New York City 2014: The Science House (45 minute keynote)
While the market complains that the it is an overhyped initial public offering. Many of the detractors are using Twitter to voice their concern. Ironic, isn’t it? Post IPO, the stock will most likely rise to $30 and wait for Twitter to show some lift in advertising revenue. This will come as the media dollars need a home and their are few options for the digital buyer.
Twitter has moved from a microblog to a trend-crowd-sourcing destination.
1 in 5 have accounts but more and more will use the service to scrap instant and succinct info from the web. With this as a unique value prop, Twitter will capture revenue and drive profit over the next 48 months. http://watch.bnn.ca/#clip1036995
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.
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)
by Gary Schwartz (24/07/2013)
In a post-Job’s era is Apple losing its innovation edge? While in Q3 ’13 results, Apple was upbeat on earnings, its revenue outlook dropped precipitously.
During a conference call with analysts to discuss its quarterly performance Apple’s CEO Tim Cook pointed to enterprise and horizontal product growth:
“From a growth point of view for Apple, our key catalyst will always be new products and new services in existing categories that we are in and in new categories. In addition to this, we have opportunities in distribution in terms of expanding our retail stores, expanding our online store.”
Apple continues to hold ground as an aspirational brand but the market for high-end devices is fast becoming saturated and the only growth window is low-cost devices in emerging markets.
Tim Cook tries to sound bullish: “I don’t subscribe to the common feeling that the high-end smartphone market is at its peak. I don’t believe that, but we’ll see.”
However, while some operators still are required to meet volume guarantees made to Apple, this will not continue. Consumers are no longer buying new phones based on glamorous launch campaigns that tout better cameras, higher-resolution displays or a reduction of a millimeter in its profile.
Apple’s needs to keep its loyalists buying across its portfolio of screens. Apple must focus on its multiscreen strategy with ‘Maverick’ and continue to expand its cloud and iTunes wallet positioning.
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?
In Dubai talking to agencies and brands about “digital velcro”. How linking content seamlessly between one screen plus other consumer screen equals a multiple of value for a brand. 20 mins – view here.
Some industry pundits such as ABI Research analyst Aapo Markkanen say there is a clear and intentional distancing of Samsung from its existing OS partner, Android. Does Samsung want to reduce its almost total dependence on the platform over the next few years? Samsung seems to quietly be building independently on top of the Android OS and may make a jump to a more neutral industry partner by 2016.
Window’s has not offered a compelling alternative to Android. What are other options?
Mozilla (Firefox) and Linux (Tizen) are going head to head to capture next generation developers with their web-based operating system. The Firefox and Tizen SDK and API allow developers to use web-based HTML5.
Tizen (a Linux Foundation initiative) may have the edge. Tizen is an open source, standards-based software platform for multiscreen devices (smartphones, tablets, netbooks, in-vehicle devices, and smart TVs). Like Firefox, it provides a cross-screen environment for application developers, based on HTML5.
Samsung abandoned its homegrown smartphone OS, Bada, early this year and announced that it would start developing Tizen-based devices: ”We plan to release new, competitive Tizen devices within this year and will keep expanding the lineup depending on market conditions.”
The implications are significant to the connected screen economy and place application development in a more mature web main-frame on the device. The application store now can exist in a more manageable web environment with bookmark apps and not get lost in widget-design interface promoted by Apple.
To sum up Mobile World Congress 2013, I will borrow from Peter Marx, head of business development at Qualcomm Labs. Peter talks about a tendency for PTA or (for those in the know) Premature Technology Arousal in the mobile industry.
Much of the MWC 2013 floor area at the new Fira Gran Via venue exhibited PTA or Premature Technology Arousal. Solutions that are excited about being solutions. Solutions that are too early. Solutions that are missing reach and frequency. Things that are just not simple enough to drive adoption.
