This morning IBM launched their Retail Therapy report where they looked at the state of online shopping around the world.
One interesting aspect to the report is that Australians seem to have become indifferent to stores with 60% of the 2000 respondents claiming they were ‘apathetic’ towards their choice of retailers.
At least this is an improvement on the 2011 report where 46% of those survey said they were ‘antagonistic’, this year that proportion is a mere 5%.
So, have we gone from hating our retailers to simply not caring any more? The answers should be focusing the minds of Australian CEOs if they are hoping for consumers to reopen their wallets.
Now the US Congress looks set to pass a law which would make online sellers responsible for buyers’ state sales tax obligations.
The next stage will be treaties between countries on the collection of sales or value added taxes.
For many retailers though this won’t be particularly good news as price differentials are more than just the 10% GST or VAT and online shopping sites compete as much on product range and customers service.
What the US Congress’ bill really shows is how online retailing is maturing – rather than thinking of companies like Amazon, eBay or niche operators like Shoes Of Prey as being disrupters they are the new normal.
It’s worth watching as he maps out where the coffee chain is heading and the importance of innovation and relevancy to his business.
Schultz’s view about the coffee store of the future is intriguing – he knows it will be different but he doesn’t know in what way and that’s why his business is experimenting with different ways of doing things.
“Sure, we’re doing work now on the store of the future,” says Schultz. “It is not only linked to the physical but the digital experience.”
It’s not only the use of digital tools, social media and mobile payments that Schultz is exploring, it’s how does such a huge chain remain relevant to its customers.
“We have to answer the question in the affirmative about how to maintain relevancy. Relevancy can’t only be in the four walls of our stores, we have to be as relevant with our customers where they work, play and even on their phones.”
Relevancy is something that can’t be taken for granted by any business – becoming irrelevant to customers is a death-knell for most enterprises. This is something that challenging the media industry as its struggles to find its role in changed society.
“Where we haven’t transformed rapidly enough, we struggled,” The Wall Street Journal reports. “We have to step up with that and deal with that, and that is on all levels.”
“Our performance reminds us that there are profound shifts under way in our industry.”
That the world’s biggest coffee chain is dealing with those profound shifts better than one of the biggest technology companies is a notable point about the times we live in.
Cutting staff numbers is costing Walmart dearly as customers desert the retailer for better stocked competitors.
Along with the carpark test, a lack of customer service is one of the best indicators that a company has lost its way.
Unattended reception desks, closed cash registers and deserted delivery docks are reliable indicators management has focused on short term staff savings which will ultimately cost the business dearly.
Walmart is the latest example of this with Bloomberg Businessweek reporting that US shoppers are deserting the chain because shelves are empty and stores don’t have enough staff.
The claim stock is piling up out the back of stores is particularly concerning, the just in time inventory management of modern retail chains means there’s little room for error as outlets don’t have a lot of space whil the cash flow of the business and its suppliers is based on getting goods quickly into the hands of eager consumers.
Some of Walmart’s pain will be spread among suppliers as the store’s contracts will push undoubtedly some of the costs of rejected deliveries back onto logistics companies, effectively creating problems through the entire supply chain.
No doubt there’s plenty of angry suppliers and truck drivers who are grumbling about lost time and payments on Walmart contracts. That won’t be good news for the company’s buyers when contracts come up for negotiation.
Walmart’s isn’t the only retailer who’s fallen for the short term fix of cutting store staff to give a quick profit boost as department stores and big box outlets around the world struggle with the damaging effects of not being able to serve customers.
That Walmart, one of the industry’s global leaders, would make such a mis-step shows the pressures on managements as economies deleverage and credit wary consumers decide that don’t need more junk in their homes.
Cutting costs isn’t going to address those bigger trends, it’s going to take original thinking and management commitment to adding real value to customers.
Service is just the start of a long process of refocusing the retail empires.
The stakes are high, companies like Amazon have built their business models on basing themselves in low tax jurisdictions while many bricks-and-mortar retailers have complained they are at a disadvantage compared to out-of-state or international suppliers.
For consumers a few dollars in avoided tax isn’t the main reason they shop online, most internet shoppers cite a better range, convenience and, in many cases, superior service as the reasons they buy over the web.
But it is clear the online retailers do get an advantage over local stores.
While provincial governments cite protecting employment in their regions as part of the motivation for trying to tax online sales, the bigger issue is the desperate search for sources of revenue to balance cash strapped state and local budgets.
Those budget requirements aren’t going to ease – the global economy is restructuring in a way that doesn’t favour 19th Century levies like sales tax or stamp duty, while aging populations and declining incomes are increasing demands on government services.
With governments caught in a pincer of rising costs and falling revenues, it’s not surprising they are trying to find ways to get more money.
It’s not clear though they’ll win this battle though, the Senate vote is a symbolic gesture and the difficulties of being able to tax all forms of internet commerce can’t be underestimated.
The struggle ahead for local governments also can’t be understated, the public demands more services while administrators have to deal with rising infrastructure costs and the pension liabilities of retired public servants, teachers, firefighters and police.
Even the bravest politician struggles to find the political capital needed to deal with that challenge.
How we tax the internet is going to be a task that will define our governments and society in the first half of this century. We’re going to have to think very carefully about the choices we have ahead.
