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ALIBABA IS THE WORLD'S LARGEST eCOMMERCE COMPANY, BUT DOES IT POSE A REAL THREAT TO AMAZON AND eBAY?

Founder and Executive Chairman of Alibaba Group 

Alibaba to invest more abroad as globalization becomes a top priority

Group Holding Ltd will invest heavily in existing and new ventures abroad, making its push beyond the China market a top priority, the Chinese e-commerce leader's new CEO, Daniel Zhang, said.

Alibaba Group CEO Daniel Zhang (Click Image To Enlarge)

Zhang's comments come at a time when Alibaba aims to maintain its rapid growth even as the prospect of e-commerce saturation at home looms over the company.

Zhang said in his first speech since taking up his new post this week, according to a report on Thursday on Alibaba's news and commentary website, Alizila.

"We must absolutely globalize,"

The vast bulk of Alibaba's revenue comes from its dominant domestic online marketplaces, but the company has been investing in a range of sectors abroad. Just this week it announced it would set up a cloud computing base in Dubai, and boosted its stake in U.S. e-retailer Zulily Inc.

Alibaba Group Holding Limited - Revenues by Segment - 2010 Through 2014 - Includes China vs International Revenues  - In Millions of Yuans - Statista (Click Image To Enlarge)

Zhang was quoted as saying.

"We will organize a global team and adopt global thinking to manage the business, and achieve the goal of 'global buy and global sell'." 

Alibaba, which handles more transactions on its platforms than Amazon.com Inc and eBay Inc combined, would continue to invest heavily in new and existing overseas operations, Zhang was quoted as saying. Those included AliExpress, a platform for overseas consumers to buy Chinese goods, and Tmall Global, a marketplace for overseas goods to be sold online in China.

For the quarter ending in December 2014, Alibaba achieved $127 billion in China retail gross merchandise value (GMV).  For calendar year 2014, Alibaba achieved $370 billion in China retail GMV. A key reason for the strong GMV growth is the continued growth in active buyers across its platforms—Taobao Marketplace and Tmall.com. The company explained that an active buyer is someone who came to its retail marketplaces to make at least one purchase during the period of measurement.

Alibaba Gross Merchandise Volume (GMV) - Taobao and Tmall - By Quarter in Billions of  Chinese Yuans - Q4 2012 through Q4 2014 (Click Image To Enlarge)

The GMV growth was also driven by category expansion. On November 11, 2014, the company’s Singles Day promotion generated GMV of $9.2 billion. This was an increase of 58% compared to the Singles Day in 2013. These transactions were settled through Alipay on its retail marketplaces within a 24-hour period.

Alibaba's online shopping gross merchandise volume (GMV) in millions of Chinese Yuan's from Q2 2012 through Q1 2015 (Click Image To Enlarge)

Zhang said if Alibaba does not globalize it won't be able to last 100 years - a goal set out by Executive Chairman Jack Ma.

But growth of Alibaba's international commerce business is lagging the pace of growth in China, even as the new CEO faces the prospect of slowing domestic growth as saturation among online shoppers threatens to hobble expansion.

In the three months ended March, Alibaba's revenue from China commerce grew 39 percent to $2.2 billion. International commerce grew 27 percent to $264 million and only accounted for 9 percent of revenue, compared to 11 percent in the same period a year earlier.

Alibaba says some of its larger overseas markets include Brazil and Russia. The company and its affiliates are also making overtures in India, where it is in talks with phone maker Micromax Informatics to buy a $1.2 billion stake, according to several people with direct knowledge of the matter.

For the United States, Alibaba is planning a major move to win business this year, by offering American retailers new ways to sell to China's vast and growing middle class.

Mobile commerce is driving an increasing share of Alibaba's business

Alibaba’s growth has been further boosted by an exponential increase in mobile users. China’s 600 million-plus Internet users are migrating to smartphones, setting off a race to capture this new market. Alibaba’s mobile GMV now represents over 51% of a staggering 289 million mobile active users.

Alibaba said it had 289 million mobile active users (MAUs) out of 350 million buyers at the end of Q1 2015.   Mobile users represented $49 billion or 51% of  total gross merchandise volume (GMV) on its Chinese retail platforms during Q1 2015, up from 42% in Q4 2014.  Mobile users also represented a whopping 40% of total ecommerce revenues for Q1 2015, up from 30% in Q4 2015.

Alibaba Active Buyers and Mobile Active Users by Quarter in Millions - Q1 2014 Through Q1 2015 (Click Image To Enlarge) 

Alibaba Total Mobile Active Users (MAUs) in Millions, Mobile Gross Merchance Volume (US$) and Mobile Revenues as a % of China Retail Rvenues (US$) for Q1 2015 (Click Image To Enlarge)

Alibaba Mobile GMV, Mobile Revenues and Revenue Contribution by Quarter - Q1 2013 Through Q1 2015 (Click Image To Enlarge)

Does Alibaba represent a serious competititve threat to Amazon and eBay?

Wether Alibaba represents a serious to U.S. ecommerce leaders Amazon and eBay depends on who you ask.  Let's look at the opinions of a few ecommerce experts.

Mike van Dulken, head of research at Accendo Markets, says Yes

In terms of sheer size, accounting for 80 per cent of all Chinese online shopping, with volume growth easily outstripping rival internet retailers thanks to 1 billion items on offer to 350 million buyers, and with 30 million shipments made per day, fast-growing behemoth Alibaba represents a genuine threat to the likes of Ebay and Amazon.

Jack Ma’s stateside charm offensive has provided key insight into the firm’s goals, with some impressive numbers, such as sales of a landmark $1 trillion by 2019, generated by a whopping 2 billion customers.  The founder has made it clear that the aim is to reduce reliance on China, increasing rest-of-world sales by a factor of 20.

This implies taking market share, which the promise of 72-hour worldwide shipping and attracting US businesses to its already highly-successful platform may well help deliver. Outside China, Alibaba is looking increasingly like the retail elephant in the internet chatroom. The competition better watch out.

Steve Mader, a vice president at Kantar Retail, says No

In the short term, Alibaba is not focused on entering the US or European retail markets to compete on Amazon and Ebay’s home turf. Its attention is connecting Chinese businesses to Chinese consumers, Chinese businesses to the world, and the world to Chinese businesses.

Ma’s goal is to remove a significant amount of friction from Chinese retail trade and have Alibaba positioned as the conduit the traffic flows through, generating a massive number of monetisation opportunities through media and marketing services, or payment programmes such as Alipay.

With Alibaba focusing on China, it offers global retailers the ability to learn and adapt. We’re already seeing this with Amazon’s moves in the UK to become more flexible in its distribution network by partnering with other retailers such as Smiths News, and Ebay becoming increasingly brand focused. In the longer term, however, the tech giants would be foolish to dismiss the threat of Alibaba.

COMMENTARY:   Based on Alibaba Group CEO Daniel Zhang goal to expand internationally by a "factor of 20," both Amazon and eBay should take this as a threat, but not an eminent one.  Alibaba Group faces several hurdles in order to successfully penetrate the U.S. market.

1)  U.S. buyers do not use escrow accounts to make online purchases like Alibaba Group uses to make sales.  We prefer to use credit and debit cards to make our purchases, expect a liberal merchandise return policy, and delivery of our purchases within 1 to 5 days.  I don't think Alibaba Group's business model translates well in the US market except for very expensive items like jewelry, art and collectables.

2) U.S. buyers are very loyal to both Amazon and eBay.  The seller reviews on eBay weed out crooked sellers.  Likewise, product reviews on Amazon are very useful in assisting buyers to make their purchasing decisions.  

3) U.S. buyers have the advantage of buying products from sellers located and shipping within the U.S.  Alibaba Group does not carry merchandise, but depends on millions of small sellers, to produce and ship the product directly to the customer.  Alibaba would have to open large distribution centers in the U.S. in order to meet the demands of U.S. customers for quick turnaround of their orders. This would require a huge investment in facilities and merchandise inventory to meet the demand of customers in the U.S. and Europe. 

4) Both eBay and Amazon have fond ways to weedout sellers of cheap knockoffs.  On the other hand, Alibaba Group has been criticized by the government for the large number of sellers selling knockoff products through their ecommerce platforms.  Alibaba Group has spent over $1 billion over the last two years to control the knockoff problem.

5) U.S. and European online buyers are much more sophisticated than Chinese consumers.  They are very leary of these small Chinese producers, the quality of the products they sell, and how to deal with merchandise returns.  This is a big reason why I believe that Alibaba Group will have to adopt a business model that is similar to Amazon and eBay in order to compete with those companies.

6) Alibaba Group does not have a well known brand name in the U.S.  This lack of brand awareness by U.S. consumers is a huge weakness.  This lack of a strong brand identity will hurt Alibaba with U.S. consumers who are used to buying from well established companies like eBay and Amazon.        

In spite of these weaknesses and disadvantages, Alibaba Group still represents a threat, probably within 5 to 10 years. Alibaba cannot just compete on the basis of price, it must compete on the basis of the four P's (price, product, promotion and place).    

Courtesy of an article dated June 11, 2015 appearing in CityAM, an article dated May 14, 2015 appearing in Reuters, an article dated January 29, 2015 appearing in The Wall Street Journal, an article dated March 23, 2015 appearing in Market Realist, an article dated March 23, 2015 appearing in Yahoo Finance, First Quarter 2015 Earnings Presentation for Alibaba Group, Full Year 2014 Earnings Statistics by Statista

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THE STATE OF MOBILE PAYMENTS 2015, MOBILE PAYMENTS COULD HIT $142 BILLION BY 2019 FROM $52 BILLION IN 2014

 

Thanks to big moves from Apple, Samsung, Google and others, the world of mobile payments is rapidly evolving. More retailers accept digital payments than ever before and these 11 tech companies — as well as the world’s most famous coffee chain — are leading the charge.

