Tag Archives: Amazon

Window Shopping and Shopping on Windows

A running theme over the last few years in business news in the US and elsewhere is the terminal decline of the physical retail store. Many of the big name chains once thought of as bastions of the high street have fallen victim to the online juggernauts, on what seems like a weekly basis. The finger of blame is most often pointed at Amazon, whose profits continue to soar to such extents that some financial analysts are now claiming that their share price is overvalued and based upon forecasted earnings of massive proportions.

It is possible that President Trump may attempt to curtail Amazon’s growth through trust-busting legislation – something which could be motivated by his feud with The Washington Post and its owner/Amazon exec Jeff Bezos – however there is little legal ground to challenge the etailer simply because their business model and disruptive technology offers a better deal for consumers as things currently stand. It’s true that few retailers can take on Amazon based on pure pricing, however there are still assets which Amazon does not yet have: a large high-street presence and refined customer service.

I was speaking to a colleague recently whose wife works as a beauty consultant in London’s West End. She was upset that although their footfall was good and plenty of customers wanted to try out products, very few actually bought anything, and many could be seen price-checking and purchasing on Amazon before they even left the store. Let’s be honest: many of us do this every time we shop. Her general feeling was that they shouldn’t even bother stocking anything in-store. This remark was borne of bitter resignation, but some retailers have done exactly that, using a sophisticated omnichannel model to remove the need for significant store inventory.

There are certain categories where consumers will always want to try products in person, and which if prove unsatisfactory can result in a glut of expensive return logistics. Clothing and fashion is an obvious candidate; US brand Bonobos recently posted a $60m increase in revenue over the past five years, driven by their Guideshop setup. Consumers visit physical stores to see the new lines, try on clothing, then pay to have clothes delivered when and where they wish. The store itself does not hold large stock or inventory. Bonobos’ system challenges the assumption that most consumers want to leave with the product in hand, and has allowed them to reinvest logistical savings in staff training and a high service-level.

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This phenomenon is also seeing green shoots for technology sales, with showroom setups such as London’s Sandbox offering hands-on experience with new categories including VR. Like Bonobos, Sandbox’s function is to give consumers the chance to try room-scale VR, something Context’s 2016 VR consumer survey showed to be a key factor in purchasing VR. At this stage in the category’s lifecycle relatively few consumers have tried room-scale VR, and would therefore be unwilling to part with the daunting initial upfront cost.

These kinds of demonstrations are arguably more important for VR marketing than traditional advertising. VR can be a revelatory experience, but selling it to someone who has never tried it is an uphill struggle. It is also fair to say that many consumers shop online to avoid feeling pressured by a salesperson, and at present very few retailers can offer truly excellent face-to-face customer service. By removing the onus of making the purchase then and there, and potentially allowing for price reductions to compete with Amazon, Bonobos’ solution, or a modified omnichannel setup could be the saviour of the high street, not to mention a huge boom time for the distribution channel and drop shipments.

The art of window-dressing has a long and proud history, once a place of hubris for serious-minded shop attendants and source of satire for comedians, but now the whole store offers a window into (Microsoft) Windows.

by JW

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B2B – a risk for the channel or a missed opportunity for tech retailers?

The recent news about Amazon launching its B2B activity in Europe, starting in Germany, has generated a lot of press coverage. In the US it is reported that in the last two years the number of business customers shopping at Amazon has increased from 200,000 to 400,000, so resellers in Europe are concerned. “Amazon’s B2B challenge is a danger for the Channel,” was the headline on CRN UK’s front page.

So is this news a risk to the channel or in fact a missed opportunity for retailers?

Three years ago CONTEXT ran a conference which highlighted the opportunity of what we named “R2B” short for “Retail-to-Business”. Many retailers from across Europe attended this conference, but very few had the real commitment to make it happen. So will the news of Amazon’s arrival in this space make them wonder if they missed an opportunity? Surely if Amazon, with no stores, no experience of providing human-to-human customer service, and no expertise in business IT, can go for this sector, then the tech retailers can do so also.

Successful retailers in B2B are those who have invested in a service capability. Best Buy and the Geek Squad, DixonsCarphone and Knowhow, the Darty van with “le contrat de confiance” emblazoned on it – these are the retailers that have invested in service. Sebastian James, CEO of DixonsCarphone, said at Retail Week Live in March 2015 “if we don’t invest in the whole chain we risk to become irrelevant”. Some etailers have also managed to create a space in this area – an example is LDLC in France which has set up a nationwide network of resellers who help their business customers to install and maintain their IT equipment.

