Amazon’s latest move towards offline commerce

Amazon launched their mobile card reader and companion app this week taking another step into the world of offline commerce. “Amazon Local Register,” similar to Square and PayPal, will enable users to accept credit card payments on a variety of mobile devices. (You can see a full list of point of sale 2.0 companies here.) Small and medium businesses (SMBs) can also purchase a range of compatible accessories including cash drawers, receipt printers, iPad stands, etc., to create a complete point of sale solution – merchants can buy a complete kit from Amazon for $380 that includes a Kindle Fire HDX 8.9.

The dongle itself costs $10, but this is instantly refunded in the form of transaction credits. Amazon is also significantly undercutting the competition with its per-swipe transaction fees, launching with a promotional rate of only 1.75% (per swipe) for anyone that signs up before October 31^st. This rate will be good until Jan 2016, when it will revert to the normal 2.5% (still undercutting the competition). There are some concerns regarding profitability with this model, especially since Square is still operating at a loss (source), but it’s a strategic move for the e-commerce company. In addition to lower fees, the company is also heavily touting its customer service and support, which could be a big differentiator over competitors. SMBs that already use Amazon online services may also find added value in syncing their online and offline data.

“According to the US Census Bureau, there are 26 million small businesses in the US. Most of those companies do not have a mobile point-of-sale solution,” says Amazon spokesperson Julie Law (source).

The macro numbers also indicate that there is a large opportunity to increase the company’s footprint. According to Forrester, online sales accounted for only 8% of all retail sales in 2013, which is expected to grow to 11% by 2018 (source). Despite the growth rate of e-commerce being significantly higher, offline commerce isn’t going anywhere anytime soon. The e-commerce giant understands the potential market and is not shy about pursuing strategic initiatives. For example, this year alone we saw the following:

• Amazon’s Fire phone that has a “FireFly” button to help find products on Amazon using image recognition.
• Amazon Wallet, a consumer facing mobile wallet service that allows users to scan and store their membership, loyalty, and gift cards within the app.
• Expanding their same day delivery service across six cities in order to entice customers that would normally shop at their local supercenters (e.g. Walmart, Target).

In looking at the big picture, it makes sense that Amazon is releasing a mobile payments product. They have already launched numerous products this year for consumers and are now taking the opportunity to move towards the other side of the value chain – SMBs.

How can brick and mortar stores enhance the retail experience?

There are a number articles that talk about the impending doom of retail stores often citing examples such as Best Buy and Sears. However, data actually show us that over 90% of retail sales still take place in-store. Don’t get me wrong, e-commerce is still growing at a significant rate, 15.5% in 2014 according to eMarketer, but it is clear that brick and mortar (BAM) stores aren’t going to become extinct anytime soon. What will happen, I believe, is that the fundamentals of the retail experience will shift drastically as the lines blur between offline and online commerce.

For example, Walmart’s innovation group @WalmartLabs announced yesterday that it had acquired Luvocracy, an online social community for product discovery and recommendations (similar to Wanelo, Pinterest, etc.). This deal, along with Stylr and Adchemy marks their third e-commerce acquisition this year alone. For a company that only did ~2% of its sales online, Walmart seems to understand and recognize the importance of integrating e-commerce tools into its existing arsenal.

So what does this mean for others? BAM stores will need to be experimental and omnipresent, accessible at every channel such as mobile devices, desktop computers, and in-person. Below is a short list of themes and example companies that retailers can use to enhance the retail experience.

• In-store engagement — In a recent Business Intelligence report on The Future of Retail, 60% of survey respondents indicated that the retail experiences are still lacking in personalization. The “in-store engagement” category is broad with startups such as Swirl and ShopKick that enable high-touch engagement and tailored content (e.g. coupons, offers) to each person.
• Mobile coupons — With mobile coupon usage expected to double by 2019, merchants need to be aware of this potentially massive distribution channel. Startups such as Yowza, Wrapp, and ScoutMob provide an easy way for shoppers to find, store, and redeem coupons based on location.
• Search and local availability — Remember how focused the National Retail Federation was on “showrooming”, the practice of looking at a product in-stores only to purchase it online? Now it’s all about “webrooming”, the inverse practice of doing research online but transacting in-store. Companies such as thefind and Boutiika work with merchants to attract online shoppers to BAM locations through location based product searches, determining availability at the SKU level.

Of course this list isn’t exhaustive, but it should give you an idea of technologies that can be used to address some of the current macro trends. At Venture Scanner I am tracking over 450 companies across 18 categories in the retail online to offline sector, check it out here!