 

Mobile payments in 2015

Apple, Starbucks and Disney are all strong brands with loyal followings, but they also have something else in common: They're early leaders in the ever-evolving mobile payments market.

Some analysts predict 2015 will be the first year all the pieces — including a larger base of NFC-enabled devices and terminals, and growing consumer acceptance — come together to take mobile currency mainstream. A number of additional companies are also entering the world of mobile payments, such as American Express, which you might expect to see, and Jawbone, which might seem surprising.

Here's a high-level look at the current mobile-payment and wallet adoption levels, as well as a breakdown of

Mobile payments today

By the end of this year, 5 percent of the world's 600 million to 650 million NFC-enabled phones will be used at least once every month to make "contactless in-store payments at retail outlets," according to consulting firm Deloitte's annual "Technology, Media & Telecommunications (TMT) Predictions" report.

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While five percent is not a staggering number, it represents a considerable increase over last year's mobile payment usage rate. As of mid 2014, less than 0.5 percent of the 450 million to 500 million NFC-enabled phone owners used their mobile devices for in-store purchases, Deloitte says.

While contactless mobile payments won't go mainstream this year, "niche adoption" will continue to grow, according to the report. Down the road, mobile payments use via NFC-enabled devices should "rise steadily" as consumers become more familiar with the concept and banks and retailers readily accept mobile payments.

Mobile payments tomorrow

U.S. mobile payments to national brands and local merchants will grow from $52 billion in 2014 to $142 billion by 2019, according to a 2014 Forrester report.  

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Forrester say.

"The adoption of mobile payments is an evolution — not a revolution — and the evolution is well underway,"

Forrester's numbers includes in-person mobile payments as well as remote and peer-to-peer payments.

Capgemini's "World Payments Report 2014" suggests mobile payments will increase to 47 billion transactions through 2015, up from 29.2 billion in 2013.

And according to Gartner, "rampant interest in mobile payments" and a "significant increase in mobile commerce" will drive mobile commerce revenue in the United States to represent 50 percent of all U.S. digital commerce revenue by 2017. Mobile commerce currently represents 22 percent of all digital commerce, Gartner says.

Amex on Apple Watch, Jawbone UP4

American Express is experimenting with facial recognition and wearable technology that could form the foundation for new mobile-payment and security features, according to The Wall Street Journal. Amex tests new ways of using its payment services on devices such as the Apple Watch and Google Glass in its own tech development lab. The company is evaluating facial recognition as a more secure way for mobile consumers to use Amex when paying for goods or sending money transfers. However, the technology isn't ready for prime time and is still in early testing phases, The Journal says.

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Amex also recently partnered with Jawbone to add mobile payment features to the company's upcoming UP4 fitness tracker.

Pay attention to Apple Pay

The Apple Pay mobile-payment and digital-wallet system debuted in October 2014. It lets consumers with NFC-enabled iPhone 6, iPhone 6 Plus, and Apple Watch devices pay in stores at contactless terminals and buy goods using apps that support the service.

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Apple Pay's impact was significant and immediate. Apple said more than a million credit cards were registered for use with the service in its first three days of availability. Denée Carrington of Forrester Research says.  

"Apple Pay will influence every discussion of mobile payments through 2015.  Apple Pay will be the catalyst for new debates on balancing data privacy with customer engagement and loyalty" and will be "the standard-bearer for the best use of tokenization to secure payments and biometrics to combat fraud."

CurrentC coming summer 2015

CurrentC is expected to be available in mid 2015, and it will combine mobile payments and loyalty benefits. Merchant Content Exchange (MCX), a company owned by a consortium of U.S. retailers including CVS, Best Buy, Lowe's, Sears, Target, and Walmart, backs the CurrentC platform. 

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Small-scale trials are currently underway in undisclosed U.S. markets, according to IDG News Service, but some critics express doubts about CurrentC.  Forbes says.  

"MCX seems completely unaware of how people actually shop at its partner stores."  

CurrentC doesn't support credit cards, to help merchants avoid those fees. Instead, CurrentC uses debit cards, which don't provide the same level of fraud protection as credit cards. The system will also initially use QR codes instead of NFC or another wireless technology.

Disney 'MagicBand' at the Magic Kingdom

According to Wired.'

"If you want to imagine how the world will look in just a few years ... skip Silicon Valley and ... (go) to Disney World," 

Disney World guests can wear a "MagicBand," a waterproof, plastic wristband that contains a short-range RFID chip and a 2.4-GHz wireless transmitter. MagicBand is also a mobile payment system, and it lets guests at Disney resorts purchase food, beverages and merchandise, and gain admission to attractions.

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Wired says. 

"You don't need to carry cash, because the MagicBand is linked to your credit card.  You don't need to wait in long lines."

Apple Pay lifts Google Wallet

Google Wallet, a mobile-payment and wallet system that uses NFC to enable payments between compatible devices and point-of-sale (PoS) readers, was released in 2011. However, the system failed to gain traction, partially because some wireless providers supported the then-rival Softcard payment system, previously (and unfortunately) known as Isis.

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In February 2015, Google acquired Softcard, integrated it with Google Wallet and announced its Wallet app would be preinstalled on compatible devices from AT&T, T-Mobile and Verizon Wireless later this year. You can use Gmail attachments to send money from your Google Wallet, too, even if the recipient doesn't use Gmail. Apple Pay's success ironically ignited interest in Google Wallet, and today more stores accept NFC payments from both competitors.

Jawbone, UP4 and Amex

Jawbone, which makes fitness trackers, portable speakers and other consumer electronics, recently entered the world of mobile payments. In mid April, the company announced that its upcoming UP4 ($200) activity-tracker wristband would let wearers make contactless payments via pre-registered American Express cards at PoS terminals this summer. UP4 will use Jawbone's app to link Amex cards to UP4 for NFC wireless payments. (Microsoft Band is another wearable with some mobile payment capabilities.)

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For UP4 transactions, Amex will provide retailers with tokens instead of consumers' credit card numbers, according to PC World, and Jawbone says it won't store credit card numbers or receive sensitive data about user transactions.

'Microsoft Payment,' Windows 10 and 'tap to pair'

Microsoft will likely enter the mobile payments space in a big way. Here's the gist of what's known so far, according to The Motley Fool: The payment platform may be called "Microsoft Payment;" the company filed official forms to become a money transmitter in the United States and already received permission to act as one in Idaho; and Windows 10's "tap to pair" feature could be used to transmit payments via NFC.

From PC World: 

"For now, we can only imagine what Microsoft might do. Perhaps the company is cooking up a direct mobile payment competitor to Apple Pay — though any effort on that front may be hamstrung by Windows Phone's meager adoption."

Microsoft's Band wearable already lets you pay for goods at Starbucks.

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PayPal, Paydiant and mobile payments

PayPal has been an ecommerce force for years. In March, news broke of PayPal's plan to acquire startup Paydiant, a platform that companies use to build branded mobile-payment and loyalty-card services. Subway, Capital One and retail consortium Merchant Customer Exchange (MCX) already use Paydiant's platform, according to the IDG News Service. Paydiant lets consumers pay for items via their mobile devices using NFC and QR codes.

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PayPal also said in March that it would sell NFC-equipped versions of its credit card readers to merchants.

Samsung Pay, NFC and MST

In March, Samsung announced Samsung Pay, which uses two different wireless technologies: NFC and magnetic secure transmission (MST). Startup LoopPay developed the latter, which has been embedded as a copper ring inside the new Samsung Galaxy S6 smartphones, according to Computerworld.

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Samsung Pay is expected to be available in the United States and South Korea this summer. The system's support for NFC and MST means Galaxy S6 users will be able to make purchases at many more retail locations than Apple Pay users, because Apple Pay requires NFC-enabled terminals.

Avivah Litan, Gartner analyst, told Computerworld.

"Samsung Pay certainly heats up the competition.  But Samsung still has a lot of work to do to improve the user experience before it can effectively compete with Apple."

Hip to be Square for mobile payments

Square's PoS card readers are already a hit with small businesses, including food trucks, restaurants and other local retailers. The Square Wallet mobile app, introduced in 2011, didn't catch on with consumers, however, so the company pulled it and replaced it in 2014 with Square Order, an app that lets people preorder drinks and food from local vendors. Then in March 2015, Square shut down that app, too. The company currently focuses on its Square Cash peer-to-peer mobile payments app for consumers and businesses, as well as its various PoS systems for merchants, including the Square Register app.

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Starbucks leads by example

Wired says Starbucks is "the master of mobile payments." AForbes headline says "Once Again, Starbucks Shows Google And Apple How To Do Mobile Payment." So what's the big deal?

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The coffee chain says it nabbed as much as 90 percent of the $1.6 billion spent in U.S. stores via smartphone in 2013. CEO Howard Schultz says the company's loyalty program drives mobile payments. Coffee drinkers purchase Starbucks cards, load them with funds from a credit card, then scan barcodes in the Starbucks app or iOS Passbook wallet to pay for food and drinks at its cafes. The more they buy, the more points they earn toward freebies.

Starbucks is also reportedly testing beverage delivery (via the Postmates service) as an extension of its mobile payment offering.

COMMENTARY:   Seth Priebatsch, 23, and CEO of SCVNGR, a Cambridge-based startup that began as company with a location-based social gaming app, could not get sufficient traction, so it pivoted in late 2011.  Priebatsch's no goal now is to dominate the market for mobile payments, allowing cellphones to be used in place of cash or plastic to buy things.

Already, 250 businesses around Boston allow consumers to use SCVNGR’s LevelUp mobile app to pay, and Priebatsch says another 100 will come online soon.  The system, deployed in eight other cities, is handling more than $1 million in transactions each month. One analyst believes the only app used by more consumers today for mobile payments is the Starbucks app.