If a retailer is keen to take on Amazon in the B2B area here are the 5 key steps to follow:

  1. Identification and targeting of business customers through the use of CRM and intelligent sales activity – for example, every time a customer asks for a VAT invoice, this is a sure sign that they are a business; or when they purchase more than 2 of any machine, this should be a sign. Human interaction with the customer is important, as well as the posing of key questions online. On Staples website, the very first action is to identify yourself as a business or as a normal customer
  2. Curation of business SKU’s – with the support of vendors, retail is a way of targeting incremental sales from small businesses of less than 25 seats. But it is necessary to have the right products, which are not always made available to retailers. You can buy a Lenovo Thinkpad for a B2B customer on PCWorldbusinessonline, at Amazon.co.uk, at LDLC but not at Fnac, Darty, El Corte Ingles or even Media Saturn.
  3. Category management to drive out the optimal product mix – the business SKU is part of an ecosystem – understanding the upselling opportunities to meet the full needs of the business customer is a key element of success. R2B market data is a vital support for retailers by showing top selling products and typical market baskets.
  4. Service at every stage – the business customer needs service in store, online, at the point of installation and support in maintaining equipment in a functioning state. This is the most demanding element of the proposition in terms of investment. Recently, I asked the CEO of a retailer in the Middle East if he was concerned about Amazon’s purchase of Souk.com, and he said “No! We will differentiate ourselves through our service offering.”
  5. Financing of small businesses – this is a key activity which helps SMB to survive and grow. Healthy credit terms and even loans help small and medium businesses to expand without fear of cashflow shortage.

It is not too late for retailers to enter into this space, and capture a market which is at risk from the ever-innovative and expanding Leviathan which is Amazon.

by AS

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Google and Amazon lay the foundations for a virtual assistant to run our homes

The dream of the smart home always seems just out of reach. Everyone knows how it should work. You buy a new connected device, plug it in, and it instantly syncs with all your other devices. Of course the reality is often markedly different—one poor man spent 11 hours trying to make a cup of tea with his new kettle. This is not an isolated experience as many tech reviewers and consumers have documented their own valiant battles to control their devices.

The root cause of the frustration stems from the multitude of technology standards, but Google and Amazon are both making great strides trying to address it. They have realised that convenience is the key to making the category a success. And what could be more convenient than telling someone, or in this case something, to do a job for you? The Amazon Echo, newly available in the UK, has won over industry experts for its ability to search online for information, and control the home’s connected devices using simple voice commands. But it is Google Home that has many in the industry excited.

Google has always been a data company, with a mission to organize the world’s information. If you have a Gmail account, it’s been reading your emails for years. If you use any of its services such as Android, Chrome, Maps or Search it knows pretty much everything about your habits. A few years ago, it launched Google Now that aimed to map out your life as a personal concierge you could speak to. With Google Home, this goes one step further.

Advances in Artificial Intelligence mean that you can now converse with Google Home. After you ask it what’s on at the cinema, you can then ask it to filter by age-certification or genre, and then to book tickets. It will wake you up and give you a morning briefing based on the papers you read. It will alert you to any delays on your commute, and remind you about appointments. Plus, it can connect to your smart home devices—though not as many as the Amazon Echo—and operate them all by voice. Initial reviews have been very positive, and while there are discussions to be had about privacy and security, the promise is there for all to see.

We surveyed 2,500 European consumers about their hopes for the smart home, and only three per cent thought they needed a hub to control all their devices. But it’s looking more likely that a device like the Echo or Home will be the gateway to your home’s other devices, with users enticed by the ability to search and manage other aspects of their lives.

The price points are within consumer expectations, though they do not leave much room for purchase of additional smart home products. Thirty per cent said they’d pay up to £150 for smart home devices over the next year, exactly the price of the Echo, with Google Home set to retail in the U.S. at $129. Fifty per cent would pay more than £150, meaning these devices are accessible, and could well act as the catalyst for people to buy more smart home devices. Indeed, Google is pushing its Nest thermostats and IP cameras anew on the back of the Home launch.

By choosing voice as the input method, Amazon and Google have removed the cumbersome user-experience of finding the relevant app on your smartphone for the lights, and then navigating to another app for speaks. It is choice that could usher in mainstream acceptance for having a virtual assistant in our homes.

by AS

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Get big, get specialist, or get out!

