Retail is changing fast and it’s part due to some new, disrupting technologies that we can see at work with companies such as Amazon, eBay or Walmart. Here are three of these technologies:
1. Print on Demand
Long gone are the days when self-published authors needed to spend a small fortune to get their novels printed, when refused by publishers.
If you wonder what exactly is print on demand here’s the basic info: say you’ve written a book. You’ve designed the book covers, you you’ve checked your beautiful work of art for grammar errors and now you wanna sell. If you’ve heard about print on demand you know you have to upload the document in PDF format, sign up for a free or premium service and companies such as CreateSpace or Lightning Source will print that document whenever someone orders your precious book. They keep a share of the revenue, the customer gets your book and you get to brag to your nephews that you are a self published author.
Anyone can sell print-on-demand (POD) books, without publishing large numbers of books, keeping them stored and dealing with the hassle of distribution and marketing. All they have to do is choose one of the larger print on demand services, upload an already fully designed book (complete with book covers, headings, table of contents and all the other things typically reserved to book designers).
Amazon’s Create space
Amazon’s CreateSpace features one of the best services reserved for upcoming authors that need to publish their works as fast and cost-effective as possible. Although anyone can theoretically publish their book by themselves, a certain amount of help with book design, copy editing and of course marketing is usually needed. CreateSpace offers a wide array of services to those willing to pay for it.
The big plus: with CreateSpace the conversion to Kindle format and distribution in Amazon’s market is fast and easy so new authors can enjoy being published on the worlds biggest book market and its new prodigy – the Kindle ebook reader.
Once the user sets up its basic account he or she can start selling. Of course, Amazon will charge 20 to 60% plus a fixed printing amount. No one said writing is necessarily profitable.
Create Space’s biggest competitor is Lightning Source, a subsidiary of Ingram, a company that deals with connecting publishers to stores and libraries. I mentioned that because if you want to see your book in a real library shelf you are most likely to choose Lightning Source.
The company has a remarkable distribution operation with libraries and stores, unlike Amazon, who is still not really in the friendliest terms with libraries, stores or publishers.
Other companies that provide print on demand services are Blurb, a bit more expensive and usually oriented to photo books, and HP’s MagCloud, featuring reasonable prices and fairly competitive printing.
2. 3D printing
We can print books on demand but what about other things? What if you could shorten your supply chain to just a big 3D printing machine, without any need for factories, suppliers or stocks that might or might not sell?
Right now the 3D printing revolution seems to be more of tech subculture than a real business. But you know what? So did the PC market back in the 60’s.
Here’s something Ebay just launched: a new product called Ebay Exact, a partnership that brings together three leading 3D printing companies (MakerBot, Sculpteo and Hot Pop Factory). Ebay’s users can now browse to a set of products from these companies, choose from a wide selection of materials, colors and options and create their personal favorite product.
This is just a small step into creating better products with faster delivery time and the 3d printing market will soon evolve to a popular solution for online and offline retailers. If you balance production, shipping and import taxes soon enough we will be better off printing, say, a chair than purchasing it from a factory overseas.
3. Robotic Warehouse Management
Although we haven’t been overrun by sentient robots as SF books and movies predicted – we did shift a lot of work to these machines. With ever growing online retail operations – humans just don’t fit in anymore in the warehouse, as their jobs and responsibilities are shrinking by the days.
Kiva Systems is a company that deals in fulfillment automation. It provides technology and robotic warehouse management to the likes of Amazon.com.
Have a look at how they manage to put their little orange robots to work:
It’s pretty hard for anyone to admit it but it’s true: universities can’t keep up with the times. They cannot deliver qualified individuals for the growing online retail segment because there is nothing to be qualified on. Of course, there are some courses that cover some successful business models but truth be told there is no use in knowing Amazon’s business model as long as there is already one Amazon on the market.
How did it come to this? When did this pillars of economic evolution start to lose ground? Let’s have a look at some of the potential causes and some answers on how to hire and develop the right individuals for the online retail segment.
Universities teach rules. On the internet rules are meant to be broken.