SCVNGR has had several incarnations.

It started in 2008, enabling sites like museums or colleges to create text-based games that could be played on any mobile phone as players navigated a real-world environment.

Then, SCVNGR started chasing Foursquare, a Manhattan company that was the first to encourage mobile users to “check in’’ and share their location with others.

In March 2012, SCVNGR launched LevelUp, which was seen as an attempt to cash in on the Groupon craze.  But while Groupon’s prepaid coupons only created an incentive to go to a business once - to take advantage of, say, $50 worth of tanning time for $25 - LevelUp offered an enticing second and third deal once you cashed in the first. The idea was to try to engender loyalty, rather than just drive a swarm of bargain-hunters to the business.

The original LevelUp product didn’t take off.  SCVNGR was pitching it to merchants when dozens of other companies were also trying to persuade them to offer new kinds of digital deals.

SCVNGR introduced the current version of LevelUp in July 2012. Once you enter a credit card number into the app, you can use your cellphone to pay at businesses that accept LevelUp. The merchant puts a SCVNGR-supplied mobile phone on the counter in a special plexiglass holder. When you open the app, it displays a QR code - a more pixelated version of a bar code - which is read by the merchant’s phone and initiates the transaction.

The LevelUp scan works more reliably than a credit card swipe, and it’s generally faster.

But the big incentive is that most businesses accepting LevelUp offer deals to get you in the door. The app lets you see a list of businesses near you, and how much they will knock off your first purchase: a $4 credit at Naked Pizza, for instance.

Once you make that first purchase, a business can dangle future discounts based on a certain spending level. That’s an easy way to run a loyalty program without having to dole out those annoying punch cards.

When you use Twitter to survey people who use LevelUp regularly, they cited discounts and the simplicity as their two favorite features.

Dan Croak of Cambridge said he liked the way it cuts down on visits to an ATM, and doesn’t require him to sign a credit card receipt.

Katie Cohen of Boston said the app’s only drawback is that "I feel more like a nerd every time I use it."                                                                  

Merchants say they appreciate LevelUp’s low transaction fee: about 2 percent.  Mike Conley, director of marketing at Sebastians Cafés, says.  

“Accepting other credit cards can be as high as 5 or 6 percent.  Plus, LevelUp gives us a wealth of data about our customers: how often they come in, and how much they spend.’’

Conley says nearly 4,000 people have used LevelUp to pay at Sebastians, and their average purchase is higher than other customers.

Patrick Lynch, who runs the Bon Me food truck, says.  

"I  have found it’s worth our while to give a little discount with LevelUp to try to convert people into regulars.’’

Bon Me offers $2 off a customer’s first purchase with LevelUp.

Building a mobile payment product that consumers and merchants like is a significant accomplishment, and Yankee Group analyst Nick Holland says that SCVNGR has maneuvered into a very strong position. Holland says.  

“It’s arguable that they’re number two behind Starbucks.  But we’re still in the very low single-digit percentages, in terms of people using their mobile phones for anything transactional.’’

Handling $1 million in monthly transactions is not generating much revenue for SCVNGR, which so far has raised $20 million in venture capital ($12 million was raised in May 2012).  The 120-person company collects $20,000 in fees on that $1 million, some of which it must pay to credit card issuers and middlemen. Even getting to $100 million a month in transactions would not create a very big business.

But Priebatsch has already figured out his next move. He said.  

“In three years, we’ll be handling $10 billion a month of transactions - and making zero on the transactions.’’

Instead, LevelUp will charge merchants a monthly fee (perhaps $100 per location) for help bringing in new customers, transforming them into repeat customers, and analyzing their spending habits.

Priebatsch says. 

“Google has had great success with selling advertising that understands what you’re searching for, and generates revenue every time you click on one of their ads.  Our ad unit is based on the transaction, on getting you into a business to buy something. We think that what we are building is the largest financial advertising system on the planet.’’

Priebatsch’s lofty vision could get SCVNGR acquired, as established players in the payments industry, such as PayPal, Google, and credit card companies, try to formulate winning strategies for mobile. But building a profitable business atop the vision would give SCVNGR a chance of becoming a major player in its own right - perhaps the 21st century’s version of American Express.

Courtesy of an article dated April 22, 2015 appearing in CIO Magazine and an article dated March 25, 2014 appearing in The Boston Globe

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A PARADIGM SHIFT FROM BRANDS TO CUSTOMERS MEANS BRANDS MUST PROVIDE PERSONALIZED EXPERIENCES OR RISK LOSING THEM

It’s true that you never get a second chance to make a first impression.

The proof? Customers are breaking up with retail brands that can’t deliver on their evolving expectations. The tech-savvy generation and their time-pressured parents are rapidly adapting (and perhaps outpacing) retail brands.  Customers are demanding a shopping experience that is intuitively seamless, fast, authentic and personalized.

So how do you answer the increasing demands of your customers?

The paradigm shift: from brand to customer

The customer experience has become the “final frontier” for retailers. It used to be all about the brand. But a lot has changed. Because of increasing customer expectations and falling store sales, retailers are learning that they have to make a big shift. It’s not about the retailer’s brand any longer.  It’s all about the customer—and how the brand can create a shopping experience built on this new-found focus.

Let’s face it. Most shoppers can find similar or better alternatives online. A large part of why they are coming to the store is for the experience itself.  

"Customers not only want, but expect a personalized experience. They expect retailers to know their preferences and interests. A recent Infosys study reported that 78 percent of consumers are more likely to be a repeat customer if a retailer provides them with targeted, personalized offers.”

But the pendulum swings both ways. The CMO Council reported that more than half of North American consumers would consider breaking ties with retailers that do not provide offers that are relevant and personalized.

So we’ve come to a place in time where retailers are forced to change their ways. The shift of focus must come away from the brand and, instead, highlight the customers’ expectations and needs at an individual level. Brands that succeed in this change will see increased loyalty and profit margins. But those that do not will be faced with a serious decline in sales and brand loyalty.

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Unless you’ve been hiding under a rock, you probably already know all of this. But the real question is:  What do you do about it? How do you create an experience for each and every one of your shoppers that will make them feel that when they enter your brand’s store, they are entering their store?

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Today most retailers realize the power of personalization and the in-store experience. The problem is that they don’t know how to craft an experience that is unique, and they don’t have the information they need to get started.

The materials for change: personas, shopper history and real-time decisioning

To get started along the journey of creating a shopping experience that is built around your
customer, you will find that personas, your compiled shopper history and an organized real-time message engine are your keys to success. However, before you can cross these items off your to-do list, you need one very important thing—data.

Data is the building block for creating shopper personas built in reality. Data that you store of your
shoppers’ past transactions with your brand will provide critical information that will deliver a truly
personal experience for them. And data will help you to make decisions about what message or offer your shopper should receive in any given moment. To be successful, you need to be sure that data is your foundation for all things moving forward and that your decisions are grounded in actionable insights.

Personas: Going beyond segmentation

Retailers have long used customer profiles as a representation of their marketing segments. personas take these profiles beyond the basic demographic makeup of the customers. A well-developed persona incorporates the basic demographics with financial information (e.g., ability to pay, credit worthiness, net worth), interests and—perhaps most importantly—transactional behavior and categorical spend.  True, it does take work (and often money) to create accurate shopper personas. But once this task is done, these can be powerful tools for getting marketers and store employees to understand and obsess about customer needs.

With personas, your brand has a holistic view of who is shopping at your stores. To be successful,
marketers have to use personas consistently.  They should serve as a reference at every step of the design process so that it’s clear who they are designing the experience for.

It’s also important to note, that building personas is not just a one-time job. Once you have created
your personas, they should serve as living, breathing documents that need to be evaluated on a regular basis. If your customer base changes, then so should your personas. Measurement is crucial to ensure that the personas remain an effective guide.

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Shopper history: the more you know

Personas are only one element of the personalized shopping experience.  Shopper history is another. Capturing a customer’s history with your brand empowers you with hugely valuable information. What have they purchased in the past? What are their preferences? What are they buying with your competitors?

Having the answer to these questions can make you a master of the retail universe.  But, knowing them is not enough. You have to ensure that they are easy to access.  How many databases are the answers to these questions stored in currently? Do your store associates have access to them? Are they fueling the messages that are being served on your ecommerce site? If your answer is no, then you have some work to do.

It is one thing to capture this information—but the most important thing you can do is to be sure that it is readily available so you can use it at every step of your customers’ shopping journey.  

Real time: Making it happen in the moment that matters 

Now that you have created your personas and you can access your shopper history at any stage of your customers’ journey, you have one more very important thing to do. You need a real-time decisioning engine.

Sound complicated? Well, in a way, it is. But you already have most of your legwork done with your personas and your shopper history database. Now it’s time to map all of the possible journeys your shoppers may take and think about their experiences.  At every step, what offer would be relevant to them in that moment?

This exploration takes time and a lot of thought. But in this mapping process, you’re actually creating a database of offers and messages for your customers that will make their shopping experience feel personal and relevant. After all, that’s the goal, right?

Bringing it together: Joining the elements of your new shopping experience

Forrester notes,

“Combining the user-archetype information that personas contain with an individual’s history, preferences and current environment can help companies engineer experiences that feel like they were designed for a specific user, even if they were not.”

In essence, this is the secret formula. It’s not possible to make every experience individually and uniquely personal to a single customer.  But if you can combine the persona + shopper history + real-time decisioning engine, you will be delivering on an experience that feels custom fit for your shoppers.

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Your customers don’t have patience for you to figure it out. They just want an intuitive experience that feels as if it was authentically created with them in mind. Shoppers’ expectations of instant gratification aren’t changing. If you can deliver on their expectations, you’ll reap the marketshare of the brands that are not.

