Retail Technology

Instant gratification and retail

We live in the era of “now” – almost instant access to almost anything. Need to settle an argument with a friend at dinner? No problem, I can lookup the information and have an answer before the entree is served. Need a new pair of running shoes? Easy, I can order the exact color combination and size after just a few clicks.As a relevant Wired article notes, anyone under the age of 25 has grown up with “instant knowledge” and “instant buying,” and that Millennial as as a generation are becoming increasingly impatient. In fact, the article notes that psychologists have called this phenomenon “delayed discounting,” where we discount our overall gratification by getting something now. As explained in the article: “The more we get rewarded by delay discounting the more we like it. It becomes a treadmill where we need more and more instant gratification.”Instant gratification has powerful effects, influencing decisions and causing changes in the way we normally operate. This effect is seen in the business world, where both online and offline retailers understand this power and have implemented practices to satisfy consumers as quickly as possible.Key e-Commerce players are moves in this space. Amazon recently announced that it would be expanding their same day delivery service to six new cities. The company wants to reduce the delivery lag and target goods normally available at local super centers. Google is testing its Google Shopping Express service, hiring drivers to make local deliveries of household goods. eBay also launched eBay Now, a service to facilitate same day deliveries from local stores in over 25 cities. We also see numerous startups, some very well funded, that are tackling this space:· Instacart — $54.8M raised· Postmates – $23M raised· Deliv — $12.4M raised· Zipments — $2.25M raisedLast week, the Hong Kong-based van-on-demand service GoGoVan raised a $6.5M series A to expand to Asia, and Uber, the black car app, announced a pilot test to make same day grocery deliveries.While this space has grown predominantly due to growing demand in e-commerce, physical brick and mortar retailers have also been taking similar approaches to enhance their omni-channel strategy. Target, Walmart, and Kohl’s are testing, or have recently implemented, a Buy Online Pick-up In Store (BOPIS) strategy in order to reduce delivery lag and take advantage of existing overhead.Lets also not forget that sustainability could be a long-term concern. While merchants and other large companies can afford to subsidize costs right now, it is reasonable to expect that they will eventually be passed on to the customer. Delivery services like Postmates already tack on additional fees, so it will be interesting to see how this space continues to grow. Nonetheless, there seems to be a strong demand due to our evolving expectations of faster service and I am curious to see how merchants will continue to play into this desire.

Amazon's latest move towards offline commerce

Amazon launched their mobile card reader and companion app this week taking another step into the world of offline commerce. “Amazon Local Register,” similar to Square and PayPal, will enable users to accept credit card payments on a variety of mobile devices. (You can see a full list of point of sale 2.0 companies here.) Small and medium businesses (SMBs) can also purchase a range of compatible accessories including cash drawers, receipt printers, iPad stands, etc., to create a complete point of sale solution – merchants can buy a complete kit from Amazon for $380 that includes a Kindle Fire HDX 8.9.The dongle itself costs $10, but this is instantly refunded in the form of transaction credits. Amazon is also significantly undercutting the competition with its per-swipe transaction fees, launching with a promotional rate of only 1.75% (per swipe) for anyone that signs up before October 31st. This rate will be good until Jan 2016, when it will revert to the normal 2.5% (still undercutting the competition). There are some concerns regarding profitability with this model, especially since Square is still operating at a loss (source), but it’s a strategic move for the e-commerce company. In addition to lower fees, the company is also heavily touting its customer service and support, which could be a big differentiator over competitors. SMBs that already use Amazon online services may also find added value in syncing their online and offline data.“According to the US Census Bureau, there are 26 million small businesses in the US. Most of those companies do not have a mobile point-of-sale solution,” says Amazon spokesperson Julie Law (source).The macro numbers also indicate that there is a large opportunity to increase the company’s footprint. According to Forrester, online sales accounted for only 8% of all retail sales in 2013, which is expected to grow to 11% by 2018 (source). Despite the growth rate of e-commerce being significantly higher, offline commerce isn’t going anywhere anytime soon. The e-commerce giant understands the potential market and is not shy about pursuing strategic initiatives. For example, this year alone we saw the following:Amazon’s Fire phone that has a “FireFly” button to help find products on Amazon using image recognition.Amazon Wallet, a consumer facing mobile wallet service that allows users to scan and store their membership, loyalty, and gift cards within the app.Expanding their same day delivery service across six cities in order to entice customers that would normally shop at their local supercenters (e.g. Walmart, Target).In looking at the big picture, it makes sense that Amazon is releasing a mobile payments product. They have already launched numerous products this year for consumers and are now taking the opportunity to move towards the other side of the value chain – SMBs.

How can brick and mortar stores enhance the retail experience?

There are a number articles that talk about the impending doom of retail stores often citing examples such as Best Buy and Sears. However, data actually show us that over 90% of retail sales still take place in-store. Don’t get me wrong, e-commerce is still growing at a significant rate, 15.5% in 2014 according to eMarketer, but it is clear that brick and mortar (BAM) stores aren’t going to become extinct anytime soon. What will happen, I believe, is that the fundamentals of the retail experience will shift drastically as the lines blur between offline and online commerce.

Why are we not using mobile coupons yet?

I came across an interesting data set by TSYS, a payment processing company, relating to the consumer use of coupons, daily deals, and card-based rewards programs. For the purpose of this post, I want to focus on the coupon data. Turns out that coupons are still widely used with 83% of respondents using some form of coupon — this includes print and display. Also somewhat surprising is that the heaviest group of users is the 150k+ income bracket. In fact, 47% of high-income earners use coupons more than 50 times per year. So coupons still seem quite popular and the top three sources for coupons are, in order, newspaper, online, and store circular. What I found particularly interesting is that only 1 in 5 respondents source coupons on their mobile device, despite the pervasiveness of smartphones. According to Nielsen’s Feb 2014 Digital Consumer Report, over 66% of US consumers own a smartphone (source). Also, with the success of online coupon companies such as RetailMeNot (NASDAQ: SALE) and Coupons.com (NYSE: COUP), the logical next step would be the mobile device. See here for the full study.

Retail Store Tracking and Privacy

The Bull Case for Beacon

In the past year I’ve been hearing quite a bit about “Beacon” such as — Shopkick piloting its shopBeacon for in-store marketing, PayPal using their own beacon for hands-free check-ins and payments, and Qualcomm pushing its Gimbal SDK for developers.

Navigating the Retail Online to Offline Space

I've been tracking ~350 companies so far across 18 different categories in the Retail Online to Offline (O2O) space.  Here is how I've broken down the various startups: