What’s a Store For?

The first e-commerce transaction—a music CD, pizza, or weed, depending on who you ask—took place around thirty years ago. That means that first truly native ecommerce generation is now in charge of their own foot traffic and armed with at least one device that spares them the trouble of leaving the house. This, paired with the broader shift in consumer behavior across all generations, means brick and mortars need to find new ways to compete with digital to inspire visits and sales. Stores are evolving and, along the way, challenging the very notion of what a store is for.
Up against digital
A big part of brick and mortar’s evolution is digital integration. Today, retailers are working to enhance and personalize customer experience by connecting to consumers in-store through their mobile devices—building apps, targeting ads, and using beacons. You can find many examples of digital integration today, though online retailer Rebecca Minkoff’s flagship store in New York offers one of the more comprehensive ones; its interactive wall and dressing rooms have been credited with tripling expected clothing sales. Timberland also just launched its first connected store while Nordstrom’s commitment to digital integration has been credited with 50% growth in revenue over 5 years. (They just hired a former Amazon exec to serve as CTO.) Target, too, is getting into the mix, launching an LA25 initiative where it’s testing 50 of its top enhancements in 25 Los Angeles stores.
The IRL advantage
But digital integration is not the only strategy; retailers can also draw on the in-real-life [IRL] advantages of the physical space. Immediacy comes in here, with more retailers enabling online ordering and pick up in store or curbside. It’s competitive because fewer exclusively online retailers can offer this instant gratification, but is not necessarily a long-term strategy given that online fulfillment will continue to evolve and speed up.
More effective is the opportunity to build community. Oftentimes, this comes in the form of caffeine; Barnes and Noble was an early innovator here, adding a Starbucks to a New Jersey store back in 1993. Since then, many retailers have adopted or tested in-store cafes, including Urban Outfitters, Target, Restoration Hardware, and Kohl’s. Along the same lines, Target, Whole Foods, and Nordstrom, among others, are offering cocktails in some stores. When trying to attract customers and increase dwell time, there’s an advantage in offering something that can’t be instantly downloaded, like coffee, booze, and yes, maybe even tattoos. (See Whole Foods.)
Meanwhile, another concept that keeps popping up is—ahem—the pop up shop. The pop up shop’s currency is urgency; if customers don’t come now they risk missing out forever. Bloomingdales is hosting a pop up inspired by the musical Hamilton while Macy’s is bringing in pop ups as part of the reinvention of its Brooklyn store. The pop up also presents a low-risk testing ground for online retailers, one compelling example being Warby Parker’s touring store that was housed in a school bus.
But…is it a store?
As brick and mortar adapts, becoming deeper integrated with digital, acting a fulfillment center and expanding to offer drinks and other services, the classic definition of “store” begins to fragment. Already, the “store” has lost its longstanding position as the finale of the customer purchase funnel; in no small part because that purchase funnel itself is an antiquated concept. Savvy retailers and brands in general now think of the consumer experience as an ongoing loop, with consumers moving from digital to physical and back until, eventually, there may be no clear delineation between the two. This emphasis on the overall experience changes the expectations of stores. It also opens opportunities for more types of brands to invest in physical locations.
For example, last year, there was an more than an hour wait at the Museum of Feelings in downtown New York City. The museum invited visitors to walk through a sensory presentation of each feeling: Optimism, Joy, Invigorated, Exhilarated and Calm, while its exterior changed color to reflect the social mood of New York. You might argue that this wasn’t actually a store, but then it wasn’t actually a museum either; The Museum of Feelings was a branded retail experience for Glade, generating buzz for an otherwise not-so-buzzed-about brand.
More recently, Samsung launched Samsung 837, a “first-its-kind cultural destination, digital playground and marketing center of excellence.” Samsung 837 serves as a showcase for innovation, offering what may be the first virtual reality experience for many visitors and providing Instagram-friendly experiences like the walk-through Social Media Gallery. But what’s unique about Samsung’s space is that there is nothing sold there. It’s an experience—an opportunity for Samsung to tell its story and give visitors a way to get excited about the brand they’ll buy in the future.
In cases like these, brick and mortars serve as a marketing vehicle—an opportunity for brands to curate their own presence for customers, just as social provided the format to operate as a media company. It’s a trend that makes Amazon’s decision to open its own brick and mortars seem strategic. But is the return there?
It always comes back to data
The ability to more accurately track consumer activity gives brick and mortars a host of insights. Not only can the more connected store know what was purchased, they can also see what products compelled the most research, price comparisons, or inspired trips to the fitting room. They can engage with in-store customers via social media as well as encourage and measure posts from their store and, increasingly, tap into emotional analytics. Further, more sophisticated attribution measurement is making it possible to determine what investments drove traffic to the store, even without purchase.
Though it would be inaccurate to suggest that traffic and sales aren’t still the key performance indicators for most stores, this broader set of data, if put to use, can help a retailer optimize beyond the limits of its four walls—especially critical at a time when stores are closing so rapidly that CNN wrote “Store Closings are the Hottest Trend in Retail.”
Where to go from here
Digital has an odd way of creating challenges and then presenting solutions for those challenges it creates. It offers a range of ways of to add genuine value, from brand awareness to interaction, coupled with pop-up flexibility. If retailers are savvier about embracing this value, they’ll stand a better chance of attracting customers. If not, they’re not only missing out on opportunities in the near term, they’re limiting their future prospects for growth—after all, isn’t it a waste to see a store as a fulfilment outlet?