It’s a lot to tackle if you haven’t already started. Remember, you don’t have to climb the mountain in one attempt. Focus on one aspect of your customer experience and use it as a beta project. Then build upon your customer experience from there.

According to Forrester,

“Organizations that have failed in personalization initiatives often tried to do too much at once. Instead, successful organizations we spoke to avoided these pitfalls in new contextualization initiatives by starting small and adding a personal touch for certain experiences before ramping up to large personalization initiatives.”

Avoiding the breakup: how to build trust with your customers

Just as in real-life relationships, your consumers are looking for authentic relationships with the brands and products that they buy. The evolving digital landscape has created competition and endless shopping opportunities. With all of these endless options, consumers want to be inspired.

However, through all this evolution, the premise of buying and selling goods hasn’t fundamentally changed. The old adage “Nothing happens until someone decides to purchase something” still applies. The difference is that now shoppers are more equipped to demand an intelligent, transparent, unique and meaningful experience with the brand of their choice. They have more choices than they ever did before when selecting a brand to have a relationship with.

Where the brand used to hold the power, now it is the consumer with all the power of choice. To be successful, you need to be strategically prepared to set your brand apart from the competition. To do this, you need to know your customer in a way that feels unconsciously unique and authentic. In the end, this is what will inspire trust for your shoppers. It’s that trust that will kindle a loyal relationship with your brand.

Conclusion

Today the customer is in control. They decide if, when and how to interact with their favorite retail brands. With all the channels of interaction available to the consumer, retailers need the ability to develop well-grounded engagement strategies to maximize the customer experience every minute of every day.

As a new breed of marketing partner for this customer-empowered world, our approach harnesses the power of rich data, world-leading technologies, engaging creativity and transformative ideas to connect customers to brands and deliver dramatic results.

Customers today have many options. We can help you create meaningful customer connections, resulting in increased revenue, more frequent engagement and more efficient marketing spend.

COMMENTARY:   Improving the customer experience is a strategic priority for 73% of businesses, yet only one percent of companies deliver an excellent customer experience, according to the 2015 Forrester Research Customer Experience Index™., 

Based on a survey of 46,000 consumers, the CX Index measured and ranked 299 large US brands, across 17 industries, on the quality of their customer experience. USAA is ranked number one. Other companies among the top 15 include (in alphabetical order): Ally Bank, Amazon.com, Charles Schwab, Discover, Edward Jones, Etsy, HSN, JetBlue Airways, Lexus, Navy Federal Credit Union, Newegg, PNC, QVC, and Zappos.com.

In the Forrester index for 2015, retailers remain the best at providing a great customer experience, but it is interesting to see that parcel shippers and hotels dropped way down the index – last year they were up there at the top with retailers. And there is an important distinction to make with retailers. Digital-only online retailers are much better at providing a great customer experience than those with a store network.

Megan Burns, Forrester Research principal analyst serving customer experience professionals said.

“The emotion that an experience elicits influenced loyalty in nearly every industry.  And making customers feel valued is the holy grail of CX emotions. Customer experience leaders made customers feel valued almost twice as often as CX laggards did.”

Megan explained that this year's CX rating used different methodology that now incorporates customer loyalty in determing the overall CX rating.    

"The biggest change in our new approach is the way we judge CX excellence. To hit a home run, the 299 brands we studied had to do more than make customers happy. They had to design and deliver a CX that actually helps the business by creating and sustaining customer loyalty.  Our new rules shook up the standings and pulled a bit of a Billy Beane, tipping conventional CX wisdom on its head.  For example:  Customer loyalty is undergoing a rapid change from being the way that you manage a points-based program with plastic cards to a strategy that requires engagement with customers and an ability to improve their experience with your brand."

Megan said that there is a shakeup on the CX leaderboards for 2015. 

"For the first seven years of the CX Index, retailers, hotels, and parcel shippers dominated — but not this year. As industries, hotels and shippers dropped to the middle of the pack. Retailers held on to first place, but there’s an asterisk on that particular stat. We broke the retail industry into two groups in 2015 — those with physical stores and those without. Retailers without stores (we call them digital-only retailers) kept the top spot. Those with stores fell multiple places in the industry standings."

Megan cautions that a high CX rating may not always be worth it and that there maybe a point of diminishing returns that brands may not want to cross.   She says.

"In most of the industries, we saw a strong positive link between CX quality, loyalty, and loyalty-driven revenue. But that wasn’t always the case. Our models for one industry showed a very clear and compelling point of diminishing return. Taking CX from poor to okay is more profitable for brands in this space than going from okay to excellent. That doesn’t mean that anyone can afford to ignore CX. Many aren’t even hitting the okay mark right now. But it gives executives something to think about as they refine their company’s overarching CX strategy."

Courtesy of the Epsilon's "It's Not You, It's Me" , an article dated April 20, 2015 appearing in MarketWatch, and an article dated April 20, 2015 appearing in Forrester Blog

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TOP 10 BRANDS THAT MILLENNIALS LOVE FOR 2015 -- NIKE, APPLE, SAMSUNG, SONY AND WHAT?!! WALMART

 

Walmart, Target, Coca-Cola and Pepsi are among the top 10 most beloved brands of Millennials, according to the 2015 Top 50 Millennial Brand Ranking Report released this week by Moosylvania, an independent digital advertising agency. The brand comparison study was conducted with Millennials in two separate surveys over the course of nine months.

The latest rankings, based on panel studies of 1,500 Millennials—defined as age 14 to 35—not only ranks which Top 50 brands continue to earn Millennial love, but why these brands are connecting so strongly with them. Participants in each survey were asked to rank their top three brands unaided—32 of the 50 brands mentioned were repeats. Eighteen new brands edged their way into the latest list.

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The 2015 top five “most beloved” brands are Nike, Apple, Samsung, Sony and Walmart. A few of the newcomers to the list included Pizza Hut (21), Chevrolet (23), Honda (31), Oreo (33), Sprint (42) and Chanel (43), among others. In spite of last holiday season’s security breach, Target rose from 27th to sixth in the 2015 rankings. Facebook, PlayStation and Old Navy were among 11 brands that lost favor with Millennials and dropped from the Top 50 list. Absent from either list were alcohol and spirit brands.

In addition to their favorite brands, Millennials participating in the latest study identified key media traits that transform a high-awareness brand into a beloved brand. Important brand characteristics that matter most to Millennials include High-Quality Products (75 percent), Would Recommend This Brand (61 percent), Fits Their Personality (53 percent), Social Responsibility (40 percent), Shares Similar Interests (39 percent) and Says Important Things (31 percent).

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Norty Cohen, founder and CEO of Moosylvania said. 

“What these two back-to-back studies reveal is that a form of personalized communication has to be involved before a brand can get recognized. Make me look good, make me feel good and entertain me—mass communication has been supplanted with friendship marketing, 'Millennials’ curation skills allow them to consider new entities. Consider that in one year’s time 18 brands went from not one mention to placing in the Top 50, proving that Millennials will adopt brands that get into their zone.”

Cohen describes Millennial consumers as their own brand managers.

“This generation is looking for brands that help them become something more than their regular selves. Provide a high-quality product or service that helps them look cool, and Millennials will return the favor with their recommendations and purchasing power.  They care about what’s happening on their street, in their neighborhood and beyond—and so should marketers. Brands that market with a strong, positive message and display a sense of social responsibility show they care about what Millennials care about.”

For example, Ralph Lauren, who went from 104th to 30th in the rankings, and Wendy’s (47), a newcomer to the 2015 Top 50 list, both created campaigns that included participatory TV commercials and music videos. The companies then micro-targeted consumers by speaking directly to them through their various social media platforms, Cohen says.

“Millennials are not just consumers—they’re friends. They trust friends who listen to them, are open and honest, remember their names, are consistent and stay true to who they are. Marketers who connect with them as friends on that level have an opportunity to break into the favorites list.”

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COMMENTARY:   Wal-Mart's popularity among young people may come as a surprise to many marketing analysts who say millennials prefer convenient, smaller-format stores and online shopping over the big-box retailers where their parents shopped.

Even Wal-Mart executives have admitted they were surprised by the data. 

Matt Kistler, Walmart senior VP-consumer insights and analytics, told Ad Age.

"Millennials now, as a generation, like Walmart the best, more so than Generation X, more so than boomers," 

Wal-mart Chief Marketing Officer Stephen Quinn said to Ad Age.

"That kind of shocks a lot of people, including inside the company." 

But Wal-Mart's cheap prices are a big draw for cash-strapped millennials, many of whom are underemployed and working multiple jobs to pay off student loan debt.   NOTE: Millennials also happen to be biggest users of discount coupons, even more than their parents.

The class of 2015 has the highest level of college debt in US history, according to CNBC. On average, students graduating this year will owe $35,051 in student loans, CNBC reports based on data from Mark Kantrowitz, a student financial aid policy expert and publisher of Edvisors.com.

Millennials are also spending more on technology and food than previous generations, leaving them with less discretionary income.

Kistler told Ad Age. 

"The millennial customer grew up with a lot of hardship.  They see Walmart as a place where they can save money."

Courtesy of Moosylvania.com's A Labor of Like: Millennials 2015 - Favorite Brands Ranking Report and an article dated June 16, 2015 appearing in Business Insider

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AMAZON'S PLAN TO DELIVER ITS OWN PRIVATE-LABEL GROCERY PACKAGED GOODS AND FRESH PRODUCE

Following the playbook of countless retailers, Amazon.com Inc. is preparing to broadly expand its fledgling lineup of private-label brands to include an array of grocery items such as milk, cereal, and baby food as well as household cleaners, people familiar with the matter said.

