WHY IT MATTERS: Digital Transformation

Take a minute to watch the video. This is the future of retailing.

WHY THIS IS IMPORTANT

Amazon has disrupted many industries with its online business. Recently, as other digital leaders have done, Amazon is trying to bring digital revolution in the world to blend our physical and digital experiences - think Google self driving cars, Starbuck mobile phone payment and geofencing app, Apple stores that are more showrooms and help centres than stores because eCommerce is there to fulfill orders to your door, etc.

Amazon has been focussed on grocery for the past 10 years to use this weekly recurring, low cost, high volume shopping trip to the supermarket as its pathway to bring digital into the real world and blend it with online e-commerce.

With Amazon Fresh for examples they have been busy putting trucks on the road to deliver groceries to your door overnight with minimal costs. Why grocery? Because its high volume guarantees that trucks will be on the road everyday in all areas. And once trucks are running around carrying groceries they can also bring other items - books, TVs, etc. - at little or no cost, effectively making FedEx irrelevant or at least giving Amazon huge negotiation power.

I wrote about this in many blog posts, just see here: http://www.scoop.it/t/digital-transformation-of-businesses?q=amazon 

Here with Amazon GO, it addresses some of the major pain points of customers in grocery stores: waiting in line at the cash register. As they've done online, Amazon focusses on its customer issues to smash them or make them so irrelevant that they are not issues anymore. See "amazon secret sauce" for insights on this: http://sco.lt/979c4P

Take Amazon Prime for example. It addresses the delivery fee issue: we do not want to have to pay for delivery. So they make it a non issue, providing 2-day delivery for free for an annual fee. Side effect: if you've paid for prime, then you spend up to 5x more at Amazon (300$ annually for average client, 1500$ for prime member), basically becoming a loyal shopper. Wow.

Back to Amazon GO and why it is important. The grocery industry has not seen a major disruption since Costco started top sell grocery in bulk format years ago - grocers ost 10% market share with that new player in the field. But today, grocery stores are the same, the layout is the same, the process is the same than it was 50 years ago. There has been little or no innovation in stores recently (last one may be the barcode in 1970s) but GO shows that there may be a perfect storm of technologies that combine to make physical stores transformation a reality:

1- mobile phones are on every customer back pocket;

2- electronic payment is everywhere, making cash almost irrelevant;

3- loyalty programs and big data allows retailers unprecedented customer knowledge and forecasting trends;

4- artificial intelligence enables real-time image analysis, feature detection, and robotic improvements.

From the concept store video and the Amazon description, all that GO is doing is applying these new technologies on a new problem set: adding and removing items to shopping basket and speeding the checkout process.

Of course, at the end of the day, the winner will not be the grocer with the best technology. It will be the one with the lowest prices and the best selection (best marketing and customer service won't hurt either). On those fronts (price & selection) Amazon GO faces huge headwinds from established grocers that have long standing relationships with suppliers and way more volume than Amazon. But it does not mean Amazon cannot provide customers with a more enjoyable, easy, fast experience - especially to millennials - which may give GO 5% or 10% of the market (the "good" 5% by the way, those that spend more and spend on higher margin items) from established retailers. And this will hurt established grocers like hell.

Also see the analysis from business insider here: http://www.businessinsider.com/amazon-go-grocery-store-future-photos-video-2016-12/ 

and the plans for Amazon to open up to 2000 store in the future if GO concept works: http://www.businessinsider.com/amazon-2000-grocery-stores-10-years-2016-10

WalMart is testing a new food traceability solution co-developed by IBM using blockchain technology.

WHY THIS IS IMPORTANT

Blockchain, the technology behind the bitcoin currency is being actively enhanced to be used for other application than Finance or payment. In this particular case, food retailers may find that using this technology will improve traceability of food products and facilitates recalls when they are needed. The fact that WalMart embraces it so early probably means the current systems are not very efficient and that there are opportunities to reduce costs and improves brand image and reduce liabilities. Digital transformation does mean more than just being present on social networks and improving marketing.