Even before 70 thousand executives hit the show floor, there were signs of “PTA”. From the Near Field Communications (NFC) show name tags that tried to emulated plastic (but that few used because you still needed to show the plastic) to tapping on Coke dispensers with cloud-base wallets that are many quarters away for mainstream adoption.
Booth after booth in this 1.01 million square feet techno-playground displayed incredible solutions and screens. But the real story to follow was how each solution quietly added value to a given business ecosystem. There was an invisible hand playing connect the dots. Here are a few examples:
The Invisible Google Hand
Google was almost absent – unlike the MWC of 2011 and 2012 where Google groupies ran from partner booth to partner booth in search of cute Android pins. But Google was most definitely on the floor. This year the company is wisely playing “powered by Google”. They are the dark silent type. Turn left or right in every hall, Android is the fuel this industry is consuming.
The same holds for Qualcomm. They are the chip manufacture that is quietly taking the lion’s share of the revenue on each global handset. (Intel just cannot seem to create a competitive landscape.) Qualcomm Labs is building in consumer identity and credentials onto its “platform” hoping to not only power the connected device but also own the big data behind the user. When Qualcomm demos a vision of a home of the near future, they power many of the moving pieces.
The Samsung Show
While Qualcomm’s chip and Google’s OS were the main stories in Barcelona, another key and not so silent player is Samsung. (So much so that my hotel concierge asked me if I was attending that “Samsung” show that was in town.) The word that floated above the white new-age Samsung booth was “innovation” but the innovation is not just the 3D camera or the ubiquity of the new S-Pen. The innovation was in their business model connecting their screen across the consumer journey. The 3D camera sells their tablet and television. The S-Pen and its SDK allows for ergonomic continuity across their new tablets and fablets.
Mozilla is other important story in Barcelona. Using the Firefox browser on lower-end ZTE devices to run the camera, map and . . . oh ya the browser was a definite tech-turn on. Moving the developer and more importantly the consumer out of the (Apple-invented and dominated) app store into the real world super-app is an inevitable step and fundamental to our mobile evolution. The quicker the industry can move away for relying exclusively on industrial design and the app storefront as the sales tool, the faster we will grow.
2014 Screen Wars
The most important leitmotif was the screen. Not only the proliferation of devices with new form factor and appliance, but the realization that it is in the connecting of these screen that the we can accelerate business models. Samsung, ZTE, Motorola, Nokia all address the consumer journey across all screens and throughout their day. Nearly all marketing VPs had spent their last few months and budget trying to tell this consumer story.
Again while many products had indecent “PTA”, the most important insight was not what was happening on the screen but what companies were doing to connect them seamlessly. The new battle ground this year moving into MWC 2014 will be centered around who can best manage big data, wallet credentials and identity between the screens.
Watch here. (6 mins)
Today Blockbuster announced that it was shutting the doors on 300 big boxes in U.S. That’s a further 35% of its footprint.
This is the inevitable and slippery slope of incumbent retail stores that cannot support business-as-usual.
The opportunity is tremendous for a company that can enter the mall with a pure showrooming business model. A company that can curate purchase into the cloud and capitalize on co-opt budgets.
Blockbuster, Barnes & Noble, Best Buy and other mall staples find it hard to innovate-from-within for two fundamental reasons:
- It has to continue to support its existing infrastructure to the bitter end and this is a costly distraction.
- It cannot effectively connect and curate its legacy cloud store and bricks store and make the two a seamless experience for the shopper.
Showrooming is shutting these leviathans down.
The new mall is going to be a challenging space for mall owners. Stores like Blockbuster, Best Buy and Barnes & Noble represent a mall entertainment experience. Now that shoppers browse but do not buy, these stores can not support their weight. The stores exiting will leave the mall a lonelier place.
Mall owners need to be a proactive. They need to innovate with their retail footprint. They need to look to partners that have a vested interest in the future of the mall and can provide new technology (such as Samsung). They need to innovate and fundamentally remodel the way consumers shop and more importantly “engage” in the mall.
Read full article at: Mobile Commerce Daily