Shop owners need no longer be scared of etailers and smartphones.
Tina Fox is a textiles designer and founder of Mumsy, which runs out of a pop-up shop in Crows Nest on Sydney’s leafy lower north shore. Although her business, part of a global trend to reintroduce creative spaces to retail districts, may have existed for only a few months she has the same problems of any shop owner.
The former architect has to receipt sales, store cash until banking it, and keep the books. And she shares the shop, its clerking and banking, with three craftspeople.
She has suppliers for textiles and paints and the utilities to pay. She says the complexities of a traditional retail solution mean they put technology in the too-hard basket, literally.
“We don’t take credit cards – we’ve lost some sales because of that – we just take cash and put it in a bucket under the counter,” Fox says.
They run creative workshops but can’t recognise a repeat customer in their system to send electronic direct mail for training courses or collections openings.
Although Fox won’t be in the shop for long – the council is redeveloping it – she would like to continue in a conventional business and encourage repeat custom.
But her collective is ahead of three-quarters of Australian small business in some ways, according to the June 2012 Sensis Social Media Report, with presences at Facebook and Tumblr, and Fox’s site links to her Pinterest, Twitter, Facebook and blog.
As an entrepreneur who balances a family – she has a young child and another on the way – supporting business technologies must be easy, Fox says.
What if she could track customer spending, offer loyalty discounts, provide multi-channel fulfillment online and in-store, or invite customers to her new shop when it reopens elsewhere?
“We’re missing out hugely,” Fox admits. “Anything that was a bit more automated would take the work away from us.“
“There’s loads of festivals around and we could market our workshops much wider and loudly and we could link up with markets. Because the same person isn’t in the shop every day we don’t have a record of total sales.”
She has turned away custom for lack of change and says, “having some kind of credit card system for people would be good”.
“One guy who came in – a repeat buyer who had bought a gift the other week – he was very busy and had a lot of bags and wanted to grab something quickly, and even though there was the cash machine around the corner it didn’t happen.”
But a new generation of retail technologies could bring sophisticated solutions into such itinerant or intermittent businesses and provide value to shopkeepers of any stripe. One such solution is Kounta – a cloud retail “platform of sale” that plugs into cloud accounting solutions such as MYOB and Xero and drives Epson receipts printers.
The demands of pop-up shop owners are common to a business of any scale, especially those who want to work smarter with their customers, says Kounta chief executive officer Nick Cloete.
“In the past, staff behind the register were taking the order and waving goodbye to the customer and hoping they come back,” says Cloete. “What we find with the mobile tablet cloud technology is you have an interaction at the point of sale, rather than [just] a transaction so you have a much bigger reach outside the door with mobile payments and transactions and then anywhere within your store, not just at the register.”
He says Kounta communicates with multiple endpoints, including smartphones and the company has forged an alliance with Epson for its printers to act as servers in shops, upending the traditional retail IT architecture.
“The nice thing about these printers is, for integrators it’s easy for them to make their own app – to be able to put a retail hospitality app on printers that the reseller can offer to their end user.”
Shop owners are right to feel outgunned by savvy consumers, who run technology rings around them, found the Economist Intelligence Unit in its recent “The i Factor” report.
“Showrooming”, where a customer compares rival price offers on their connected handheld device often while experiencing the product in another store, is of particular concern to retailers.
“Armed with smartphones and wider broadband access and coverage, consumers boast unprecedented price transparency and can call on customer reviews with the swipe of a barcode or the tap of a touchscreen,” The Economist says. “The shopping trip does not start on the high street, but rather during the lunch hour at work, at the bus stop or even in bed.
“When customers do hit the shops, more than ever they expect to know what is in stock and demand the ability to reserve it, pay for it and go.”
Consider the morning coffee ritual. As Cloete notes, Kounta allows the customer to order before they get to the barista, pay while they wait, have their coffee added to their loyalty card and get moving before others even fumble for change.