UPDATE: Retail online to offline

In the time that I have been tracking the retail online to offline space at Venture Scanner, I am even more convinced that startups in this sector are among the most exciting and innovative. With the most up-to-date one-pager below, it is easy to see the breadth of categories covered as well as the investor interest.

I have also noticed a few trends while watching this space that I thought would be worth mentioning here:

• The interest and number of companies using beacon have grown significantly in the past year, paralleling the trend of IoT (hardware is becoming cheaper).
• The prospect of mobile is still apparent, but there continue to be barriers with execution and adoption (see my article on mobile coupons).
• The lines between online and offline are being further blurred with new point of sale systems, and mobile payment offerings from historically online-only players.
• While still early on, new retailing technologies and techniques such as augmented reality and in-store customer relationship management seem to hold promise.

And while there are numerous companies cropping up, it will be interesting to see how the retail space evolves with overlapping sectors such as IoT and FinTech.  My prediction, with 90% of retail sales still occurring in brick and mortar stores, this space will continue to see strong growth while e-commerce and physical retailers continue to try and co-exist.

Is the Android TV platform a winner?

Last week, Google held their annual conference and made some major announcements including the Android TV software platform. As some of you may recall, this isn’t the company’s first foray into online TV. Back in 2010 the company launched its first initiative with the unsuccessful Google TV, a software platform that worked on top of Logitech and Sony devices. After the V1 showed lackluster sales, the company launched a V2 that gave users a better interface and access to Android apps, which still wasn’t enough. Then in 2012, the company unveiled the Nexus Q, a decent looking set-top box that was so poorly received that it never made it to production. Not to be discouraged, the company released the Chromecast in 2013, a streaming HDMI stick that broadcasts content directly from your mobile device or computer.

Similar to Google TV, Android TV is a software platform that will sit on top of OEM devices and smart TVs from companies like Sony, Sharp, LG, Asus, and Razer. A major pain point that Google cited for this move is the lack of a unified operating system and fragmented landscape currently available. Google is also learning from its success of the Chromecast and has enabled Android TV to stream content directly from the host device as well as support for native apps like Netflix, Hulu, and others. Finally, Android TV is also focusing more on gaming with a proprietary controller and dedicated sections on the home screen, an attempt to capture the casual gaming market like the Amazon Fire and OUYA.

So what makes this rev any different? Lets first look at the Chromecast. It’s a simple piece of equipment with a relatively low price point, $35 dollars versus the $100+ devices from competitors like Roku, so you can attach one to every TV in the house. It is also INCREDIBLY simple to use. Fred Wilson wrote a quick piece about the dongle last week highlighting its ease-of-use and stating that his son was able to quickly get up and running with minimal setup time. This is largely due to the fact that content is stored separately on the device — no fumbling around with individual apps or dealing with clunky user interfaces. With Android TV, users will also have this function, and that’s a significant factor that people will be attracted to. I believe there is a much lower tolerance threshold for TV-related technologies compared to devices like computers or phones, so simplicity is a prerequisite.

As I read more into the Android TV I am optimistic. I like that Google is working with manufactures to essentially abstract a layer on top of the hardware and provide the beginnings of a universal experience, similar to the mobile OS. I also think that timing is much better than when Google TV first launched. One of the main criticisms with Google TV was the lack of a strong third party ecosystem, something that is significantly stronger now. However I also see potential pitfalls, one of them being the fragmentation from multiple hardware manufactures and multiple versions — similar to mobile. Then there is also the fact that the competitive landscape is crowded with numerous companies building their own proprietary set-top boxes, you can see the full list on our future of TV scan.

For the full presentation at Google I/O click here: https://www.youtube.com/watch?v=y3dCUPeyhag

Why Playstation TV has a *slight* advantage

Sony made an interesting announcement at the E3 gaming conference in Los Angeles last week. The company presented its Playstation TV set-top box that will enable users to watch video content, stream games, and remotely play their Playstation 4 consoles on other TV’s. FYI, the Playstation TV is just the North American/European version of Vita TV that was launched in Japan last year. The device starts at $99 dollars but with a controller it comes out to $139, similar to the Amazon Fire. So why bother writing about another device? I think that Sony may actually have the leg up in this game, especially when you take into consideration the massive reach and niche focus in gaming.

