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?

Amazon Books should be the future of brick-and-mortar retail chains

Earlier this month, Amazon opened a bookstore in a mall that used to house a Barnes & Noble. Much has been written about this foray into the physical realm: It’s been called a potential library of the future; Amazon itself has been called the Darth Vader of the books business; and some have wondered about the possibilities afforded by a location that bridges online and offline commerce.
Those are all interesting considerations, but as with Amazon’s other programs, the secretive company hasn’t said whether this is a small test or the beginning of a larger initiative that will lead to Amazon Books locations across the country. So I don’t want to consider the effect this physical store could have on Amazon — I’d rather question why other brick-and-mortar stores are resting on their laurels.
Seriously, why aren’t there more retails stores like Amazon’s book store experiment? A store with a variety of goods on physical shelves with prices that fluctuate to stay in sync with the online version of the store. Of course, there would need to be some changes to accommodate those who don’t like change, but there’s potential here to merge the online and offline shopping experience.
People use their smartphones while they shop. Often this is because they want to learn more about an item before purchasing it. One study from 2013 states that only six percent of people who use their smartphones in a physical store plan to purchase an item online. The rest were seeking more information about the item’s quality, the reputation of its manufacturer, and other data that might inform a purchase. (I’m sure that has changed significantly over the last two years, with Amazon’s image-based physical product search tool helping lead the charge.) Still, that could change as more people use their smartphones to find the best prices. Why buy something from a brick-and-mortar store when you can order it online for a lower price, even after figuring in the costs of having it shipped? Unless someone needs the item immediately — in which case someone probably isn’t comparison shopping — the lower price will win most of the time.
Retailers could change this by emulating Amazon Books’ model of automatically price-matching items sold in their stores to items sold on their websites. Right now there’s no guarantee that a Walmart store will match the price of an item sold on Walmart.com, for example, and other stores have similar policies. It’s almost like retailers actually want shoppers to treat their stores like showrooms.
The truth is that I don’t want to check the prices of items on my smartphone. I’m indecisive enough when it comes to shopping — I’ll often grab an item, think of buying it, then put it back right before I get to the checkout aisle. Multiple times. Having to worry about a price discrepancy between a retailer’s physical location and their online store just gives me even more reason to reconsider a purchase. Knowing that the price I see on a shelf is the price I’d have to pay online would make the whole process easier. (While I could still compare the price to Amazon and other sellers, it would be foolish to expect retailers to automatically match a competitor’s price instead of requiring shoppers to notice the discrepancy.) That offers all the benefits of shopping at a physical store with fewer of the drawbacks.
Of course, Amazon can get away with this because it’s running a test in one location and is comfortable with wafer-thin margins on the items it sells. Other retailers have their own challenges, like the sheer number of employees required to staff physical locations around the United States, that make it harder for them to pull an Amazon Books and bridge the gap between on-and offline shopping.
But that might be what it takes for these stores to thrive. What happens when Amazon slowly but surely competes more and more with physical locations? The company’s already expanding its grocery business, for instance, and is reducing the amount of time it takes to ship items to customers with multiple services. Amazon Books — if it’s successful — could easily become an Amazon Market. There are other advantages, too. If an item on the shelf is sold out, retail stores could provide incentives for people to pull out their phones and have the item shipped to their home later on. Surely that’s better than just losing the customer.
Stores could also apply dynamic pricing to certain goods. I’m not saying they should be dicks and implement “surge pricing” the same way Uber has — that wouldn’t sit well with shoppers, managers, or regulators — but it would give the stores more control over the price of items that sit on or fly off the shelves. Why have near-static prices that only change once a week, or when a sale goes on, when you could experiment with different prices to see what works the best?
Perhaps we’ll see more online sellers follow Amazon’s lead here. It seems easier for online stores to introduce physical locations than for brick-and-mortar stores to get people to use their websites. The future is digital; better to build for that future and experiment with the past than the other way around. Still, it wouldn’t be surprising if traditional retailers like Walmart and Target attempt this fusion.
If that happens, it will be caused by Amazon’s willingness to make shopping easy. It doesn’t ask people to leave their homes to buy something; nor will it require them to buy something online if they prefer to handle the item in person. The company morphs to suit its customers instead of requiring its customers to change their lives (even if it’s just by asking them to drive somewhere) to shop.
Doesn’t that sound better than driving to a brick-and-mortar store and having to check prices on your smartphone to get the best deal? Who wants to waste that trip? Hell, who wants to walk around stores filled with people struggling to push a cart and check prices on their phones at the same time? Grabbing an item, taking it to a register, and getting a fair price on it shouldn’t be so damn hard.

Amazon and Sprint may pick over RadioShack’s remains

After getting suspended from the New York Stock Exchange, RadioShack is probably headed for bankruptcy, but it looks to have a couple of potential buyers lined up to take over its retail stores. Both Amazon and Sprint are weighing bids for some of RadioShack’s 4,000 U.S. locations, according to two separate reports from Bloomberg.

[company]Sprint[/company], which Bloomberg says is interested in 1,300 to 2,000 stores, might mainly be interested in [company]RadioShack[/company] for defensive reasons since RadioShack is one of its big reseller partners. The electronics chain has not only long sold Sprint phones, it also carries its prepaid Virgin Mobile and Boost Mobile brands. [company]Amazon[/company], however, would be tackling some entirely new: brick-and-mortar retail.

