Bank of America has closed a number of locations as the customer shifts to mobile. I believe banking is several years ahead of where retail shopping is headed. Each door will fall into one of the following buckets: 1) transition to fulfillment/product trial store; 2) shrink overall square footage footprint; 3) closure.
No Ecommerce For Us
John Bason, CFO of Associated British Foods who owns Primark on why they will forgo the launch of an ecommerce site:
"This is not a profitable avenue for us.”
For a retailer known for selling $10 jeans and $3.50 t-shirts, this is understandable. Primark has over 270 stores in the UK and still no ecommerce presence. The high cost of fulfillment direct to the customer and 2-5x higher return rates of online do make the channel much less profitable.
However, the retailers and etailers that excel in ecommerce realize the convenience online shopping provides for consumers. That convenience often leads to a willingness for higher prices. And given that Primark ONLY sells exclusive private label merchandise, consumers are likely willing to pay higher prices, purchase in bundles and forgo the option to return. Primark is forgoing ecommerce today, but I'm sure they are constantly reevaluating this stance as customers see ecommerce as a foregone conclusion.
Circular Inflection Point
In March, WSJ had an article outlining a drop in circular spend in 2014 of just over 6%. Fast forward to August and it seems we may have hit an inflection point for several key retailers:
Wal-Mart published half as many circulars in June, compared with the same month last year, according to Molly Blakeman, a company spokeswoman. For the three months to July 31, Wal-Mart reduced its circular count to four pieces from 20 a year ago, Greg Foran, Wal-Mart’s U.S. chief, said on Tuesday in remarks discussing the company’s earnings.
Kohl’s distributed 19 circulars from June 1 through Aug. 14, compared with 27 circulars in the same period a year ago, according to Market Track. The total number of pages Kohl’s circulated declined nearly 27%. At Sears, total pages were down 44% for this period. A Sears’s spokesman declined to comment.
Wal-Mart, Kohl’s and Sears were among 14 large retailers whose circular distribution was tracked by Market Track. All told, the number of circulars fell 24%, while the number of pages mailed decreased 27%.
We are far from the point of the death of circulars but we likely are at an inflection point. The culprit? Digital..but even more so, direct mail.
Games: Brick vs. Tap
Further to the post in July in which I asked if Gamestop will survive, I was surprised to see a few pieces of news this week that are providing a glimpse into how full size content games will sold and accessed digitally in the future:
- Madden NFL 16 - A game that sold over 6 million copies (Xbox One, PS4, PS3, Xbox) last year has been made available to play one week before official release date via Xbox One and EA. The catch? Signing up for EA Access for $4.99 per month and downloading the game via Xbox. If you then purchase the game digitally from EA, you are given 10% off.
- Gamefly Samsung TV Game Streaming - Gamefly has announced that Samsung Smart TVs are now capable of streaming a variety of games. At launch, the library of games seems quite limited.
Based on the success of initiatives like the ones above, I expect publishers to run similar campaigns and provide access to their catalog of games. The sooner the games are made available and the easier to access, the more likely a consumer will shift purchases from physical media to digital media. And as the purchases shift from brick to tap, the Gamestops and Best Buys of the world will see their share of the market negatively impacted. We saw this play out in music, movies and books. Video games are no different.
Deep Links vs. Contextual Deep Links
The core problem was that deep links only really worked if a user already had the app. Because the average phone has fewer than 100 apps installed, and the same apps dominate most phones in the market, deep links were useless for almost every app in the app stores.
Recently, a new type of deep linking has appeared. Contextual deep-linking technology offersdeep links that can pass data to an app through install, in addition to supporting the legacydeep-linking method.
This data is used by the app to show the user relevant information when they open the app for the first time (below). This makes deep links useful for users who didn’t have the app, as well as those who already did. Now, deep links work for newly acquired users, not just existing users, driving growth and re-engagement.
Providing context prior to and after install of an app is crucial to new user signup and retention. Haven't found many, if any retailers using contextual deep links.
News Referrals: Facebook > Google
Anyone who works for a major news website or publisher knows that social referrals—that is, links that are shared on social networks such as Facebook and Twitter—have become a crucial source of incoming traffic, and have been vying with search as a source of new readers for some time. Now, according to new numbers from the traffic-analytics service Parse.ly, Facebook is no longer just vying with Google but has overtaken it by a significant amount.
