Category Archives: Retail technology

Apple Pay not yet ripe

Last week’s announcement of Apple Pay’s UK launch brought that day a step closer.

This isn’t the first mobile payment product, so why the fuss? Partly because it’s from Apple, of course, but mainly because Apple Pay, unlike some previous attempts, actually works.

Take an iPhone 6, press your thumb to the screen, tap it against the shop’s contactless payment terminal and you’re done.

No need to unlock the phone. No need to input a passcode. No QR code. No question, it’s going to be a great user experience.

But don’t expect too much too quickly.

Most British shoppers don’t have the right device. Apple Pay only works with the iPhone 6, which accounts for just 20% of new phones sold in the UK and, of course, a much smaller proportion of the phones currently in people’s hands.

Barclays, the nation’s biggest card issuer, hasn’t agreed to participate yet, so even some iPhone 6 owners won’t be able to use Apple Pay.

As importantly, the payment industry has got itself into a pickle around how contactless transactions are processed. This risks making the experience at point of sale unnecessarily confusing for staff and shoppers and reducing uptake.

Contactless transactions are currently limited to £20. This will rise to £30 in September. For the higher amounts, the payment terminals will need to go online to get the transaction authorised.

If it’s a broadband terminal this will add a slight delay, or if it’s one of the 250,000 dial-up card machines still active in the UK, a rather longer one. Less tap and go –  more tap and pause and go.

Apple Pay isn’t restricted to £30. There is already provision for ‘high value’ contactless transactions to be processed, provided they are validated by a security protocol from the cardholder’s phone.

However, last week’s Apple Pay publicity revealed that some payment service providers hadn’t yet made the necessary technical modifications to their systems.

Retailers would be well advised to suggest their suppliers get moving, and to train their staff that contactless behaves differently according to the transaction value.

There’s one more wrinkle that retailers need to know about. Apple Pay dynamically generates a new card number for each transaction.

This means that any service that uses card numbers to track shopper behaviour to provide CRM or loyalty/rewards is going to struggle. Card-linked offers may become a thing of the past.

Although there will be teething troubles, Apple Pay has legitimised mobile payments in the eyes of mainstream commentators and the general public.

It will spark a wave of innovation and will make life easier for those that follow, such as Samsung Pay or Zapp.

Initially, Apple Pay will work well in high volume/ low ticket value applications such as rapid transit or sandwich shops in which there is already a high propensity for contactless payments.

Elsewhere, retailers that have not yet upgraded to contactless payment terminals will need to make a judgement, based on their customer profile, about when or whether they will lose sales if they can’t accept Apple Pay.

Longer-term, service-led retailers should look to phase out card machines and move the transaction to an app sitting on the shopper’s device, for which Apple Pay also offers a very neat payment mechanism.

And it is here that the real payment revolution will begin.

This post originally appeared in Retail Week (£).

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Thinking small. Here’s what became of the British e-commerce platform industry.

Last week, Shopify, a Canadian e-commerce platform company floated with a valuation of $1.3b. Demandware, a similar business from the US that focuses on meeting the needs of larger retailers now has a market capitalisation of $2.4b. The North Americans have created significant value from this corner of the retail technology market but what happened to all the British e-commerce platforms? We used to have quite a few of these.

ecom platform

Of the 22 vendors listed in the 2009 edition of the e-consultancy platform buyers guide, 18 were home grown. Yet none has gone public, none has passed more than £45m annual revenues and none have made any meaningful impact globally.

It’s not a very positive story and symptomatic of the UK’s inability to capitalise on business opportunities. Although e-commerce has boomed since 2009 and UK retailers are at the forefront of best practice, the 18 remain mostly relatively small businesses serving the local market.

What happened?

Fresca sold out early to BT. Snow Valley was snaffled by Micros. Portaltech went to an Italian buyer. Only three, Venda, Salmon and ecommera (now called Order Dynamics) were strategically set on growth. Venda ran out of steam last year and was sold to Netsuite, And then there were two.

While Salmon and Order Dynamics have managed to both grow internationally and remain British, neither is likely to be a unicorn. But they do have one thing in common and that’s WPP. Martin Sorrell’s firm is a lead investor in Order Dynamics and bought Salmon outright in 2013. Thank goodness for Martin Sorrell otherwise the story might have been worse.