Amazon’s planned expansion in the private-label business mirrors a more traditional retail model where name-brand products are sold beside store-owned goods. Private labels have become a vital business for mass-market retailers, generating stronger margins and building loyalty with consumers who no longer view generic products as lower quality.

In early May 2015, Amazon sought trademark protection for more than two dozen categories under its Element brand, including coffee, soup, pasta, water, vitamins, dog food and household items like razors and cleaning products. Diapers and baby wipes—the latter of which is still on the market—were Amazon’s first line of Elements, available to customers who pay $99 a year for a Prime unlimited shipping membership.

Amazon Element private-label brandname (Click Image To Enlarge)

Amazon has approached some private-label food manufacturers seeking a partner, according to people familiar with the matter. Those discussions included TreeHouse Foods Inc. of Oak Brook, Ill., one of the larger private-label producers, with $3 billion in sales last year, said one of the people.

Amazon declined to comment. A spokesman for TreeHouse declined to comment on any talks with Amazon but noted the company does “business with all of the nation’s top retailers and operates in 15 grocery categories.” 

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The business isn’t without challenges. Amazon must rely on outside manufacturers to design the products and then vouch for the quality, as it did when it launched its Elements brand of diapers last December.  The next month, Amazon pulled the diapers from its site, citing a flawed design—customers had complained about quality issues.

Many of Amazon’s coming private-label products will be ingested, making quality-control a critical issue.

The Seattle retailer has long dabbled in private labels. Besides diapers and wipes, it has offered all customers batteries, USB cables, backpacks and even ceramic plates under the Basics label, noted for its spartan black-and-white color scheme. And Amazon sells patio furniture and linens under its Strathwood and Pinzon brands.

Not all of Amazon’s private-label ventures have been winners. It discontinued a line of cookware endorsed by a Seattle chef in 2012 and a tool line, in addition to the diaper snafu.

Never before has Amazon ventured into perishable goods. By rolling out a broad portfolio of private-label products, Amazon could yield higher profit margins, while also gaining leverage with its largest suppliers to pare prices—though many of Amazon’s vendors also produce private-label goods.

Rivals ranging from Costco Wholesale Corp. to Target Corp. to Walgreens Boots Alliance  Inc.offer an array of store-brand products with names including Kirkland, Archer Farms and Nice, respectively. Private labels made up about a third of Target’s $73 billion in sales last year.

Eddie Yoon, a principal at brand consultancy The Cambridge Group, says.  

“It makes a lot of sense for any retailer to get into private label.  Private label has a lot of room to grow in terms of sales and can attract a new value-focused customer.”

Mr. Yoon said that despite their lower price tags, private label merchandise tends to have higher margins than name-brand goods for both retailers and manufacturers because of savings on marketing and brand development.

Market researcher Information Resources Inc. estimates private-label packaged goods was a $120 billion market in the U.S. in 2014, up 2.1% from a year earlier. Private-label merchandise represented about 18% of money spent on all packaged goods in the U.S. last year.   

For the year ending 2014, Amazon reported a $241 million loss on $89 billion in sales, has been pushing to expand sales of food online, including through its Fresh grocery delivery. And last year it rolled out Prime Pantry, which allows customers to order small items that the company generally only offered in bulk, such as a single shampoo bottle or bag of potato chips.

Private-label goods also could bolster Amazon’s reputation as a lower-cost retailer. IRI estimates that private-label products are, on average, 28% less expensive than their name-brand equivalents.

Amazon’s diapers were about 10% less per diaper than the priciest offerings from Procter & Gamble Co. or Kimberly-Clark Corp.—makers of Pampers and Huggies—but 25% more expensive than P&G’s Luvs and Target Corp.’s Up & Up brand, according to an analysis in December by Sanford C. Bernstein & Co.

It couldn’t be learned how Amazon may price its private-label food goods, when they may be released or whether they will be sold exclusively to Prime members, as the baby wipes are.

But it seems likely Amazon would sell them through its  Amazon Fresh grocery delivery service, available today in a handful of U.S. cities.

It also appears Amazon will be transparent about where its Elements products come from, as it has done with the diapers and wipes. The trademark filing mentions the slogan, “Every pack has a story.” Amazon’s page for its wipes details how they are produced by manufacturer Nice-Pak Products Inc., starting with the process of moistening them with purified water from the White Lick Creek Aquifier in Mooresville, Ind.

COMMENTARY:   A huge market opportunity awaits online retailer Amazon as it plans to launch its own private-label brands of perishable groceries including milk, cereal and baby food. However, the e-commerce giant must overcome challenges in quality, the distribution logistics of perishables and customer preferences that the firm hasn’t previously faced.

According to Amanda Nicholson, professor of retail practice at Syracuse University’s Whitman School of Management,  “There’s plenty of room for growth [in online grocery deliveries] … in a time-pressured society Twitter ,”   She noted that upscale supermarket chains like Wegmans have built that reputation over time, but her optimism came with a crucial rider:

"With food items, especially private-label brands, consumers need a sense of faith that this is going to be a good product, and that takes some time to build,” she said,“I don’t think Amazon has that automatic advantage at all.”

According to Wharton management professor Daniel Raff, Amazon will benefit from the refinement over the years in the business model for home deliveries of online grocery orders. He pointed to two critical factors for success — warehouse locations that can guarantee freshness of produce; and sophisticated routing and planning of transit schedules to ensure timely deliveries. He noted that Amazon has been building warehouses on the outskirts of major U.S. cities.

Nicholson and Raff discussed the opportunity Amazon faces in private-label food deliveries on the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.) Amazon’s plans were first reported by The Wall Street Journal in late May.

Amazon already offers private-label brands in products including cables and batteries, but this is the company’s first attempt to extend that to perishables. As part of its plans for private-label food items, Amazon sought trademark protection in early May under its Element brand for products like coffee, soup and pasta, according to the Wall Street Journal report.  The U.S. market for private-label packaged goods was worth $120 billion in 2014, the story said, citing research firm Information Resources.

“There is plenty of room for growth [in online grocery deliveries]… in a time-pressured society.” – Amanda Nicholson

The Quality Threshold

Ensuring quality will be the biggest challenge Amazon will face in food deliveries, said Nicholson. She recalled Amazon’s abortive launch last December of a brand of diapers under its Elements brand. Amazon had to withdraw the product from its site a month later after customers complained of quality problems.

Unlike with delivering books or music, the quality bar is set much higher for food items, said Nicholson.   

“When we are talking about melons or fruit or private-label yogurt, most of us have very specific likes and perhaps dislikes.”

Also, in certain food categories like melons, avocados and other fruits that can easily become bruised, most customers may want to see what they are buying, said Raff.

He explained.  

“The secular change over the last dozen years or so in grocery merchandizing, and in the investments grocery store operators are making, has to do with the general shift in consumer preferences toward higher-quality fresh produce.  Vendors would be aware that customers who experiment with online grocery shopping would be very sensitive to the quality that is delivered. So it is probably worth it for the stores investing in the quality of such products in the beginning in order to generate consumer loyalty.”

Learning from Mistakes

Raff recalled the rise and fall of Webvan, an online grocery business based in Foster City, Calif. Launched in the thick of the dot-com boom in 1996, it went bankrupt five years later. Webvan became a part of Amazon in 2009 and focuses non-perishable groceries.

Webvan was “a great idea,” but it failed because of distribution problems, said Nicholson. Nevertheless, Raff said.  

"Its experience inspired entrepreneurial minded people.  It strongly suggested tha1t once people figured out how to do the infrastructure properly, something like [Amazon’s latest move] might be coming. We know now that this sort of service is commercially feasible.”

Nicholson pointed to FreshDirect, an online grocer based in Long Island City, New York, that was founded in 2002 and serves markets in New York, New Jersey and Pennsylvania and appears to have gotten its business model right. “FreshDirect keeps its edge by focusing on its food route,” she said. She noted that the firm’s founders have experience in the supermarket and grocery businesses, “which is helpful.”

“Vendors would be aware that customers who experiment with online grocery shopping would be very sensitive to the quality that is delivered.”–Daniel Raff

Follow the Money

Customer satisfaction is key to online grocery deliveries — but the business also has to make money. Nicholson said.  

“The crucial thing in home deliveries is [to ask]: Is it worth delivering?”

Clearly, each customer’s order has to cross a value threshold before it becomes worthwhile to the retailer, she added.

The arithmetic gets more complex with same-day delivery. Raff said that while “same-day delivery was cheap, prices [of products] were higher than they would otherwise be,” citing research by some stock analysts.

Raff also wondered how Amazon might use the customer data it collects. He recalled a controversy Amazon faced some years ago where it supposedly experimented with data on customer search behavior to adjust prices of goods “in a way that is [more] favorable to Amazon than … to the consumer.” He said that in the ensuing negative publicity, some found this to be “a somewhat more sinister side” of the company.

In any event, Amazon could be a winner with its grocery delivery business if it scores on two fronts, according to Raff. One is about persuading customers of the convenience, reliability and quality of its offerings, he said. The second aspect is about getting consumers “habituated with their orders arriving in hours rather than days later,” made possible with Amazon’s warehousing network and transportation infrastructure.

Raff said.  

“[Eventually], all categories of consumer goods will fit into this general mindset — not just music or clothing or food.  Amazon is really trying to be ‘the everything store.’”

Flat Growth 

According to private research firm IRI, private-label market penetration rates in dollars and units sold have not changed since 2011.    

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According to IRI, private-label market shares vary considerably by channel.   The grocery channel leads with a 22% market share, followed by Club chains (18.1%), Drug chains (16.3%) and Mass Supermarket chains (15.2%).

While pure-play private-label grocers like Trader Joe's and Aldi have made strong gains, and mass supermarket chains like Kroger's and Safeway are selling more private-label premium grocery products, not all grocers have faired well.  