Or in a fashion shop, a customer scans their items, pays on their smartphone, and walks out – but the transaction won’t end there.
“Merchants can set up their own loyalty and rewards programs and market those straight to the customer” on the spot or at a later date, Cloete says. It sends electronic receipts and dovetails with MYOB and Xero.
Kounta’s application programming interface allows developers to write software for it or integrate legacy systems. And there’s an opportunity to upgrade ancient cash registers and arcane processes to deal with the realities of mobile e-commerce.
Craig Heckenberg, business unit manager with Epson Australia, says the PoS specialist tries to simplify retail solutions for its partners to make it easier for them to consult on the business.
And for their retail customers looking at embarking on a cycle of hardware replacement the company offers some powerful solutions around printers and tablet devices.
“Epson has developed e-pos technology that interfaces with the API and receives extensible markup language data and prints a receipt and validates coupons,” Heckenberg says.
Upgrading requires downloading plugins at the customer’s shop to the Epson TM-i intelligent printer that communicates wirelessly or over Ethernet to cash drawers and secondary printers, such as those in the kitchen.
And cloud-based deployments are beginning to gain favour in the retail sector, especially amongst small and nimble players less encumbered with legacy technology and practices.
“We’re seeing more of the smaller chain of retailers moving quicker than the larger retailers due to the (latter’s) larger infrastructure to consider,” notes Heckenberg. Epson is rolling out its partner program in November and has a demo suite at its Sydney offices prior to a national education program for its channel.
Heckenberg says resellers have opportunities to impact every inch of their customer’s supply chain in ways previously unimaginable.
“What resellers should consider is how deep do you want to take your system; just front counter or all the way into the back room? This will drive a lot more development from a lot more companies that weren’t traditionally possible.”
Not content to sit at the end of the chain any more, banks are extending their reach into their customers’ IT infrastructure. Commonwealth Bank is readying its next-generation Pi retail platform, says its executive general manager of corporate banking solutions Kelly Bayer Rosmarin.
Pi is the foundation on which the bank’s technologies reimagine in-store commerce; first among which is “Albert”, an iPad-lookalike to replace cash registers.
“It will transform the retail industry at the point of sale and make things possible that people are just dabbling with now,” Rosmarin says.
“Retail customers grasp the concept and the open platform that allows them to do other things than take payments.”
CBA has 450 app developers who will distribute through its AppBank and expects solutions, such as a bill-splitting app for restaurants, to roll out next year. Devices such as these blur the lines between B2C and internal systems – she says another app turns a shopkeeper’s inventory into an Albert catalogue from which customers can buy while in store.
The same concept applies to B2B transactions, with apps to allow suppliers to top up their retailers’ stock levels. CBA integrates with cloud accounting and loyalty will be a big component. And, because the business logic is in Albert, it makes it easier to deal with different devices, she says.
The recent elongation of the iPhone 5 means CBA’s “Leo”, which turns it into a merchant terminal, has to be recast but will also be available next year.
Square out of the box
In the US, Square is a startup built by Twitter founder Jack Dorsey that turns a smartphone or tablet into a payment terminal. Square takes a cut of 2.75 percent to 3.5 percent of the transaction and, while it lacks readers for smart cards and near-field communications (“Wave and Go”), its minimum viable proposition of a magnetic-stripe reader makes it attractive to most small shop owners such as Fox or market stall holders.
In just three years, the now 400-person company has raised $US341 million in capital, is processing $8 billion of transactions a year and is valued at more than $US3 billion. Square could be set for a launch in Australia, as Starbucks has invested $25 million in it but, more importantly, will take Square payments at its 7000 locations worldwide.
And although the lion’s share of the income passes back to the credit card companies, what Square learns about customer behaviour may soon surpass that known by loyalty cards.
Square rolled out analytics and discovery tools to merchants a couple of months ago, which allows them to break down sales by the hour to see which shifts are most profitable. Along with improvements in inventory and product discount management, the US behemoth is moving rapidly into back-end systems previously the domain of specialist providers.