There are plenty of companies competing in the connected device and set-top-box space; Roku, Google (Chromecast), TiVo to name a few. (You can see a full list of companies here — scroll down to “Set-Top Boxes and Connected TV Devices.”) What can Sony’s product do that’s different? Gaming. Sony’s Playstation console has been powering hardcore gamers since 1994 and the current iteration, the Playstation 4, has sold over 7M units globally since it’s launch in late 2013 (source). And looking back at Sony’s last generation console, the Playstation 3, the company has sold over 80M units worldwide (source). The company has acquired a unique demographic of millennials. This established distribution network, combined with the upcoming Sony Gaming cloud service (currently in beta testing) makes for a closed loop ecosystem that can captivate and keep users engaged on a single platform.

But wait, doesn’t Amazon Fire also have a gaming angle? Amazon Fire is targeting casual gamers with lightweight android-based games. While I believe there is a market for these products, I also believe that there will always be a different market for more serious gamers — people who want richer experiences and story lines.

On a final note, I see a huge opportunity in using all these devices as a conduit for Sony’s internet TV service, slated to launch this fall. Sony already plans to take advantage of the 25M Playstation 3 consoles in the US, giving them an instant edge against competitors who still need to sell both new hardware and service.

Why are we not using mobile coupons yet?

I came across an interesting data set by TSYS, a payment processing company, relating to the consumer use of coupons, daily deals, and card-based rewards programs. For the purpose of this post, I want to focus on the coupon data. Turns out that coupons are still widely used with 83% of respondents using some form of coupon — this includes print and display. Also somewhat surprising is that the heaviest group of users is the 150k+ income bracket. In fact, 47% of high-income earners use coupons more than 50 times per year. So coupons still seem quite popular and the top three sources for coupons are, in order, newspaper, online, and store circular. What I found particularly interesting is that only 1 in 5 respondents source coupons on their mobile device, despite the pervasiveness of smartphones. According to Nielsen’s Feb 2014 Digital Consumer Report, over 66% of US consumers own a smartphone (source). Also, with the success of online coupon companies such as RetailMeNot (NASDAQ: SALE) and Coupons.com (NYSE: COUP), the logical next step would be the mobile device. See here for the full study.

If we look at the startup landscape for mobile coupon startups (see the map here — scroll down to ‘Coupons’), there is no shortage of companies — Scoutmob, Key Ring (Gannett), SnipSnap, and Yowza to name a few. And really, why shouldn’t there be? The value proposition seems clear enough, (in general) consumers get access to coupons based on personalized interest, location, and trending, while merchants have more distribution control and customization options. I believe that one of the biggest hindrances is the adoption and integration barrier.

In the 2013 Mobile Wallet Consumer Report, the survey cited that only 19% of respondents saw a retailer take advantage and offer coupons via a mobile wallet (source). Whereas newspaper prints and store circulars have become standardized, different mobile offerings mean different coupon creation/integration tools. Some companies enable retailers to pull data directly from a product catalogue while others require more manual processes to create, distribute, and redeem offers. There is also an education component on both the merchant and consumer side. With multiple point-of-sale solutions redemption can be an issue, some apps produce bar codes while others may require visual verification. That can make accurate tracking difficult for larger merchants. Consumers may also require a small education component in working with new discovery tools and workflows.

I’m curious to know if you use mobile coupons and if so, do you prefer them to traditional print coupons? Let me know in the comments or by reaching out on Twitter @nsoohoo.

Retail Store Tracking and Privacy

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In my post about beacons I asked about privacy and what it means to consumers. Well, yesterday I found out. Philz Coffee, a Bay Area coffee chain, landed right in the middle of a privacy debacle when it was reported that the company uses Euclid to track customer data using a cell phone’s Wi-Fi.  People were up in arms on Twitter and Philz cut the cord with Euclid. You can read more about it here and here.

Physical in-store tracking isn’t new technology, there are numerous companies tackling this using various methods (see the map of companies here – scroll down to ‘Physical Store Analytics’). Some companies like Euclid use your phone’s Wi-Fi while other companies use bluetooth low energy (beacons), video from in-store cameras, sound waves, etc. These technologies can be incredibly useful by giving retailers data such as indoor mapping, in-store hot spots, and operational analysis to help optimize efficiency and user experience.

On the flip side, providing adequate disclosures and peace-of-mind to customers is key for any retailer that wants to take advantage of these systems. Opt-out policies help, but in order for this category to be successful customers really need to opt-in on their own. In return, the value proposition to customers is a serendipitous in-store experience and more personalized interactions. There is no doubt that people are more cautious/aware of their privacy, but it will be interesting to see how these technologies evolve with shopper’s perceptions.
Tl;dr: If you want to track your customers, make them opt-in.