You’re a brave person to be the only representative of a titanic eTailer in a room full of established and independent retailers. This was my thought last week at the PCR Bootcamp where I was lucky enough to evangelise on the subject of Smart Home to the brightest and best in the British ICT channel. Time and time again the name of a certain rainforest popped up when the subject of tough competition was mentioned. Having scanned the attendance register earlier that day, I knew that one of the Amazon team was probably in the audience, but if they were they had decided to wisely remain reticent and keep their head down.

In fairness, the presence of Amazon in UK retail is nothing short of terrifying. Amazon is now the first port of call for many consumers for just about everything from laptops to t-shirts suggesting that the 40th President of the USA was an undead monster. Indeed, in the last CONTEXT consumer survey on Smart Home, 80% of respondents in the UK said they would look to buy Smart Home products from Amazon, followed by Maplin with 60%. There is a lot to be wary of when in competition with Amazon, however that’s not to say that traditional retailers do not have a play in the current retail environment – even the mighty Achilles had a dodgy ankle.

Towards the end of the panel discussion, Rich Marsden (MD VIP) made the comment that in today’s world it’s “…get big, get specialised, or get out”. This resonated with everything I had tried to admonish during my own speech. The owner of a very successful Smart Home eTailer recently confided to me that a significant portion of his customers were those who had bought from Amazon but ended up returning the products because the post-sales support was not sufficient to help them set up their purchase. This particular eTailer has a fantastic technical support service and pride themselves on their very low return rate. Smart Home products won’t sell themselves and are not your average plug-and-play devices.

Consumers need to be educated, if possible in store and in person. Moreover, some products cry out for home installation and partnerships with trusted service providers. Many consumers struggle with resetting their fuse box, let alone fitting a new thermostat. As Rich went on to say “…there will always be a market for people who want to walk into a shop to make their purchase.” With emerging product categories such as Smart Home (and soon, VR), the experiential is far more important than convenience of purchase. It’s time for retail to bring back a little theatre and hands-on salesmanship, something an online transaction cannot currently capture.

by JW

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Filed under Home automation, Mobile technology, Retail in CONTEXT, Smart Home, Smart Technology

New products, new formats, old world

This year CONTEXT is hosting a breakfast at the CES show in Las Vegas. Our objective is to give a voice at CES where senior players can examine the issues which retailers are facing in Europe as we go into 2015. We have ICT retailers from Dixons, Boulanger, Auchan, Mondadori as well as the CEO’s of Darty, Euronics, Lick and Bimeks, and senior representatives from vendors and distributors such as Lenovo, Acer, Samsung, AMD, Netgear, Webroot, the GTDC and Esprinet.

The old continent is divided – there are continued risks to euro integrity, the latest being the threat of Greece reneging on its agreements; UK growth vs Eurozone stagnation; the threat of deflation in France which has been recorded for the first time since modern records began; and the cutting off of Russia – not many Russians will be expected this year at CES. What does 2015 hold for ICT retailers and for the European economy as a whole? There are two encouraging macro-economic trends – the collapse in the oil price puts more money in consumers’ pockets and the QE being engaged by the ECB for the first time will stimulate growth. But overall economic prospects in Europe show a fragile recovery.

Against this environment traditional ICT retailers face well documented threats – the growth of etailers such as Amazon and Ebay, the development of ecosystems in which they play a small role, such as Apple and Google, and the new threat posed by vendors themselves as they engage directly with end customers in a world of connected products.

Régis Schultz, Darty CEO will address the CES breakfast and maintain that unless retailers step up and deliver high value service to their customers, they will no longer serve any useful purpose. Retailers must reclaim customer relationships which are their lifeblood and which are at risk.

The Darty solution has been to advance unique service solutions. Schultz will talk about the innovative Darty button – it is a physical button which links to your wifi and smartphone, and is only available if you have a service contract. You press it and are put in direct contact with Darty service engineers 24/7. “Unless a product has a service opportunity we are not interested in it, for example we only sell Nest thermostats in a bundle with the installation performed by our engineers.” A 100% attach rate is a decision which Darty has taken even if they may lose some deals to consumers who want to instal themselves.

Hans Carpels, the President of Euronics, the 2nd largest retailer in Europe with a consolidated turnover of 17.6 billion euros, will deliver a message about his view of the European technology market in 2015. He is uniquely placed being at the head of a retailer with a presence in 30 countries spread across North, South, East and West Europe.