“We want to solve problems that are universal and we’re reviving commerce from a payer and merchant perspective,” Square chief operating officer Keith Rabois told GigaOm. “Our vision is to fill out the entire package and it just works out of the box: payments, analytics, loyalty, inventory management we do so you don’t have to think about it.”
That’s a shot across the bow to the cloistered Australian Big Four and loyalty providers such as FlyBuys and Altitude, as well as those supply chain systems provided by distributors and even many IT value-added resellers.
But although analytics or “big data” is attractive, businesses still struggle with the concept, US consultant Bricks Meets Clicks found in its August survey. Although nearly two-fifths of 113 respondents had heard the concept only in the past year, two-thirds agreed with the statement that “data is now the world’s most precious raw material”.
But of 60 definitions cited for big data, none were the same. From the shopper’s perspective, analytics is a shortcut to special deals, recommendations and lower prices.
But perhaps one of the most attractive aspects of analytics for retailers is the promise to compete with e-tailers by offering geolocated offers, say, for pedestrians passing by their stores, for location check-ins or smarter routing to and inside their shops.
StreetLight Data, which is building its international channel, is a US startup looking to do for bricks and mortar retailers what web analytics did for Amazon. It uses the “exhaust”– or not-quite-realtime data – from mobile phone companies, says founder Laura Schewel.
“We have very little information about how people are using cities,” Schewel says. “When you compare what we know about transport data versus online data, it’s absurd.
“It was clear who had the most to gain – real-world stores. Every vice president of marketing knows the value analytics brought to e-commerce, but there’s nothing remotely comparable” for bricks and mortar.
Schewel’s breakthrough is learning who passes stores, what they earn and their trip frequency to allow retailers to customise offers to lure them to break their trip. The data is “completely anonymous – no names, addresses or phone numbers”, she says.
“Outdoor signs are a big application for our data.”
A surprising hookup was using data to target ads on internet radio – imagine people listening to Spotify and hearing an ad for your customer’s shop as they go past.
And there’s no reason it can’t work in Australia, she says: “It does scale outside the US. It requires the right relationships; we did a pilot in India where things went very smoothly.”
Over the next year Schewel will run beta pilots with partners, “looking at how they use it, the value they create and value they see”.
“A year from now, we’ll have a web application for people to sign up as a subscription service to get data for the regions and corners they’re interested in.”
Such data is valuable for shop site selection and will put new metrics under retail strip leases.
Another vendor bringing analytics into the shopfront is video surveillance company, Axis, on which platform third parties have built systems to break down shopper behaviour. For instance, heat mapping and traffic flows show shopkeepers the busy parts of their store or where to improve their layout, says Axis Australia country manager Wai King Wong.
“Video systems can prove that certain areas have higher traffic flow so they can showcase it to vendors – that this aisle is more popular,” Wong says. “All this is because they’re trying to maximise the space.”
Face recognition may in future link private video surveillance to law enforcement to identify, for instance, known shoplifters or their behaviours. Following the recent Melbourne murder of ABC staffer Jill Meagher, which was solved with the aid of a store camera, voices were raised arguing for networking private cameras with police databases and the IP-nature of modern cameras now makes it technically feasible.
Wong says resellers have an opportunity to upgrade their customers’ black and white CCTV that records to analog tape with IP systems that backup over the network and offsite. A good time to have such discussions is as the NBN rolls through an area because it lifts upload speeds and provides quality of service.
“In future, we see them using cloud or hosting solutions, cameras or video footage all hosted in the cloud, just pay by a service,” Wong says.
Sentiment analysis, understanding a speaker’s attitude to a topic by analysing their language use, is another big data area that exercises the minds at Australia’s leading ICT lab, NICTA.
Technology strategist Dean Economou says broad demographics are giving way to an intimate understanding of the customer.
“Everyone is an individual and patterns of behaviour will tell you more about what someone is going to buy than the fact that they are 45-year-old male,” Economou says.
