Last night we held an event here in New York in which VP & Principal Analyst Peter Sheldon presented some of his recent research on the new omnichannel imperative. He talked through the state of omnichannel retail today, why omnichannel is now essential for retailers and which changes retailers must make in order to drive their omnichannel initiatives forward. A few takeaways from the event:
Online sales and web-influenced sales now represent the majority of all retail transactions in the US. This year’s $3 trillion US retail market is dominated by a combination of online transactions and offline transactions influenced by online research (our colleague, Sucharita Mulpuru, documents this trend in our cross-channel retail forecast). Peter pointed out that high-value purchases tend to be the most heavily researched, with some categories like cars seeing extraordinarily high levels of online research prior to purchase.
Retailers are thinking creatively about in-store pickup. Today’s in-store pickup initiatives vary greatly in terms of execution: Not every retailer has determined it’s best to place in-store pickup areas in the back of stores, forcing consumers to walk past a variety of potentially tempting products en route to the pickup area. In Canada, for example, Future Shop (a division of Best Buy Canada) offers items for pickup within 20 minutes of the order being placed online and provides a separate pickup area just inside or outside the front of retail stores. Consumers don’t spend precious time waiting for pickup and navigating to hidden-away pickup areas – instead, the idea is to provide them with time to shop after collecting their purchase.
There is no hotter topic in retail today than beacons. These small objects which transmit location information to smartphones based on Bluetooth Low Energy have transformed our retail imagination, conjuring up visions of continuous offers being showered onto customers as they walk the aisles of their favorite grocery store. The reality is more subdued. We are still very early in the development of location strategies that leverage beacons and the iBeacon protocol, and retailers need to solve for a variety of challenges such as customer privacy, beacon maintenance, connectivity, and campaign management.
Beacons require the right combination of hardware and software. BLE is required as beacons leverage the Bluetooth hardware found on most new smartphones. A mobile app is also required to interface with the beacons, transmitting the location information provided by the beacon to a server, and then receiving the appropriate content back from the server to display on the customer’s mobile device.
Beacons enable rich experiences beyond offers. We all enjoy saving money, and pushing offers to us via beacons will be a popular use case. However it is possible to offer a deeper level of engagement. Based on location, retailers can allow the ability to unlock dressing rooms, authenticate a mobile payment, or provide enhanced service such as preparing your favorite latte as you enter your local coffee shop.
Our report lays out many commonly-encountered obstacles to mobile banking execution success and how digital teams can overcome these obstacles. Here are a few of the areas the report looks at:
Overly ambiguous — or nonexistent — business goals. Clearly articulated business goals should be part of a bank's mobile strategy. But a successful road map also lays out the business objectives and records specific goals for each initiative. As one eBusiness executive at a bank told us, "We literally have a section we call 'What's in it for us?' and we use sticky notes to write out what we think we can gain from each action."
Legacy systems and back-end integration. Technology may well be the largest obstacle to executing a mobile banking strategy — especially for larger, traditional banks. As such, successful mobile road maps need to outline how initiatives will plug into existing or soon-to-come platforms and systems.
eCommerce revenues are soaring around the globe. This year, the US, Western Europe, and China alone will generate over $800 billion in online retail sales. Growth rates, too, remain staggering in many countries: China’s massive online retail market will more than double between 2013 and 2018, as will Brazil’s. India’s much smaller market will grow by eight-fold during this timeframe.
However, a litany of businesses have failed as they attempted to tap into shoppers outside of their home markets, with many large US and European brands factoring prominently on the list of casualties. eCommerce is no exception: Numerous eCommerce businesses have taken the plunge into new markets, only to find their offerings didn’t resonate with local consumers or they were outsmarted by much savvier local rivals.
What separates successful global eCommerce businesses from their counterparts? Which tactics have proven particularly effective for brands aiming to extend their reach into new markets? What are some of the most common challenges businesses tend to encounter? Our newly published eCommerce globalization playbook helps brands through the thorny process of global expansion. Clients can read our playbook for insights on how to:
Discover and quantify international revenue opportunities. Our playbook includes reports outlining the global opportunity and identifying how eCommerce markets typically develop with time. Our online retail forecasts for the US and Canada, Western Europe, Asia Pacific, and Latin America provide a quantitative look at market sizes and eCommerce trends in these regions.
My colleague Thomas Husson and I put together our 2014 mobile predictions. (See Report) One of the key predictions is:
Mobile will sit at the epicenter of mind-blowing exit events. The kernels of activity we saw in 2013 around mobile transactions will explode in 2014.
Those media companies that can't build audiences fast enough to capture spend of the Global 1000 will also look to acquisitions (think $3 billion for Snapchat).
What is mind-blowing is that neither Snapchat nor Instagram had a revenue stream when the bid or acquisition was announced.
In 2014, mobile companies with real revenue streams will go public. King.com (Candy Crush Saga) filed for an IPO with an estimated valuation of $1 billion based
on generating a couple of million dollars a day in revenue. What does King.com do? It monetizes mobile moments by taking advantage of the consumer's addiction to competition.
