The retailer tablet race

Tesco launched a tablet and sold 400,000 in three months till Christmas. Soon others like Aldi and Argos followed suit. This promising marriage of retail and tech piqued my interest so I dug deeper.

As we consumers have changed our shopping habits, retailers have invested heavily in online. Roughly 11% of our total shopping expenditure in the UK happens online and it’s growing fast.

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Retailers like John Lewis have been aligning their brick and mortar stores with their online operations. Two thirds of John Lewis customers now interact with the company’s website and a store before making a purchase. And a third collect their online orders in store.

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Smartphone and tablets use is on the increase as we browse, compare prices and buy on the way to work, in the shopping mall and on the couch while we watch TV ads.

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Amazon was the first retailer to launch a tablet back in 2007. Today, Kindle owners are big loyal spenders on Amazon.com. No surprise then that Amazon reportedly prices its tablets at break-even prices.

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So it makes sense for a retailer to be in the tablet business. Households will own a tablet on average for two years. During that time, the retailer will have an opportunity to influence buying behaviours.

As to what happens next, I guess that more retailers will launch tablets. Buoyed by initial success, they will get better at making tech hardware and experiment with software experiences. As tablets get lighter, smaller and easier to carry around, retailers will also start to experiment with in store experiences.

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Payment wars

I took a look at mobile payments space and specifically, offerings from Square and Paypal in the US and iZettlePaylevenSumUp in Europe. Here’s what I found. Firstly, they have similar business models.

imageSecondly, all of these companies have deep pockets.imageThirdly, all of these companies are rapidly expanding. Square and Paypal started from US. imageiZettle was founded in Sweden. SumUp and Payleven were founded in Germany.image

Update 27.01.14: I assume below that “entry-level” customers are small businesses or free-lancers with low volume of payment transactions who would want to try the card readers on a no commitment or contractual basis.

Fourthly, until now, these companies had priced their product in a similar way for entry-level customers. However recently, SumUp dropped its entry-level price which led some to speculate if a price war was looming.

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What happens next? Let me try and guess. Rapid international expansion will continue. New players like banks will enter this space. New partnerships will be forged and new teething issues faced. Increased competition and pricing pressures will squeeze margins. So some players will strengthen their product proposition.

I believe execution will be key. Players with effective sales, targeted marketing, and strong logistics will gain scale and look to consolidate.

Mobile revolution will change industry landscape

Expect large-scale industry disruptions as mobile apps re-write our lives.

The good thing about being in the mobile space right now is that everyone thinks mobile is important. No one though has a clear sense of how things will go. For example, Facebook has been criticised for not having a clear mobile play. People are increasingly accessing Facebook from their mobile phones yet Facebook doesn’t have a clear way to monetize or present advertising on its mobile site. Similarly, while sites like Paypal are showing a lot of mobile transactions, they are only doing so because people have registered their credit cards through the non-mobile site. One moral of the story here is that if you’re an established online player, you can piggy back on your online offering to gain quick mobile traction. The harder challenge of course is how do you truly leverage the full capabilities of the mobile experience which is far more powerful in some aspects and less so in others.

The mobile device inherently is a much more interesting machine than a PC or a laptop. It goes places with you. It is your primary camera, music player and text messaging service. You can customise it with apps. I download more apps than I ever did with my laptop or a Macbook.

What I’m describing is a pretty recent thing. The iPhone came out in 2007. App Store was available in July 2008. Android phones started appearing in late 2008. The iPad came out in 2010. Yet it feels like they’ve been around forever. Its hard for me to conceive my urban life without one or two of these devices by my side. What’s even more interesting is that we’re still in an early stage of the revolution. Smartphone penetration will hit 50% in the UK and US in 2012. There are more devices from more manufacturers in more form factors being unveiled every year. Even book-sellers like Waterstones are getting in to the game. Of the 30 or so billion dollar valuation startups, few who are truly mobile can claim to be part of it. Only Square, Instagram, and perhaps Rovio come to mind. Even some savvy venture capitalists are struggling to articulate as to which mobile business models are safe bets. Perhaps, we are looking at another decade of mobile growth and innovation if we take the global perspective.

The cost of innovation has also dropped and consequently the pace has picked up. It doesn’t take as much money to create a software product today than it did a decade ago. Equally, the evolution of software tools has made writing software easier and increased the pool of developers. With the dropping of the cost, comes the opportunity for a small-scale entrepreneur to come along and address profitable niche markets. We’ve seen this happen in Shenzen China at the very low end of the mobile phone market. In Shenzen, small 15-people companies created small batches of mobile phones for niche markets. Over time, thousands of such small companies each targeting their own niche, were giving large established manufacturers like Nokia and Samsung, a run for their money.

I think we’ll see something similar in the app software industry. This will mean an increasing threat of large scale disruption to whoever believes he or she is the incumbent. Software developers in very small teams, funded by an ever increasing number of accelerators, will create a succession of cool new apps which we, the consumer, will love. Our lives will subtly change every month and we’ll learn to accept and maybe even take it for granted.

What this means for the established industries I don’t know, but change is inevitable. The economic climate is unstable and a cause of high youth unemployment but this I believe will help entrepreneurship. The risk of a startup is considerably lower when the alternative is unemployment.

The world is a smaller place and more uniform thanks to the proliferation of mass-produced media. It’s easier today to produce a scalable product for the global market than it was two decades ago when I was growing up. Globally-aware young entrepreneurs will see an opportunity. Exciting times ahead and not all doom and gloom.

Physical retailers take on Amazon and eBay with their own mobile apps

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.

As internet changes the high street, what can we expect from mobile?

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.

Smartphone industry revolution gathers momentum

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.

I want to be an entrepreneur. How do I find my business idea ?

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