Amazon partners with Synchrony to offer a secured credit card to those who have a low credit score. Normally, a low credit score results in a rejection of a credit card application at a financial institution due to default concern; which, in some real-life cases, can lead to significant trouble. With the Amazon Secured Credit Card, potential customers put in an amount of money that serves as collateral and their credit limit. Customers then gradually build up credit profile by being financially responsible before graduating to a better credit card.
I think it’s smart of Amazon to implement this initiative
They can tap in a new customer segment
It’s hard to imagine that folks with low customer score can be Prime members and Amazon’s profitable segment. Yet, after years of exploiting the higher customer tier, Amazon will likely need to widen the customer pool for growth and more than 11% of the population in the US is a sizable segment to appeal to.
This will increase switching costs and customer loyalty
Amazon Secured Credit Card comes with 5% cash back on purchases like the ordinary Store Card. A pretty competitive cash back rate on every purchases. Convenience, a variety of choices and generous cash back can definitely encourage purchases on the Seattle-based company’s website.
More customers and purchases mean more vendors and advertisers
Vendors who wish to appeal to low-credit-score customers will want to get on the e-commerce platform if there is enough demand. Advertisers will be willing to pay to put their products, services or brands in front of the new customer segment, in addition to the existing customer base.
Thursday was a big day for Disney as the company announced the much anticipated streaming service called Disney+. You can learn more about it from this link. The top executives went through a lot of aspects of the new service, including programming, roll-out plan, pricing, investment in future original content and forecast financial impact. The service will offer users ad-free access to an incredible library of content owned by Disney, such as Marvel movies, Pixar, Star Wars, Disney and National Geographic. Users will also be enjoying some new original content such as WandaVision, Loki or Falcon and The Winter Soldier. The price is very attractive at $6.99/month or $69.99/year with all content downloadable for offline consumption.
It is a serious challenge to Netflix as Disney has plenty of content that can appeal viewers across demographics, the brand name, the marketing expertise and the financial resources. It can be argued to some extent that Netflix also has a brand name (apparently “Netflix and chill” is quite popular in our society), content (it invests billions of dollars in originals) and the marketing power. But there are two things that Disney has going for them: additional revenue streams and the ability to bundle more.
Firstly, below is the segmentation of Disney’s revenue and operating income. (Figures are from Disney 2018 & 2017 annual reports and in $ millions)
Revenue – Services
Revenue – Products
Revenue – Media Networks
Revenue – Parks and Resorts
Revenue – Studio Entertainment
Revenue – Consumer Products & Interactive Meida
Operating Income – Media Networks
Operating Income – Parks & Resorts
Operating Income – Studio Entertainment
Operating Income – Consumer Products & Interactive Media
In 2018, Parks and Resorts’ operating income is almost three times that of Netflix in total, let alone other segments of Disney.
I think it’s great for Disney to offer an attractive penetration pricing model to quickly sign up viewers and scale up. Additional revenue streams, in my opinion, can help finance the play. Meanwhile, a Netflix plan is almost twice as expensive as Disney+, at least in the US market. I doubt that Netflix will lower its price to match Disney+’s, given their increasingly big investment in content and troubling negative free cash flow.
It’s not a zero-sum game. I believe that a lot of viewers will have both streaming services or even have Netflix exclusively, but on the other hand, some will likely choose Disney+ over Netflix. If the economy is still strong and folks have disposable income to spare, I think it will be beneficial for Netflix. However, if the economy contracts in the future and spending cut is required, I suspect that Disney+ at this current price will appeal more than Netflix.
Secondly, Disney now also has ESPN+, a sports subscription, and Hulu. Disney already said that there was a chance they would bundle Disney+, Hulu and ESPN+ together. It will be even more attractive to viewers.
With all that being said, execution matters. Though it seems Disney has a lot going for them, this is a new territory for them while Netflix is the trail blazer in video streaming services. I am excited about this competition in the future and Disney+ itself, as a big Marvel fan.
Disclaimer: I have Disney in my portfolio, but this post stems from my curiosity and is not an investment suggestion or anything more than just my opinion.
For the past two months, I lost interest in picking up a book for some reason. Nonetheless, the streak ended today as I finished this book.
The book offers a detailed and insightful view on hard discounters which usually act as disruptors in a local retail market. The book defines hard discounters as follows:
Hard-discount retailers offer basic goods and daily necessities at the lowest possible prices, while maintaining high-quality standards. A hard-discounter store differs from discount supermarkets or hypermarkets like Asda, Kaufland, or Walmart. Hard-discount stores are typically about 8,000-15,000 square feet, less than one-tenth the size of a Walmart Supercenter, with probably lower staffing levels.
To reduce costs, hard discounters often display items on shipping pallets and in the boxes in which they arrive. The store is minimally decorated and offers a limited assortment of consumer packaged goods and perishables – typically less than 2,000 stock-keeping units (SKUs). In contrast, the average US supermarket carried 40,000 to 50,000 SKUs in 2017, while a Walmart Supercenter sells over 100,000 grocery and non-grocery items.
Here is what I learned from it
Beware of potential threats in the market. The book told stories of retailers around the world that paid the price for under-estimating hard discounters. They dismissed the arrival of hard discounters at first and when they realized the threat was real, it was already too late to stop the hard discounters.
Benefits of offering a limited assortment of SKUs. I am usually overwhelmed by a plethora of choices at restaurants or supermarkets. As the book says, to shoppers who are under time pressure or who intend to buy rather than browse, a better shopping experience is to be offered streamlined options or a limited range of choices. Plus, retailers who sell a limited assortment, especially private labels, can negotiate a better economic deal with suppliers due to economies of scale. A better deal will help the margin of hard discounters. Additionally, a limited assortment of goods means smaller stores – lower rent, saved costs on logistics and staff.
Go-to-market strategy. Hard discounters tend to enter a new country through a specific market first. Get the foot in, the logistics and operations in and then expand. Also, each go-to-market strategy varies from one country to another due to a host of factors such as household income per capita, economic growth, shopping preferences. Blindly adapting a blanket strategy to different markets may lead to failures.
The book offers a comprehensive view on different aspects of hard discounters and retail in general. It confirmed my belief that a competing strategy can be made up of so many factors that are intertwined together, including to not limited to:
The size of assortments
Whether a retailer carries more private labels or national labels
How man perishable items a retailer carries
Whether it has a good brand name
Whether it has economies of scale
Whether the shopping preferences of local shoppers are a good fit
How much a retailer spends on marketing, promotions and discounts; and for how long it can sustain the effort.
A retailer’s culture
After penetrating a market, whether a retailer can survive the competition depends on the retailer’s ability to carve out a niche in the market where it can be competitive, using a combination of the above factors or more.
A few notable stats
Private labels account for somewhere between 70-90% of hard discounters’ assortment
In 2017, middle-class shoppers in the UK account for 60% of shoppers at Aldi and Lidl
In Germany, hard discounters accounted for three out of every ten euros spent on grocery purchases or 60 billion euros in 2017
Aldi entered Australia in 2001, and by 2017, had cost conventional retailers like Woolworths and Coles AU $16 billion in lost annual revenues
Trader Joe’s offers around 3,500 different items, Lidl between 1,500 and 2,000 while Aldi carries between 1,200 and 1,400 products
In Germany, Lidle was the largest advertiser among grocery retailers in 2017 (almost 280 million euros) and the sixth-largest advertiser in the country ahead of McDonald’s, Daimler, Unilever and Samsung
Trader Joe’s sales per square foot is $1,633, twice that of Aldi and Lidl, four times that of a Walmart supercenter and 8 times that of Dollar General
In Australia, 26% of Aldi shoppers were from high-income families in 2006. The figure shot up to 50% in 2014
For the average US grocery retailer, a loss of 1% in sales leads to a loss of 17% in operating profit
Bundling is the act of adding several individual services or features together in one package. Think of Amazon Prime as the example of bundling. With Prime, you’ll get fast deliver (my experience lately hasn’t exactly matched that), free return, Prime Videos, audiobooks and access to exclusive deals, just to name a few.
Unbundling refers to the act of selling a service/feature separately from an usually bundled service or product. Think of flight tickets as an example. Before low-cost no-frill, flights tickets had many features, but low cost fliers such as Ryan Air were the pioneers of selling only flight tickets and making the other features such as luggage, priority check-ins as add-ons and additional revenue.