1 in every 5 minutes online is spent on Facebook in the US.
Traditional Pay TV: Negative Q1 & Abysmal Q2
Not only did traditional pay TV see it's first negative net subscriber quarter in Q1, but also the most severe drop in Q2 seen in several years. The trend does not seem to be slowing.
Netflix UK & Original Programming
The two biggest online TV services in the UK, Netflix and Amazon’s Prime Instant Video, have invested heavily in original programming in a bid to attract more subscribers. Amazon recently struck a £160m deal to create a new show with former Top Gear stars Jeremy Clarkson, Richard Hammond and James May.
Just 31% of people told Ofcom in April they used an online TV service to watch original programming, compared to 75% who said they used the service to watch films and almost half who said they watched US shows.
The Quiet Giant: Vine
Vine serves more than 100 million people across the web every month, according to the company, delivering more than 1.5 billion “loops”—its term for video views—per day. It is a top-100 free iPhone app in 13 countries, according to App Annie, a service that tracks app stores, and is currently ahead of Tinder and Shazam in the US rankings.
Meanwhile, comScore says Vine reached 34.5 million unique visitors in the US in June across desktop and mobile—roughly the same as Snapchat, which has grown rapidly over the past year and is valued by investors at $16 billion.
UK Etail Sales to Overtake Retail Internet Sales
Sales made by internet companies without physical stores, such as Amazon and Asos, will surpass online sales of store-based UK retailers for the first time this year
So-called "etailers" are expected to generate £21.8bn-worth of sales in 2015, an increase of 18pc from last year, while traditional stores should grow their online sales by 11pc to £21.5bn, according to a report from market research firm Mintel.
The Facebook Virus
There was no shortage of jaw dropping statistics highlighting how Facebook continues to spread like a virus globally. Within the US specifically, this statement from Sheryl Sandberg required a double take:
"We continue to get more than one out of every five minutes on smartphones in the U.S."
Tech Infused Retail Newsletter #87
Google showed off quite a few new tools embedded within the various ad types they run for retailers within search apps. The buy buttons created the most excitement but it was good to see tools allowing customers the ability to search inventory at specific stores or even be notified of price doors on particular items. Google is happy with driving, influencing or processing the purchase. Link
In other news, Google announces the launch of Eddystone for beacons. Pretty compelling announcement as the platform is open, cross-platform and will allow beacons to drive engagement through browsers and not just downloaded apps. This might be a case of slow and steady wins the race when comparing to iBeacon from Apple. Link
Facebook gets serious about empowering eCommerce within store pages. Link
Facebook using Messenger to test virtual assistant named Moneypenny. Link
What would food delivery be without Groupon? Link
Why Alibaba stumbled in the US with 11 Main offering. Link
Venmo transacted $1.6b in payments this quarter, a rise of 240%+. Small when compared to eBay's $66b, but service has definitely found a market niche. Link
Messaging is changing how we use social media. Link
Oculus buys hand-tracking company. Might this bring augmented capabilities eventually? Link
More of the same...Google Play downloads exceed iOS and iOS revenue exceeds Google Play. One point of interest, China iOS downloads now exceed the US...inevitable but now realized. Link
Pew provided a thorough update to social media access for news. Basic findings were Twitter and Facebook are becoming more of a critical role for news consumption and unsurprisingly continue to be more popular for the younger generations. I would expect Facebook to see improvements in importance for news as they shift focus to surfacing content from mainstream media outlets. A few of the worthwhile charts (Link):
Gmail maintains dominance and becoming more so according to Mailchimp stats (Link):
US Smartphone Statistics: More Apple, More Facebook
A few stats I found interesting in the latest comScore US Smartphone Market Share Report:
- Approximately 190 million US smartphone users which accounts for a penetration rate of ~77% of the mobile market. Significant growth still ahead for smartphones.
- Apple was a winner in both smartphone handset market share and operating system market share growth versus February 2015.
- Facebook has a reach of 70% on US smartphone users. Incredible to know that 70% of all smartphone users in the US have the Facebook app on their smartphone.