How the Nook Simple Touch GlowLight glows: Science!

Back in April, Barnes & Noble one-upped Amazon by introducing the Nook Simple Touch with GlowLight, taking e-ink reading out of the dark. So how did Barnes & Noble get light evenly across the display? It’s not just technology magic, but science that makes it work.

A brief history of Microsoft’s e-reader efforts

Although Microsoft invested $300 million in a Barnes & Noble spin-off on Monday, this isn’t the first time Microsoft played the e-book game. Typical for the company, it often has great ideas, but it errs on the timing: Microsoft debuted e-book software back in 2000!

Hands on with the Nook Tablet: A solid $249 device

After buying a Kindle Fire tablet and sharing first impressions, I received a Barnes & Noble Nook Tablet review unit, so I’m giving equal time to the new Nook. Here are my first 30 minutes’ worth of impressions to share on the hardware, software, and user experience.

Updated Nook Color shows a smart $249 tablet strategy

The Nook Color gains new magazines with enhanced interactivity, along with performance updates, in a software update today. At $249, many iPad competitors could learn from the “tablet that’s not a tablet” approach: Focus on key features at a reasonable price and customers will see value.

Nook Color E-Reader Hits 1M Tablet App Downloads

The blending of e-readers and tablets continues while Barnes & Noble creates new revenue streams with its mobile app store for the Android-powered Nook Color. The company today announced more than one million software downloads from the Nook Apps store, which launched just a few weeks ago.

Smartphones Didn’t Kill Flip, Cisco Did

Today Cisco announced they’re shutting down the Flip video camera business, and the nearly unanimous reaction is that the smartphone market killed the device.
After all, when consumers have the choice between a great multipurpose device like the iPhone, why would you use a single-function device like a Flip?
But if single function devices are dying and the swiss army knives of technology are taking over, how do you explain the success of the e-reader market?  Amazon and Barnes and Noble are selling millions of units, and are easily holding their own against the iPad.
Ok then, well what about digital cameras?  After all, the iPhone and many other smartphones are great cameras, and no one would buy a digital camera when you can use your smartphone, right?
Well, again, not really. Evidence shows that despite the arrival of the cameraphone a decade ago, digital still cameras are still selling, and the market is forecasted to grow this year.
No, the real reason for the death of the Flip isn’t the iPhone. In fact, I’d argue well done single-function devices have a place in the market, particularly in a market as unsaturated as digital video capture.
Evidence supports this.  According to IDC, the Flip has actually done fairly well, leading the category and amassed 26% market share.
So if that’s the case, what’s the real reason the Flip is dead?  Simple: Cisco, despite owning the top-selling brand in pocket video cameras and one of the top brands in home connectivity, isn’t a consumer company at heart. In other word, they don’t have the stomach for the most brutal of all technology markets, consumer electronics, and all that being a true consumer electronics company entails.
What do I mean by this?
Most importantly, running a consumer hardware business means you have to be able to handle low margins. Just compare Cisco’s margins to that of a company like Logitech, Panasonic or Sony, and you’ll see one of these doesn’t belong. Cisco has historically been used to 50-60% gross margins and net profit margins in the 20% range, and selling $120 devices was always going to be a difficult balancing act for a company who has a history of keeping Wall Street impressed with their rapid growth and near-monopolistic margins.
Second, you’re either all in or all out in the consumer electronics business, and you can’t treat it as a hobby.  This means you have to innovate on the product, something Cisco didn’t do much of since they acquired the device.
Lastly, you have to a consumer brand builder.  The company advertised the Flip, but you never saw the type of committed brand-building you see from the great companies in the consumer space like Nintendo, Apple or Sony.
Cisco, as it stated today, is an enterprise and service provider company to its core, and despite the high-profile acquisition it made of Pure Digital, that’s where their focus was always going to stay.
So no, the Flip didn’t die because smartphones killed it. Sure, Cisco overpaid for the company, but the actual product would have continued to sell well, particularly if the company had innovated on the product as it had originally intended (again, being fully committed to the market would have meant creating new products at a much faster rate) and invested more heavily in the brand.
Instead, Cisco admitted today it didn’t have the stomach for the consumer electronics market and because of that, they killed the Flip.