According to IRI, more than half of package foods major categories have had flat private-label share growth since 2011.  This reflects the trend of overall flat consumer dollar and unit sales since 2011. 

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Amazon has to truly standout not only in price and quality, but in uniqueness as well.  It will be competing against some well established firms with loyal customers.  Amazon will have to provide a strong magnet to get these consumers to switch to its private-label consumer packaged goods and fresh foods.  Amazon will need to differentiate itself in other ways besides price, quality, freshness and delivery.  It needs to expand the market for private-label products, by offering products that are not presently sold under a private-label, otherwise it will have to rely on marketing wizardry to steal market share from existing venors of private-label products.  Some possiblities include gourmet frozen meals, fresh organic foods and organic packaged products.  The company needs to start promoting its Element private-label brand.  This means spending on advertising and promotions, and positioning its private-label products as "right-now" products that appeal to busy consumers who don't have time to shop or hate to shop.         

Courtesy of an article dated May 28, 2015 appearing in The Wall Street Journal, an article dated June 9, 2015 appearing in Knowledge@Wharton, and an article dated June 11, 2015 appearing in Market Realist

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QR CODE ADOPTION FINALLY SHOWING SIGNS OF SLOWING DOWN, QR CODE SCANNERS ARE MOSTLY MALE AND 25-44 YRS OLD

Even though QR codes still represent the majority of print-to-mobile activations in print and retail, brands and publishers are not clamoring to use the technology like they once did.

In 2014, mobile bar codes ruled the mobile space – they were placed everywhere – from billboards, to clothing tags to magazine pages. However, perhaps in large part to lack of education, it seems the technology has lost some of its glimmer.

Matthew Szerencse, market development manager of Digimarc, Beaverton, OR says.  

“Yes the spark has faded.  QR Codes take up valuable real estate and don't offer brands any creative control.  Brands don't want to place a generic black and white box all over their creative.  Seventeen Magazine has used over 250 imperceptible digital watermarks in multiple issues.   There is no way a publication like Seventeen can place 250 QR codes in their publication without being obnoxious.”

Key technologies

Done right, QR codes are effective.

However, many marketers simply place a QR code on their product and assume that consumers will see it and automatically scan.

Mr. Szerence said.  

“Advertisers just slap a QR code on their creative and pay no attention to the post-scan experience.  This has caused some consumers to not trust QR codes since broken links, boring content and non-mobile optimized sites are second-rate experiences.  We're also seeing an increase in malicious QR codes that lead to malware and viruses after scanning.  This year we'll see even more publishers and retailers using digital watermarking to connect with their mobile audience.  Since digital watermarks can be placed in any type of media, brands can use one platform to engage with consumers across multiple touch points throughout their shopper's journey.”

According to Ritesh Bhavnani, chairman of Snipp Interactive, Washington, the shine on QR codes has dimmed down. However, that is not necessarily a bad thing.

Mr. Bhavnani said.

“One of the interesting thing about mobile marketing is the proliferation of choice available to marketers.  Even as much as two years ago, you pretty much had to choose between text messaging and QR codes.  Today you have a wider palette with image recognition, NFC, AR and digital watermarks.  So as a marketer you can now choose the technology that best fits your specific needs.” 

For QR codes that means that although the shine is off, the utility of them may well continue to increase.

Mr. Bhavnani said.

“Probably the single biggest issue with QR codes remains the need to have an app to scan the codes and the need to launch the app to scan the code.  It’s time-consuming and not elegant.  If any of the phones ever does a passive QR scanner that is always on and one has to just point the phone camera in the direction of the QR code to launch the content that would make QRs much more user-friendly,” 

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According to the executive, mobile bar codes work well in utilitarian contexts – as identifiers, for providing dense amounts of information and for getting access to very specific pieces of content.

When used appropriately QR codes can indeed build engagement and drive interaction.

The problem, however, is that because QR codes are free and easy to generate they are being thrown onto everything – reducing their overall perceived utility for customers.

Mr. Bhavnani said.

“We are seeing a lot of great applications of augmented reality this year – and if I had to put my money on one specific application in mobile marketing it will be that.  You're starting to see augmented reality move away from the ‘gee-whiz cool’ towards providing customers with real utility and creating real engagement which is great.”

For many marketers, QR codes are a cost-effective way to bring the digital and physical worlds together. 

And, many industry experts believe that the technology’s decrease in popularity is due in part largely to a lack of innovation and a lack of consumer appreciation for what the technology can do. 

QR codes have been around for years and yet, according to eMarketer statistics, only 19 percent of Americans have activated one. 

Additionally, QR readers are not standard on many devices and require an additional download, making them less convenient in consumers' eyes. 

Vanessa Horwell, chief visibility officer of ThinkInk, Miami Beach, FL said.  

“Marketers need to do more than stick QR codes on posters.  Instead, they need to strive for creativity when trying to break out of the QR code funk.   I think image rendering/augmented reality will take center stage.  For one thing, camera technology and sensitivity continues to advance.  Then there’s a host of apps that mix real-world and digital data together. And all of this imaging convergence is coming as the lead-up to wearable products like Google Glass.” 

According to Alex Romanov, CEO of iSign Media, mobile bar code popularity has never really inspired a true fire of consumer demand.

QR codes, which have been around since 1994, but only capable of being read by smartphones since 2010, have not gained wide-spread traction, per the executive. 

Mr. Romanov said.

“I do see QR codes as an effective companion technology for digital signage and proximity advertising and engagement – all of it in real time.  There’s also important technological similarities with digital signage that may help QR codes’ growing popularity: both are opt-in experiences.   In that way digital signage and Bluetooth and Wi-Fi connectivity may finally soften the ground for a true QR code success.  In my eyes, marketers haven’t been creative enough in their QR code usage." 

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Marketers and brands appreciate their ability to merge the physical and digital worlds, but in the fast-paced world of mobile technology, image recognition and augmented reality have, in some ways, surpassed the QR code's initial cool factor.

What’s more, compared to newer technologies, QR can be downright clunky. Consumers must first have a QR reader on their phones; often they must download additional software and then visit a Web site as part of their engagement. 

None of these steps inspire grandiose calls to action. Consumers are an instant gratification lot. And, sometimes QR codes fall short in that area.  

Mr. Romanov said.

“I remain partial to proximity advertising via mobile devices; that is the wireless transmission of messaging or offers to mobile devices, taking the form of SMS, email, push notification and opt-in deals, discounts and digital coupons.  It's timely, interactive, and relevant - and provides consumers with the information they want, when they are primed and ready to receive it.  And Apple’s recent $20 million purchase of WiFiSlam, an indoor GPS tracking technology, suggests proximity advertising’s and location-based marketing’s reach is only going to grow.  Augmented reality, image recognition and wireless opt-in communications like SMS and push notification will prosper as well. I think that partnerships across marketing channels, like mobile messaging used in combination with digital signage, for example, will really flourish. In my eyes, no one technology can really be dominate today with consumers literally consuming content across a number of screens at one time. Marketers must really find a way to capture their attention – and to do it in a way that is personalized and respectful of consumers' privacy.” 

Many industry experts believe that mobile bar codes still hold acclaim with marketers.

According to Rick Chavie, vice president of omnicommerce at hybris, QR codes have not faded. 

Instead, marketers are seeing a broader penetration and more use cases being developed. 

Mr. Chavie said.

“A few examples include luggage tags, physical or digital signs, product information that's accessible from a shelf label, coupon offers in newspapers, loyalty program emails, and even repair manuals that are accessed by scanning the QR code directly from an appliance.  There is continued growth for QR codes in diverse spaces.  Much of this growth has been spurred by consumer brands who see QR codes as a way to disseminate a message at a low cost, yet provide a pathway to rich content upon scanning the code.  Based on the adoption of QR codes by companies ranging from Coca-Cola to Starbucks to UPS, we are seeing the broad reach of this tactic as a marketing tool.  Unlike a hot software app that may come and go, QR codes can be updated continuously even if the QR code itself is embedded in a static print advertising vehicle such as a magazine.”

COMMENTARY:   While talk about QR codes has moved to the back burner, being replaced by the likes of  beacons, augmented reality and mobile payments, it doesn’t mean mobile code scanning has gone away.

I happened across the latest quarterly Mobile Trend Report by ScanLife, one of the very early QR code pioneers, and it has some interesting insights and scanning tidbits.

• 47% or almost half of scans came from those between 25 and 44 years old
• 38% of scams came from those 45 and older.

When 22 million QR codes were tracked according to gender the numbers look like this:

• Males are responsible for the majority (59%) of scans.
• Females are responsible for 41% of the scans.

Some other interesting factoids concerning QR scans:  

• The most active time of day for product scanning is between 6 p.m. and 7 p.m.
• The average person who scans does it 4 times.

By operating system, Apple edges out Android devices, 54% to 43%.

But it gets more interesting. Based on items scanned, ScanLife identified the interests of iOS and Android users.

Here are the top interests of people who scanned with an Apple device:

• Value shoppers
• Casual and social gamers
• Music lovers
• Health and fitness enthusiasts
• Photo and video enthusiasts

Here are the top interests of people who scanned with an Andorid device:

• Value shoppers
• Catalog shoppers
• Social influencers
• Casual and social gamers
• Entertainment enthusiasts

The top interests based on mobile engagement were technology and gadgets, food and drink and media.

Most scanning apps now can scan both QR and UPC codes and it looks like consumers are doing both. The largest category of both QR and UPC code scanning was groceries.

Here are the top categories for UPC code scans:

• Grocery
• Book
• Health and beauty
• Consumer electronics
• Toys

For QR codes scanning, consumers appear to be looking for content, which seems logical. Here are  the top pieces of content delivered via QR code scanning:

• Product info
• Video
• E-commerce
• App download
• CRM

The leading websites from scanning were SeaWorld, Coca-Cola and HP. Go figure.