With Apple, an example of their bundling is Apple Card/Pay. I have seen quite a bit of criticisms online about the features of the service aren’t anything new. To some extent, yes, that may be true. The thing is that Apple managed to bundle all the following features together to make an attractive product that is yet to be seen elsewhere.
Beautifully and elegantly designed titanium card
Rewards and immediate cashback
Acceptance everywhere (Apple claimed) for Apple Card and 40+ countries for Apple Pay
Security as in that biometric validation is required for payments with both Apple Card and Apple Pay
Privacy as in that consumer data won’t be used or shared with advertisers
Application process is fairly easy, reportedly, through Apple Wallet, which is loaded on your phone by default
Integration between Apple Card and Apple Pay
With regard to unbundling, I think that’s what Apple is doing with their hardware and services. Most services can only be enjoyed on Apple devices, yet such services lure consumers to the luxury devices which have been highly profitable to Apple. On the top of my head, there are three subscription services from Apple that an average consumer may likely use: Apple News+, Apple Music and iCloud. Soon there will be Apple Arcade too. Selling services separately and services from hardware gives users freedom to choose. If Apple bundled everything into, let’s say, $100/month for 1.5 years for the use of a new iPhone and all services, that would make some customers pay for what they didn’t use. Nonetheless, if the usage of paid services is high and consistent, I wonder if Apple will have an optional bundle for services alone for power users.
A few days ago, Mark Zuckerberg shared with the world his privacy-focused vision for Facebook moving forward. I understand that it may make sense strategically for the company, but I have real concerns over the feasibility of the strategy.
Lack of trust
Facebook has been littered with scandals for the past two years. The trust between the blue brand and users isn’t particularly at its all-time high. There have been documented evidence on the exodus of users from Facebook or the significant decrease in activities. If the trust is already shaky, why would users trust Facebook with every aspect of their life by using their proposed super app? (The super app concept is similar to WeChat, which users can use to do many things while on the platform such as booking movie tickets, paying bills, transferring money to friends and families…). If we can’t trust Facebook with just daily communication, how can we entrust it with more aspects of our life? If you can’t trust a dentist to treat your teeth, would you trust that dentist if he said he could fix your eyes?
I think one of the reasons why WeChat is successful is because of the target audience. Coming from that part of the world, I can say from personal experience that we Asians tend to not care as much as Western audience about privacy. I think there is a reason why WeChat hasn’t been as successful overseas as it is in China. If it were marketed to Western audience, given its relationship with the Chinese government and Western users’ concern over privacy, I don’t think it would be a triumphant effort. Hence, to convince Western users to use Facebook for everything, the trust has to be pretty solid. It’s not there now for sure.
Facebook has attracted unwelcome attention from lawmakers recently. And for a good reason. Even if they had done nothing wrong, which is definitely not the case, I suspect that the road to the super app vision wouldn’t be without robust challenges from the regulatory perspective.
Essentially, it’s all well and good for Facebook to change its stance on privacy. However, the trust isn’t there. I would love to see more concrete actions to transition from a company whose more than 95% of its revenue is from ads to a company that values privacy first. I am not a believer at the moment since Facebook has used up the rope we gave them already. If they want us to trust them again, they have to do it the hard way. And I think they have to hurry as well as the world won’t stand still for them. If this is the vision that makes business sense, others will go for it as well.
If they are committed and succeed in the future, kudos to them. Until then, I choose to remain skeptical of the vision.
Yesterday, Mark Zuckerberg released a blog post on a “privacy-focused vision” that centers on:
Private interactions. People should have simple, intimate places where they have clear control over who can communicate with them and confidence that no one else can access what they share.
Encryption. People’s private communications should be secure. End-to-end encryption prevents anyone — including us — from seeing what people share on our services.
Reducing Permanence. People should be comfortable being themselves, and should not have to worry about what they share coming back to hurt them later. So we won’t keep messages or stories around for longer than necessary to deliver the service or longer than people want them.
Safety. People should expect that we will do everything we can to keep them safe on our services within the limits of what’s possible in an encrypted service.
