Rewiring – Part 2: Walmart+Goog, Amazon+Whole Foods, …

I’m taking a rather abbreviated approach to blogging today.. as most of my key points have more detail in my other posts. I’ll just link to my old posts and focus on a few new thoughts.

Thoughts for the day…

  • Inefficiency cannot hide. There is a re-alignment of resources guided by consumer behavior, value delivery and information flow These forces are driving out inefficiencies (both internally and externally).
  • Payments and eCommerce are great investment bets that will see further acceleration. Payments is becoming part of a commerce bundle. Alipay and Amazon bundle w/ shopping and mobile, Google with discovery and distribution. Best bets are with companies that can influence consumer behavior. (Apple I have some ideas for you).
  • Most established companies are small part of an overall “commerce” value proposition (banks cough cough). To create great consumer experiences there is a need to partner.
  • Most Companies don’t excel in collaboration…. Particularly unstructured collaboration where there is “experimentation” until value is created/refined. However realized threats prompt action… and Amazon is the mover in Retail. Many partnerships today are responses to specific threats. Future collaboration will be much more consumer centered. The cost to create (and terminate) partnership connections will drop, this will increase the speed of change and enable smaller companies to take part (ie through data democratization).
  • Today Google is a natural partner for most retailers, but they are a double edge sword. Additional consumer data “feeds the beast” with more data (and consumer intent). This aggregation “hub” model will compete with new collaboration networks where data flow is controlled by each node (my Company).
  • If everyone is a “dump pipe” where is the intelligence? A: Orchestrator. Invest in networks and participants that can create trust, transparency, standards, bundles and enable value exchange. Entities with large troves of customer data (with rights to use). Retailers, Banks, Mobile operators all have opportunities here if they can build technology platforms to support (not lead) building great customer experiences. My top picks in each industry: Capital One, Vantiv, Visa, Verizon, Macy’s/Target/Starbucks, … and many more.

Last week Walmart announced it was joining Google Express…. I love this collaboration. As reported by the mainstream press, the first phase seems focused on voice ordering with Google home (vs Alexa) which has seen a massive increase in consumer adoption. Beyond WMT, all mainline grocers saw their stocks tumble yesterday as Amazon plans massive price cuts at Whole Foods.

Collaboration, re-wiring commerce, and “orchestration” have been the topic of over 20 of my blogs.. so I thought I would give my update. I incorrectly named 2015 as the “year of collaboration”. I didn’t realize it would take another 2 years of Amazon, Google, Facebook crushing data and consumer dominance to force action (et al.). The economy is undergoing a transformation of BOTH networks and commercial structures, with the general principle: inefficiency cannot hide. There is a re-alignment of resources guided by consumer behavior, value delivery and information flow (more detail in Transformation of Commercial Networks a $4T Opportunity).

We see the impacts in: retail, banking, mobile, advertising, transportation, media/entertainment, …etc. In Small Wins (Nov 2016) I pointed out that Phase 1 of “orchestration” was connecting existing capability with intent. Within the Google/WMT tie up, Google Home (Google’s version of echo) is capturing additional consumer intent.. and WMT has the selection/distribution capability. WMT has nothing to lose in this Google tie up, by publishing inventory to google, WMT allows consumers to more easily gain access AND google provides free distribution (in most cities) .. with no direct cost (see Future of Retail) . Google’s win is advertising, which has a transaction margin of 2000 bps…. (Compared to payments 200bps).

Previously, I outlined the shopper marketing landscape (below) shows the MANY approaches that retailers take to engage and reach consumers. Google is the leader in many of these.. AND they have the intent data.