Tech Infused Retail Newsletter #86
In a further push to satisfy activist shareholders and focus on the Marketplaces business, eBay looks to divest their previously acquired GSI Commerce business. Link
American Express finally announces their online payments play. Because Amex controls the account management vs. Visa and Mastercard who issues cards through banks, the process seems a lot simpler for consumers. Auto populated shipping address and payment information using your everyday American Express login credentials. The land grab for the checkout page continues now that every major issuer has their own button. Link
Most marketers believe Facebook's new pricing model based on website clicks will lead to increased spending. I generally agree as the targeting abilities of Facebook far outweigh those of Google and this eliminates the question that baffles most marketers: What is the value of a like? Link
Facebook testing picture in picture / second screening. Link
Twitter is now allowing for birthday submission to drive improved targeting. Link
Pinterest has become a social login for other sites and apps. Link
KFC in China using Alipay. Link
Google's Waze testing carpooling in Israel. Very interesting as we know Google is an investor in Uber. Link
Bitcoin transactions per day are seeing new highs with Greek liquidity crisis and Chinese market correction as the price briefly broached $300 pre-Greece deal.
With the latest updates to retail sales, the department store sales versus overall retail sales show why the department store space continues to "shift the pie":
Commerce Point of Entry: Amazon
A good friend of mine, Chuck Martin recently highlighted the findings of a Mizuho survey of 1,000 smartphone users on where consumers turn to when searching for information. Unsurprisingly, Google is the first choice:
- 34% -- Open Google search app
- 27% -- Open Safari browser and type inquiry
- 19% -- Open Chrome browser and type inquiry
- 9% -- Go to specific apps like Maps, Yelp
- 7% -- Use voice search (Siri, Google Now)
However, when consumers are shopping on smartphones, the picture is quite different:
- 45% -- Amazon
- 16% -- Google
- 6% -- eBay
- 2% -- Walmart
- 1% -- Target
- 1% -- RetailMeNot
With Amazon owning 45% of search volume, including Amazon in any brand or retailer's traffic acquisition strategy is a must. Amazon and subsidiaries have evolved into the largest point of entry for smartphone commerce.
Can GameStop Survive?
I am often asked if GameStop can buck the trend of physical media transitioning to digital content. Will GameStop go the way of Border's, Barnes & Noble, etc?
Whilst digital downloads on consoles are still quite low, the ability to download full size console content is actually quite new. Given the size of games, the limited access to high bandwidth internet connections and poor marketplace interfaces, downloading console games has never been an enjoyable experience. That is all changing...high bandwidth connections are ubiquitous, games can be booted using a partial download and the publishers are pushing direct to consumer sales much harder. Direct to consumer downloads have better margins for publishers by avoiding the middle man (the retailer) and allow for games to avoid the used market.
Given that GameStop makes the majority of its profit on used games and consoles, I believe they will inevitably see an impact as digital downloads become more prevalent. GameStop feels the sense of community with gamers will keep them relevant but we have seen how that played out for the Borders and Barnes & Nobles of the world. Book reading and sharing moved to locations such as Starbucks while sales moved to Amazon through the Kindle. GameStop realizes this and has been aggressively trying to broker deals with publishers to allow for used game reselling. Allowing for used game reselling would be a tremendous win for GameStop but margins would still be lower than current physical game sales. For these reasons, I believe we will soon see an inflection point in digital console game sales forcing GameStop to evaluate the number of store locations and focus on selling consoles versus actual games. Although the overall market is stronger than ever, I'd argue GameStop has some of its' toughest years ahead.
Razor Sales Move Online
The online market for razorblades barely existed a few years ago, yet Americans have taken to it quickly: Web sales of men's shaving gear in the U.S. have nearly doubled in the 12 months through May to $263 million, according to estimates from Slice Intelligence, a market research firm.
That is about 8% of the roughly $3 billion market and a big surprise to people who follow the market.
The pace continues to quicken. In the first five months of 2015, online sales amounted to $141 million, more than double that a year ago, according to Slice.
More than double last year...>15% of total sales are now coming from online. Although the deep pockets of venture capital funded startups like Dollar Shave Club and Harrys are funding this shift, the trend continues. Currently in the US, there is a 90/10 split on brick and mortar to online. However, more connected countries like Korea are already seeing 14-15%.
Side note, I'd love to know the percentage of Gillette's business that is now purchased online from various retailers.
Commerce & Apple Watch
Groupon is the best example of commerce conducted through Apple Watch thus far.
Familiarity and Use of Mobile Wallets Increasing
CMB recently released a survey of 1,500 consumers and their views on mobile wallets. Key takeaway: familiarity and use still small but increasing.
