Decoding the new economy

This is not toy time

A podcast with Profitable Hospitality’s Ken Burgin on payments and the hospitality industry

We’re past the time where business owners can dismiss new technologies as toys says Profitable Hospitality’s Ken Burgin.

Ken’s Profitable Hospitality website is a must read for anybody in the industry and I was lucky enough to be the the guest of his 99th podcast where we discussed payment systems, marketing and the challenges facing restaurant and cafe operators in a changing marketplace.

In the podcast we discuss PayPal’s plans for the retail sector along with how startups like Stripe look to disrupt the sector and what Apple’s announcements last week will mean to the payments industry.

The key message from the podcast is the entire sector is facing massive changes both from technology and changing consumer behaviour.

Like many other industries, the successful restaurant and cafe businesses over the next decade will be those who have the flexibility to adapt to a very different world.

Activating main street

PayPal lays out its vision of the future of retail

The future of retail is being fought out on three fronts believes eBay’s Michael Camplin — global, local, mobile and data.

At eBay’s Commerce Innovation Showcase at its San Jose head office Champlin shows visiting partners, media and government officials part of the payments giant’s vision for that future.

“It’s about connecting buyers and sellers across the globe,” says Champlin. “Local is important for us because even with the growth of the online ecommerce revolution that we’re in the middle of right now we still see 75% of commerce happens within fifty miles of the customer and 90% of that happens in bricks-and-mortar stores.”

“So to be able to connect buyers and sellers in those local stores is a major push we have at eBay.”

The first presentation in the tour demonstrates a day in the life of an eBay customer from the bedroom of a fictional customer, Reese McLaren, a funky young guy shopping for new equipment ahead of a camping trip. Champlin illustrates how Reese can order, pay and collect through a store’s integrated online service from his home.

On the other side of the transactions, store employees use the PayPal apps like Red Lazer and Braintree to complete the order. A key part of that is using beacon technologies to log a customer into the store to alert staff that a customer has arrived to collect an order.

At the next stage of the tour, we visit some demonstration stores; first we start with the Burger Bistro where eBay’s Eric Armstrong shows how restaurant’s point of sale system is integrated with PayPal services, showing waitstaff who is logged in through the company’s app.

Integrating PayPal’s services into the establishment’s point of sale system means customers can order through the PayPal Wallet service and waitstaff know if a customer has paid through the app.

The app also speeds up settling customers’ bills as diners can pay the check through their phone and not bother with using cash or swiping credit cards.

One key point with PayPal Wallet is that users can enter any payment form that suits them and choose whichever option suits them at the time including direct bank transfers and credit cards.

Another area that PayPal are pushing out are coupon offers. At present the company is subsidising them as they test how the services work. The objective is to offer a digital equivalent of everything people currently have in their wallets.

For staff, eBay are offering the ability to bring your own device for point of sale systems with cloud base apps turning staffs’ tablets and smartphones into POS terminals.

Tying into the Point of Sale capability is the PayPal Now service that allows establishments to swipe credit cards directly into the app through a dongle that reads the chip or stripe. Despite the rise of online payment services, swiping credit cards is still the main way US customers pay their bills.

Despite the continued popularity of credit cards, eBay are hoping to move customers over to the online services through ease of service; the one stop authentication service means customers are logged into the payment platform as soon as they check into a location.

One area PayPal sees great opportunity in stadiums and major events where attendees automatically check in and can then access food and souvenir stands without having to re-authenticate or authorise each purchase they make.

A key part of eBay’s retail strategy is the use of beacons to monitor customers entering establishments. The one illustrated is the PayPal beacon that was a limited release earlier this year. The device doesn’t have its own battery, instead relying on a USB socket for power.

Two weeks after this tour Apple launched its Pay service with its range of integrated APIs to offer many of things shown in this showcase. eBay and its Braintree subsidiary was conspicuously missing from the listed partners.

For PayPal and eBay the field has suddenly become more competitive, this is a sector that is now at the forefront of the battle between today’s internet empires.

Changing the payments industry

The effects of Apple Pay are being felt by the payments industry

It didn’t take long for the effects of Apple’s payment service to be felt by the industry, within a day of the announcement Bloomberg reported Apple is negotiating with US banks to shift transaction fees from merchants.

At the same time Bank Innovation reports the major credit card companies are considering changing the definition of ‘cardholder present’ rules which would make app based purchases cheaper.

The changes Apple Pay is bringing in is part of a wider move to easier, frictionless commerce as Stripe co-founder John Collison discussed on this site last week.

For the banks and credit card companies this means a very different operating environment. What was once a very profitable business is now changing rapidly and profits may not be so easy to come by.

Tipping and mobile payments

During the recent switch over to chip and pin payments, many in the restaurant industry feared that tips would fall and waitstaff would lose jobs, the reality is somewhat different claims PayPal.

This post is the second in a series of four sponsored stories brought to you by Nuffnang.

During the recent switch over to chip and pin payments, many in the restaurant industry feared that tips would fall and waitstaff would lose jobs, the reality is somewhat different claims PayPal.