The whole concept behind higher education was that one might benefit from (1) a few extra education years, (2) access to some very experienced professors and most important although not usually talked about – (3) a network of like minded, probably successful colleagues. These three factors don’t really apply to online business in general and online retail in particular:
with wonder kids such as Mark Zuckerberg and the Google Duo, dot-com entrepreneurs are expected to be successful before their early thirties. Spending too much time in the academia is not really the best choice if you are an aspiring young millionaire. Have a look at this M. Zuckerberg’s interview back when Facebook was Thefacebook.com. The thing you should be thinking about – how can someone driven, ambitious and aware can stay in college for 4 years when he feels ” ‘near future’ being like anytime in the next seven or eight days.” Remember – this guy is a Harvard drop-out.
as for the “very experienced professors” – there is no way they can actually be that experienced unless their name is somewhere along the lines of Jeff Bezos or Jack Ma. The high education fees and the time spent in conventional education facilities are not really that useful when it comes to innovation. Professors are not really the most adaptable types. Most of them are still trying to understand and explain the Dot.com Bubble. They are historians rather than explorers. Of course, understanding our past can save us from some trouble but it can also lead to a certain lack of innovation, a thing the internet thrives on.
the network of like minded, probably successful colleagues is not really spending that much time in the classroom. They are studying, alright, they are building networks and they are building stuff. Just not where you would expect them to do that. They hang out in technology hubs, they read books on their Kindle and their laboratory is probably a Macbook.
Unfortunately a college diploma shows only that the individual can remember some things and can obey rules. That’s great for middle management and below but what do you do when you need to hire talent? Where can you find people that can turn Brick and Mortar stores into online retailers?
How to attract talent that can develop Online Retail Companies?
No matter how big your company is – you will be always faced with recruiting issues. How to look for the right candidates, how to attract them and how to keep them are always distinctively difficult issues.
Some of the larger companies, such as Walmart, have chosen the path I believe works best: buying entrepreneurs. When I say buying – think more than cash. The large pay check is one type of incentive, but not the only one. The right kind of people need a purpose, a direction and the freedom to choose their own teams. They will be motivated by a large vision, a goal to strive to and a team that can help them achieve that goal.
Here’s how Walmart CEO Mike Duke managed to lure ex-eBay engineer Jeremy King, now CTO of Walmart. Notice how Mike Duke had already decided that although ecommerce is not really the biggest piece of the pie – it is the key to continue Walmart’s development in the future.
After years of seeing his company lag online, Duke swore that digital was now a priority for Walmart. Duke had restructured the company, placing e-commerce on equal footing with Walmart’s other, much larger divisions. He had made serious investments in high-tech talent, acquiring several startups.
Hire experience – any kind of experience.
Remember – what did you do when you first tried to ride a bike? Chances are that unless you were an unusually talented child or a late learner you got a few bruises out of your first try. However, due to those slightly annoying incidents, you managed to learn what to do and what not to do.
As an online retail business owner or manager you should be looking for experience. Experience doesn’t come easy. As I said earlier in the article – there is no one there to teach young professionals what to do and what not to do. So far, at least. As such you will be dealing with people that failed, struggled, tried again and again and eventually learnt a thing or two about online retail.
In time, education will adapt to this changing landscape and it will offer better suited courses. In the same time online retail will develop into a mature industry and things will start to get rusty again, just as it had happened to classic retail. Then you will be able to hire diplomas again. Until then – keep you eyes open for experience.
There are retailers and then there are super retailers. Here’s a list of some of the bravest and strongest online retailers and their super hero avatar.
Let’s start with number 5:
Secret Identity: Apple.com
The Batman Super Retailer is a mighty hero – strong, determined but first of all – rich. He uses gadgets to fight off the competition and just when you think he is going down he manages to bring out a game changer out of his handy secret belt (once every year during the WWDC).
But oh my under its dark armor (designed in California, made in China) lies a hurtful secret: The Batman Super Retailer misses his dad, killed by cancer. He tries to cope with the loss by continuing in its tradition and trying to save the world from bad design. Sometimes unsuccessfully.
The Redmond Joker and Mr. Android.
The Dark Knight is everybody’s target. Everyone talks about the “the iphone killer”, “the ipad killer”, “the Apple killer”. Why? Because “he’s the hero Gotham deserves, but not the one it needs right now… and so we’ll hunt him, because he can take it.”
Secret identity: Fab.com
You know that awkward kid that no one actually cared about back when he was into, what was that – photography? Oh, no, wait – it was social networking. It seems he is not so awkward anymore. Overnight he turned into this fabulous, tights wearing, home decorator that simply just loves to help you pick that lovely new carpet for your living room (yeah, he’s also gay).
His super powers are a. his spidey senses when it comes to picking beautiful products and selling them online, b. climbing on walls and giving you ideas on how to better redecorate, and last but certainly not least his unmatched ability to adapt fast to the market. By doing things like letting you design the furniture you want to buy.
The Spiderman Super Retailer has recently moved on from the recently mainstream Flash Sales market and into this new thing he’s doing right now, that doesn’t include Flash Sales and is aaaaalll about design. Also – you’ve probably never heard about it.
