Mobile Black Swans and Turkeys

Part I: Tame Turkeys

On the return flight home for Thanksgiving this week, I read Nassim Taleb’s book The Black Swan and decided that tis the season to draw profound parallels between innovation and poultry.

And so while busy stuffing the family turkey I thought about how this all applied to my world of consumer engagement, retail sales and payment.

Here are my insights:

  • Chickens: Bertrand Russell’s wrote an anecdote about the benevolent farmer in 1912. The fat and happy chicken thinks the farmer is a benevolent protector until it is hauled away to the slaughter house.
  • Turkeys:  Nassim Taleb, in his book The Black Swan, says that the same holds true for the Thanksgiving turkey. However, he adds that the surprise for a turkey is not a surprise to its butcher.
  • Swans: So the black-swan question for the marketing community is: How do we play the role of the butcher not the turkey?

Moving your retail business from a step-by-step evolutionary growth to revolutionary, black swan transformation is not easy. In fact, it may be impossible. Corporations find it difficult to reinvent from within. However, to be aware of the nature of outliers and revolutionary innovation is a good first step.

You can rename your CIO: Chief Innovation Office, your CTO: Chief Transformation Officer and your CDO: Chief Disruption Officer. However this is all for nought if they cannot identify swans or at least the turkeys.

Look to social media. There is a succession of ever faster black-swan innovations starting with email and ending in SnapChat’s self-destructing messaging. Microsoft did not anticipate Google search, Google did not anticipate Facebook communities; Facebook did not anticipate Twitter micro-blogging; the same holds true for Instagram’s social picture publishing or SnapChat’s peek-a-boo messaging.  The same applies to retail as well as broadcast, payments, health, advertising to name a few rudely disrupted verticals.

Retail payments is a classic chase-the-tail solution mashup. But payment vendors have been more astute. The FIs ran a two-sided business to establish MasterCard and VISA credit services. The FIs have fought to be a part of any POS and prepaid activity in retail. With the emergence of digital payment, payment incumbents have aggressively invested and acquired companies in the mobile POS space (VISA/Square) and as well as in the cloud (VISA/Playspan).

VISA’s purchase of PlaySpan was particularly forward thinking. PlaySpan allowed gamers to buy virtual swords and pumpkin seeds for their virtual battle grounds and farms without leaving the game. Frictionless commerce engineering: meet VISA’s present day  V.me.

But even leviathans like VISA and MasterCard have been sidelined to commodity commerce rails.While they make nice transactional revenue, Amazon, iTunes, PayPal and Playstore and other consumer commerce portals have made the card credentials second fiddle. They discount the interchange and grab the CRM and big data.

Shopper marketing, Shopper engagement all follow similar twists. But not always evolutionary:

SMS was the black swan technology revolutionizing communication for the unsuspecting (but delighted) wireless carriers. We all thought QR codes, mobile apps and NFC would supplant this messaging channel.  WhatApp, Skype and Viber all have eaten away at the peer-to-peer traffic; however, for brands, SMS, and for some successful apps, the notification channel, remains the main opt-in and content delivery channel of choice.

Black swan on the horizon? iBeacons, WiFi Direct or LTE Direct? Maybe.

Proximity engagement is essential for a brand or retailer to drive path into purchase.  Shopkick and Beacons are valuable but are ultimately broadcast solutions.  Future solutions such as LTE Direct promise to extend the retail network and add more intelligence and peer to peer interactivity to this engagement.

However, in all the above cases it is difficult, if not impossible, to identify one strategy, vendor, agency that will bring revolutionary black swan ideas.

When attending events whether speaking or listening, it all seems so easy. Innovate they say. . .

Well so my friends, the innovator’s dilemma maybe just to avoid becoming the turkey.

Happy Thanksgiving!

 

Mall Busting with Wal-Mart, Facebook & Zappos

Samsung strikes a deal with the beleaguered Best Buy to subsidize their rent with a store-in-a-store initiative. Borders exits the mall and last-man-standing Barnes & Noble seems to becoming a living room chachka vendor with more book browsers than book buyers. Zappos Labs runs field research in malls and Facebook launches a commerce strategy (again).

Is a retail dust bowl about to blow through the mall nationally? Or is this a digital tempest in a tea cup?

We know that online commerce is booming but it still accounts for a small slice of America’s mall business. Undeniably, this $200 billion digital business (ComScore) is expanding scope daily.