“The software is very good at detecting similarities and next time you see data that looks like a pattern you can (act on it).”
In another example, NICTA analysed reporting of the milk price war between Coles and Woolworths last year in a way not possible using, say, Google News alone.
“Coles gets mentioned a lot but the sentiment is negative; Woolies was mentioned less but the sentiment is positive so if you were head of marketing for Coles you would ask ‘What is Woolies doing right and Coles doing wrong?’
“So you can very quickly zero in on whether something is a negative or positive perception of you and for a beast as big as Coles or Woolies that’s (important).”
And the advent of Google MapReduce (Hadoop) has opened big data to those outside of the fast moving consumer goods (FMCG) giants and government, says NICTA researcher Scott Sanner. The challenge for resellers writing bespoke systems is adapting to a distributed, massively scalable methodology.
“You need to know how to make an algorithm run efficiently over 10,000 machines and then combine that,” Sanner says.
NICTA released its Scoobi library, used by the likes of Walmart, under an open source licence to help developers more easily code for Hadoop. Many retailers fall down because, having got a customer into the store, they don’t have stock.
“If you look at reasons why people don’t buy then out-of-stock is a major one; inventory control is vitally important,” says Motorola’s David Fenner.
Motorola has sold about 2500 of its handheld MC55 devices into Australian retail to counter showrooming’s effect because, once a customer leaves, they are unlikely to return.
“It empowers the employee to negotiate down to a certain level based on the company’s metrics or margin requirements and make a sale on the fly they may not have made previously,” Fenner says.
Free in-store wi-fi is another way shops can claw back advantage by identifying which products the customer is browsing online and then, potentially, giving the retailer the chance to offer a special deal to close the sale. And customers’ MAC addresses are captured so they are identified on their return visit and a profile of their interests built up over time, allowing the retailer to proactively make special offers, Fenner says.
Oracle is also wrestling with identification of customers, turning to the OAuth system favoured by the likes of Facebook and Twitter to ease customers’ interactions with brands, says the database vendor’s sales director Richard Watson. An example might be a company such as Virgin, which is a virtual provider of various services.
Watson says bigger retailers are branding services outside their traditional sectors, for instance, a supermarket providing credit cards, mobile phones or airline tickets.
“If I’m a consumer shopping online I want to be able to buy with a loyalty scheme and then buy insurance as a loyalty customer,” Watson says.
“Those brands are needing a greater association with the customers they serve – they’re moving from an anonymous transaction into a relationship where they offer higher and greater levels of service but they need to build higher levels of customer data.”
Founder of e-tailer Kitchenware Direct, Peter Macaulay, is the first local user of NetSuite’s cloud system SuiteCommerce, which he uses to market to customers.
“The single view of the customer seems really easy but for us email marketing is important,” MacAulay says.
“We can put our customers into buckets that they haven’t purchased for zero to 60 days, 60 to 90 days and then test offers – do we need to send them a 5 percent offer, free shipping or bonus gift, and we can test against all the different buckets very easily but to do that with disparate systems would be complex.”
Such a system is light years ahead of creative entrepreneur Fox, but she sees the possibilities.
“We talked about writing down everybody’s email addresses when they’re in the shop so we could send them a newsletter or updates but we don’t and that’s a big downfall because stock’s always changing over and there are workshops to do and we’re looking to hold events,” she says.
“So we should build up a database of all these people.”
Macaulay says the big challenge in the Australian market is pure-play retailers working with brands to leverage themselves online.
“We understand online marketing and really sell that to the wholesalers. We’re moving away from a discount website where people just want a bargain.
“In terms of pure-play e-commerce we’re right up with the US but in terms of multichannel, we’re behind.”
He says that when big players like David Jones or even Harvey Norman get behind it, there will be widespread uptake.
“If Amazon comes to Australia, that’s a good thing, because with the halo effect of people becoming comfortable online, it’s going to be great.”