The Green Goblin living on One Kings Lane, and a distant cousin of Iron Man, the Doctor Octopus also known as Gilt Home.
Spiderman the Super Retailer catches clients in a pretty expensive marketing web. It seems that its greatest weakness is the high customer acquisition cost.
3. Iron Man
Secret identity: Gilt.com
Rich, famous, bright and ready to wear some of the best suits in town. The Iron Man Super Retailer was fathered by Kevin P. Ryan, that had a history of investments in some companies you have probably heard before: Business Insider, Mongo DB, Double Click. Although his corporate siblings are definitely bright, Gilt.com seems to be the prodigal son.
The Iron Man retailer is no match for any of his enemies when it comes to building the best technology, working and managing the smartest people and just being a genuine charismatic fashion and style icon.
Although not really into astrophysics the Iron Man Super Retailer manages to learn new things on the fly, adapt and … look … he does offline retail now.
The dreaded Miss RueLaLa – rich, smart and uber-sexy. She is backed up by her corporate hotshot husband, Mr. Ebay and has so far snatched a couple of victories from Mr. Gilt.
When it comes to this Super Retailer – one thing’s for sure: you do not want to make him angry. When things go south this green retail monster will squash its competition with its low prices and national coverage. You are never too far from him and you won’t be able to hide when he gets all “Hulk, Smash!” on you.
What’s his super power? The Hulk Super Retailer has the upper hand when it comes to size, strength and endurance. The whole operation employs 1.6 million people, it’s bigger than Home Depot, K-Mart, Costco, Kroger, Target and Sears, combined and most americans (90%) live within 15 miles distance to a Walmart shop.
His online operations aren’t to shabby either: it made $4.9 billion in 2011 and that’s him not really trying. When exposed to the Big Poppa Walmart’s Green Dollar Radiation this Super Online Retailer has the potential to make its fellow competitors look like scrawny kids.
Biggest enemies. Biggest weakness:
The biggest enemy this hunk of overgrown retailer has is itself. Bigger is not always better. The Hulk is either a smashing machine or the smart researcher working at Walmart Labs. He is still trying to control its size and keep its balance while growing so fast. He is not yet there but he will be. From that moment on there will be only one Super Retailer that will, maybe, be able to face it:
Secret identity: Amazon.com
This Super Retailer is actually in a class of its own. He is stronger and faster than anyone else online. He has a global reach and can fly and wirelessly deliver its products to anyone, anywhere. He grows faster than anyone else and has so far proven unbeatable.
He was born in a time when people didn’t believe in its type of heroes. He struggled and after some slightly awkward teenage years (it took Amazon 9 years to turn a profit) it finally showed up at the graduation party, red cape flowing and all.
He is known for making a living of print but in time it diversified its product catalogue through a combination of digital content and marketplace products. After all – how could this Super Super Retailer finance its Fortress of Solitude other than by reporting a whooping $48 billion revenue in 2011.
General Zod, a super enemy seemingly out of this world, seems to have set up shop with AliBaba.com and is now threatening Superman’s global reach. The Hulk (mentioned earlier) is not too happy with Superman’s hegemony either and is trying to catch up but is not yet strong enough to go head – to – head with the Man of Steel.
No one has actually found the Kryptonite that is said to be the Amazon killer but rumor has it that its expanding marketplace and investment in digital sales might not be so healthy after all.
Apple unveiled its new take on the iOS – the iOS 7. Certainly a big change in terms of design, the iOS 7 is actually a bit more than that – it’s an assault on a couple of yet untapped markets. Let’s forget about the shiny new icons for a few minutes and let’s focus on what really matters: iOS7 is a huge improvement for what we now call Mobile Commerce.
What does this “big change” mean for mobile commerce? First off…
How big is iOS on the mobile commerce market?
Let’s have a look what the iOS means in terms of mobile usage and mobile commerce:
First off – iOS is not the best sold mobile operating system but that doesn’t really matter as the iOS is by far (61%) the most used mobile operating system when browsing the internet. As a result, when it comes to mobile commerce, the iOS is the most important operating system.
We know m-commerce is growing fast, just like mobile usage. Last year meant an 81% increase in m-commerce sales, up to $ 24 Billion and as eMarketer estimates, the growth will continue at a fast rate in the following years, reaching almost $90 Billion in 2016.
That means that the mobile space means big bucks and Apple is all about big bucks. The new operating system is meant for the masses, it’s meant to take on the new wave of heavy (borderline obsessive) mobile users that will be soon shopping online from their mobile devices first.