If there was ever a digital demarcator, it is the soap business. When Unilever and P&G, the markets main consumer package goods companies, begin to sell soap on Amazon, and when Wal-Mart begins to ramp up its online business, leveraging its 4,000 stories and 158 warehouses as an online distribution network, then mall property owners possibly need to rethink their role in bricks and mortar.

Inertia as a strategy

Malls are entertainment destinations. Always have been. We go to the mall for a movie or latte just as we bundled the family into the Buick 60 years ago to go shopping. But if Best Buy and Barnes & Noble leave the mall, what is left to attract the consumer? Hours of gizmo browsing and cook-book thumbing gone.

Browse-verse-buy business has whittled way the margins of many stores making Blockbuster and Gamestop digital road kill. It forced Target Chief Executive Gregg Steinhafel and Kathee Tesija, Target’s executive vice president of merchandising to cry uncle on “showrooming” in a memo to its suppliers in 2012.

However, muscling your supplier’s prices down is a pharic victory. Even with the volume sales of Target and Wal-Mart know that they need to move some of their business into the cloud. During Wal-Mart’s August 2013 earnings call it announced that eCommerce sales rose by 30 percent in two trailing quarters. Neil Ashe, Wal-Mart’s CEO indicated its total online sales could pass $10 billion in fiscal year 2014.  This is only two percent of the stores earning and only 12 percent of Amazon which sales totaled $61 billion in 2012 but it is a marked trend and a harbinger of the exodus of earns from the mall.

What incumbent stores presently have in their favor is inertia.  The cloud and the mall are still not fluidly connected. Although each shopper is armed with a mobile computer which has the capability of scanning, sourcing and saving the consumer in every aisle, there are too many hurdles and friction between the idea of digital buying and the products within arms reach.

The mandate of any red blooded digital retailers is to eliminate this inertia.

No-click Cloud Checkout

Apple’s iTunes, Amazon and Paypal built their business on simplifying checkout: making sure that the act of buying does not get in the way of intent to buy.

One-click checkout or combining stored customer credentials with a simple password is the sole reason that these companies continue to grow their market share. Their UX team would tell you that every informational and graphic design is based on optimizing clicks to checkout. Each click makes a precipitous drop off and abandoned shopping carts litter the web.

But digital checkout demands trust and mindshare. Even online real estate barons such as Facebook have been unable to enter this market.  Although “Social” and “commerce” seems natural allies, Facebook has not been able to delivered on its promise to leverage its millions of customers to shop cross-channel.  The company launched Facebook Credits in 2009 and phased them out last year. “F-commerce” experiments abound. Remember Facebook + Amazon + P&G partnering in 2010 to change the world. Unilever followed suit launching a storefront on Facebook for its Dove brand. Retailers including JCPenney and Gamestop have attempted to monetize their Facebook community by opening stores inside the Facebook network. After underwhelming results they shut their virtual doors.

Apple and Amazon have proven that community plus one-click checkout works. These digital wallet holders started their business explicitly to sell stuff. And they are poised to remove the inertia from online shopping and with it the last refuge of the mall owner. Online shopping provides advantages with an endless aisle allowing for access to more sizes and categories. According to Nielson the average basket size is much larger for consumer package goods ($80 online to $30 offline) and beauty purchase ($30 online to $10 offline).

The question is that when the households put soap and diapers on their shopping list will they log into Amazon to buy Dove Body Wash 24 Ounce Bottles (Pack of 4) and Pampers Sensitive Wipes 7x Box?

Baked Beans & Apple Pie

The last refuge of the American mall maybe a can of baked beans and fresh produce. If the household shopper wants to grabs a can for dinner tonight or smell the oranges and squeeze the melons before buying, then off to the store they will go. Grocery stores are big box convenience stores.

However, should mall owners that are grocery-anchored feel safe? Their clientele should come from a weekly shopping list.

Well, hold your Kraft peanut butter!

The traditional grocery retailers are faced with increased competition. In March, Wal-Mart opened grocery concept stores about a tenth of the size of their supercenters. With big box and online retailers entering the grocery space, specialty grocers capturing the “foodie culture” consumer and brands creating direct relationship with the consumer, perhaps this is not a safe bet for mall owners.