This week Cisco announced it is shutting down the Flip video camera business, and the nearly unanimous reaction in the blogosphere was that the smartphone market killed the device. After all, when consumers have a multipurpose device like the iPhone, why would they use a single-function device like a Flip?

But if single-function devices are dying and the swiss army knives of technology are taking over, how do you explain Amazon and Barnes and Noble selling millions of e-book readers and easily holding their own against the multi-functional iPad? And what about digital cameras? The iPhone and many other smartphones contain great cameras, but evidence shows that despite this, digital cameras are still selling and the market is forecasted to grow this year.

No, the real reason for the death of the Flip isn’t the iPhone; according to IDC, the Flip has actually done fairly well, leading the category and amassing 26 percent market share. The real reason for the death of the Flip is simple: Cisco, despite owning the top-selling brand in pocket-video cameras and one of the top brands in home connectivity, isn’t a consumer company at heart. In other words, it wasn’t ready to face the most brutal of all technology markets, consumer electronics, and all that being a true consumer electronics company entails.

What do I mean by this?

Running a consumer hardware business means you have to be able to handle low margins. Just compare Cisco’s margins to that of a company like Logitech, Panasonic or Sony, and you’ll see one of these doesn’t belong. Cisco has historically been used to 50- to 60-percent gross margins and net profit margins in the 20 percent range; selling $120 devices was always going to be a difficult balancing act for a company with a history of impressing Wall Street with its rapid growth and near-monopolistic margins.

And you can’t treat the consumer electronics business as a hobby; you’re either all in our all out, and you have to innovate on the product, something Cisco didn’t do much of since it acquired the Flip.

Finally, you have to be a consumer brand builder. Cisco advertised the Flip, but we never saw the type of committed brand-building through innovative campaigns and repetitive messaging as you see from the likes of Nintendo, Apple or Microsoft.

Cisco, as it stated this week, is an enterprise and service provider company to its core, and despite the high-profile acquisition it made of Pure Digital, that’s where its focus was always going to stay.

So no, the Flip didn’t die because smartphones killed it. Sure, Cisco overpaid for the company, but the actual product would have continued to sell well, particularly if the company had innovated on it, as was originally intended, and invested more heavily in the brand.

Instead, Cisco admitted it didn’t have the stomach for the consumer electronics market and because of that, they killed the Flip.

Question of the week

What alternative strategy could Cisco have used instead of killing Flip?

Microsoft Sues Over a Feature Windows Phone 7 Lacks

Microsoft is far behind Google Android in mobile device market share but has a secret weapon: patents that the company claims are infringed upon by Android device makers. Ironically, one of the patent examples is a feature that Microsoft hasn’t implemented in it’s own handsets.

eBook Craze Spurs $15M Funding for LibreDigital

logoWhile analysts estimate the number of Kindles currently on the market at around a million (s amzn) (sales of the iPhone, by comparison, stand at around 13 million), it seems like ebooks are here to stay, whether they’re delivered via an iPhone (s aapl) app or on the upcoming Plastic Logic reader for Barnes and Noble (GigaOM Pro subscription required). As further evidence, LibreDigital, an Austin, Texas-based company we wrote about back in December, just scored $15 million to digitize content from book and newspaper publishers for electronic devices. The funding was led by Triangle Peak Partners and existing investor Adams Capital Management. The New York Times (s nyt) is also an investor.