So – we know m-commerce is big and it’s getting bigger. We know Apple dominates the market. Let’s have a look at iOS7 ‘ s new features from a mobile commerce perspective:
1. The iCloud Keychain will make mobile shopping easier
The iCloud Keychain is meant to make it easier for the iOS user to store passwords and credit card information. As mobile devices become more and more personal they will be carrying more and more of our personal information, personal history and, of course, cash.
Even with such a personal approach to mobile usage, one of the biggest bottlenecks in mobile commerce remains the actual checkout. Partly because there are so many inputs one has to fill in. Partly because taking out your credit card and filling in payment details while sipping the Venti Latte at your local Starbucks is not really what comes to mind when you think “secure payments”.
Here comes the Keychain – Apple’s solution to an improved mobile shopping experience.
2. The iOS and NFC (near field communication) payments
The iCloud Keychain integration goes beyond online payments, actually. It will probably work also as a NFC wallet, if this patent is any indication. NFC payments and transfer will probably replace the plastic cards in the near future and Apple is sure to be a part of the m-payment revolution.
3. Siri may be the next personal shopping assistant
Apple’s personal and sometimes quite charming personal assistant, Siri, was so far thought to be an overhyped voice controller for the mobile devices. With the iOS 7 Siri gets lots of improvements, with related tweets and social media connectivity, new voice features, improved usability for french and german speakers and Bing instead of Google.
Siri also gets to do a little predictive analysis to better match the user’s need. With better and better suggestions Siri will quickly become the go-to …. uhm … feature … when in need of anything, really. That includes stores, products, restaurants, cafe’s and so forth.
With Siri dictating the recommended venues to spend your money in, that may become a serious threat to Google’s search hegemony, which might be one of the reasons Apple is ditching the search leader.
4. iOS7 in the Car and the Radio Killer
Apple has been working closely with a couple of car manufacturers, such as Mercedes Benz, Honda and Volvo, to tap into the emerging market of car entertainment and technology. The automotive industry has really taken its time improving car entertainment and control technology but it seems Apple has once again managed to bring on the innovation it is known for.
The “iCars” will be available starting 2014, the year cars will probably start coming equipped with wireless internet. Such news may mean an improved driving experience as Apple promisses a new car experience.
As the iOS 7 comes with an “iRadio”, streaming from Apple’s iTunes library, that may be very bad news for both conventional Radio Stations, online radios and probably, even the new music stars – on demand streaming apps such as Pandora, Spotify or Deezer.
The iOS 7 in Car integration also means location based recommendation from Siri and a decrease in local radios driven sales. Instead Apple will probably push forward some kind of location based ad system. This was probably the reason it was bidding against Google for Waze.
You may wonder why is the iOS7 in the car such a big news for m-commerce. The answer is the letter “M”, for mobile. The car becomes the actual “mobile device”. The iOS7 car integration may be a whole lot more than we expect in terms of market disruption.
Maybe Apple’s iOS7 is not its best take on mobile interface design. Maybe they did get a little too inspired by Windows Mobile. But also, maybe we’re underestimating the new, Steve Jobs free Apple. The company showed guts and determination at launching a revolutionary, if unusual, product. Apple may stumble once in a while but the company continues innovating and bringing change to new markets. The iOS7 may not have the prettiest icons but it is sure as hell huge news for mobile commerce and the car industry.
The Starks. The Lannisters. Dragons. Swords. Power. Blood. Sex. Aaaand violence. I guess this pretty much sums up a slightly superficial yet short description of the Game of Thrones series.
Now if you’ve opened up your Facebook or Twitter account today, you definitely know something happened. Last evening HBO aired a certain episode called “The Red Wedding”. I will not spoil it for you, if you’ve not seen it yet, but it was a pretty shocking episode. Blood and death ruled the storyline and social media reactions quickly followed.
Just to get an overview of how much impact Game of Thrones had, here’s a tweet from musician Ed Sheeran that pretty much sums it up:
i dont know what just happened in game of thrones. i’m in shock.
Yeah, things got pretty violent. Shocking actually. And that got me thinking. Not the usual things one might ponder on but something closer to my professional interests. As the credits rolled in, I found myself wondering what could online retailers take away from the GoT Universe? I pretty much narrowed it down to 5 things (there is still a certain limit one can take away from blood, death and violence). Here they are:
5. Form alliances
You are not alone. Of course, you might have a strong company, you may not need partners right now and yes, others can sometimes slow you down.
However, you never know when you might need to launch a new product or face a strong competitor. That’s when allies such as industry bloggers, influential community members, thematic forums or websites will prove really useful.
Develop your customer community. Grow a company blog. Sponsor thematic websites. Maybe all of these. You never know when but your allies will come in handy.