Interoperability. People should be able to use any of our apps to reach their friends, and they should be able to communicate across networks easily and securely.
Secure data storage. People should expect that we won’t store sensitive data in countries with weak records on human rights like privacy and freedom of expression in order to protect data from being improperly accessed.
Be that as it may that this vision can bring business and strategic benefits, meaning that Facebook has a reason to follow suit. Nonetheless, I have nothing, but skepticisms about this vision.
First of all, the majority of Facebook’s revenue comes from ads. By majority, I meant 98.5% of their revenue in 2018 comes from ads
When something is 98.5% of you, any claim that you will do something threatening that 98.5% part tends to raise genuine concerns about its legitimacy.
Second of all, Facebook’s track record on keeping its promise isn’t that great. For the last two years, it will be a hard ask to find a tech company that is involved in more scandals than the blue brand. I came across this disturbing article from Buzzfeed on Facebook. Here is what it has on decision-making at Facebook
Zuckerberg and Chief Operating Officer Sheryl Sandberg do not make judgment calls “until pressure is applied,” said another former employee, who worked with Facebook’s leadership and declined to be named for fear of retribution. “That pressure could come from the press or regulators, but they’re not keen on decision-making until they’re forced to do so.”
On Facebook’s attention to privacy
One former employee noted that Facebook’s executives historically only took privacy seriously if problems affected the key metrics of daily active users, which totaled 1.52 billion accounts in December, or monthly active users, which totaled 2.32 billion accounts. Both figures increased by about 9% year-over-year in December.
“If it came down to user privacy or MAU growth, Facebook always chose the latter,” the person said.
On their denial to admit problems:
Other sources told BuzzFeed News that Facebook executives continue to view the problems of 2018 fundamentally as communication issues. They said some insiders among leadership and the rank and file could not understand how Facebook had become the focus of so much public ire and floated the idea that news publications, who had seen their business models decimated by Facebook and Google, had been directed to cover the company in a harsher light.
On a new feature called Clear History:
“If you watch the presentation, we really had nothing to show anyone,” said one person, who was close to F8. “Mark just wanted to score some points.”
Still, nine months after its initial announcement, Clear History is nowhere to be found. A Facebook executive conceded in a December interview with Recode that “it’s taking longer than we initially thought” due to issues with how data is stored and processed.
By now, you should see why I am skeptical of Facebook’s new vision. We all have to take a side and so does Facebook. It just happens that taking advertisers side means Facebook is not on ours as users.
Disclaimer: I do own a few Apple stocks, but it’s nothing major and this post is just to share my observation of Apple. As a fan of business strategy, I have been a fan of the company and interested in how it performs amid the concerns after the letter to shareholders on 2nd January 2019.
Apple no longer reports units sold across their
Overall, Apple recorded $84.3 billion, down 5% year
Products gross margin was 34.3% and Services
gross margin was 62.8%.
iPhone revenue dropped by 15% year over year
Services revenue in Q1 was $10.9 billion, a 19% YoY
increase. Service revenue grew from $8 billion in calendar 2010 to $41 billion
in calendar 2018, allegedly on pace to reach $50 billion in 2020
Mac revenue was up 9% while iPad revenue was up
Wearables, home and accessories revenue grew by
33% to $1.8 billion
There are 50 million paid Apple Music
subscribers, up from 40 million reported in June 2018
Apple reported a base of 900 million installed iPhones,
out of 1.4 billion active devices in total from Apple
There are 360 million paid subscriptions across
Services portfolio, an increase of 120 million versus a year ago.
This quarter saw 1.8 billion transactions
through Apple Pay, twice the volume recorded in the same quarter a year ago
In Germany, there are more Apple Pay activations
in one week than for Android in one year
“Revenue from cloud services continues to grow
rapidly with year-over-year revenue up over 40% in the December quarter. And
readership of Apple News set a new record with over 85 million monthly active
users in the three countries where we’ve launched the United States, the U.K.,
Ending Q1 2019, Apple cash stands at $244
billion while net cash is at $130 billion
I am a big believer in the notion that business models need
to be adapted to the changes in the business environment. No business model
could be effective while staying still over the years, especially in the fast-changing
world that we live in today. Apple should be no exception and from the numbers
reported, it seems to me that they are making changes.
