Retail and the internet of machines

Paypal and eBay are using the Internet of machines to put service station cashiers out of work.

Online retail and payment giants Ebay and PayPal hosted a media lunch in Sydney yesterday to publicise their Australian Business Update.

While eBay dominates the online selling market, PayPal’s position in the payment market place is extremely powerful with Internet monitoring company Comscore reporting in their Digital Wallet Roadmap how PayPal dominates the US market and does likewise in other markets like Australia.

PayPal's US market lead

Their update confirms the trends which have been obvious for some time, particularly in how mobile devices are now driving retail. eBay’s research indicates properly implemented multichannel strategies drives six times more sales than just having an online presence.

What was particularly notable with eBay’s presentation was how the Internet of Machines is changing the retail and logistics industries as smartphones and connected point of sales systems are cutting out jobs and middle men.

Paypal are particularly proud of their US partnership with cash register manufacturer NCR that integrates smartphone payments with the point of sales systems in restaurants, convenience stores and gas stations.

eBay illustrated this with their examples of coupon offers being tied to smartphone payment systems so people paying for gas with their smartphone get a voucher offer for various up sells.

Studies in the US have found a $10 offer can result in sales of up to $100. A pretty compelling deal for most merchants.

With these technologies, we’re seeing how connected machines are changing even the most mundane business tasks.

It may well be that the days of the service station cashier are numbered; it’s quite possible that in one generation we’ll have gone from full staffed gas stations to totally automated facilities.

The example of gas station attendants and cashiers is just one example of how automation is changing many retail and sales tasks. It would be a brave person to say their job isn’t safe.

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The real e-myth

The Internet is not killing retail, it’s lousy service, poor pricing and 1980s management that digging the incumbents’ graves.

The collective gnashing of cavity filled teeth over the demise of the Darrell Lea confectionery chain has given rise to some interesting commentary. If some pundits are to be believed, the lolly maker’s financial woes were due to the evil interwebs allowing Australians to buy choccies from cheap overseas suppliers.

But if you were to cross the road from Darrell Lea’s flagship Sydney shop you’d be outside one of Apple’s iconic stores that are the most profitable retail outlets on the planet – US Apple stores are 17 times more profitable on a per square foot basis than the average American retailer.

So retail can be successful. It just depends upon how it’s done and the internet has little to do with many of the retail failures we’re seeing at the moment.

Darrell Lea being absorbed into the VIP Pet Foods empire has a lot of lessons about retail but they are more about service and the failure to move out of the Twentieth Century, particularly when new competitors like Haigh’s and multinationals like Lindt are entering the marketplace.

Service is an integral part of this story. While the service at Darrell Lea stores wasn’t terrible it also wasn’t particularly notable and neither was the value of many of the products, leaving the customer underwhelmed.

A similar story of poor service is behind the failure of the Allans Billy Hyde chains – the comments on the Smart Company story about the music stores’ collapse indicate how customers found service lacking while the prices and range were ordinary. There was no real reason to shop there.

The business models of Darrell Lea and Allans Billy Hyde are locked into a 1980s way of doing business where one or two chains dominate a segment and attempt to charge duopoly prices while exercising their market power to screw suppliers.

A duopoly model works for Woolworths and Coles simply because of their scale. If you’re a smaller chain selling non-essential, non-perishable goods then customers will either not buy them or find better deals and service offshore.

Staff, of course, are a nuisance – after all they only serve customers and customers don’t matter when you have the market locked up – so staff are treated as a cost to be ruthlessly minimised while being paid the minimum that the well-paid management can get away with.

That contempt for retail staff is exacerbated by management’s reluctance to train them, which locks the stores into a downward service spiral as knowledgeable and experienced shop assistants find a job where their skills are valued.

Despite the scorn poured on Apple’s staff training policies, the core of their retail success is that you will get a passionate, knowledgeable person helping you at one of their stores while their competitors will leave you wandering the aisles unless they think there’s a fat commission to be had.

This contempt for suppliers, staff and customers is the real malaise for Australian retail and it’s an opportunity for smart new entrants into the marketplace.

While many of those new entrants might be online, the ecommerce side has little to do with the fundamental problems of lousy service and overpriced products.