Last week I had the opportunity to tour the PayPal Innovation Centre in San Jose where they showed off the work they are doing in the retail and hospitality industries to change payment systems.

One of the products they showed was their Pay At Table app that integrates into a café or restaurant’s point of sale system and allows customers to pay their bills immediately.

The immediate reaction to this has been resistance from restaurant managers who were worried customers to skip without paying. For waitstaff, the worry was they could be replaced by an app.

It turns out the technology has had a different effect, the productivity of floor staff in the establishments where the app has been trialled has improved substantially.

“In a typical café it takes around ten minutes to get the check,” says the lead demonstrator of the Innovation Center, Michael Chaplin. “We find that freeing waitstaff up to help customers and letting them pay their bills faster means everybody is happier.”

With that ten minute per table improvement, management have found customers’ satisfaction has improved and the waitstaff have seen tips improve – partly because diners are happy and also because the tipping is integrated into the payment, calculating an appropriate gratuity is always a hassle in the United States.

That ease of payment from mobile phone and table apps is rolling across industries, it’s not just limited to the hospitality sector. Increasingly these technologies are being used by tradespeople, retailers and across the service industries

Increased productivity is more than just saving money and reducing staff numbers, it’s about giving the customer a more seamless and easy experience.

All business need to think carefully about how they can use technology to improve their service and increase revenues.

Rise and fall

We live in rapidly changing times. Incumbents and market leaders shouldn’t assume their positions are safe.

Twenty years ago UK supermarket chain Tesco was an also ran.

A decade ago it was the market leader.

Today Tesco is in trouble again as low cost European competitors like Aldi and Lidl have chipped away the British majors’ market share.

A few weeks later, Tesco shares plummeted on revelations the company’s profit guidance had been overtstated by 250 million pounds with the company’s chief executive Dave Lewis announcing several executives have been stood down as auditors investigate the descrepencies.

Tesco is a very good example of how quickly how competitors can come from behind in today’s marketplaces; first Tesco itself during its 1990s rise and then its crash in recent years.

We live in rapidly changing times. Incumbents and market leaders shouldn’t assume their positions are safe.

Regent Street fights back

London’s Regent Street shows how main street retailers can use new technology to reinvent themselves

Main street shopping strips have had a hard time over the past forty years as supermarkets and big box stores have steadily drained customers away, however the new wave of retail, manufacturing and logistics technologies may be an opportunity to revitalise them.

A good example of shopping strips using new technologies is London’s Regent Street with its smart shopping app that integrates with iBeacon location devices, the website Contactless Intelligence reports how shopkeepers, landlords and the local authorites are rolling out an initiative as part of a £1 billion regeneration project.

London’s Regent Street is a fairly unique mainstreet in that it’s extremely upmarket which gives it a lot of advantages over most neighbourhoods, but it does point the way for how other shopping strips can use new technologies to reinvent themselves.

Winning the three-legged race

Merging two trouble companies rarely resolves the underlying problems

Does tying together two lame men give you an Olympic sprinter?

It’s quite common in the business world to see two second rate companies merging in the hope that their combined market share will give them enough momentum to overcoming the market leader.

The tactic rarely works as the businesses running third, fourth or fifth in a market are usually doing so because they have ordinary products or indifferent management rather than any inherited size disadvantage.

Merging two second-rate companies usually results with a pair of competing silos of mediocrity where the former workforce and management of the original business squabble over power in the new entity.

Far from being more competitive, the merged company is even more distracted with internal politics and power plays.

The story that Australian department store Myer proposed a merger with its rival David Jones is a very good example of this as two poorly run companies whose managements that have abjectly failed to adapt to the modern times, try to paper over their chronic problems by merging.

Both companies have failed internet strategies – Myer’s website managed to collapse during the Christmas sales season and no-one could be bothered fixing it for over week.

Along with lousy internet strategies, both companies have underinvested in IT systems leaving their point of sales and logistics systems antiquated and incapable of meeting modern customers’ needs.

Probably the greatest mistake that Myer and David Jones’ management made though was a focus on cutting costs through reducing sales staff.

The resulting lousy and often pathetic service resulted in both brands being seriously tarnished and had the effect of driving high value customers away.

Further damaging the stores reputation was the tactic of offering perpetual sales which trained the customers that would still shop with them into waiting for goods to be marked down rather than paying full price.

Merging the two operations would have done little to resolve any of the long term management failings of the two businesses, although no doubt there would have been some fat advisors fees for some of the boards’ friends.

Nothing fixes poor management better than getting rid of the poor managers, merging two poorly run business like Myer and David Jones does nothing.

Retailers failing as their poor management struggles to deal with changing marketplaces is an international problem, as this story about US chain Sears illustrates. The Australian experience though is a classic case study of two poorly led organisations trying to pretend their failings can be fixed through mergers.

Resolving the problems of troubled companies like Sears, David Jones and Myer involves having good management and smart investment, merging with a similarly troubled organisation solves little except perhaps putting off the day of reckoning.

Tag: retail

This is not toy time

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