For years, the bulk of Apple’s business has come from
hardware which is differentiated by its exclusive software, especially in the
case of iPhone. iPhone revenue has made up approximately 60% of Apple’s turnover.
However, the luxury smartphone market has reached the maturation point. iPhone unit
sale growth has been either minimal or flat for quarters. Greater China market,
which makes up 20% of their iPhone revenue, has boasted challenges to Apple,
particularly in 2018. Their iOS isn’t as appealing to Chinese users as it is to
users in other parts of the world while competitors such as Huawei and Xiaomi offer
alternatives with more or less same features at a lower price. The
macroeconomic conditions in China and the trade war aren’t helpful either.
The growth in iPhone revenue has come largely from the price
hike which lengthens the upgrade cycle and puts a limit on how much Apple can
reach out to potential users. Not everyone can afford those pricey phones. Lowering
the prices isn’t the solution. Firstly, Apple is a luxury brand. Lowering
prices may leave significant damages to its brand power. Secondly, cheaper
phones will require substantial changes to its operations, including supply
chain, distribution and Sales & Marketing.
All the signs point to the fact that too much dependence on iPhone is no longer sustainable for Apple moving forward. Enter Services.
Services has been a bright spot amid concerns over iPhone revenue for the past 2 or 3 years, growing at a 20% annual clip. Put that in perspective, their Services revenue this quarter alone is $10.9 billion, almost equal to Netflix’s revenue in 3 quarters in 2018 while Facebook Q3 revenue was about $13 billion. Instead of making money from devices, Apple is betting on users keeping devices longer and paying consistently and more for services. And why not? If the users tend to hold on to devices longer, it makes sense to generate more money from their activities. Plus, margin from Services is substantially higher than that of Products.
And they have been doing a good job. Apple Pay transactions reached 1.8 billion this quarter, 100% YoY increase. Revenue from cloud went up by 40%. The number of paid subscriptions grew by 50% year over year and Apple Music has added 10 million users, reaching the 50 million mark and achieving a 25% growth, since June 2018.
As of June 2017, developers earned $70 billion from App store since its launch in 2008. As of January 2019, the figure went up to $120 billion. Moreover, we are about to see their investment in original content as their streaming service is reportedly going to be live this April.
In summary, Apple seems to be heading to the right direction strategically in my opinion, given the changes in the environment they are operating in. I think the following guidance in the next few quarters will continuously be lower than analyst expectations as the reduction in iPhone revenue may not be sufficiently offset by the growth in Services yet. There is a chance that Apple won’t have the same revenue level as they had at the peak of iPhone-dominated era.
Nonetheless, I think the company is far from the demise alleged by some after a letter to shareholders on 2nd January 2019. They generated $84 billion in revenue and almost $20 billion in net income in 90 days! Instead, the change to be a Services company may be better for the company’s health.
Yesterday, Netflix announced their new price structure. Per WSJ:
Netflix will increase the price of its most popular plan 18% to $13 a month from $11. That plan allows users to stream from two screens at the same time. The most basic plan, which allows a single stream in standard definition, will go up one dollar, or 13%, to $9 a month. The new rates will go into effect immediately for new customers and be applied to the accounts of existing customers in the next few months, according to a person familiar with the plans.
The increase in price is not really surprising in my opinion. Netflix has been investing heavily in original content. WSJ reported that the investment would amount up to $12 billion this year. Netflix needs to enlarge its war chest and the additional revenue from the new prices will help with that. It doesn’t hurt that Netflix has some wriggle room to up its prices, according to Priceintelligently. Additionally, as some content owners such as Disney or Warner Media plan to launch their own streaming services, Netflix will likely have to pay more to retain popular shows or movies.
But there is only so much room for increase in subscription prices. If Netflix pushes too hard, they may lose viewers. Consumers will have more options with the arrival of Disney, Warner Media and NBC, in addition to major current players such as HBO, Amazon, Hulu and Showtime. A normal user should not be expected to pay so much for subscriptions every month. Netflix may need to find another area to grow its user base and revenue.