Read more about it :

1. Understand blockchain in 2 min: http://fmcs.digital/blog/understand-the-blockchain-in-2-minutes/
2. How blockchain can change the world: http://fmcs.digital/blog/how-blockchains-could-change-the-world-not-just-banking/ 
3. Editing the blockchain: http://fmcs.digital/blog/editing-the-uneditable-blockchain-accenture/ 
4. Chain block blog: http://fmcs.digital/blog/chain-blog-a-blog-dedicated-to-blockchain-technology-and-innovation/ 
5. Bitfinex lost 120K bitcoins: http://fmcs.digital/blog/hong-kong-bitcoin-exchange-bitfinex-loses-nearly-120000-bitcoins-in-hack/ 

A review on real-life beacon deployments in retail store tends to demonstrate a resurgence of proximity geographic location tracking.

WHY THIS IS IMPORTANT

Digital transformation strategies require that customers are tracked in the real world as much as they are in the web-world. This often means that the mobile devices we carry enable a seamless digital communication - tools to push promotions and notifications while we walk the street or store aisles. To do so, retailers must know where you are and geofencing is not enough anymore. Beacons come to the rescue and mobile OSes - both Apple and Google - now build into their APIs very good location services which allow mobile app developers ways to connect with users in a very personal way. Using GPS location is not sufficient, especially indoors, so beacons are a must and reports such as this one show that our physical world has become a forest of digital beacons to track our every moves. We all thought this technology was dead after the initial failure of the 2013 Apple announcement. However, all retailers should now include geolocation and proximity tracking in their digital strategies and mid-term roadmaps, as it has apparently moved from the lab to the real world.

More on location services in the OSes, see the following links:

https://developer.apple.com/library/content/documentation/UserExperience/Conceptual/LocationAwarenessPG/Introduction/Introduction.html#//apple_ref/doc/uid/TP40009497-CH1-SW1

https://developer.android.com/guide/topics/location/index.html 

Deloitte survey on Thanksgiving weekend forecast.

WHY THIS IS IMPORTANT

Always interesting to look at the forecast then compare with actual numbers. In the past, the pattern was clear: people move their holiday shopping online. What is also interesting is in the chart above about webrooming and showrooming: physical stores continue to play a big role and that is why omni-channel technologies are more important than never.

A video from Google demonstrates how to drop virtual furniture in your home environment, make sure it fits in the room then buy it directly from the augmented reality scene. The eCommerce segment starts at 17m16s

WHY THIS IS IMPORTANT

Augmented reality has the potential to revolutionize businesses much before Virtual Reality because it can so seamlessly add to your existing world. The video shows examples of an AR measuring tape that can also be used in an commerce setting. Other uses for AR in the business context, to review floor plans and planograms in retail settings, or help with repairs have been proposed in the past. Some Google glasses videos demonstrated some interesting use cases. It now looks like our mobile phone will in fact be carrying the necessary hardware to make AR a reality much sooner than anyone may have anticipated...

See also:

field repair, parcel delivery and other usage for google glasses: http://fmcs.digital/blog/google-glass-will-be-more-successful-among/ 

IKEA AR via its 2013 catalog: http://fmcs.digital/blog/augmented-reality-catalog-places-ikea-furniture-in/

translation AR: http://fmcs.digital/blog/looking-for-google-glass-killer-apps-via-mit/ 

google glass in operating rooms: http://fmcs.digital/blog/google-glass-finds-its-way-to-the-operating-room/ 

An inventory of technologies that can be deployed in retail stores.

WHY THIS IS IMPORTANT

Retail stores are being transformed by digital technology. Apple stores have shown that retail space today is more than a warehouse where customers fulfill orders. Today's store must also demonstrate products, educate customers and provide customer service. Store must also fulfill orders, although that should preferably be done online. In that context, stores leverage technologies to communicate with their customers, inform them, as well as provide an omni-channel experience.

Choosing the right technology to deploy is a challenge, but my experience has shown that the overall retail store business model must be reviewed to ensure the right content, support and service is made available. 

Looks like in-store technologies - screens, beacons, kiosk, mobiles apps, etc. - should be considered for other purpose than to increase revenue.

A great reference if you are in the market to build your own eCommerce solution.