Amazon, too, is only interested in some of Radio Shack’s locations, Bloomberg reported, but those stores could serve as showcases for its increasing number of mobile devices, living room gadgets and services. Amazon could also use the stores as physical pick-up and drop-off locations for customers, as well as provide immediate face-to-face tech support the way Apple does in its Genius Bars.

Leveraging existing assets for disruption

Let’s compare two ways big tech companies are differentiating themselves this week: using contrarian marketing angles and using existing assets to enter new markets. We’ll look at four stories of disruptive moves. A common strand we find in each of them—whether a move of market enhancement or market extension—is the value of low-cost infrastructure and a large-scale customer base for continuing disruption.
Two of the stories involve going at competitors from a different angle:

And two of the stories involve using built-out infrastructure to enter a new competitive niche:

T-Mobile using a new technology
T-Mobile is known for disrupting the market for mobile service on a price basis. This makes sense given that the company hasn’t historically been known for being first to market with the highest-speed networks. Now, however, T-Mobile is an early adopter, rolling out a new technology that should significantly increase the consistency of call quality within its LTE network.
Gigaom’s Kevin Fitchard had a scoop on the story last June, but he was able to get confirmation on the deployment this week from Mark McDiarmid, the company’s VP of technology. The 4-by-2 multiple input-multiple output (4×2 MIMO) technology uses multiple antennas to send twice as many transmissions to a phone as is usual in  LTE (2×2 MIMO). While this doesn’t crank up network speed, it does improve transmission around obstacles or at the fringes of a network.
Amazon challenging online grocers
On Wednesday, Amazon launched Prime Pantry, which unlike its Prime Fresh service doesn’t compete with FreshDirect, Peapod, or Instacart on speed of service. However, Gigaom’s Laura Hazard Owen, who had the story and has already done price comparisons with FreshDirect, Instacart, and local New York City grocers, has found that Prime Pantry clearly undercuts its competitors on price. The service allows customers to mix and match small quantities of low-cost groceries for a combined delivery charge of $5.99 per 45 pounds of product.
Amazon using its own trucks
No, there’s no need to look overhead for the drones quite yet, but Amazon is testing the use of its own trucks for ‘final mile’ package delivery in San Francisco, New York, and Los Angeles. The company is moving to vertically integrate its supply chain by supervising contractor-supplied trucks and drivers. This trial does compete on speed of service, as it enables same-day delivery of packages that FedEx, UPS or the U.S. Postal Service can’t match. These trials were started late last year, following an earlier rollout in the UK. But the Wall Street Journal has the story, reporting that last year’s Christmas delivery snafus with the usual carriers created a greater sense of urgency for Amazon to control its last-minute delivery.
The move can also be seen as an effort to counteract the advantage that brick-and-mortar retailers like Wal-Mart have in providing same-day, local delivery in combination with the proficiency they have now also achieved in Amazon’s online turf. However, Amazon’s scale of delivery and prowess in logistics present a direct threat to the traditional package delivery services.
Facebook filing to provide online banking
Fortune this week picked up on reports earlier this month in the Irish press of Facebook filing with Ireland’s central bank for an e-money license to provide its own Bitcoin-like currency. With approval possible within the month, Facebook would be able to provide the service across Europe.
In leveraging its customer and technology network to provide a form of payment services, Facebook would be joining non-banking companies like Google, T-Mobile and Sprint that are similarly looking to leverage their technology platforms in financial services. Facebook’s approach is slightly different, however; and with its services and reach, the company may be especially suited to serving the many under-banked customers in developing markets.
The value of low-cost infrastructure
A common strand in all of these moves—whether market enhancements or market extensions—is the value of low-cost infrastructure and a large-scale customer base for continuing market disruption. In that sense, this dynamic is just a modern update to the manufacturing advantage that the Japanese automakers used successfully against Detroit in the 1970s and 1980s.
While Toyota and Honda initially competed against the American car manufacturers at the low end of the market, they used factory automation, in part, to gain a cost advantage in producing small and simple automobiles. Having solidified that niche in the market, however, they were able to leverage that same technology to provide better and better made cars. First they were able to establish a quality advantage, then they moved up-market to producing larger autos. Finally, they were able to disrupt the luxury segment with their Lexus and Acura brands. (Even earlier, Honda had been able to leverage its manufacture of motorcycles and motorcycle engines to get started as a low-cost manufacturer of autos.)
The implications for enterprise IT
The implications of this dynamic for enterprise IT are pretty clear. A low-cost technology delivery platform becomes a vessel for delivering more, new, and better products both within traditional markets and beyond. Companies that have achieved a common, low-cost and flexible technology platform are in a position to roll out new competitive offerings, enter new markets, and counter competitive challenges. Those that have not are sitting ducks for sharp-shooting competitors within their own markets, as well as for hunters from neighboring or foreign markets—or putative partners within their supply chains.

Is the elimination of payment Apple’s next retail revolution?

Paying for something is still the one part of Apple’s retail experience that isn’t ideal. But Apple may be on the verge of taking payment concerns out of the Apple Store equation entirely, according to a new report. That change could be Apple’s next retail revolution.