 

 

Appendix: Companies that are currently participating in the “Future of Privacy Forum” opt-out program:

Aislelabs
Brickstream
Euclid
eyeQ Insights
iInside, a WirelessWERX Company
Measurence
Mexia Interactive
Radius Networks
SOLOMO Technology
Turnstyle Solutions
Path Intelligence

(Source)

The Bull Case for Beacon

In the past year I’ve been hearing quite a bit about “Beacon” such as — Shopkick piloting its shopBeacon for in-store marketing, PayPal using their own beacon for hands-free check-ins and payments, and Qualcomm pushing its Gimbal SDK for developers.

Beacons are devices that transmit a signal to determine the proximity of another device, like a shopper’s phone. The technology utilizes bluetooth low energy, which can transmit signals for years off a single battery and comes standard on most modern devices. Apple is currently using iBeacon (its their own standard of Beacon) to track and engage with shoppers in their retail stores, while other programmers and service providers are using Beacon as a platform to develop new applications. Use-cases include in-store marketing, customer relationship management, business intelligence, indoors navigation, guided tours (e.g. in a museum), and asset management.

I had the opportunity to attend MobileMonday’s Beacon event a few weeks ago with panelists from Qualcomm Retail Solutions, Walmart Labs, and more (the full list can be seen here). Here are a couple points that I found informative:

Business models around Beacon: Since Beacon is still in its early days, the panelists had varying opinions on who would actually pay for the hardware such as advertisers (e.g. the ‘cookie’ for the physical world), supplier subsidies (e.g. manufacturers keeping prices artificially low) and retailers. However, the prediction that resonated with me was that the service provider (e.g. in-store analytics providers) would be the primary customer.

This idea draws from existing precedents and parallels, and may be the answer to reducing adoption barriers. Startups like Shopkick (in-store marketing) and Brickstream (video hardware for analytics) are already working with major retailers and provide a complete solution (e.g. the applications as well as the devices). So while Macy’s may not care about the delivery mechanism to achieve ROI, third party service providers have a much larger incentive to research and deploy this technology.

I also believe that there will be certain retailers who will always want to maintain control of their data, pointing to private solutions that can be deployed in a closed ecosystem.

Beacon may not be just another transitioning technology: Mobile payment technologies already exist (e.g. NFC, QR codes), but the problem seems to be the lack of consumer adoption. This could be for a variety of reasons including effective range, convenience, and accessibility. Beacon, however, may differentiate due to better strategic positioning. For instance, iBeacon has the entire network of compatible iOS devices and retail stores. Not to mention Apple also has over 600M registered payment cards on its iTunes platform that could, theoretically, tie into a mobile payments network compatible with iBeacon. Although having a large user base may not be that important, since the NFC joint venture between Verizon, AT&T, and T-Mobile known as ISIS has yielding lackluster results. One panelist did note that NFC attempted to change an incredibly complex process, and could have made a stronger impact if the technology was used to take incremental steps via coupons, or loyalty cards. While beacon adoption clearly faces a lot of challenges, proponents have the opportunity to learn from the past mistakes of other technologies.

What’s next: As mentioned earlier, Beacon is still in an early state but appears promising. Large players like Apple, Qualcomm, and PayPal are leading the way, but there are also numerous other Beacon companies (e.g. Estimote, GeLo). It was also noted that there are currently as many as 40 Beacon manufacturers, so expect some consolidation in the space. Also, I would keep an eye out for the companies that can marry both the hardware and software aspects of Beacon as that will be key in creating quality data.

You can see the full panel discussion and presentation by Qualcomm Retail Solutions here.

On a final note, will shoppers even opt in to share this kind of data? Do shoppers want to be tracked by their every movement (knowingly)? I’ve seen a few articles touching on the subject, but would like to get your opinion. Feel free to leave a comment or get in touch — nathan@venturescanner.com.

The 3D Printing Startup Landscape

A map of the 3D Printing landscape, ~185 companies organized into 9 different categories and counting.

 

Categories:

3D Printer Manufacturers: Companies that manufacture 3D printers and accompanying hardware (e.g. injection heads). There are numerous players in this space from large incumbents (e.g. Stratasys), to emerging crowdfunded projects (e.g. Pirate3D).

3D Printing Services: Companies in this category provide 3D printing as an outsourced service for their customers. Services can vary on a spectrum from consulting (e.g. design, create, scan, print) to only managing one aspect of the value chain (e.g. upload your design to print, scanning service only).