4. Always be on the watch for challengers.
Retail is a fast moving industry. Online retail moves even faster. You might be the king of the hills today only to find out your market share has dropped faster than you could say “Winter is coming”.
If you’re not the market leader you probably want to be. That’s human nature. Also – online retail nature. With hard work, creativity, and a couple of other things you too can reach the “Iron Throne” you’ve battled for. Once you’re there you need to keep an eye for certain news that might predict a strong challenger:
a more flexible business model
3. Technology can save you. Almost magically.
If you’ve been watching the Game of thrones you might remember season’s two finale. Peter Dinklage’s character, Tyrion Lannister leads an outnumbered army against a potentially disastrous siege. His best choice is to use the “Wildfire” – a magical substance that acts as a very powerful and persistant explosive (consider sorcery to be the equivalent of technology in the Game of Thrones universe).
With the help of the Wildfire, Tyrion manages to save his castle and his life.
Now, just like the movies, technology is probably lurking somewhere around you. Be sure to reach out and use the best available technologies if you want to stay competitive.
4. Keep a look out for the new king product.
There is probably no secret to you by now that some products perform way better than others. For a limited time. Than some other products gain your customers best favors. And than others and so on.
Keep a look out for the king product. There is always a struggle on the market and while you can marginally influence the outcome you cannot predict it. It is really not up to you to decide what your customers want but rather what they can choose from.
Be sure to treat your king product or products royally and they will repay you. How can you do that? Here are some tips:
be sure to make it easy for your customers to reach your king product
bring on new customers by advertising your best sellers
if you don’t have one already – create a special products category
Remember though: different customers may be on the look out for different king products. Try to customize your online shopping experience according to each customer’s needs. With the help of technology.
And finally …
5. Kill your products.Well … not all.
Just because you have a virtually unlimited storage space doesn’t mean you really have to keep all products in your catalogue.
Some products are … well … underachievers. They cannot be kings. Or queens, or barons, or soldiers. They are not wanted. Your customers don’t buy them. Maybe they don’t even want to see them.
So – test your products and clean up the mess. You can handle an limited amount of products. Your customers want a limited amount of products, curated only for them. With the rise of flash sales focused on certain types of individuals online catalogues seem to be getting smaller and more focused on customer’s needs.
Don’t be afraid to cut out underperforming products. You get more time with your king products. Do the math – more focus on the best sellers, less on the underachievers. You can only improve.
Unless you’ve been living under a rock for the past 5 years you’ve probably heard about a little thing called flash sales sites. Well … maybe not so little. It seems that, according to Gilt founder and ex-CEO Kevin Ryan, the flash sales sites you’ve probably heard about, such as Gilt, Fab and Rue La La have been doing great with turnovers between $100 million and $1,69 billion.
These are all new fresh companies so how come have they managed to grow so fast? How do they work? What is the business model and who are the most prominent players on the market?
Let’s start with number one:
What are flash sales sites?
By now you may have pretty clear idea that flash sales mean generously discounted merchandise. It may be fashion, home products, electronics or others. Customers expect flash sales sites to deliver well .. cheap(er) products.
The whole idea is by no means new. Brick and mortar stores used to and still do it from time to time (usually seasonally) in order to unload overstocks. At some point someone realized that there is a business opportunity there:
Say you have a dozen retailers each having 10 products that went unsold in the previous seasons and they want to get rid of all these stocks. They can either deal with all the hassle of organizing a sales operation to unload extra stocks or someone can just buy the whole merchandise, at an even lower cost and then resell it and turn a profit.
At first companies buying these products didn’t need to sell it at a discounted value. They would just buy the whole unsold stocks and try to sell it (they were usually successful) on a different market. Example: buy discounted merchandise in the US and sell it in Eastern Europe where last year’s collection is not only “good enough” but “great”.
In time the whole “moving to a different market” operation proved to be a little too complicated, with global recession, countries getting a little more protective with their own economy and so on. So a new business model came up:
How do flash sales sites work?
Flash sales develop a large targeted potential buyers database, test these potential buyers to see which is the right product mix and then buy unsold inventory and resell it at a large discount. Sometimes – they don’t even do that. They just attract potential customers to several discount offers which become active when a certain number of buyers is reached. They ensure this way that they are able to purchase the merchandise without reporting losses.
The logistics in this business is a little tricky if you are dealing with “volatile” stocks and can sometimes turn to frustration from customers as orders sometime take weeks to arrive.
However, when purchases are made, flash sales sites customers are more likely to buy again, according to this study. Customer lifetime value increases 385% for flash sales sites, whereas traditional online retail shows an increase of “only” 94%.