Google Wallet, ISIS and other phone wallets promise to make in-store shopping more digitally fluid, but what is the digital wallet never makes it to the mall.  Online grocery shopping has grown five fold over the past eight years to $25 billion. Tablets devices have made shopping more leisurely and couch commerce has accelerated.  With CPGs moving their diaper and detergent business into the mainstream online stores like Amazon, the inertia may soon come from the home.

Poaching People

Since Tesco opened their virtual grocery store on the subway in Seoul, Korea two years ago, scan and shop on-the-go signage has become more common. While it is still a media gimmick, it has the potential of becoming a way of luring the shopper online. In every mall or transit hub America at least one brand has attempted to use the in-mall media to engage with the shopper and move them into their cloud store.

In CNET interviews with Zappos Labs’ (an Amazon-owned online retailer) the Director, Will Young, confesses that his team sits around malls stalking shoppers. Their goal is to emulate these shoppers’ behavior online. Young is asking “How can you make the digital experience feel like the in-store experience?”

Whether they succeed or not, there is no question that malls need to re-evaluate their passive media deals. When a brand buys signage on an ad impression basis but uses this media to poach customers then this signage perhaps should not be sold as an impression but as a “mini-storefront”.

Mall owners nationally are holding strategy sessions to evaluate how technology is affecting their business. These stakeholders need to re-evaluate their real estate assets and start to see media as leasable square footage.

Part Two: Mapping the Mall (to be continued)

From Singapore to Moscow: Is OPEN a four-letter word?

by Gary Schwartz  (23/07/2013)

I recently returned from speaking in Singapore at the regional CommunicAsia conference and Rasia.com event in Moscow. Innovation was a central theme.

In Singapore I was in a discussion with Google, SingTel and Microsoft. I asked Doug Farber, managing director for Google in Asia-Pacific, if mobile innovation is stifled when there are only a few power brokers that control the mobile ecosystem.

Google has always had a “healthy disregard for the impossible,” Mr. Farber said. Agreed. However, while Google has a healthy internal innovation culture, is it allowing the ecosystem to do the same?

I recall Richard Kramer from Arete Research’s jab that in mobile O-P-E-N is a four-letter word.

There are only a few powers that are trying to lock the mobile ecosystem: Apple, Amazon, Google, Facebook, Microsoft and Du. And while Apple and carrier networks are unabashedly closed fiefdoms, Google’s Android empire may not be truly open.

“But,” Mr. Farber said, “I am the open guy.”

“Open only on the front end,” responded Bill Chang, CEO of group enterprise at SingTel.

Outside of a few global plenipotentiaries, mobile developers have had to pick from the crumbs at the table.

Twenty-five applications command 50 percent of the app store revenue. The billions in revenue do not feed many mouths. The average developer lives on $5,000 per month, which is a bread-and-water diet of $60,000 per year, said Richard Kramer. “Where are the developer’s yachts?”

Hardware innovation has flat-lined and power is exclusively in the hands of Apple and Samsung.

The yearly CES announcements have underwhelmed and recently left the Las Vegas melee altogether. Another handset release with faster “mega” screens does not excite the crowds. With $75 smartphones entering emerging markets, smart has become a commodity.

SingTel’s Mr. Chang said in a market where companies are “cost-cut to death, it is difficult to drive innovation forward. Mobile-first is a challenge.”

Mr. Chang talked about the importance of the CIO is this process. He plays the initialism game that we all do at public events: “The CTO is now the chief transformation officer and the CIO the chief innovation officer.”

But what does that really mean to companies trying to navigate the mobile marketplace?

The CIO never had power, said Michael Thatcher, chief technology officer of Asia for Microsoft. “It is only when something is broken they have power. How can we advance this and stop being tech centric? Stop being reactive. Follow the money.”

But is there money in mobile innovation?

Outside of the big six ecosystem players, there are few that command significant market share. We live in an “app store economy” where we all need to play the piper 30 percent and never own the customer. To make money on Apple’s SDKs or Google’s, dominant big data position is difficult.

The social leviathans are also closed.

Facebook has built a business on connecting people. With its post-IPO revenue focus, it has worked hard to create a media buying tollgate on the impressions and big data that it owns.

In social portals there is little big data sharing and little opportunity to make money as an outside developer. It is a bigger issue for the entire social ecosystem.

The more that these social portals try to leverage these assets to generate revenue, the less socially authentic they become to the consumer. Our social spaces have become more like driving down the public highway.

Social portals such as Tumblr and Instagram have generated such value in the market because they remain authentic – pre-revenue and pre-commercial, of course.