shopper marketingSummary

  • Inefficiency has nowhere to hide.. even within a corporation. Investors should run away from companies that can’t define their value. Data science is making EVERYTHING measureable. The top area impacted today are marketing spend.. WHO CARES about clicks or impressions if you measure sales. The IAB is right, 2017 is the year of measurement.. and the core of my business Commerce Signals.
  • Consumer behavior and value creation will be focus of new partnerships. Voice commerce is exploding beyond anyone’s wildest expectations (except perhaps Brian Roemmele, my #1 expert in Voice Commerce).
  • When tracking the value chain, start with who is first to capture intent (think “alexa add milk to the shopping list”)
  • Bundle of “commerce” (and ALL NETWORKS that support it) are going through seismic change: Retailers, Banks, Advertising, …etc. No one company can compete against Amazon or Alibaba.
  • Google is capturing more intent, what does the end game look like? Walmart is not giving any additional information to Google, however banks, retailers and advertisers must look at new data collaborations as a Faustian bargain. Commerce Signals believes you should must keep your data in your facilities.
  • Key challenges for retailers: How can you create (and participate in) great consumer experiences? The future points to collaboration (internet 3.0).
  • Banks have great potential to participate, but must move beyond the core “card” value proposition. The Amex/Viacom partnership is best example (unfortunately the model of collaborating within an Acxiom white room is hard to scale). Banks’ first step is to stop the data leakage… they will never have a data business if they keep allowing Argus to bring their data to market without their involvement.
  • Impact on Consumer Advertising Spend. Agency’s like WPP have seen consumer ad spend drop 10%, P&G cut $150M from digital budget with no sales impact. We will see a MASSIVE fallout in media spend as all must account for the sales impact that every dollar of media has on consumer. Success is not a “click” or “impression”, retailers are demanding sales. The good news for consumers.. no more irrelevant ads.
  • Today’s winners are those closest to the customer, or those that can best deliver value through best “bundle” (unique products, pricing, delivery, service, or experience).
  • As the cost to “connect” across participants decreases and access to data becomes democratized, the future winners will be small data science driven teams that can orchestration [smaller] resources. Data democratization and “speed to create contracts” also operate to reduce Transaction Cost Economics (TCE) and the design of the firm.
  • There is a battle in brewing in the future design of the internet that revolves around trust, identity and the structure of data. This excellent article in Digital Trends outlines how Tim Berners-Lee is seeking to reclaim “data” from Google and Facebook – Solid (“social linked data”), a way for you to own your own data while making it available to the applications that you want to be able to use it. This federated data design (Tim’s SOLID/Data Pods) are also core to what we have built at Commerce Signals
  • Opportunity for Apple.. a consumer champion is a version of SOLID built on top of Apple’s phone. The three key components for success: Trust, Data, Collaboration.
  • Implications for Payments. There is no competition to V/MA.. payments work VERY WELL. While there are many more logical ways to pay, there aren’t any that have the adoption. To create a great consumer experience you must allow the consumer to pay the way they WANT TO.. not the way you want to guide them to (sorry ChasePay). Apple, Alibaba and Amazon are best able to alter consumer payment behavior… through an overall experience.
  • Investment bets.
    • Voice Everything…
    • New networks solving big problems of “collaboration”: Uber, Airbnb, Alibaba, and small upstarts like mine (Commerce Signals)
    • eCommerce/payments. Amazon, Alibaba, Visa, MA, Platforms, Stripe,
    • Consumer Value/Consumer Data/Behavior
    • Measurement and market forces operating on data.
    • Sell Grocery.. my bet is that it will be a loss leader for Amazon and others.

Sorry for the bulleted format.. I have a 9 page blog on “discovery” that I will get out soon.

 

1 thought on “Rewiring – Part 2: Walmart+Goog, Amazon+Whole Foods, …”

  1. “There is no competition to V/MA” — while this might be largely true in US and other developed markets, their is enough competition in the emerging markets. I believe the competition in the emerging markets will come either the platforms that can alter consumer behaviour (like alibaba/amazon) or even the local inter bank payment networks (like UPI in India). The platforms potentially pose higher risk to existing market models given their tech and product prowess; additional challenge exists because none of these platforms are ubiquitous and hence we usually have a fragmented platform led payments landscape, probably no different than current state. The national networks when executed well are very credible competition (e.g. the UPI tech stack design is great but service level quality needs to improve). Would be curious to hear your views on how payments networks like V/MA should evolve to keep up with this new reality

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