So – business is a-booming. Buyers flock around flash sales sites, they buy more than on traditional online stores and the business model seems to be more stable than Gorupon’s.
Who are the champions and who are the contenders? Let’s start with number 5:
Which are the top largest flash sales sites?
Ruelala had a dashing growth in the previous years but few know it is part of GSI Commerce, which in turn is a subsidiary of eBay so yeah, Ruelala is part of eBay.
One Kings Lane.com is a place where customers can get a great curated product mix for home. The revenue was roughly $200 million in 2012.
The award for the largest flash sales site goes to Vente-Privee, which has had a 40% increase in flash sales in 2012. Their sales went up to € 1.3 billion (aprox. $1.69 billion). They’re living large. So large that in order to celebrate this great feat they bought a theater. No, really.
How big are flash sales?
Now, if you’ve find flash sales interesting, you might head over to this link right here, where you can have a look at an infographic showing more information on the subject at hand.
When it comes to online retail conventional wisdom states that customers will choose the virtual over brick-and-mortar store mainly because of the price. While this may be true , it’s only partially true. Price is a big factor and probably the most rational factor when it comes to shopping online. However, choosing online shopping takes more than the rational.
Above you can see a chart on a recent study by PWC, that shows some of the reasons driving customers to shop online. Lower prices and better offers is the second most important reason people will buy online followed by the speed factor and things like better variety and better product information.
So – if you are managing, owning or part of an online retail operation, you should know your customers motivations.
Here are the top 5 reasons, other than price, that drive people to buy online:
1. Shopping online is convenient for anyone, anytime.
The usual trouble with business hours is that they are the same for pretty much everyone. Both shoppers and retailers. While movies portrait people as care-free, on-the-go individuals, the reality is that much of the time people are either stuck in an office, stuck in traffic or just at home, spending time with the family. Say customer X remembers he needs to buy a new pair of shoes at 2 PM, while still at work. Will it be possible for him to drive to the closest store? Will he just go online and buy his favorite pair of shoes, from a wide selection of brands and offers. Of course it’s the latter which brings us to …
2. Shopping online is easier and less stressing
Think about shopping centers. Picture the people, the crowd, the options. Hear the noise. Now think about looking for a parking space, walking to the mall, walking some more from store to store. Trying on. Maybe going home empty handed.
Now picture doing all that in front of the computer, listening to your favorite music, comparing the best deals, without anyone trying to convince you what is the perfect fit. Shopping online is just easier. Customers choose it because it’s stress-free, it’s rational and you can get the best deal without spending a whole afternoon looking for a pair of pants.
3. Shopping for products unavailable in the near area
Not longer than 10 years ago, most shoppers would have had to choose between the products available in the nearest store or not buy anything at all. There was no “shopping for that special bottle of wine I saw last year in Paris”. If the local wine store was not selling it, well … it simply wasn’t worth the hassle to look for it anymore. Now consumers can just “google” a particular brand or product and someone, somewhere, will be ready to sell it and ship it.
4. It’s easier to compare offers
To be fair, this one has a lot to do with price but than again comparison and especially easy comparison is a matter of convenience rather than pricing. Comparing prices online is way easier than any of the options offline stores have.
5. It’s just so much better to talk about
Remember the last time you talked about visiting a store while chatting with your best friend? Probably a long time ago. Truth is conventional retail stores are just so … available to anyone. Uninteresting. Common. You cannot brag about a new, indie, never before heard store that still offers a lot of products. Shopping online is just much more conversation-worthy.
Conclusion:if you are selling online – please don’t focus solely on price. It is so yesterday.
Online retail is the wonder kid of retail – it is young, energetic, it is growing fast yet it is still in its infancy. Based on 2010 estimates online retail amounted for no more than 7% of total retail purchases, as seen below.
The figure may not be exact as it amounts for purchases that happen exclusively online. Users tend to mix retail channels in their quest for a better shopping experience. They might know the brick-and-mortar store brand and order online because it is more convenient. They might also discover the online store, find the product best suited and than “feel” it in the physical store.
Multichannel tracking has not changed that much since the days consumers would receive coupons in magazines and advertisers would track these coupons to get a better view on what’s efficient and what is not in their marketing efforts.
What is Multichannel Shopping?
First and foremost – what is Multichannel Shopping? As you probably have noticed or done so yourself, shoppers tend to use multiple ways of combining online and offline activities. Here are the most important:
Shopping across multiple channels (brick-and-mortar stores, online shops, mobile apps, phone order etc.). Consumers will try to use the best channel available at the time. Say you are a avid online shopper but this evening your brother celebrates his anniversary and you forgot to buy him a present. You will rush over to the closest store and buy something from there, after you have searched for that store and the gift online.