Everything is disintermediated. App stores and social portals are all controlled by Facebook, Amazon, Apple, Microsoft and Google, and somewhere we all have to pay the piper.

Telecommunications is the history of open and then closed systems, from RCA closing down FM Radio and early television.

It is the same recent history of Apple disintermediating the wireless carriers with an “Internet device” and then turning around and using the same iPhone to shut down the mobile Web with a closed App Store.

Are we entering another closed loop where innovation becomes stifled? What does this mean for business?

Google sponsors the ship, “Unreasonable at Sea,” to sail around the world evangelizing entrepreneurism and innovation. How can we make the power brokers more unreasonable at home?

Compare Political & Retail Strategies

Just published an excerpt from my recent book Fast Shopper, Slow Store in the Retail Touchpoints publication

As a post script to this chapter, the 2013 election underscored the value of digital BIG DATA. When President Obama hired an analytics war room that was five times the investment in his 2008 campaign, we knew where the focus would be.

Pointedly President Obama’s team hired a supermarket sales promotions “Chief Scientist” called Rayid Ghani. His team rated PERSUADABILITY. . . the art of knowing who was likely to “swing” blue.

Mr. Ghani knew where to target.  This data helped them target media and played perfectly into the mobile (personal) opt-in strategy that the Obama team excelled at throughout the campaign. It allowed them to successfully knock on BLUE doors not RED and target BLUE (and possibly BLUE) phones and steer the vote.

I like to draw a parallel between politics and retail as it illustrates that tactics in one vertical as applicable cross-industry. I would say it is essential for banking, publishing, and entertainment verticals to understand that they are not alone.

The connected screen and the new (painfully) independent shopper are disrupting all incumbent  industries.

Many people in the business of connecting to retail customers are busy reworking their game plan. It may reassure the reader that no one is immune to digital disruption, which has left most industry folk, from brands to broadcasters, from publishers to politicians, questioning the way they engage with their audiences.

The 2012 U.S. presidential election was a perfect example of brands desperately seeking buyers. As the candidates claw for positioning, it is evident that the election process is (surprisingly or not) similar to selling a product in a hugely competitive retail market. Each electoral cycle demonstrates the challenge of courting an increasingly digital public.

The techniques that President Barack Obama and Mitt Romney used to market their platform and gather votes are the same as those embraced by brands to manage their market presence, build engagement, and move their audience to a sale. All the challenges of chasing the itinerant mobile public are the same as those facing bewildered shopkeepers.

Why Square’s Giftcards are essential for its wallet strategy

Square’s business model is successful but needs accelerated growth in 2013. If Mr. Dorsey can shake the trees in the prepaid world, he can expand his business significantly.

Prepaid gift cards are a valuable strategy for Square for two key reasons:

  • One is growth – a digital gift card is viral and thus expands Square’s influence horizontally. And Square wants more users. Now a viral nudge will lead a friend to download a free Square Wallet from the Apple App Store or Google Play.
  • Secondly, is margin – Square plans to disrupt the incumbent gift card issuing fees with a low 2.75 percent charge. Given there is no high bank interchange on prepaid, Square can reap a healthy margin.

Key to adoption on the small screen will be the user experience – especially with a viral gift product. As Jack Dorsey says, “This is a product where the experience really matters.”

A Square user can search for nearby businesses, click to buy a gift card and enter the recipient’s email address. The recipient (benefactor) can download the Square Wallet app (Square’s preferred outcome) or save Square gift cards to Apple’s new Passbook app.

The success of the gift card strategy may be dependent on Square being able to sign up additional big name merchants such as Starbucks, which began accepting payments via Square Wallet this fall. But Square will have a hard time finding another commerce partner like Starbucks. As I like to say you can successfully sell an addictive substance – coffee – on every street corner in America.

It is harder for other retailers. With a close-loop gift card you need partners with scale.

 

OTT needs to go TTM: The New Orwell-Speak

OTT (or Over-The-Top) has been coined as a disruptive term that refers to new monetization services that ride for free (or for little cost) over existing broadcaster and carrier infrastructure.

Is it interesting that incumbent companies (and their executives) that have been adversely effected by OTT services, seem to be happy to use this term at conferences and in boardrooms. These executives have been hoodwinked into promoting OTT as a necessary business evil.

