybody focused on the much awaited iWatch or the iPhone 6 and 6 Plus. The real news, however, both business-wise and from a consumer point of view is the launch of Apple Pay, an NFC (Near Field Communications) ready payment system. Simply put, Apple’s payment system allows customers to store credit card data on their iPhones and when the time comes, just tap to pay.
The product launch was not unexpected. With the previous operating system launch, Apple packed several features that would allow for better mobile commerce. The iCloud Keychain was introduced to Safari in order to allow both faster logins to known websites as well as, in the future, a faster checkout.
With Apple Pay, the Cupertino company joins the omnichannel payment war as was predicted in this previous post. Google, Amazon, Ebay (through PayPal), AliBaba and even Facebook are trying to get a piece of the $15 trillion payments market. As banks and established financial institutions have failed to meet customer expectations in mobile payments, the gap between needs and available options will probably be filled by one of the tech titans.
Google tried its luck with the Google Wallet, Ebay’s PayPal is now crossing the bridge into offline teritorry and Facebook recruited Paypal’s former CEO David Marcus. Marcus is the man that helped Paypal grow from $750 million in 2010 to $27 billion in 2013, so one can only assume Facebook is also serious about payments.
To help the product take off, Apple signed 220 000 merchants onboard its Apple Pay project. Among them: Mc Donald’s, Babies R Us, Macy’s, Staples, Sephora and of course, all Apple retail stores. The 220 k merchants are just 2.4% of the total 7 to 9 million merchants in the US but it is a great start given the fact that Apple has a habit on pulling seemingly impossible feats, starting with close to nothing.
For example the iTunes Store launched with not more than 200 000 songs and only Mac Users could move the purchased songs to their iPods By September 2012, it was home to more than 37 million songs, 700,000 apps, 190,000 TV episodes and 45,000 films. By February 2013, the iTunes store had sold more than 25 billion songs worldwide.
So yes, there is a pattern here and there is probably a whole lot of room for improvement in the payments area.
Apple Pay’s security
Although recent iCloud security issues clouded the product launch, the security behind the payment technology looks great. First of all it allows customers to save credit card data on their phone without exposing sensible details to potential hackers. It also features the Touch ID identification technique where users sign payments with their biometric input (the fingerprint).
The credit card information is not beemed online but rather stored in a special chip, on the iPhone, a hardware – software combination that Apple named Secure Element. When a transaction is processed, credit card details are not sent to Apple’s servers and the retailer can’t see the data. Instead, a proxy account number is issued that the retailers charges. Each transaction is secured by an unique security code that authenticates it. Apple has laid more layers of security then we came to expect and that should work just great. But take it with a pinch of salt because everything is secure untill it is not anymore.
The company states that it does not store transaction data regarding location, products purchased or the amount the customer has spent. That certainly leaves room to question why exactly would Apple choose not to store these valuable data. The answer lies with data from Bloomberg sources. According to these anonymous sources, Apple has partnered with banks in the system to receive a percentage from each transaction.
The banks involved are JP Morgan Chase & Co, Bank of America and Citigroup Inc. They agreed to integrate their cards into the system and alongside came three of the biggest card networks – Visa Inc., Mastercard Inc. And American Express Co.
So we have a great lineup for Apply Pay and although NFC payments where slow to take off, it seems that Apple’s incredible effort to bring every important player on board will be the push mobile payments needs right now.
As the company promissed it won’t charge users, merchants or developers, one of the biggest issues (the cost issue) seems to be out of the way. With customers using their mobiles more and more, retailers will be forced to adopt some form of omnichannel payment system.
How does Apple Pay benefit retailers?
Retailers and merchants in general receive several incentives to adopt NFC payment compliant technology.
First of all, the Apple Pay system allows a greater connectivity between online and offline sales channels. Customers can order products on the web store, in the brick and mortar stores or within a mobile app. The security and speed allow for greater ease of use.
The second big advantage is payment speed. By just tapping the phone, customers can pay within a 10 second timeframe, improving sales speed. This allows merchants to move customers through almost instantly.
Third big advantage Apple brings is an improvement in mobile purchases and payments. Although customers are so far browsing for products, they rather pay on the web store or order and pick up in a physical store. The biggest bottleneck is the mobile payment experience, one that is just awful for most retailers.
Famously Amazon has solved this issue with its One-Click Payments, where registered customers can use previously stored credit card data to move as fast as possible through the checkout process. Amazon’s patent sits at the heart of Apple’s payment system within iTunes, an extraordinarely usable example of mobile payments.
Actually that’s one of Apple’s strong points when implementing Apple Pay. The company will leverage almost 800 million iTunes accounts, most of them having their cards linked to the account. The magic of paying with a tap will now probably become mainstream.
A chart based on US Census Bureau and Comscore data was published by Business Insider. It shows Mobile Commerce growing three times faster than Ecommerce overall.
The numbers behind it are very interesting:
Smartphones and tablets have brought forth a revolution in computing and social interaction. Unfortunately for overenthusiastic mobile-only fans, mcommerce usage is lagging behind mobile device adoption.
If you look at the chart above you’ll see there’s a linear growth in mobile commerce. Not a hockey puck growth. Not even an accelerated growth.
Even more – ecommerce accounts for only 5.9% of all retail. Mobile commerce itself is just 11.4% of ecommerce. This means mobile commerce, however ambitious is pretty much insignifiant. It accounts for just 0.67% of total US retail.
And hey – it’s not the fact that people don’t like smartphones. Oh no. People love smartphones:
They also love tablets. Almost 42% of all US adults own at least a tablet. Remember – this is a product that went on sale only 4 years ago, when Apple introduced the iPad. In just 4 short years, the tablet has become a virtually ubiquitous computing item for US adults.
So – people are buying mobile devices like crazy. PC sales are dropping yet the mobile commerce is just 0.67% .Why?
The short answer – there is no mobile commerce.
Mobile is the bridge. It helps connect the physical world to the virtual world. The act of purchasing happens on multiple channels. Mobile is not “the future”. It is the present yet the present comes in a form we have not met before – a bridge across channels.
If we take the time to see matters from the consumer’s point of view things are not as black and white as we expect them to be. Few if any consumers think in terms of mobile OR desktop OR brick and mortar. The consumer will spend time in a B&M store, browse the web to search for the right products, do a little showrooming to find the be best pricing. In the end, the whole purchasing experience stretches across channels and some are more popular than others.
But the customer has only one perspective where channels blend in. The omnichannel perspective. To provide the ecosystem for this perspective, the new retailers will try to understand and implement omnichannel retail because mobile, however massive, is just a piece of the puzzle.
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