18 Feb 2014
One my most often repeated lines is mobile payments are not about payments.. but about everything else. We have no payment problems today. When was the last time you left a store without your goods because the merchant doesn’t take your form of payment? Payments are the easy part, and experience has shown that it takes a VERY VERY long time to change consumer payment behavior (20 yr plus, see my blog on Behavior Change). My personal bets are all around mobile’s future role in commerce…. I call it Rewiring Commerce (previous Blog).
As an engineer I like to take a control volume approach to systems. To some extent, marketing is a measure of inefficiency… heat or friction in a mechanical sense. Marketing spend makes up almost 19% ($750B) of total US Retail sales (around $4T), with most of that spend untargeted and non digital. Even these astounding numbers do not begin to touch the total opportunity in Commerce Efficiency (ie transportation costs, spoilage, mark downs, discounts, and inventory write offs). Rewiring Commerce is much more than Apple’s beacons talking to you when you shop, it’s about how local suppliers/producers could meet needs locally, providing manufactures with tools to better estimate demand (eliminating waste and transportation), mass customization, resource optimization, value orchestration.. yada yada yada.
Who is impacted by rewiring commerce? Everyone that buys or sells. What is key? Data, trust, identity, platform.
I see disruption of Commerce (ie rewiring) occurring in 4 phases.
The First phase of mobile commerce disruption was focused on improving information flow (ie Showrooming). Second phase is underway, experimental and highly fragmented with one my favorite companies being Blue Kangaroo. In this phase there is context to the mobile interaction without the consumer’s direct input. This is where Apple’s beacons will play (see blog Apple and Physical Commerce earlier this month). Perhaps the best categorization of Phase 2 is in shopper marketing from Booz & Company.
Third Phase: Intent
Theme here is consistent with a physical world version of Google’s search word marketing advantage. In this phase retailers and manufacturers work to influence your behavior before you are in the store (as opposed to in store beacons in phase 2). One of the start ups I’m incubating is focused on helping any company purchase intent information. For example, when someone turns their car off in a mall parking lot they may be intent on shopping. Or when you buy suntan lotion you may be intent on a beach trip. Google is light years ahead of everyone in physical intent… why do you think they want to put up all those free wi-fi hot spots. But their information is extremely limited.. much more location based than behavioral. In this phase retailers use their consumer insight in combination with others to provide relevant information to specific consumers.
In order for consumer adoption to take place there must be real value. Value requires:
- knowing the customer (historically),
- knowing the customer now (intent),
- having the ability to touch the customer before they shop (publishing),
- trust (consumer permission),
- ability to run an advertising campaign,
- ability to target consumers based upon insight,
- ability to track consumer behavior after the campaign (redemption/purchase)
- tracking requires ability to work with retailers
Yep.. that is a long, long list. What companies can do this today? Google, Apple, Amazon and Facebook.. with Google and Amazon 3-5 years ahead.
There are several strategies at play here today, but the biggest challenge is in obtaining real world intent. Several “Omni Channel” plays leverage online intent to create off line behavior to get around the real world data challenge (only if the consumer starts online).
- Platform: Amazon, Apple, Google, Facebook
- Retailer Focused: Square, Amex/Loyalty Partners PayBack Card, OminChannel, Paypal
- Big Data: IBM, …
- Big Government: NSA (meant for a laugh, please don’t add me to Echelon/PRISM)
Third Phase Summary
In this phase the Retail environment is not changing substantially, we are better using mobile to interact with consumers within the current retail and advertising constructs. Junk mail and random push messages are gone. Consumers are choosing to “trust” entities that consistently deliver RELEVANT VALUE. Services will be focus toward affluent consumers, as the focus of value will be around discretionary purchases. As efficiencies improve, we will begin to see a massive shift in advertising spend toward digital channels and specifically mobile. The key for mobile monetization will be in Consumer Identity Arbitrage.. with Apple’s framework the clear leader.
Fourth Phase – Value Orchestration
I discussed this in Value Creation and Distributed Innovation, Static Strategies and the Rewiring of Commerce and in Future of Retail.
In this phase we will see real world changes to how Commerce is conducted, including: store formats (footprint, layouts, inventories), advertising, online/omni channel, customized products (by region and individual), local sourcing of goods, new intermediaries, brokering of: trust, identity, anonymity,…..etc.
Retailers and Mobile Network operators will begin to translate their distribution and data advantages into new platforms. Big data will be used to project your behavior, and recommendations will be targeted to you. I’m not going to go into much detail here, as this is where most of my big bets are…..
This is not a good wrap up.. but I have work to do.
Next Blog: Targeting and Attribution