Should Netflix go for sports?
Sports is a hugely important part of our life and hence it
is important to businesses that want our money and attention. To see how
important sports become to social media and streaming services, here are a few headlines:
The last headline is very interesting. Coming from Vietnam, I can tell you that football (as millions of people in the world outside the US call it) is a religion in my country and hugely popular in that region. Premier League, in particular, attracts football fans in Vietnam in a way that few leagues do. We have to or at least, used to pay for cable TVs to be able to see the games. The service is subpar, and the fees are slightly cheaper than a Netflix subscription. Vietnamese users pay around $8-9 a month for a Netflix subscription while a cable subscription costs around $5-7. If the fans can stream games from their laptops/computers or project games onto TV through Netflix, it will be a game changer. Fans will strongly consider the service, especially with hours of shows and movies as well.
But does it make sense for Netflix to do so from a business
and financial standpoint? Let’s run a scenario.
Together, Vietnam and Thailand have 165 million people in population. The total number of Netflix subscribers in the two countries are just 500,000 (300,000 for Vietnam and 200,000 for Thailand). If we just assume that 40% of the two countries’ population are young from 15 to 40 years of age, fitting the target demographic, I presume, for Netflix, the Total Addressable Market (TAM) is around 66 million for Vietnam and Thailand. I don’t have the number of subscribers in Laos and Cambodia, but if we apply the same assumption to those countries, the TAM is 9.2 million potential subscribers. For the four countries, the TAM is around 75 million.
If a subscriber is worth $8/month and Netflix gains around 100,000
subscribers a year each in Vietnam and Thailand, as well as 50,000 each in Laos
and Cambodia, the total revenue can be around $230 million in 3 years, $30 million
less than what Facebook pays for its exclusive rights. Also, the total number
of subscribers should be at least 1.7 million, barely a fraction of the TAM
mentioned above (75 million).
If we increase the subscription price by $1 in the original
scenario, the revenue will be around $259 million, almost as much as what
If the number of subscribers in that scenario goes up by 30%, the revenue in 3 years will be around $300 million and the subscriber count in 4 countries for Netflix will be around 2.06 million, still a small fraction of the TAM.
Of course, all of the above are assumptions which can be way off the mark, but to me, it seems that it is an opportunity there for Netflix. Besides the financials, gaining more subscribers can make Netflix more valuable due to network effect and give them more data about the users. Netflix paid $100 million to keep Friends on its network for
a year. Given that amount and the potential upside of providing sports to international
markets, I believe Netflix should give it a try. Plus, it can’t afford to see competitors
add sports to their selection without doing anything.
Hulu has its own TV package that shows live
The same goes for YouTube TV
I admire the consistency and focus of Netflix. They have been very consistent on their long-term view as a video streaming service. Nonetheless, the situation may necessitate some changes in the future.
In this post, I’ll discuss what I have found to be the trends in retail. Since I already had to do some research for work, why should I not share it here?
First of all, all businesses want to achieve one or more of the following objectives:
Boost customer satisfaction
Retailers are not an exception. Trends, plans or strategies revolve around those objectives. From my perspective, there are three primary fronts where most retail actions take place: stores, digital presence and logistics.
Stores as a destination
Retailers are increasingly turning stores into a destination, aiming to make shopping an experience as much enjoyable as possible for shoppers. Nordstrom offers pickups from online shopping, alterations and tailoring, curbside pickup and services. More details on their well-known customer service can be found here and here.
You must have heard about Amazon Go Stores. On your way into the stores, simple scan your phone on a reader and Amazon automatically knows about you through your Amazon account. Grab any item you like and simply walk out of the store without any cashiers or checkouts.
Another example is how Nike is using their app to elevate in-store experience for shoppers. With the Nike app, consumers can scan QR code on products to get more information and have the products brought to the changing rooms or to themselves. The app can be used for payment as well so that consumers no longer have to stand in line.
One final example is Apple. Apple stores, in addition to fancy display of products and glass windows, also feature coding lessons, music labs and kid hours.
There are more examples of how retailers are making in-store shopping as enjoyable as possible for consumers. If shopping becomes more frictionless and customized, consumers are happy and retailers can boost their top line.