In alphabetical order, here’s what happened to those eighteen platforms listed in 2009. If revenue is “not disclosed” it is below £6.5m and hence not reported to Companies House.

Actinic – an early market leader in e-commerce for small retailers, Actinic was caught out by the move to software as a service. It sold its embryonic cloud business together with its brand name to Oxatis, a French competitor in 2011. The desktop business continues, rebranded as SellerDeck. Revenues are not disclosed.

Fresca – I joined BT Expedite shortly after it bought Fresca, a software as a service platform company. My predecessors had made a smart acquisition as the addition of e-commerce to Expedite’s existing retail software suite helped attract and retain customers. Fresca could have been the British answer to Demandware but BT wasn’t able make product investments fast enough to keep pace with the market. The latest annual accounts show revenue of just £6.5m.

Design UK – A marketing agency that was very early into web development, Design UK still works for brands like Hobbs and New Look. Its marketing continues to reference its in-house software (LavaSuite) although its website claims just nine customers. Revenues are not disclosed

Digivate – this digital agency moved away from its proprietary software to develop on Magento in 2010 although most of its work now seems to be conventional PPC and SEO business. Revenues are not disclosed

eCommera – The most glamorous British competitor, eCommera attracted funding from Tom Hunter and Martin Sorrell while winning high profile accounts such as House of Fraser and Asda. It began as a Demandware integrator but raised £25m in 2014 to reposition itself as “cloud software and big data company and to conquer American. Renamed OrderDynamics after a Canadian software vendor it acquired, the business now commercialises decision support and order management software. Latest accounts show revenue of £25m with operating losses of £5m.

e-inbusiness – Proudly trading as “Yorkshire’s largest e-commerce agency,” e-inbusiness renamed itself eibDigital, now builds on EPIserver and boasts Hallmark among its customers. Revenues are not disclosed.

Ekm – specialising in templated sites for micro-businesses, Ekm now claims to power one in five online stores in the UK and has opened its own sites in France and Spain. Revenue is not disclosed.

eSellerPro – focused on helping brands manage large volume/complex assortments on the leading market places (eg eBay), eSellerPro recently rebranded as Volo Commerce. It boasts 90 employees and reported turnover of £4.5m.

Imano – in 2009 it commercialised its own e-commerce platform called CommerceNow with clients including Radley and Past Times. Imano still exists but is a pure mobile agency with last reported turnover of £1.2m. It was acquired by Israeli integrators, Ness Technologies, in 2012.

Maginus – the leading Microsoft integrator, Maginus recorded sales of £9m in 2014. Predominantly aiming at the mid-market incuding Fortum and Masons and Smeg, Maginus has taken advantage of its strong Microsoft relationship to position itself beyond e-commerce as an integrator of the full AX software suite.

MoneySpyder – first appeared in the e-consultancy guide in 2009 and is still marketing its proprietary platform based on Ruby on Rails. Target customers are smallish catalogue retailers. Revenue is not disclosed.

Motive – now called E-Motive, this business remains focused on helping brands sell on the large marketplaces but is more consultancy than software vendor. Revenue is not disclosed.

Pod1 – one of the first agencies to build on Magento, Pod1 was very successful with brand-led retailers such as Harvey Nichols. It’s now extended to build on Demandware too and is part of an anglo-American digital agency group called Born. Revenue is not disclosed.

Portaltech – listed as Quicklive in the 2009 guide, Portaltech was one of the first Hybris integrators, listing clients such as Monsoon. By 2010, with sales of £4.5m and EBIT of £0.8m, it was acquired by Reply (an Italian group) for £1.6m. It now claims to be the world leader in Hybris implementation with offices in the UK, Italy and Germany. Turnover is now £13m with operating profit of £3.2m.

Red Technology – operating a proprietary platform called Trade.it, Red continues to invest in new features and has maintained a decent client list including Hotel Chocolat and Crabtree & Evelyn. Revenue is not disclosed

Salmon – the most successful of all the businesses listed in 2009, Salmon built its capability around implementing IBM Websphere for tier 1 retailers including Sainsbury and Selfridges. WPP bought the business in 2013 and most recent financials were turnover £42m and operating profit £3m.

