London recently hosted a retail technology expo at Earls Court. I went along with a few questions in mind.
Smartphones offer price transparency to shoppers. Amazon and eBay enable shoppers to scan products in a physical retail store and order them online more cheaply. How are physical retailers responding ?
I found that retailers have acknowledged the price transparency offered by smartphones and are responding. According to the retail analyst, Bjorn Weber, this area was the biggest in terms of investment from large retailers. Some retailers were bulking up their online presence and adding home delivery capabilities to their websites. He felt that for many retailers this wasn’t going to be a profitable response in the long term. Margins can be pretty slim for online distribution bearing in mind that physical retailers have made large capital outlays for their existing retail outlets. He felt the right response was using smartphones to re-engage consumers and improve in-store buying experience. Several european retailers are doing just that.
He gave several examples.
- IKEA Spain has a mobile app that uses augmented reality to enable consumers to visualise their homes with Ikea products.
- Tesco in some international markets allows consumers to scan product QR codes in shop windows to order deliveries when stores are shut in the evening.
- Jumbo, Swiss DIY retailer is rewarding shoppers for visiting their stores through the shopper’s smartphone. Shoppers get a 15% discount on their baskets.
I’ve been speaking to many retailers about their biggest challenges. There seems to be an increasing acceptance that the internet is changing the high street. Consumers are less likely to physically handle goods i.e. buy something from a physical retail store and take it back home. Increasingly in the long term, items such as CDs, books, electrical and electronic goods will slowly disappear from the high street. Similarly, service oriented retailers such as travel agents will also move online. There will be a significant restructuring of the high street. However, fashion stores will always be physical stores. High street would become more about acquisition of services e.g. dentists, health and beauty stores, chemists, food and drink.
We can see a similar trend if we look abroad to Scandinavia where broadband penetration has always been high and small populations and taxation make man-power expensive. Walk down the city centre in Copenhagen and you’ll be hard pressed to see an electronics store. Instead, you will see an endless array of fashion chains and boutiques and cafes.
Retailers will respond. They will more fiercely manage their online presence, offer a more differentiated product mix and improve in store experiences. What does this mean for mobile commerce? For over a year, shoppers have been taking advantage of smartphones to compare prices in store. QR codes as marketing tools have become commonplace on magazines and in store despite doubts over their effectiveness. NFC is gaining momentum although phone penetration remains low. Plethora of mobile payment solutions continue to gain interest and yet confuse at the same time.
Rightly, retailers remain keen to partner and experiment.
The smartphone industry has never had such a rich offering of players, products and services.
Apple has multi-screen assets including the iPhone and iPad, a sticky iTunes, and an increasingly discontented following of developers and content publishers. Google is stretched across many battle-zones such as search, local, browser, social, and payments while also being occupied by strengthening Android through the Motorola acquisition. Microsoft is under pressure to develop mobile, tablets, cloud services and Bing in order to stay fresh, while at the same time extracting the most value from Windows and Xbox. Amazon has diversified from books to offer Web Services, Kindle and if rumours are correct, an upcoming tablet.
In the backdrop, a valuation bubble is enabling easier access to capital and fuelling new innovation and faster global penetration for US high growth startups. New emerging names with billion dollar valuations include Dropbox, Square, Spotify, AirBnB, Zynga, Groupon, Pandora to name a few. Venture capitalists see mobile as the next big area for venture growth.
The pace of change is undoubtedly going to accelerate. This is a truly exciting time for the industry and consumers.
The first challenge any entrepreneur faces is to generate an attractive business model that will captivate his or her interest for the several years it takes to grow the business. Recently, I’ve assisted several London entrepreneurs generate new business models and in doing so, developed a set of useful techniques one of which I’d like to share.
Technique #1: Brainstorm in pairs and use consumer & technology trends as food for thought
1. Pair with someone else and ideally grab an airy bright room with a whiteboard
2. Randomly pick one or more consumer trends (see Trendwatching or TrendHunter for ideas)
3. Based on your experiences, in the areas that relate to the selected consumer trends, identify and list out pain points or problem areas that you think require better solutions
4. Select one or more technology trends (see Gartner or TechRadar for ideas)
5. Using selected technology trends, sketch out technology solutions for the pain points which resonate with you the most
6. Maintain an open mindset and patiently entertain ideas and concepts that you ordinarily wouldn’t
7. Ideate for a couple of hours max till you have at least one business model with the target segment, value proposition, delivery mechanism and monetisation method identified
If you’re an entrepreneur, would you rather base your business in the US or the UK ? Here are a few things to consider.
US is a larger market with 300M people and offers easier scale up. UK offers 60M people plus an opportunity to expand into Europe.
Silicon valley has proven pedigreee when it comes to building large technology businesses. Europe has a few successes eg Skype, Spotify, last.fm, and Rovio. UK has even fewer successes to boast of.
What makes up pedigree? Easy access to capital? Anecdotally, its seems there is much more early stage funding available in the US. Appetitie for risk may be higher in the US than in more conservative Europe.
What about access to technology talent? Anecdotally, its hard to acquire and retain developer talent in the Valley. Anecdotally, same is true in London. Good developers in London cost lots thanks to competition from the financial sector.
So US seemingly wins thanks to a larger market size, proven pedigree, and better provisions for early stage capital.
However, many entrepreneurs are foreign-born. Can they simply buy a flight ticket to the Valley and setup shop? Nope. The US visa situation is tricky. One needs a H1B visa to work for another company and there are few around. The situation in the UK is more friendly for foreign-born entrepreneurs. All they need is committed capital for their idea.
Read about how UK government has made it easier for entreprenuers
Read about a British entrepreneur’s attempt to move his company to US:
Read about how the Valley is a better place for startups than UK