The old world of Europe is coming up with innovative ways to sell new products in new formats, and which will be explored at the breakfast. If you are interested in attending the Retail CEO breakfast, please contact Adam Simon, Managing Director of Retail at CONTEXT on asimon@contextworld.com

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The Purchase Experience – who cares? Retailers, it’s a Question of Survival

A 30 second video extract set the scene for the inaugural strategic forum hosted by CONTEXT at Melco Club last week. A man was calmly fishing on an ice floe, when suddenly, Jaws-like, a whale burst through the ice and the man disappeared. Chris Petersen, veteran consultant on Technology Retail and our keynote speaker, asked the audience who the whale was, and most people said Amazon. But Chris turned the issue on its head, and pointed the finger at the Retailers themselves and said the whale is the internal mindset inside your own companies, because you are not prepared to change. So now we were engaged with our guts or as the French say in our “tripes” – it is a question of survival.

Our topic was “The Purchase Experience – Who Cares?” – a deliberately provocative theme – of course we all care, but when the consumer gets less than a wonderful experience buying technology is it the Retailer’s fault or the Vendor’s? Senior leaders in the Spanish and South European consumer markets came together to explore collaborative ways of making the Purchase experience better. At the Forum there were positive signs of connections being made, meetings taking place (even one on the following day) for Retailers and Manufacturers to trial out new ways. As Inés Bermejo, HP Consumer Director, Spain and Portugal, said, “we have to trial new ways of doing things”.

Chris showed us examples of the Purchase Experience which work – the Starbucks secret menu, the Tesco virtual stores in S Korea, Build-a-Bear with their phenomenal CRM, the John Lewis omni-channel journey – getting the different channels to collaborate and not compete. There are still so many retailers where online and offline have competing objectives and organisations. And the maths is simple according to recent studies quoted by Chris – consumers who shop omni-channel, the new normal, spend 350% of what single channel consumers spend. Why not have some of that? Also size is important in today’s omni-channel world – there is a race to be small again with Walmart opening up new stores of 1,200 square metres compared to the old leviathans of 20,000 square metres. We know this in Europe where the hypermarket format has been dying a slow death in the last 10 years. But it is also a change in understanding of the store’s purpose. “The store is now a distribution point” said Chris Petersen. Of course, it always has been, but the point is making the whole omni-channel experience easy for consumers, and that is why Amazon and other e-tailers are looking to open stores or use other people’s store network.

When the Advisory Board panel spoke, they captured the sense of urgency – “we have to bring the human touch to selling technology” said Ramon Abad, head of Business Development for AMD in Spain. “We need to be better at explaining what technology does” said Ines Bermejo from HP. “We must integrate online and offline” said Eugenia Albares, head of buying at Fnac Spain. “Computers are such an important purchase for people, we have to make it an experience for them…” added Javier Galiana, head of Consumer Marketing for Intel Southern Europe, “…or else it is just about price.” Maite Ramos, General Manager Iberia Consumer Business for Lenovo said that the tech industry has to do their best to attract people with the resources they have. For example, they are using bright colours like red and are also investing in store within store. Lastly, Gonzalo Ruiz, head of Windows & Office Consumer Channel Strategy, spoke passionately about how Microsoft work with retail partners to design pilots based round research on consumer behaviour, which leads to better results.

Chris Petersen ended his keynote by giving participants a fascinating insight into one specific measure – GMROII – which is commonplace in the US, less so in Europe, to calculate the impact of different retail programmes. It stands for Gross Margin Return on Inventory Investment and allows retailers to measure for every dollar they spend, the return which they get including the impact of both gross margin and inventory turns. With the decline in gross margin in Best Buy from 35% in the glory days to 23% currently, and with a rate which is declining by 1% per year, Best Buy has had to look very hard at its inventory, and the white hope for 2014 is that store inventory is now online which according to the CFO in the Q1 investor call in May 2014, will unlock $2bn of the $3bn inventory which they hold. According to this measure, a score of 2-3 is good, and 1-2, which is where most technology retailers are, is ok at the higher end. But where Best Buy sits at 1.25 it is dangerously close to 1, which is where retailers close up shop.

Chris left us with a recipe for technology retail in these difficult times.

  1. Pilot new initiatives putting the consumer, omni-channel and the purchase experience at the heart
  2. Measure the outcomes using GMROII
  3. Pursue the best – “results count – everything else is conversation!”

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