Screenpages – coming into e-commerce very early from a catalogue background, Screenpages moved to Magento from Microsoft in 2008. It has now delivered over 50 Magento projects including Atterley Road and RSPB. Revenue is not disclosed.

Snow Valley – building on Microsoft Commerce Server, Snow Valley listed Majestic Wine and Clarks Shoes among it customers. It was acquired by Micros in 2011 at a time when its revenue was reported as just £3m. Subsequently, Micros was bought by Oracle and, although the old Snow Valley business persists, it’s future isn’t clear.

Venda – the closest thing to Shopify listed in the 2009 guide, Venda was the initial mult-tenanted SaaS e-commerce platform. Founded by Dan Wagner, Venda attracted plenty of customers but racked up losses throughout its existence (see Farewell Venda). Revenue did manage to hit £20m but the business was acquired by Netsuite in 2014 for $50m, rather less than the owners has been hoping for just 12 months previously.

REVIEW: Walking to the iBeacon beat on Regent Street

The Regent Street app is one of the first multi-retailer deployments of iBeacons in the UK. The app itself is great – credit to The Crown Estate for nailing the customer experience – but the retailers themselves really need to do better.

The first positive news is that the app doesn’t ask for registration. I really like this. Granted, it’s tricky anyway for a landlord such as Crown Estates to start collecting customer data without annoying its tenants but lack of registration certainly improves the initial customer experience and gets you straight into the useful screens without delay.

First, the app asks for permission to use your location data and then begins to discover your shopping preferences.

Regent Street App first screen

It has a very intuitive Tinder-esque swipe up/down for brands you like or dislike. If you are indifferent, you swipe sideways to move them out of the way.

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The whole process took less than a minute and didn’t feel like work. I selected the brands I like – mainly mid market menswear – and gave a thumbs down for perfume and jewellery.

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Next the app makes a first guess at what categories you like but gives you the chance to refine the selection. Interestingly, the Regent Street app – unlike others – doesn’t ask any demographic questions. It uses preference information to deduce what it needs to know about you and prepares a personal wall of brands which can be accessed when you’re away from Regent Street to help plan your next visit. Good idea.

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Within the app, you can discover the events happening in Regent Street, a helpful map of participating shops and a set of screens you can browse offline containing messages from each brand.

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With my preferences registered, I set off down the West side of Regent Street, heading South, to see what iBeacon related messages would arrive.

First, Jaeger offering a discount although (like the other brand communications)  it’s not clear whether this offer is special to the app or how it would be redeemed.

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Next, another message from the same brand but from a different app. Jaeger are also working with Iconeme (the people putting beacons into mannequins) but this one suffered from both a technical problem and poor targeting. Iconeme knows I’m a man (it asks during registration) but sent me a womenswear message.

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After Jaeger, it was Gap suggesting I get fit but not offering any special reason to visit the store.

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Then Levi Strauss promoting its loyalty programme.

Levi iBeacon

Followed by Brooks Brothers advising on its new collection.

Brooks Brothers iBeacon

And Reiss suggesting some personal shopping.

Reiss iBeacon

And finally, on the East side, Wolford reminded me about its new collection. I’d excluded womenswear in my preferences it’s no great secret that people who like menswear (men) often also like lingerie.
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Then I crossed the road and headed back up towards Oxford Circus.

Only one brand on the West side of the street wanted to talk to me. That was Gant with a (small) discount offer.

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Stepping out of Gant, I was buzzed a second time by the Jaeger store across the street through the Iconemene app.

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Some notable brands didn’t get in touch at all. I’d given a thumbs up to both SuperDry and Clarks but neither sent me an iBeacon message. Neither did Gaucho even though I’d ticked “I like Argentinian food.”

The Regent Street app’s user experience is excellent but the volume of messages I was sent while walking down the East side of the street could quickly get annoying. Each time the iBeacons contact your phone, you have to pick it up, and click through to the Regent Street app to see what’s on offer. Most of the time it’s going to be easier to just to look at the shop window and read the posters – “Come and see our new collection”, “£100 off when you spend £300” or whatever.

For iBeacons to be genuinely useful, they need to be deployed to send personalised messages about stuff you can’t know about just by looking at a shop window or by following a brand on Twitter. Otherwise, shoppers will quickly become bored and switch off.