Instead of bemoaning how Apple is OTTing AT&T or how Amazon is OTTing Best Buy or how Netflix is OTTing Turner, the disrupted companies need to own the new words on the street. It is Orwellian: Words are used in his book, 1984, in order to control and censor the language that the public used or more pointedly are not able to use.

In an OTT economy, incumbent carriers, retailers, broadcasters need to change the term. I propose that they need to innovate “Through-The-Middle” (TTM). Carriers, retailers and broadcasters need to take back the discussion and start taking about strategies to leverage their assets “Through-The-Middle”.

  1. Carriers need to talk about the TTM services that they can launch and manage using their communities and billing relationships.
  2. Retailer need to talk about the TTM in-store clientelling trust that is moving shoppers seamlessly into purchase in-store and in-(their) cloud.
  3. Broadcaster need to talk about the TTM assets that are creating seamless multi-screen engagement platforms.

The term is TTM!

Amazon & Books’ Slippery Slope

It is likely that ebook prices will soon start dropping as a result of a settlement reached between the Department of Justice and several book publishers last week.

The agreement is a blow to Apple, which was also named in a DOJ antitrust suit brought this spring alleging that the technology company and publishers fixed ebook prices. However, Amazon is likely to benefit by being able to sell competitively priced ebooks and attract consumers to its new ereader and tablets, which were introduced last week.

“Based on this ruling Amazon.com will undoubtedly grow its market share,” said Gary Schwartz, “But this ruling is a soft push down a slippery slope for the book industry that dates back to 2007, when we saw the first Kindle. This was the harbinger of a new power game and more important, a new relationship with the digital consumer.

“My concern is that Amazon.com is simply using books to build its m-commerce empire? It is a stepping stone to developing a commerce checkout for sectors such as apparel and electronics and the quality of the bookshelf will suffer.”

The publishers are also required, as part of the settlement, to phase out any contracts with retailers still using the agency model and bans them from imposing similar restrictions on prices for two years.

“Amazon.com says it is ‘pro-consumer’ but you cannot take the agent/publisher out of the value chain and expect the ecosystem to thrive,” Mr. Schwartz said. “The number of self-published titles in the United States has tripled over the past few years and will continue to grow.

“However, by cutting out the agency and publisher, the industry has made the online and mobile storefront into the Wild West,” he said.

“Publishing has become the easy part. Selling and driving profit for authors has become difficult.”

READ MORE: Amazon gains, Apple loses in DOJ ebook price-fixing settlement

Girls Around Me: An issue of privacy and trust!

By Gary Schwartz

Why the shock and awe of a mobile application that helps guys find girls around them – an app which uses publicly available data from Facebook and foursquare’s APIs, data which is completely permission-based?

Well, the “GirlsAround.Me” app, understandably, riled the press. The Cult of Mac blog’s headline reads: “This Creepy App Isn’t Just Stalking Women Without Their Knowledge, It’s A Wake-Up Call About Facebook Privacy”. CNET’s op-ed reads: “Girls Around Me and the end of Internet innocence.”

However, the “Girls Around Me” app is simply another in a long list of controversial services that use information that is floating about the digital commons.

The Russian company, i-Free, that developed the app cannot understand the kerfuffle, claiming that it has been used as a “scapegoat” for the privacy debates whirling about Washington. Honestly, it has every right to be confused.

The industry itself is confused and responding to privacy in reactive knee jerks instead of thoughtful best practices. The problem is the complexity and sensitivity of social data. Combining location check-in with social graph is a potent privacy cocktail.

→ Read More

SXSW roundup interview on BNN (Adult Spring Break)

 

 

 

 

 

 

 

 

 

It was “adult springbreak”. Lady Gaga, Bruce Springsteen, ACL, Venture Classmates, these are the names Gary Schwartz, President & CEO of Impact Mobile has been discussing in meetings at The South by Southwest (SXSW) Conference in Austin.

Watch interview here

2nd in Series: Banking the UNBANKED with mobile

Wireless carriers, money-transfer vendors, and other stakeholders are poised to bring mobile banking services to North America’s unbanked.

This is Part 2 of a two-part series by Gary Schwartz exploring the opportunity to service the large unbanked and underbanked population in North America through innovative new banking services. Part 1 discussed the need for “mobile wallets” in North America, and how they could benefit lower-income communities in the same region. Part 2 takes a closer look at the stakeholders that are poised to offer mobile banking services.

FULL ARTICLE HERE