September 23, 2015

Retail Cyber Race

The days of real, brick-and-mortar retail stores are over. Sure, it is still more convenient to jump in your car and drive to the local Walmart or Home Depot and pick up the item you want "now", but that is going away soon, very soon.

Everyone among the big retailers is working on the next day delivery, same day delivery, or next hour delivery, if Amazon will have their way with PrimeAir.
Sure, there still will be the limited-real-estate Galeria of products stores, but they will only be driving online sales. However, I am getting ahead of myself.

A couple of years ago, I was an Architect for Mobile Innovation Group at Sears/Kmart, so naturally I will take that company as example.

Sears/Kmart stores are not doing well, however they could turn around, but how?

A short history lesson: many older Americans remember Sears as catalog business. Every year you've got your booklet from which you were able to select some goodies for your kitchen and for your husband for Christmas. It was great. Then came mega stores and they were great, too, people did not have to wait for weeks on delivery and could shop now. Sears and Kmart had their heyday. Then came Japan, then China and multitude companies started to compete. Then came computers and Walmart bought and used some, Sears and Kmart did not do as well. All suddently the prices got 20% lower in stores like Walmart and Target while offering gt better and nobody could understand what has happened, customers exodus followed.

Then came Amazon, they sold you a book, then another book, then they sold you a TV and then a movie. They also have bougth some computers and used them, used many of them.

Then came Google and the rest of the story will be written in the future, unless...

Let's start with the brand. I am sure there are still a lot of people who like brands like Craftsman, or Kenmore, but honestly it is hard to get a Millenial kid to enter the mall thru Sears entrance. It is hard to change image once the name is stained. Sears launched a program named Shop Your Way, it may work. At this point Kmart and Sears could be called "Red and Blue" and they might have better sales.
What is wrong with catalog business? Nothing much, except it has to be created for you, a single person, every day, and has to be short. People like to have a perception of many choices, but immediately they want to narrow it to a couple of choices. If they cannot, they go somewhere else, continue shopping.

So the next question is how do you narrow 10 million products Sears offer to a handful you want to buy today? Amazon knows it, that is why they kick butt, however they are not sharing. Google will know and that is why they may be the biggest danger for all retailers. Facebook is entering the game. Let me explain.

You post something online, Google learns, you like something and Facebook learns, you search, Google learns, you click, they know, you skip, they know. You do that many times, over 10 years. They build a profile of you, they know precisly what you are looking for today, they serve you search results, advertisements and products.

What can "Red and Blue" do about it?  Time for some pointers!

1) Sell everything under the sky, even at the break even, yes, no profit margins. In a sense Sears is doing it already with the offering of 10 million products via 3rd party Marketplace. You need to sell everything because you need to capture most Google product searches. I would go further and have competitors' offering, too. Explanation coming soon.

2) Know your client. By name. So I searched for something and found result, clicked on it and now I see it on "Red and Blue" mobile website. This is opportunity for Sears to learn about me. Me! But what happens, I add the item to the cart and Sears is asking me to log in, I might do that later when I am by the computer because I don't remember the password (OK, it will never happen). I go to, same product, the cart does not know me. Why not allow me to log in with Google+ or Facebook, I know it sounds counterintuitive as you compete with them, but that is what we do these days, we log in with Google+, Facebook, etc, no harm done.

3) Collect data and use it. So now you allow me to log in with Fb, great. I search Google and because you carry millions of products, sooner then later I end up on your mobile website, you know me by name. I am presented with this product, 4.5 stars (however no profit margin) and two other similar products cheaper and more expensive, both 4.7 stars (and nice profit margin). I click around and eventually choose something. I have done that 50 times before and you get to know me among millions other users that have similar tastes and interests.

4) Communicate. I get my daily doze of emails from Sears, Craftsman, Kenmore and Show Your Way - my intuitive opinion? You don't know me! I get $10 in points for oil change, I am not moved, when is the last time I used any offer? How about "How is your Astro van doing, we haven't seen it in a while and honestly we miss it! Come for oil change, we make it worth it! (offer here) You know we have great Carftsman tools you can pick from while we change your oil."

5) Crowdsource information. Engage the user, make it super easy to rate and tell you about the product, yours and your competition's. People buy in one place, tehn come to Amazon to write their product review. We need to ask ourselves why that happens and do better.

6) Make sure you can deliver. As I mentioned Amazon want to air drop your packages using drones and we all have seen on YouTube the Roomba robots turned into their warehouse busboys. Company has to invest in ability to know what your client wants, where they want it, in what quantity and how short the delivery should be to please the customer each time. The company should invest in their own software as using the same package only guarantees that consultants, once they finish with you will go to your competition and offer "improved" version.

Sears and Kmart are currently in process of selling the real estate and investing in the ecommerce, updating their mobile and chain of supply software and winning awards, so there is a real hope to turn the company around.

The summary of this story is that the companies have to learn about their clients and have to use that knowledge wisely to communicate with the client. When I walk in to the store, or enter the website you have to know me, by name and by my interests. You have to connect the dots and heavily invest in machine learning and profiling algorithims.

by Uki D. Lucas

you can find him on LinkedIn.


Uki's Google Java Technology blog