3D Printing Marketplaces: Marketplaces that connect two parties around 3D printing products and services. This can include the finalized 3D products (e.g. jewelry, action figures), CAD files, and proposals (e.g. designers looking for bids from manufacturers).

3D Printing Materials: Providers of 3D printing materials such as proprietary plastic filament (e.g. acrylonitrile butadiene styrene) or resin.

3D Scanners: Companies that manufacture scanning equipment used to create digital models of 3D objects. Models can then be reprinted or modified and shared using compatible software. Includes industrial 3D scanners, and more recently, consumer-focused scanners (e.g. MakerBot) and do-it-yourself types on crowdfunding websites (e.g. Kickstarter, Indiegogo).

3D Printing Applications: Companies that highlight specific use cases and advantages of 3D printing (e.g. mass customization). Emerging trends in the space are health, dental, consumer applications (e.g. custom eyewear), rapid manufacturing.

3D Printing CAD Software: Computer Aided Design software that enables users to upload, create, and modify 3D models. Some of the newer CAD software can be used directly through the browser, reducing friction for e-commerce websites or consumer facing services.

3D Printing Communities: Groups and websites that organize multiple users around 3D printing.

3D Printing Networks: 3D printing networks connect to printers via the cloud and enable features such as wireless printing, job reporting, etc..

Navigating the Retail Online to Offline Space

I’ve been tracking ~350 companies so far across 18 different categories in the Retail Online to Offline (O2O) space.  Here is how I’ve broken down the various startups:

Categories:

Local Daily Deals: Companies that sell locally available, pre-paid vouchers for steeply discounted goods and services. This category also includes daily deal aggregators.

Point of Sale 2.0: New point-of-sale solutions that create frictionless consumer transaction experiences and also enable retailers to collect data about their customers that can be leveraged for marketing and CRM purposes.

Online to Offline Payments: Technologies and services that are changing the way we pay for goods. In addition to payment execution, this also includes companies that provide consumers with a mobile wallet (e.g. payment information, loyalty cards) or other digital storage functionality (e.g. receipts).

Loyalty Programs: Products that provide or power a merchant’s reward / loyalty program. Examples include digital frequent shopper cards, tailored rewards based on spending, etc.

Social Discovery: This category includes companies that allow for discovery through location check-ins and social sharing of ideas, products, companies, brands, etc.

Coupons: Companies that focus on both traditional and digital merchant coupons.

Local Incentives: These companies help stores increase loyalty, customer base, and revenue from both new and repeat customers through deals, local offers, discounts, frequency rewards, gamified badges, and other techniques.

Marketing Platforms and Customer Relationship Management: Products that enable merchants / brands to engage with their customers across social media channels, and execute and manage marketing campaigns. This category also includes customer relationship management tools used to improve customer communication, tracking, and overall relations.

Infrastructure and Enablers: Products and tools designed to help developers increase functionality in their existing products (e.g. payment integration), create applications (e.g. mobile apps, websites), etc .

Physical Store Analytics: Using sensors, cameras, and mobile devices to provide retailers more data about customer behavior in-store such as window conversion rate, customer dwell time, optimal shelf placement, and ideal store hours. These companies help retailers optimize the customer experience to increase revenue.

Local Advertising Technology: Companies that alert the consumer of a retail product or service. The advertising models in the O2O market often center around targeted ads, real-time mobile ads, retargeting, dynamic ads based on proximity to clear inventory, ads targeted based on check-ins or social comments, and in-store up-sell ads.

Data and Analytics: These companies help with the acquisition, organization, and distribution of data that companies can then utilize to enhance their applications and service offerings.

In-Store Experience: Companies that are innovating with in-store navigation, mobile-enhanced shopping lists, monitoring friends and family in-store, real-time customer relationship management, and “looking” inside venues to see product offerings and clientele demographics before making a purchase.

Convenience as Marketing: Much of the value proposition of these services is that they allow for the more convenient selection and purchase of goods or services.

Gift Cards: This category includes both physical and digital stored-value and prepaid cards.

Search and Local Availability: The companies in this category provide the means by which consumers can search and/or compare local availability of products and prices. This includes innovations such as store-level inventory searches and local comparisons.

Price and Feature Comparison: Services that empower consumers to compare product prices at different outlets or compare features across similar products (e.g. scan and engage capabilities for QR codes, bar codes, or physical items to bring up product information and comparisons in real-time).

Retail Augmented Reality: Companies that enable consumers to interact with products using augmented reality (e.g. virtual manipulation).