A report shows that letting customers order ahead using mobile apps converts to higher sales order value.

WHY THIS IS IMPORTANT

Retailer have invested in mobile apps in recent years mostly use them as marketing tools to notify customers of promotions, etc. With recent trends showing that customers download less and less apps to concentrate on a few well known ones (Facebook, etc.), retailer must find new ways to have their customers use their apps. Looks like if you allow customers to save time by pre-ordering their meal, it becomes a hot and customers spend more. Good to know.

Always interesting reading on digital transformation by Capgemini which has been at the forefront of defining digital transformation. Read this one, then flip through old ones...

Outstanding 20 minutes video that explains what geofencing is and how to it, them in layman's terms.

WHY THIS IS IMPORTANT

We all carry mobile devices in our pockets so we are all targets for beacons and geofencing by retailers and brands. We were just getting used to being tracked everywhere we go online, and now we have become targets in the physical world as well. It is essential that we all know what level of tracking we are subjected to.

On the other hand if you are a brand or a retailer, you must know about beacons and geofencing and ensure your marketing team includes it in their digital strategy otherwise you may be missing out over your competitors.

Study demonstrates direct link between omni-channel maturity and corporate profits. Also provides an index to measure the omni-channel maturity.

WHY THIS IS IMPORTANT

Companies ask why invest and transform into omni channel. It appears that those with the most advanced omni-channel implementation are able to translate this into profits. Thus, omni channel becomes something you do to improve bottom line more than something you do to improve customer satisfaction, as is often thought to be the case.

Amazon announces it will open 100 popup stores.

WHY THIS IS IMPORTANT

This is one piece in the vision for the future of retail. Here are the components:

1. great online store where you can find anything you want under one roof with a single payment and account profile - amazon.com
2. 2-day free delivery - Amazon prime
3. low cost delivery network based on grocery delivery - Amazon fresh
4. small friendly stores where you can browse products, try them out, get help - Amazon popup stores (same principle as apple stores)

All retailers should copy this recipe. For example grocery supermarkets should shrink in size, provide customers with tasting stations and chefs and mini-restaurants (think Eataly) and cooking classes, along with butcher and other fresh produce. The rest (all packaged food that has a barcode) is delivered from a warehouse on a schedule right to your door at no cost if you are a member.

Also see Amazon's dedicated site for its popup stores: https://www.amazon.com/b?node=14303222011&tag=bisafetynet-20

Amazon and Morrisons grocery store partnership in the UK is growing. I can see it be very good for Amazon, but is it for Morrisons? Typical reaction would be to think they are inviting the enemy within their stores.  Maybe not. Here is what I think:

- Morrisons is a grocery fulfillment and distribution fighting to remain relevant in the digital age. Amazon brings orders and leverages its supply chain and procurement and expertise in buying fresh products;

- Amazon most likely will pay to host its lockers in stores, a new source of revenue;

- Amazon will bring customers to stores, something that is more and more difficult to do

- customers have an infinite aisle, able to shop online to Amazon when in stores, which may represent a new revenue stream

- competitors are investing heavily in money loosing or barely break even online ecommerce for grocery: morrisons can use this cash to do other, more profitable ventures, until the business model for grocery ecommerce becomes profitable

Who knows, this may be a wise move from Morrissons executives.

Google research on the topic of eCommerce includes so many topics that I use it as guidance on the different aspects I need to cover when building an eCommerce strategy: just look at the table of content below.

You should too.

If you don't have a Gartner account or would like a free resource, start with their primer https://www.gartner.com/binaries/content/assets/gml/ki-pages/research-primers/94142c1d-730d-4251-97c7-938ce27b304c_gartner_for_marketers_digital_commerce_primer.pdf 

or go to one of the major solutions such as Hybris to get access to analyst reports that favor them positively (!): https://hybris.com/en/downloads?q=:prioritySort:type:Analyst+Report 