Mobile is moving so fast that that number is already dated. King started trading publicly on the NYSE Wednesday and part of the release was $1.9B in reported revenue in 2013 - way more than reported 8 months ago.
What happened this week?
1) Intel completed its acquisition of Basis Science - a wearable device - for a reported $100M to $150M. (See TechCrunch, VentureBeat)
One of the biggest recent stories in the eCommerce media has been the talk of splitting eBay and PayPal, which was driven by activist investor Carl Icahn. eBay maintains Mr. Icahn’s idea is not new, and that eBay’s board has rejected the notion based on its own previous evaluations of the best strategic paths for PayPal and eBay, saying now is not the time for separation. Icahn has backed off his proposal for a full spin-off, now agreeing that a relatively small public offering of PayPal shares, say 20% would be sufficient after all. (eBay’s shareholders will vote on the proposal themselves on May 13.)
For those of us in the eCommerce industry, there was largely a sense of head-scratching and general befuddlement as to why Mr. Icahn was targeting eBay and PayPal in the first place. Everyone in our industry knows that eBay’s purchase of PayPal back in 2002 is largely regarded as a categorical homerun and a textbook example of synergy executed right. At its heart, PayPal gives eBay buyers a frictionless and trustworthy way to complete a transaction (perhaps THE single most important moment of truth in ecommerce) and eBay remains PayPal’s most important retail partner, a source of continued customer acquisition around the world, insight into the world’s most engaged shoppers and a funding source for innovation in payments. Those are the arguments on behalf of eBay shareholders, but the entire eCommerce industry in the US has an equally vested interest in keeping these two businesses together as the long-term impact on online retailers of a separate PayPal would be disastrous. Here are three reasons why:
King had $1.9B in 2013 gross revenue with the majority coming from Candy Crush.
I first heard of Candy Crush about a year ago. I was on vacation in Germany with my husband. One of my friends – for context, she was a college roommate now a CTO at a Fortune 500 company in Silicon Valley – started chatting with me on Facebook. It dawned on me it was 2 am in California.
Turns out she had worked late and was up playing Candy Crush. I couldn’t get my head around what it was about this game that was keeping her from sleeping, but she explained, “It’s fun. It’s hard. The game keeps changing. It’s always challenging.”
I advised her to go back to sleep, but couldn’t stop thinking about the conversation. The analyst in me had to dig a bit further.
There are a number of publishers with big hits like Candy Crush. The business model for some lies in in-app revenue, which is why “free” downloads want your gender, age, mother’s maiden name and social security number. Others profit from a minority of users who make in-app purchases to do things like purchase more lives, buy weapons (other games), and send gifts to their friends and fellow players. What’s interesting?
1. It’s software on a connected device.
Users are able to continually update and expand the game. They can even personalize it to feed their particular addiction—keeping them coming back for more.
I’m delighted to announce that Forrester has hired a new Principal Analyst, Brendan Witcher, to bolster our coverage of commerce technology. Brendan joins Forrester from a retail background, having most recently held several leadership positions in eCommerce, CRM and strategic planning at Guitar Center. Prior to Guitar Center, Brendan also held senior eCommerce and direct marketing roles at Harry & David. Brendan will be based in Forrester’s headquarters in Cambridge, MA.
With the addition of Brendan to the team, Forrester is making an investment to grow our coverage of commerce technology across the four stages of the customer lifecycle (discover, explore, buy and engage). Vendors and clients alike have already been asking how we’ll be dividing research coverage across our ever growing team. The answer is that we will intentionally be collaborating on much of the research, so expect to see some or all of us on inquiries, briefings as well as authors of much of our respective research. Each of us on the team will also be specializing in certain areas in addition to collaborating on core commerce technology research. The 1000 ft view looks like this:
I will continue to lead Forrester’s research on commerce platform, mobile commerce, digital experience management (DXM) and order management technology.
Adam continues to research and write about the digital retail store and will lead our research on the commerce service provider landscape in addition to order management, site merchandising, and omnichannel logistics and fulfillment.
Globally, executives acknowledge the disruptive influence that digital technologies have on their businesses. In fact, in a recent Forrester survey fielded in conjunction with Russell Reynolds, 41% of business and IT executives believed that their industry had already been moderately or massively disrupted and over half expected to see more disruption over the next 12 months.
You don’t have to look far to find evidence to back this belief up. In fact, you don’t even have to look globally — digital disruption is happening right in your back yard. Just take the UK as an example:
The UK government is transforming its public services to deliver “digital services so good that people prefer to use them.”
Retailer John Lewis is offering a £50,000 cash investment to the winner of its tech incubator “JLab.”
British Airways is driving for operational excellence in baggage handling by RFID tagging luggage.
Movie streaming service Blinkbox, owned by retailer Tesco, is expanding into music.
PruHealth is partnering with wearable technology firm Fitbug to offer rewards for active health insurance customers.
A number of us from Forrester offices inside and outside of China converged on Shanghai for a few days last week for our annual Marketing & Strategy event. The trip proved to be especially timely given the extensive media focus on China’s eCommerce market with the recent news on Alibaba's US IPO.