Real estate is limited and expensive. Hence, it is important for retailers to maximize revenue per square feet. One trend that I noticed among retailers is that stores get smaller and retailers become more conscious of what they display. Below is a quick look at some retailers’ footprint. The majority’s store size decreased from 2016 to 2018, but revenue per square feet increased
Even though there has been talk of the retail apocalypse, major retailers are opening more stores
One Carson’s store in
Illinois had shrunk from 250,000 to 120,000 square feet as the management team
went through 100 TBs of data to figure out what people really want to buy.
Apparel which was not selling well was reduced by 50% while popular categories such
as furniture, large appliances, toy department, bakery, hair salon and art
gallery expanded. Instead of restocking once a season, the store receives fresh
items daily and changes over all its merchandise every two weeks
I believe that when people talk about the demise of retailers because of technology, they are referring to retailers who fail to embrace technology. Physical stores nowadays are the showcase and extension of the technology that the retailers have in place.
The integration of physical stores and technology happen through your personal phone and digital accounts with retailers. Whether it’s QR code, digital app, mobile shopping, information research or online payment, everything happens through your phone. It is interesting that it’s no longer the case that online enhances offline by driving traffic to stores. Nowadays, data generated inside stores can be used to enhance the online experience. Imagine that retailers can use data such as what you buy or what you are so close to buying, but decide not to, in order to run targeted marketing on you through your mobile app.
As mentioned above, the use of mobile apps can make in-store experience pleasant. Mobile apps can help improve significantly revenue with mobile shopping and payment. With the integration of data generated in-store, theoretically, target marketing should be more efficient.
Below is one slide from the investor presentation of Casey’s Store, regarding its digital strategy
We all want our deliveries to arrive as fast as possible. Amazon is the trailblazer in this with Prime and then Prime Now. Other retailers such as Target or Walmart follow suit with two-day delivery with fewer and fewer restrictions. The challenge to retailers is how to achieve such a feat without breaking their bank on having many fulfillment centers and all other expenses.
First, on-demand Just-In-Time warehousing. The idea is to tap into unused space in a crowded U.S. industrial real-estate market. As buying behavior changes rapidly and demand forecast is more unpredictable, retailers prefer not being locked into long-term leases or rents. For example, per WSJ:
This holiday season, Walmart Inc. used Flexe Inc., a Seattle-based marketplace that connects warehouse operators with businesses in need of storage, to secure about 1.5 million square feet of temporary space to handle the mounting demands of e-commerce fulfillment. Hence, improving the logistics efficiency is of importance to retailers.
Another trend is micro-fulfillment. It’s about leveraging robotics to operate warehouses in confined urban spaces, speed e-commerce fulfillment, and reduce last-mile delivery costs. Micro-fulfillment focuses on leveraging software, AI, and robotics to operate small urban warehouses and fulfill online orders.
In short, technology is rapidly changing retail on different fronts. It is an exciting space and I am both curious and excited about it. I do believe that physical stores, as long as they are run properly and integrate technology, are here to stay.
Where we get information matters. As there is so much information/noise floating around, a good curator and/or a great content provider has become increasingly important, at least to me. Here are a few of my go-to sources every day. Keep in mind that these are related to business and technology, two areas I am invested in.
It offers deep-dive reports into technology and business. There are many free reports that can be downloaded or consumed immediately on site. What I like about CBInsights is that their researchers really roll up their sleeves in their work and offer great insights, sometimes from a surprising angle. Their use of visualizations such as tables, graphs or mind maps is pretty rad as well
It’s a newsletter on business and tech. Apart from offering what news you should know at the beginning of a day, The Hustle has a great team of copywriters. Their witty and funny writing is what hooks me up. The newsletters don’t have the same level of deep investigation as CBInsights does, but if you want a skim of what is going on out there in business and technology, it’s pretty good. Oh, if you want to do some B2B marketing, it can be a promising channel. I have seen Airtable, Microsoft and Salesforce sponsored content by The Hustle
It’s a highly regarded website on strategy and technology. There is a paywall to his daily content, but his weekly content, I believe, is free. You will learn a lot from Ben as many others, including some famous names in technology, do.