I did notice that the Regent Street app has been live since September 2014 but hasn’t published any user statistics yet. It’s not widely promoted either (just the bus shelter poster below) and together this suggests that it’s still in the experimental phase. That’s sensible.

Landlords and brands can only learn by trial and error but the measured pace of progress on Regent Street underlines  why 2015 (like 2014) is not going to be the year iBeacons revolutionise retail.

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People in Faraday Cages shouldn’t throw stones

Shoppers tend to ignore the technology provided by retailers. Instead, customers prefer to use their own devices in stores and savvy brands will do all they can to help. So concluded Chrid Johnston, customer insights manager at Schuh (a mid-market, full price, footwear retailer) in a presentation to last week’s Purple Wifi event.

This insight is based on experience. Schuh had installed a network of iPad screens which could be used to check stock and to make online orders for home delivery. Staff found them useful but customers walked right past. Schuh made them bigger (see below) but customers still wouldn’t touch them.

Giant screen at Schuh

The strategy is now to encourage customers to use their own mobile devices through provision of free Wi-fi. Shops, particularly those localed in malls, are frequently built with steel frames. These form Faraday Cages. Mobile signals, particularly the 4G networks that carry most data, struggle to penetrate very far from the front door.

Schuh customers love mobile. Mobile sales are growing strongly and accounts for 46% of visits to the Schuh website, up 10% points in just the last twelve months. Schuh has upgraded its instore Wifi with Purple Wifi, this allows it to access a greater range of analytics and offer customers and easier login process via social sign-on. The social sign-on part is interesting as it can provide a wealth of demographic data as you can see from this (remarkably balanced) Channel 4 News clip.

Paradoxically, Chrid did mention that social login was much less popular at Schuh than she’d been expecting.  Why is Schuh keen to provide free Wifi?

Showrooming. 85% of Schuh merchandise is branded and its customers often use their phones to showroom competitors’ pricing. It’s better they do this while remaining in the Schuh store than stepping outside to get a better cellular signal.

Self-service: Schuh is a service brand but there are some customers who prefer to self serve to check product or stock information.

Multi-channel: cross-channel orders are becoming very significant. Schuh took 100K “check and reserve” orders last year with 48% conversion. Wifi can help to increase this rate. “Buyer collect” is also important, accounting for 11% of all onine purchases.

Discounts: knowledgeable shoppers are checking social and affiliate networks for deals. Having them online when they are in the store ensures everyone gets what they are entitled to.

Social: Wifi encourages shoppers to share photos and ideas about shoes with friends and family, primarily via ShapChat and Whatsapp.

Reluctant co-shopper: Wifi can keep bored husbands and kids entertained. After login, shoppers are directed to Findmysize.co.uk, a Schuh site that offers quick stock checking. This has been well received as it offers an instant and useful service.

Post authentication URL redirect at Schuh.
Post authentication URL redirect at Schuh.

I like this implementation. It’s been kept simple and Schuh has resisted the temptation to over-market. Too many advocates of in-store Wifi and associated technologies such as iBeacons are encouraging site owners to use these platforms to proactively push messages to customers. Yet few, if any, retailers have enough customer insight to be able to send shoppers a time-sensitive, location-aware, contextualised and relevant communication. Spam would be inevitable and lazy marketers could kill the whole category; just as they have done for email. Chrid recognised this. So did Lee Smith from Harvey Nichols who spoke afterwards.

Shrewd retailers will put the client in control and use the technology reactively to give quicker and more accurate information when they signal that they want it.

Universal Basket & Knyttan – Techstars’ Selection of the Best in UK Retail Tech

Here are two great ideas for solving real but very different problems for retail: how to make affiliate purchases and how to economically mass customise fashion. Both were showcased at last week’s Techstars Demo Day and are looking for investment.

Universal Basket

There are many sites that aggregate and curate products but can’t actually sell them. When shoppers click on something they like, they are sent (via an affiliate network) to the brand owner’s site to make the purchase.

This is often a poor customer experience. You can’t buy products from more than one brand at the same time and the hand-off process can be clunky, resulting in quite a lot of drop-outs. The brand owner makes fewer sales and the aggregator loses commission.