Interestingly, while Darrell Lea had an online strategy, the new owner doesn’t. Any customer visiting the VIP Pet Foods site has no chance of finding where they can buy the products, let alone order them through the website.

While it would be nice to know where you can buy their products, the owners of VIP probably don’t care as their business model is based upon distributing their products to retailers and those stores can do their own advertising.

So retail still matters and the high hopes we had in the late 1990s that ecommerce would drive the middle man out of business was just as wrong-headed as the old-school managements of our dying retailers.

 

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Creating a fresh view for online commerce

Andable provides a platform for time pressed creative entrepreneurs to sell their work.

When you’re running a part time business and holding down a full time job, selling is difficult and its hard to find the time to setup websites.

Online marketplace Andable provides an outlet for creatives and those entrepreneurs juggling full time jobs. The site’s mission is to be “an online marketplace where you can discover extraordinary things to buy and sell.”

The problem for those passionate entrepreneurs busy making things is they don’t have time – and often lack the skills – to sell their works. Co-founders Rupal Simian and Melissa Dean decided they would set up an online marketplace to help those businesses.

Central to Andable’s service is the ability for these small businesses to tell their stories. Most of the service’s merchants are part time businesspeople who hold down full time jobs.

Andable’s name comes from compressing “willing and able” and the site lets micro businesses list their products for free with a 5% commission from sales. Payments are handled through PayPal who they work closely with.

For sellers to qualify for a listing, they have to meet at least one of Annabel’s FRESH criteria; Fairtrade, Reused, Eco-friendly, Supporting local business or Handmade.

An interesting thing about Andable is how 10% of the sale goes into a Kiva microfinancing project. After six months that loan is repaid – Kiva boasts a 99% repayment rate – the 10% is rebated to the merchant.

Since the service’s launch in July, two investments have been made with Mel and Rupal looking at completing 600 loans by the end of their first year’s trading.

A month into operation, Andable has close to 200 shops including ranging from hand crafted jewellery, vintage lightboxes and hipster homewares. Sellers are based around the world from Germany and Indonesia through to Byron Bay and Fremantle.

What’s interesting about Andable is how we’re seeing different online marketplaces appearing to cater for different markets. For businesses, this means it’s becoming easier to get your products to market.

The challenge is to get attention in a marketplace that’s saturated with advertising and information. Platforms like Pinterest, eBay and Andable are ways motivated customers can find businesses.

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Taxing the Internet laggards

Should users of old software pay more?

Online retailer Ruslan Kogan is never short of a good stunt to promote his business. His latest, a tax on users of Internet Explorer 7 has given him worldwide attention.

Ruslan touches on a real problem for web designers, e-commerce shopkeepers and the online community in general – that Microsoft’s older versions of their Internet Explorer web browsers don’t conform with standards.

This means IE6 and 7 don’t display pages the way other browsers do meaning designers have to spend extra time catering for the people who won’t move to new versions.

For those who insist on using the older versions of Internet Explorer, they are also taking a risk as these products are far less secure than the newer editions.

It’s in everybody’s interests to have the latest browsers and security patches, so both Windows and Mac users should be making sure they have the latest updates on their computers.

Even with the latest updates, it’s worthwhile using a different web browser to the one that comes with the system. That’s why Opera, Mozilla Firefox or Google Chrome are the better options for web browsers.

Ruslan Kogan’s right in forcing users to move onto modern software, it’s a media stunt that might do some good.

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Continuing the online payments battle

Mastercard’s PayPass is a direct challenge to Visa and PayPal

Today Mastercard announced their PayPass service, a “digital wallet” that allows consumers to pay through various online channels including the web and their smartphones.

Mastercard’s PayPass is the latest move in the battle to control the online payments industry as consumers move from plastic cards to using their mobile phones and Internet devices.

One of the interesting aspects of PayPass is how it is a direct challenge to PayPal who in turn recently launched their PayPal Here service which threatens incumbent credit card services like Mastercard and Visa along with upstarts like Square.

While its early days yet in the mobile payments space as consumers slowly begin to accept using smartphones and tablet computers to pay for goods and services, its clear the industry incumbents are moving to secure their positions in the market place.

It’s going to be interesting to see how this develops, many merchants will be hoping this competition starts to drive down transaction costs.

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