Though some categories are scanned more than others, it looks like scanning is permeating pretty much everything a consumer may consider purchasing.

Courtesy of an article dated April 23, 2013 appearing in Mobile Marketer and an article dated June 1, 2015 appearing in MediaPost eCommerce Daily

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ASPIRATIONAL LUXURY CONSUMERS: THE EXPANDING LAP OF LUXURY AMONG U.S. CONSUMERS

 

In the U.S. retail market, the word luxury doesn’t have the same connotation that it once did. Or perhaps it’s just that the consumers who shop for luxury goods aren’t who they used to be. Either way you look at it, defining luxury today is no easy task—and neither is identifying how people view the term.

For many consumers, luxury is a way to signal that they’ve “made it,” but the ways they choose to showcase or express their status can be as varied as the consumers themselves. For example, some convey it subtly through the scarcity and heritage of the products they purchase. Others take a more forthright approach by purchasing eye-catching products they want to showcase for everyone to admire and covet.

Regardless of how consumers choose to bring luxury into their lives, the U.S. has the deepest pockets when it comes to luxury retail spending. In fact, management consulting firm Bain and Co. estimates that Americans spent $73.3 billion on luxury goods last year—more than consumers in Japan, Italy, France and China combined.

Despite the breadth of the U.S. luxury goods market, however, retailers have plenty of untapped potential to explore. In fact, a closer look at the luxury goods arena shows that the households that want to buy luxury goods outnumber those that already do by 8%.

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In order to engage with luxury-buying and aspirational buyers, retailers need key insight into the specific differences among these consumers. While no two consumers are exactly alike, Nielsen has identified five distinct perspectives around the meaning and value of the term “luxury,” and has categorized them into specific consumer segments. Three of them value luxury and make luxury retail purchases. The other two value and aspire to buy luxury items, but are less likely to actually make the purchases.

The aspirational consumer market is vital for luxury brands looking to achieve volume and growth. Both younger and older aspirational consumers place value on luxury products, but they haven’t traditionally been luxury consumers themselves. Lower-priced offerings and partnerships with mass merchandisers give these consumers access to the brand and build loyalty.

A luxury purchase should feel like an indulgence and a reward for aspirational consumers. Aspirationals under the age of 55 tend to live in college towns like College Station, Texas, and Lafayette, Ind., and they often shop at retailers like Burlington Coat Factory, Express and Old Navy. Aspirationals over 55 tend to shop at retailers Stein Mart and Chico’s, and live in Florida locales like Homosassa Springs, Punta Gorda and Sebring.

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In order to engage with luxury-buying and aspirational buyers, retailers need key insight into the specific differences among these consumers. While no two consumers are exactly alike, Nielsen has identified five distinct perspectives around the meaning and value of the term “luxury,” and has categorized them into specific consumer segments. Three of them value luxury and make luxury retail purchases. The other two value and aspire to buy luxury items, but are less likely to actually make the purchases.

The aspirational consumer market is vital for luxury brands looking to achieve volume and growth. Both younger and older aspirational consumers place value on luxury products, but they haven’t traditionally been luxury consumers themselves. Lower-priced offerings and partnerships with mass merchandisers give these consumers access to the brand and build loyalty.

A luxury purchase should feel like an indulgence and a reward for aspirational consumers. Aspirationals under the age of 55 tend to live in college towns like College Station, Texas, and Lafayette, Ind., and they often shop at retailers like Burlington Coat Factory, Express and Old Navy. Aspirationals over 55 tend to shop at retailers Stein Mart and Chico’s, and live in Florida locales like Homosassa Springs, Punta Gorda and Sebring.

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COMMENTARY:  When it comes to luxury products, 73 percent of luxury consumers consider quality to be the most important attribute, according to a study by the Luxury Institute and Epsilon.

“The new face of luxury: Breaking down the myths and stereotypes of the luxury shopper” aims to better understand the luxury shopper. The research study was conducted by Epsilon in partnership with the Luxury Institute.

The report focuses on defining the different tiers of luxury consumers, focusing on those who are true luxe customers and those who are aspiring to that level. By understanding their consumers, luxury brands will be able to adjust their marketing tactics based on the individual’s level of consumption.

Milton Pedraza, CEO of the Luxury Institute, New York said. 

“The only way you can have a good understanding of a human being is to have honest dialogue with them.  You have to treat people as an individual and you have to have an honest and open dialogue with them,” 

Deeper understanding

Interacting with consumers in a relevant and personal manner is key for brands looking to make a connection, especially since 50 percent of luxury brands lose their top clients every year. Also, since 47 percent of consumers say it is the customer service that defines a luxury brand, understanding and catering to the top customers is vital.

The study breaks down the luxury consumers into four categories:

• Aspirational shoppers are individual who want to own luxury items, but cannot afford to on a regular basis.  They typically shop at outlet stores or on discount Web sites and purchase low-ticket designer brand items.
• Moments of wealth shoppers may save for a specific piece from a specific luxury brand, but they are not a regular consumer of the brand.
• Dressed for the part shoppers purchase luxury items to present themselves as someone living a luxurious lifestyle, but do not have the finances to be true luxe shoppers.
• True luxe shoppers do not have any financial concerns when purchasing and buy from luxury brands on a frequent basis.

Understanding where individuals lay in the scheme of luxury shopping and where they may jump to is important for brands. With a degree or a job change, consumers can move up a level of luxury shopping.

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True luxe shoppers are:

• Predominantly Male.
• Between the ages of 25 and 44.
• 52% are single.
• 42% are college graduates.
• Their net worth is more than $500,000.
• Annual incomes between $125,000 and $250,000.

Online shopping is less than 25 percent of sales for luxury brands, since consumers are still shopping in-person, leaving an opportunity for brands to offer more traditional white glove experiences.

However, this does not mean that luxe consumers are not actively online. Here are some stats that prove this point.  

• 98% regularly use the Internet and more than 50 percent research products before purchasing.
• 75% compare prices on their mobile devices.
• 75% of these consumers are on social media, but less than 25 percent engage with brands on Facebook. 

The digital nature of these consumers allows brands to have an online presence and attract consumers online, but offer customer service in-person.

The report suggests that brands organize and analyze housefile information to best understand their consumer’s habits and purchasing history.

Big data for personal results

Luxury brands are delving into more bespoke options and marketing, according to Wealth-X’s president at Luxury Retail Summit: Holiday Focus 2014.

Mr. Friedman spoke about the necessity among brands to understand their consumer, who they are, what they do and who their friends and family are in order to gain a full understanding of these individuals in order to effectively market. Luxury brands can learn from Wealth-X’s research on the ultra-high-net-worth individuals to create specific marketing strategy for the ultra-affluent (see story).

Some brands are adopting data trackers to attempt to understand in-store sales and trends.

For instance, Italian lingerie maker La Perla has teamed with a software platform to create a platform that will be implemented for all La Perla boutiques and fashion stores where its products are sold.

La Perla worked with MicroStrategy Mobile to analyze sales and other company data points through key performance indicators. This new technology will allow La Perla to be aware of information in all its stores and make necessary alterations to tactics without too much delay (see story).

Taking these opportunities to learn about and understand clients is vital for brands looking to engage and maintain a relationship with individuals.

Mr. Pedraza said.

“I think from the targeted marketing perspective if they understand who their clients are deeply they can really target those individuals and make it personal,  People will be excited about the human approach.  It gives you a wonderful opportunity to connect with [them] in a truly unique and personal way.”

The Wealthiest Consumers Hold Positions of Power, Prestige, and Influence

After tracking trends among the wealthy for over 35 years, we know how and where to uncover the ultra-affluent. It’s not only where they live that’s important; it’s their possessions, positions and proclivities that matter in determining an accurate definition of what it is to be a member of the top 1%.

Traditional sources for identifying affluence for marketing are insufficient

• Many wealthy individuals do not live in the most affluent census tracts
• Many affluent individuals do not have typical sources of income
• Many people of means are not found in public directories

The wealthy engage in activities indicative of their status

• Exclusive association memberships      
• Luxury travel
• Golf & country club membership      
• Major gift giving/philanthropy
• Gourmet food and wine appreciation      
• Power spending
• Green awarenes                                         
• Private equity investing

Courtesy of an article dated May 26, 2015 appearing in Nielsen Newswire, an article dated December 31, 2014 appearing in LuxuryDaily and an article appearing in ALC Wealth Window

WSJ: GOOGLE WILL ADD BUY BUTTONS TO SEARCH RESULTS ON MOBILE

Google's getting ready to face Amazon and eBay, according to The Wall Street Journal, and will be adding buy buttons directly to its search results. You'll see those buttons accompanying sponsored results under a "Shop on Google" heading -- they won't be used for non-sponsored links returned by the algorithm -- when you search for products on mobile devices. Upon clicking one, a separate product page will load where you can pick sizes, colors and ultimately complete your purchase. Any product you buy will still come straight from retailers, the WSJ says, so it doesn't sound like Google's stocking up warehouses with goods like Amazon does.

However, some major retailers are apparently worried that they'll get stuck with back-end order fulfillment with no real customer interaction. Since Google wants to remain in good terms with them (they are some of its largest advertisers, after all), it will give shoppers the choice subscribe to their marketing programs. That typically means mailing lists and the like, so the company's giving them access to customers' info, most likely names and addresses.

In addition, Google promised them that the product landing pages will be heavily branded with their names and will link to more of their products. The company also won't take a cut from their sales and will only get paid for every person that clicks their links. Mountain View will reportedly offer several payment options, "including digital payment methods from other providers," but it (thankfully) won't be giving retailers access to payment details. If you input credit card info to make a purchase, the website will save it for future transactions, but it will remain with the company.