Using more channels to purchase goods from a single retailer. Users that are accustomed to a certain brand will try to buy as often as possible from that particular brand. They will mix offline and online purchases, depending on the specific occasion, while staying loyal that brand.
Using multiple channels to complete a purchase. Users will use multiple channels sometimes, to get the best deal / the easiest way to get the goods. They might browse the online store, order the product on the phone and purchase / pay for it in the brick and mortar store.
How can we track Multichannel Shoppers?
As retailers increasingly look for new ways of tracking consumers and increasing sales they use a combination of old(er) and new(er) strategies, such as:
Multichannel loyalty programs – this programs are usually extended CRM programs, using identifiers such as member cards, phone numbers, unique ID’s or others. Consumers are encouraged through loyalty points incentives to use their ID’s on the different channels
Multichannel consumer life cycle – tracking the consumer through different channels by combining online and offline purchase steps (Ex.:buy online, pay offline, support on the phone)
Track users through wi-fi and mobile use – a rather cutting edge yet extremely promising strategy of trading free on-location internet (everybody wants some), combining it with personal online data (such as Facebook user accounts) and seeking trends in collected data, in order to increase sales and understand the consumer life-cycle better.
Here are 5 companies whose combined online sales in 2011 amount to almost $75 Billion, US and Canada only. Let’s also have a look at their background and how did they manage to reach the top 5. The winner is one of the fastest growing companies in the world, a company born and raised online and probably the future of global retail. Let’s first have a look at the runners up:
Dell is the only company in this top to have a negative growth. The decrease in sales is a direct result of global PC sales contraction in 2011. If your company is not named Apple and your business has something to do with PC’s, than 2011 was probably one of the worst years for you. In fact Dell’s PC’s shipments declined 8% throughout the year so that makes dell.com’s sales 200% better than the overall company performance.
Dell was one of the first companies to integrate ecommerce in their sales process. Its e-commerce operation started off as a static page in 1994, integrated online sales features and soon enough they were selling more than $1 million a year, which as you might remember, was $1 million more than most of the companies.
Dell’s innovative approach to online commerce (customize and buy) was a result of:
its business model that allowed companies and individuals to order customized computers via mail orders pre-internet era
an increase in losses due to aggressive competition from its arch-nemesis – Compaq. Dell recorded losses of nearly $100 million in 1994, before launching Dell.com.
Following the launch Dell expanded its online operations in Europe and Asia and by 2000 it was already the market leader in PC sales worldwide. It stayed in the pole-position until 2006, when HP reclaimed the throne. Not bad.
Walmart is big. Really big. It operates more than 10.000 retail units in 27 countries. It’s net sales in 2012 increased 5.9% to 443.9 billion dollars. Big as it might be, Walmart did miss the start and that’s one of the reasons it’s “only” no.4 on our list. But worry not – the company expands its operations online as aggressively as it does with its brick and mortar stores and soon it will be fighting for the top position.
The company, whose first store opened in 1962, had launched Walmart.com in 2000, after it incorporated it as a separate company, based in Silicon Valley. Accel Ventures had a minority stake in the company at the time but the two agreed to disagree and in 2001 Walmart bought back Accel’s share.
As of that moment Walmart.com worked as a subsidiary of Wal-mart Stores, Inc. and it slowly started its development. CEO Mike Duke, an alumni of Georgia’s Institute of Technology, showed he meant e-business when it turned the company from a rigid, unambitious company to one of the biggest challengers to Amazon’s ecommerce reign.
Walmart started @WalmartLabs, and brought aboard the ship hundreds of talented engineers and business people, all focused on retail, social media and mobile. Yup, they do have all the buzzwords they need and as of 2011 they also have Jeremy King, one of the leading engineers at eBay, back in the day.
In 2011, Walmart agreed to purchase Kosmix, a social media startup founded by Venky Harinarayan and Anand Rajaraman in 2005. It’s worth to mention this just to get a glimpse in the kind of people and technology the company is now bringing aboard:
Mr. Harinarayan and Mr. Rajaraman previously founded and sold Junglee to Amazon for a reported $250 million
The two were angel investors in Facebook
Kosmix was funded by Lightspeed Venture Partners, Accel Partners, Dag Ventures and … wait for it … Jeff Bezos’ personal investment company Bezos Expeditions
Walmart is now acting as a Silicon Valley start-up when it comes to ecommerce – it’s lean, it values technology talent and it has a vision and a strategy.