Universal Basket has come up with a way of allowing shoppers to make multiple purchases directly from the aggregator site. Details are sketchy but if it works, this is a real winner for the aggregators. Not only will they sell more products and have happier customers, but brand owners will pay higher commission to affiliates that actually make sales rather than just generate leads. We’re talking 40% vs 6%. Big money.

Some of the larger aggregators have begun building their own technology. Examples include Lyst’s Express Checkout and Keep’s OneCart. The closest concept to Universal Basket seems to be TwoTap which has raised $2.7m and claims to be able to improve mobile conversion rates 6-10 times.

Knyttan

An industrial knitting machine takes two days to programme. Hence, production runs need to be in batches of at least 50 to be economic.

Knyttan has found a way of reducing this time to minutes and so can produce bespoke pieces at mass-market prices. This is highly attractive to the designers who now have a way of getting smaller collections to market bypassing the traditional middle-men of the industry. Result: more choice for shoppers at better value.

Knyttan claim now to have more designers on their books than Zara. The Techstars audience was really excited about that. Watch the video. Then visit their store in Somerset House.

Demandware Heads In-Store

Omni-channel retail requires omni-channel systems. That much is clear. Retailers that implemented point solutions to trade online are now demanding that their vendors offer joined-up solutions that facilitate the sharing of key information – price, promotions, stock and basket details – across all customer touch-points.

This is why the e-commerce vendors have been steadily bought out by the (generally larger) enterprise application or EPOS vendors. From the top to the bottom of the market, we’ve seen a steady consolidation which began in the UK with the acquisition of Fresca by BT Expedite in 2008.

One e-commerce vendor has bucked this trend. Demandware this week announced that it had paid $65m for Tomax Group which trades as Retail.Net. This business provides API’s, middleware and a presentation layer that allows retailers to trade across multiple channels with a consistent set of data. This is achieved without the need to upgrade enterprise applications or replace the existing EPOS.

Retail.net architecture
Retail.net architecture

This is an intuitively attractive proposition for retailers and Retail.Net claims 50 enterprise customers including Hallmark and LL Bean.

There is clear strategic logic for Demandware here. By incorporating the Retail.Net capability within the overall Demandware offer, it can position itself at the heart of its customers architecture. This will make relationships stickier and should permit Demandware to claim a higher share of its clients’ IT spend. It also means that Demandware can properly claim to be omni-channel which is helpful when talking to sales prospects.

However, Demandware has paid a stiff price. Tomax’s made $24m sales in 2014 split between licenses, professional services and subscription/hosting fee. This puts the purchase multiple at 2.8x revenue. Revenue is split into thirds – licenses, professional services and subscription/hosting fees. Gross margin was c.$13m and “it has historically been running at breakeven profitability.” It has 170 staff.

Contrast this with Sanderson – a British ERP vendor, which bought One Iota, which does roughly the same things as Retail.Net but is rather smaller, for £5.4m. One Iota has performed really well since the acquisition – revenue and profit doubling in its first year of ownership – and it does look like Sanderson bagged a bargain.

If a Mannequin Could Talk…. (part two)

Everyone’s talking about iBeacons but remarkably few retailers have the retained customer intelligence needed to make use of them. The technology has no value to a business that simply doesn’t possess the capability to come up with a useful, location-based message.

I’ve posted before about iBeacons. This is an interesting new technology that can help retailers communicate time and location based information to their customers.

I walked past the Hawes and Curtis store in Jermyn Street this morning. It’s my favourite shirt shop. It is also a trial site for the Iconeme iBeacon product.

If you look at the windows, there’s a very strong promotional message based. It’s January, after all.

Jermyn Street window, January 2015
Jermyn Street window, January 2015

As I was looking at the sale poster, my phone pinged with quite a different proposition.

iBeacon "push" message, January 2015, Jermyn Street
iBeacon “push” message, January 2015, Jermyn Street

Welcome to our store. Good, I like that.

Launch our app. Why? I’m outside the store. What’s the point of opening an app when I’ve got the merchandise within reach. Invite me in!

New collection. Eh? The windows have ten foot tall messages about the sale. Why not remind me about the bargains to be found inside?

My guess is that the head office marketing team are excited about the new collection and want to tell everyone about it. Meanwhile, the retail operation has stock to clear.

Joining up departments and joining up customer messaging will be vital if iBeacons aren’t to become a high-tech turn-off.