As for why the feature will only be available on mobile, well, Google has a plethora of reasons. The biggest one is most likely the fact that more people now perform searches on their phones than on computers. According to the WSJ, you might spot a buy button or two as soon as the coming weeks. We don't have a list of official partners yet, since Google hasn't officially announced anything, but Macy's might be one of the first retailers available.

COMMENTARY:

Even though more people are shopping on their phones, the majority aren’t making actual purchases on mobile. Google’s solution: sponsored, mobile-only “buy” buttons that keep people on Google rather than sending them back to the retailer’s check-out page. The idea: People will buy more with a seamless checkout than they would if forced to wait for a retailer’s page to load and then go through a less user-friendly checkout process.

With the addition of a buy button, Google Shopping would go from being a simple search engine to being more of a middle-man. However, unlike companies such as Amazon, Google would not get a share of the profit, but more a pay per click profit.

Mobile Commerce Increasing

According to an eMarketer retail sales report, retail mcommerce is rising rapidly, steadily gaining a larger share of overall ecommerce.  

• In 2013, retail mcommerce—which includes products and services ordered on mobile devices, including tablets—increased 70.0% to reach $42.13 billion.
• In 2014 eMarketer estimates that figure will increase another 37.2% to total $57.79 billion, or about one-fifth of all retail ecommerce sales and 1.2% of total retail sales. In 2014, tablet sales will account for nearly two-thirds of mcommerce sales, eMarketer predicts, increasing to nearly 75% by the end of our forecast period.
• By the end of 2015, eMarketer estimates that total US retail mcommerce sales will reach $76.41 billion or 22% of total US ecommerce sales.   

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As more consumers use their mobile devices to conduct online searches for product reviews and price comparisons using search engines and recommendations from friends on social networks, it makes sense to incorporate call-to-action motivators like buy buttons.        

What does this mean for smaller ecommerce stores?

Of course, with the release of these rumors, many smaller ecommerce store owners are worried that this means they will see a dip in sales, as Google will provide linkage with large retailers instead of smaller companies. Rumors state that Macy’s is already in talks to join the new program,

Furthermore, many retailers are afraid that they will lose out on a very important customer relationship if everything is handled by Google.

What will Google do to calm the storm?

According to The Wall Street Journal, ecommerce store owners will be able to continue with the same marketing programs that they have running on their own sites, in other words this will allow retailers to get access to customer’s contact information, for future marketing purposes. Furthermore, Google will brand  the product pages with links to the ecommerce store, finally sources state that recommendations for future purchases will only be shown from the retailer providing the product.

What is the upside?

One of the most difficult areas for ecommerce owners to succeed in is mobile sales, many ecommerce owners see much of their traffic coming from desktops, with the mobile purchase process still in its infancy.

According to research, many shoppers search for products on their smartphones, but then switch to their desktop computers to make the final purchase. One of the reasons for this is, that it is still relatively difficult to fill out a whole purchase form from a smartphone. However, if Google was to make the whole process more seamless, then perhaps retailers participating in Google’s buy now program would gain a major advantage as they would see mobile sales grow exponentially.

What is the downside?

Jason Goldberg, V.P. of Strategy at Razorfish says.  

“While it’s a good feature, it definitely isn’t a no-brainer that all retailers should invest in because a whole set of issues can come with transactions on a third-party platform."  

Other issues include Google’s sponsored ads might not be able to keep up with stock quantities or backorders and shoppers will be subjected to Google’s less specialized customer service.

Keeping Up With The Competition

In December 11, 2014, Facebook announced the addition of new "Call-To-Action" features to Facebook pages.  This includes a "Shop Now" feature that will allow brands to convert fans into buyers from ads running in the newsfeed.    On September 8, 2014, Twitter announced that it was testing "buy buttons" in tweets.     

Twitter says artists, brands and non-profits taking part in the test include Burberry, DonorsChoose, Pharrel among other, and their followers will get offers and merchandise not available elsewhere. They can complete the transaction in a couple taps.

Courtesy of an article dated May 16, 2015 appearing in Engadget, an article dated May 24, 2015 appearing in EcommercePlatforms, an article dated April 10, 2014 appearing in eMarketer, and an article dated May 19, 2015 appearing in Digiday

NIELSEN: AGE MATTERS WITH DIGITAL SHOPPERS--MILLENNIALS (AGE 21-34) ARE LEADING THE WAY

E-commerce is growing around the world. In fact, global online purchase intention rates doubled—in some cases tripled—between 2011 and 2014 across more than half of 22 categories measured by Nielsen. But not all age groups are shopping online to the same degree. And the age group that has grown up in the digital era—Millennials (age 21-34)—is leading the way.

Millennials comprise at least half of all respondents who plan to make an online purchase across every product category measured in Nielsen’s Global Survey of E-commerce. Baby supplies, personal care items, toys/dolls and alcoholic drinks garner the most significant share of Millennial online purchase intenders.

MILLENNIALS COMPRISE MORE THAN HALF OF ALL RESPONDENTS WHO PLAN TO MAKE AN ONLINE PURCHASE IN THE NEXT SIX MONTHS

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OLDER GENERATIONS SHOP, TOO

But don’t count older generations out. They represent a sizeable 40% share of online purchase intenders. But reaching the older age set is much more fragmented territory than with their younger counterparts. As can be expected, the older the age, the greater the decline in online shopping intent. Globally, Generation X (age 35-49) respondents comprise about 28% of those willing to make a purchase online, and Baby Boomers (age 50-64) make up about 10%. The Silent Generation (age 65+) contributes roughly 2%. The youngest age group, Generation Z (under age 20), represents about 7% of those who intend to purchase online.

John Burbank, president of strategic initiatives, Nielsen says.

“While the generational mix of online shoppers currently skew younger, attention to the needs of all segments should be considered when developing outreach plans.  Tomorrow’s highest purchase-power consumers are ones who skew much higher for digital shopping. As the population ages, greater percentages of consumers will be connected and online prominence will continue to grow. Building trust at the onset is the foundation for sustaining lifetime loyalty among shoppers.”

DEVICE DIFFERENTIAL

Beyond the generational breakdown of who’s shopping online, brands should also consider the devices consumers use to shop. With a plethora of Internet-connected devices to choose from, there’s no shortage of ways for consumers to browse and buy online. And the device of choice is decidedly different around the world.

Computers are the largely favored device for online browsing and buying among respondents in all regions, but mobile phones are a close second pick for respondents in the Middle East/Africa region and growing in prominence in Asia-Pacific and Latin America. In developing markets, mobile is often the first-access device to the Internet. Tablets—which have become more popular since the 2010 introduction of Apple’s iPad—are used by nearly one-third (31%) of global respondents for online shopping. While tablets are currently less popular than other devices for shopping online, their portability and large-screen features are conducive to E-commerce. As penetration of these devices continues to grow, so too will online shopping usage.

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Courtesy of an article dated September 14, 2014 appearing in Nielsen Newswire

URBAN STATION'S UNIQUE 'MOBILE CAFE' OFFERS PATRONS THE COMFORTS OF AN OFFICE AND A CAFE EXPERIENCE

“It is not a coffee shop, it is not an office. But if you are a mobile worker, it is something much better than both things together.”

More people are working remotely than ever before, which is bad news for coffee shops. Once the province of college students and stoned poets, suddenly they’re teeming with everyone from copywriters to pushy corporate types willing to raise fisticuffs over a free electrical outlet. What’s a cafe owner to do?

You could ban laptops -- the favored route of New York coffee houses nowadays -- or you could make the cafe more conducive to work. That’s the approach at Urban Station in Buenos Aires's hipsterish Palermo Soho district. With copious desks, conference rooms, and electrical outlets in spades, the place feels like a trendy workplace that happens to serve coffee and croissants. From the company press release:

“It is not a coffee shop, it is not an office. But if you are a mobile worker, it is something much better than both things together.”

So how does Urban Station make money?  It rents desks. We don’t know the exact pricetag but they tell us it’s “less than a promotional breakfast in any Palermo bar.” The conventional wisdom is that charging for anything in a cafe is a bad idea; that people won’t even pay for wireless, let alone a seat.Urban Station’s trick is to throw in a raft of perks: Wi-Fi channels; food and drink included in the cost of the hour; printers; fax machines; scanners; lockers; and even a couple of bikes you can bang around on when you need a break.

There’s a real and growing market for this sort of thing. Seventeen million to 26 million people work remotely at least some of the time depending on how you calculate it. And the figure will only swell as companies look to cut costs and workers increasingly eschew desktop computers for mobile technology. Freelancers and part-timers already spend hundreds of dollars a month -- or more -- on co-work spaces. Urban Station’s the same idea, but with free food.

One quibble: The design, while cheery, feels a tad unpolished. (A green futon with purple earplug tables? This is not a Deee-Lite music video, people.) Corporations are always prettying their offices, then holding them up as company billboards; if Urban Station is going to be the workplace of the future, it might wanna do the same.

COMMENTARY:  I love the Urban Station office cafe concept very much. To my knowledge, I don't believe we have anything similar in the U.S.  

I don't believe they are going to get a lot of college students, who spend very little at cafe's offering free WIFI, and very often bring their own food, and tend to hog the tables for hours on end.  Many cafe's in the U.S. have gone the other way, and stopped offering WIFI in order to discourage these practices. 

Urban Station's concept provides a lot of value-added features, offering an environment designed specifically for the mobile office worker.  Instead of tables, they are more like workstations.  Patrons pay for the food and beverage and for actual spent working at their "workstation".

This is a very cool idea, but Urban Station does did not divulge whether they are actually making any money with that concept.  Just the same, I sent off for some information.

Courtesy of an article dated August 25, 2010 appearing in Fast Company Design