Table of Contents

• Analysis
• Digital Commerce Market: Definition, Growth and Trends
• Definition
• Growth
• Trends
• Digital Commerce
• Digital Commerce Platforms
• On-Premises (or Hosted) Software
• SaaS
• Digital Commerce for Midsize Businesses
• Digital Commerce for B2C Organizations
• Digital Commerce for B2B Organizations
• Open Source
• Marketplace Commerce Sites
• Digital Commerce Services
• Digital Commerce Service Providers
• Hosting Services and Managed Services
• Digital Commerce Ecosystem
• Distributed Order Management
• Payment Solutions
• Commerce Search
• Web Content Management
• Personalization Engines
• Digital Analytics
• Customer Journey Analytics
• Digital Customer Acquisition for Service Industries
• Marketplace/Channel Integration Platforms
• Social Commerce
• Subscription Management
• Configure/Price/Quote
• Master Data Management
• Warehousing, Logistics and Fulfillment Service Providers
• Marketing Automation
• Assisted Selling
• A/B and Multivariate Testing
• Cool Vendors in 2014 and 2015

To succeed in eCommerce you need to master one thing: delivering products to your customers rapidly at the lowest cost possible.

This is why events such as this one have become essential. I would even say that delivery is the single most important aspect of an eCommerce solution, as it is where your margins are made or lost. Ensure you have a comprehensive last mile model and you will be guaranteed not to loose money.

A great blog on different elements regarding eCommerce, from strategies to solutions and statistics. Here, one post that identifies the issues that prevent ecommerce deployment.

One post from a great blog on all things related to eCommerce, Amazon, Google, and others.

A recent survey and study confirms that shoppers want to receive notifications on their mobile phones when they are in store.

related article: http://www.the-cma.org/resource/leadership/enhance-customer-experience

study: https://www.the-cma.org/Media/Default/Core/Library/Publications/Using_Digital_Solutions.pdf 

A short article on the use of 3D printing in fashion, with lots of links to follow for more details.

WHY THIS IS IMPORTANT

Technology permeates every industry and changes basic assumptions and business models. We often think this is limited to low margin commodity products but it looks like specialized, niched industries can benefit too. Look at your industry and ask, where can I apply 3D printing, eCommerce, augmented reality, connected objects, etc. in my company to revolutionize the way I design, fabricate, distribute, market, sell, support. 

Think of everything because everything is on the table and open for digital transformation.

1Atelier leverages a fully digital customer experience and strong back office systems to provide one-of-a-kind luxury handbags in 21 days instead of many months for traditional firms such as Hermes or Louis Vuitton.

WHY THIS IS IMPORTANT

Niche retailers and small handmade manufacturers should look into this new disrupting company for clues into how best to transform traditional industries that are based on hand-made, custom, high quality solutions and products. Going digital does not mean sacrificing customer interactions or hand-made manufacturing: it can revamp, improve and recharge the back office support systems and processes.

Amazon has invested heavily in warehouse automation to reduce costs and improve quality. It holds an event every year to select the best robots to accomplish warehousing tasks, this year to pick different items from store shelves.

WHY THIS IS IMPORTANT

Looking at the video it is clear that the technology remains primitive. That being said, with large investments made by Amazon in Kiva autonomous warehouse robots in the past, it is clear they are serious about warehouse automation.

It is clear that order fulfillment and delivery remain the 2 bottlenecks of eCommerce providers, adding costs and delays to the process compared to brick and mortar retailers. If Amazon could develop fully autonomous warehouses and have low cost delivery by leveraging Amazon Fresh grocery delivery trucks, it could have a profound impact on the viability of online pure plays and mark the decline in store-based commerce, which still account for 95% of all sales in the USA today.

Explains how runkeeper uses eCommerce to reward customers and achieve impressive conversion rates of 4% to 7%.

WHY THIS IS IMPORTANT

We too often think of eCommerce in classic, undifferentiated terms: catalog of products, shopping cart, checkout. This paper offers an interesting twist to the whole thing, embedding eCommerce within the mobile app and unlocking certain products based on goals achieved by customers. Retailers should apply this approach to leverage their eCommerce platform beyond the classic website: behaviour-based rewards, special categories, loyalty-based commerce, mobile commerce, social commerce, etc. The eCommerce platform should become a platform not merely a transactional tool.