How a cloud computing service wants to radically change customer service and business
“Nobody got girls on the helpdesk” says Mikkel Svane, founder of online customer service company Zendesk.
Mikkel hopes to make customer service sexy again as businesses find they have to focus on keeping clients happy.
This is a reversal of management thinking of the 1980s where, as Mikkel says, “customer service is a cost centre, outsource it, don’t spend any time on it and don’t let customers steal any of your time.”
Now the internet gives customers to tell the world about a company’s service, the days of outsourcing or disregarding support are over.
Mikkel Svane and Michael Hansen of Zendesk
Cloud technologies are changing how software is used in business, as Mikkel found when he and his partners started Zendesk.
It became very obvious that building something that was easy to adopt, web based and integrated with email, websites. Something easy to use that didn’t clutter the customer service experience.
Something that moved from managing the customer service experience to focusing on customer service.
We built it, put it out there and customers starting coming.
A lot of these companies thought they could never implement a customer service platform. Suddenly small companies found they could compete with bigger competitors.
The appeal to investors
Having customers signing up proved to be a big advantage in Silicon Valley, no-one knew anything about a Danish company, but with local customers starting coming on board US Venture Capital firms understood what the company does.
That customer base proved powerful as Zendesk has to date raised $84 million dollars over four rounds of VC funding and is looking at a stock market float with an IPO in the next few years.
“Silicon Valley has a great tradition of building businesses.” Says Mikkel, “coming to Silicon Valley was such a big step for Zendesk, in taking it from being some little startup to being a real company that could scale very quickly.”
A question of scale
Groupon is a good example, when Mikkel and his team first met the Groupon team the group buying service was a team of four guys in Detroit. Groupon founder Andrew Mason personally signed off on the initial Zendesk subscription.
“What the hell is this company, we don’t get it.” Mikkel said at the time.
Three years later Groupon was the fastest growing company in history with thousands of support agents on their systems supporting hundreds of thousands of products.
Despite Groupon’s recent problems, Svane is proud of how Zendesk helped the group buying service with growth that no business had seen before.
“With Zendesk they got not only a beautiful, elegant system they also got the scale and the trajectory. Imagine if they’d tried to do that with an Oracle database? You’d have never been able to grow so quickly.”
On being a good internet citizen
In the past we talked about platforms – the Oracle platform, the Microsoft plaftorm – today the Internet is the platform.
“We are a good citizen on the Internet platform,” says Mikkel. “Shopify is a good citizen of the internet platform, these type of tools are easy to integrate. We are all good citizens of the Internet platform.”
Having these open system is the great power of the cloud services, they way they integrate and work together adds value to customers and doesn’t lock them into one company’s way of doing things.
The threat to incumbents
Vendor lock in has been a curse for businesses buying software. The fortunes of companies like Oracle, Microsoft and IBM have been built holding customers captive as the costs of moving to a competitor were too great.
Cloud services like Zendesk, Shopify and Xero turn this business model around which is one of the attractions to customers and it’s why huge amounts of money are moving from legacy solutions to cloud based services.
Another reason for the drift to cloud services is the reduction in complexity, the incumbent software vendors made money from the training and consulting services required to use their products.
Having simple, intuitive systems makes it easier for companies to adopt and use the new breed of cloud services.
Focusing on the business
Mikkel’s aim is to help businesses focus on their customers and products rather than worry about IT and infrastructure. In the long term it’s about helping organisations establish long term relations with their clients.
“Companies today realise that it doesn’t matter how much it matters how much I can sell to you right now, it pales into in comparison of how much I can sell you over the lifetime of our relationship. This ties into the subscription economy. It’s much more important for companies to nurture the long term lifetime relationship.”
Having a long term relationship with customers is going to be one of the keys for business success in today’s economy.
The days of transaction based businesses making easy profits from skimming a few percent off each sale are over and companies have to work on building long term relationship with customers.
Services like Zendesk, Xero and Salesforce are those helping new, fast growth companies grab these opportunities. For incumbent businesses, it’s not a time to be assuming markets are safe.
A good chart can help tell a story, all too often though graphs are designed to mislead.
One way to illustrate a story is with charts. All too often though misleading graphs are used to make an incorrect point.
A Verge story on Groupon shows how to get graphs right – clear, simple and tells the story of how the group buying service’s valuation soared and then plunged while it has never really been profitable.
The vertical axis is the key to getting a graph right, cutting off most of the y-axis’ range is an easy way to mislead people with graphs. In this case you can see just the extent of Groupon’s valuation, profit and loss over the company’s short but troubled history.
Since its inception, The Verge has been showing other sites how to tell stories online, their Scamworld story exposing the world of affiliate internet marketing sets the bar.
Using graphs well is another area where The Verge is showing the rest of the media – including newspapers – how to do things well.
For Groupon, things don’t look so good. As The Verge story points out, the company’s income largely tracked its workforce which grew from 126 at the start of 2010 to over 5,000 by April of 2011. Which illustrates how the business was tied into sales teams generating turnover.
The spectacular growth of Groupon and other copycat businesses couldn’t last and hasn’t. The challenge for Groupon’s managers is to now build a sustainable business.
For investors, those graphs of Groupon’s growth were a compelling story. Which is another reason why we all need to take care with what we think the charts tell us.
