The future of retail – What digital will do next for commerce

Back in July of this year, while schoolchildren dreamt of holidays and commuters sweated their way to work, management consultancy McKinsey sat down with president of eBay Marketplaces Devin Wenig. The interview is above; we’re going to pick on some highlights below as Wenig pontificated on the future of bricks and mortar stores, the change needed in marketing, the fallacy of big data and what will make for good competitive advantage over other retailers in the months and years to come. Often with talking heads the output can be generic and anodyne. Wenig though offers some insightful thoughts.

The future of the store: “I think stores are going to become as much distribution and fulfillment centers as they are full-fledged shopping experiences… They’ll become technology enabled so that you can go to a store and see enough inventory, but you may shop “shoppable windows.” We’re building those right now for retailers around the world. You may end up hollowing out the real estate, where the showroom is a much smaller part of the footprint, and the inventory and the distribution center become more of that footprint.”

How marketing needs to change: “There are still many instances that I see where it is old-school marketing. It’s still about major TV campaigns, get people into the stores. That’s still important, and that’s not going to go away. But understanding how to engage in a world of exploding social networks, how to use search, how to use catalog, how to optimize, and how to engage—very different skills.”

Competitive advantage: “I think the answer is data… While from the merchant standpoint incredible selection may seem great, from the consumer standpoint it can be overwhelming. I actually don’t want to shop in a store with a billion items for sale, I’m just looking for this. Data is the way to connect a long-tail advantage with consumers that oftentimes want simplicity.”

Executing on strategy: “Great data is both art and science. There’s a lot of press about the science; there’s not as much about the art. But the truth is that judgment matters a lot… we bring quantitative analysis to that to say, “The right way to look at our customers is this, not this,” even though there are infinite ways we could.”

The fallacy of big data: “It’s not about big data, it’s about small data. Big data is useless… it’s about me connecting with you, my business connecting with you. You don’t want to be part of a big data set; you’re just looking to buy a shirt. And that’s about small data. That’s about understanding insights that I can glean about you that don’t feel intrusive, don’t feel creepy, and don’t feel artificial—but feel natural. That, to me, is the future. There are glimmers of success there. I wouldn’t say the industry has arrived. For all the rhetoric about data, it’s a work in progress, but a critically important work in progress.”

Merging experiences: “E-commerce [fulfills] a utilitarian function… Stores have an important element of serendipity… The future of digital commerce is trying to get the best of both… we’re trying to spur inspiration.”

Gambling with Engagement

Understanding + Innovation = Real Engagement

Though not yet quite falling into the category of a degenerate gambler, Zeitgeist regularly receives communications from various bookmakers keen to incentivise a bet or two. Indeed we’ve previously commented on the activities of bookmakers and the gambling industry both good and bad.

It is an unusual category, one where the consumer has a number of suppliers to choose from and the product is abstract.

Consquently the service is essentially the same across brands – anyone can take a bet – and punters can visit sites like oddschecker.com to find out the best odds on a given event.

In such a market, the equity each brand has, from a long heritage in a given sport to their brand attitude and from levels of innovation to ease of use, becomes ever more important as a means to differentiate them from their myriad competitors. Marketing activity becomes crucial as brands try to establish their territory in a cluttered category.

Event Based Promotions

Some activities are based around major sporting or cultural events such as the flyer below which was distributed in Paddington Station during the Cheltenham Festival a couple of months ago.

From the tone of the copy and the reference to a girlfriend rather than wife, one might infer that the target audience for this communication was a male up to the age of 40. However, this particular flyer was handed to a female colleague who indignantly passed it on in exasperation at such a poor piece of targeting.

While some media platforms don’t allow brands to ensure their message only reaches their target demographic, it is one of the benefits that handing out flyers does offer.

It’s simple really. If the message on the leaflet isn’t relevant to someone, don’t give it to them.

Given that there are more women than men in the UK it is entirely possible that some might like a wager or two.  Indeed the recipient of the flyer is a sports enthusiast who regularly places bets.

So why didn’t Boylesports produce a flyer that would appeal to women too? Or failing that, why didn’t they educate the people giving out the leaflets as to who they should be targeting?

They may only be leaflets handed out in a busy railway station, but just because an activity is intended to be quick and cheap doesn’t mean brands can be lazy and allow standards to slip.

In addition to short term tactical executions such as the poorly executed Boylesports example, some bookmakers also invest in attempting to build longer term engagement with initiatives that show an understanding of their target customer and the kinds of things that will appeal to them.

Trends

Since Conspicious Consumption and the Age of Bling disappeared along with our wealth, consumers have increasingly sought cool experiences that not only break the stress of daily life but also act as a form of social currency. By providing or enhancing such experiences, brands are able to create an emotional connection with consumers.

Whereas boasting about material wealth is seen as crass, sharing the fantastic things you’ve been up to with friends is perfectly fine.

As we live our lives ever more publicly, we can begin to experience a low level sense of peer pressure as we try to keep up with our more exciting friends. Tools such as Facebook, Twitter and Foursquare allow us to share what we are up to before we do it, while we are doing it and then upload photos after the event.

Another unsurprising consequence of the economic downturn is that people don’t have quite as much money to spend and as such want to get value out of any money they do spend.

For some, gambling might seem like a way out of financial strife but for the majority it is something that makes sporting events a bit more exciting and let’s us back up our hunches.

Innovative Engagement

For the past few weeks Zeitgeist recently been monitoring the development of a new initiative called BetDash which has been created by Paddy Power, a brand that is all too aware of the need to differentiate and maintain a high profile.

The site, currently in beta, claims to be Europe’s number one ‘Social Betting’ site and allows players to ‘buy’ a £100,000 bankroll to gamble on real events. The cost of the intial £100,000 is variable, ranging from free, then increasing by £5 to up to £50 and directly influences the potential winnings.

After 21 days the player wins cash depending on how well they have done – if they’ve been lucky enough to turn their money into a million pounds they win twenty times their original stake, otherwise they have to settle for smaller rewards, all the way down to nothing if they’ve blown the lot.

The site works because it simultaneously allows people to experience the thrill of making a bet worth tens of thousands of pounds with the safety blanket of not losing more than their initial stake. Importantly, it also allows people to compete with their friends and make the experience a shared one.

The site has a Twitter account which updates occassionally with news of new ‘millionaires’ and the odd retweet and a Facebook fan page, though they appear to be more of an exercise in getting ready for when the service is fully developed.

To that end, BetDash impressively crowdsources improvements via a page through which users can recommend improvements to the service.

With ‘gamification‘ a hot topic, Betdash taps into the trend and offers players rewards, such as free bets and badges for returning to the site on a daily basis and achieving feats, like winning three bets in a row. You can also challenge other players bets and laugh at their wagers.

And for those who still find it hard to pick a winner, there is a list of the trending bets so you can see what everyone else is betting on. If 96% of bettors think Watford will win and 94% have bet on a Federer victory then maybe you’ll feel safer putting money on a double.

With the curtain having just come down on the current football season players will have to try and make their fortune on summer sports, though with each round lasting 21 days that’s only three rounds until the 2011/2012 seasons kicks off.

In the meantime, the BetDash development team will be no doubt be busy implementing the ideas users recommend so that the site is ready for next season.

The site hopes to create a behaviour amongst users that gets them thinking and talking about bets they’ve placed socially. From gambling being something personal and secretive it will become something to be shared – there will be little stigma as you are gambling with imaginary money. The aim will be to make BetDash one of those handful of sites you visit with regularity.

And of course, if you see a bet that you think is too good to pass up, PaddyPower will no doubt be delighted to let you stake some real money.

Since we opened our account (for research purposes!), Zeitgeist has already bet on football matches from Poland, Russia, Japan and South America, not to mention Boxing, Tennis and Horse Racing with mixed success as we try to grow our bankroll.

We’ll be keeping an eye on BetDash to see how it evolves, but in a category where differentiation and staying front of mind are key, we’d bet that this type of innovative activity will prove more popular than poorly distributed flyers in train stations.