As I am writing this post Exxon surpassed Apple to become, once again, the largest company in the world. However, Apple is still valued at $413 billion and it is still the coolest thing in technology. The company started its online sales operations in in november 1997, an year after acquiring NeXT Computers and bringing back Steve Jobs.
The whole online store was based at that moment on NeXT’s WebObject’s technology. This allowed fast implementation (1 year was needed to implement the whole online store) and a great online experience. As Steve Jobs declared at the time, $12 million worth of sales were generated using the online store, in the first month.
One of the cornerstones of Apple’s development for both offline and online sales was the Apple Store – the physical, brick and mortar, beautifully designed, concept store. When the first Apple Store was opened in 2001, Jobs wanted an experience rather than a shopping center. The Macs were beautifully designed, they worked better than most PCs but were still compared in terms of specs to PCs, as most consumers were not considering computing an area were design, experience or feeling had anything to do with a purchase decision. That was what the company needed to change.
The Apple Store started as a Store-within-Store experience when Steve Jobs stopped retail contracts with most retailers, except CompUSA. In exchange for being the exclusive Apple Dealer, CompUSA agreed to offer Apple a 15% area of all stores, and the right to have its own sales-person on-site.
People would walk in, experience the Apple ecosystem and even if they didn’t buy right then they would still remember the brand and later purchase online.
The Apple Store was a move that greatly helped Apple sell online. It was the most beautiful showroom, before online retailers even thought about having offline stores to increase market share.
The online shopping experience changed when, following 2001’s launch of the iPod, Apple released the iTunes Store in 2003. 5 years later, the iTunes Store was already the largest music vendor in the US and in 2010 it was the largest music vendor in the world. In Q1 2011 Apple’s iTunes Store revenue alone was $1.4 billion.
Along came the iPhone and, just as the company previously revolutionized the music industry with the iPod, the iPhone changed mobile, software and well…basically anything we humans do.
Apple’s retail concept is not just a store, it’s an ecosystem. It’s growing fast and it’s got a solid lock-in on its customers. Right now Apple’s online sales can only go up.
2. Staples Inc.
Online Sales: $10,600,000,000
2011 Growth: 3.90%
The first company in this list to cross the $10 billion in online sales threshold is Staples, the largest office supply chain in the world. Staples has more than 2000 stores in 26 countries but it plans to slash its brick and mortar space by 15% and focus on online sales.
The first store was opened in 1986, when the company was funded by certain private equity firms, including Bain Capital, co-founded by Mitt Romney (yeah, that Mitt Romney) who stayed on board for the next 15 years to help with the company strategy.
Staples.com was launched in 1998 and had a steady growth ever since, unlike its offline operations. Although often overlooked as a key competitor in the online retail arena, Staples did beat Apple and Walmart in this top so we should give credit where credit is due.
It’s main online sales channels are Staples.com, StaplesAdvantage.com and Quill.com. The infrastructure is based on IBM hardware and software and the company is ready to heavily invest in developing its online operations. It even started its very own innovation hub called E-Commerce Innovation Center.
Ok, long story short – the early bird catches the worm. Staples may not be the coolest brand in this list, but it was on of the pioneers in this field and it’s making lots of money online and unlike OfficeMax, and Office Depot, its main competitors, it has the best chance to make a shift online when its stores will stop being profitable.
1. Amazon.com Inc.
Online Sales: $48,080,000,000
2011 Growth: 40.60%
Yes, I know it may come as a shock but Amazon is, indeed, the largest online retailer in the world. It leads the online retailers’ top by a very long margin and it will continue to do so for a very long time, if we are to look at its continuous growth, its innovative practices and its aggressive expansion.
The company was founded in 1994 by Jeff Bezos and Amazon.com went online in 1995, way before any of the other companies in this list were. Amazon was one of the few companies to exit the 1997-2000 dot-com bubble still intact. It would take another year after that for the company to turn a profit – in 2001 Amazon had its first profitable quarter – $5 million in profit on revenues of over $1 billion. Not very much but it proved its model.
It got sued by Barnes & Noble and Walmart (you might recognize these companies as some of those most affected by Amazon’s growth), it acquired some great startups (such as Kiva, Zappos, IMDB.com) and in 2007 launched its revolutionary device, the Kindle.
Although there is so much to say about Amazon one thing is clear: it is the top online retailer and it is eating into the large offline retailers’ sales too. Soon enough it might take their place.
I hope you enjoyed this list. Keep in mind that this post is based on Internet Retailer’s top 500 online retailers and features companies in the US and Canada. Figures are based on 2011 sales provided by different sources, usually the companies themselves. I recommend having a look at the full top and, as I will also do, purchase the full guide.