Category: Commerce

I Spent a Few Hours in the Future and I Liked It

Tuesday I was in New York City for the day on business. After finishing up my last meeting it was time for me to make my way to the airport to head home. The process of getting from 34th and Madison to my seat on Delta flight #6054 at LaGuardia took me through a series of events over the course of a few hours that gave me a hopeful glimpse into how we will perform everyday transactions in the near future thanks to mobile consumer technologies.

I started things off by launching Uber’s smartphone app to request a town car. With the evening taxi cab shift-change in full effect (good luck tracking down a cab that will take you out of Manhattan at that time of day) and an expiring promotion from Uber that would make the entire trip cheaper than a taxi ride anyway (thanks Ed!) I requested one of their contracted drivers pick me up through the app. With Francisca, my driver-to-be, estimated to arrive in 13 minutes (an unusually long wait for Uber by the way) I went across the street to grab an ice coffee from Starbucks for the ride. After ordering my drink I paid for it by showing the barista my phone which displayed a barcode from the downloaded Starbucks app for her to scan. The barcode contained my Starbucks card information and credit balance for her to deduct the appropriate amount from. After picking up my drink I went outside to meet Francisca who had called to confirm my location and her momentary arrival. Once we arrived at LaGuardia I thanked her and went inside Terminal D- no payment transaction required. That’s because the fare was calculated by Uber based on the time, distance and tolls incurred during the trip (which was tracked via GPS) and charged to my credit card on file with Uber, who emailed me a receipt of the transaction with all the details by the time I made my way inside Terminal D.

To get to my boarding pass I skipped the ticker counter and kiosks and headed straight to the security line where I opened up an email from Delta and launched the link to my QR code-based boarding pass. Aside from my driver’s license for identity purposes, that’s all I needed to get to my flight’s gate. Since I made it with time to spare I decided to grab some dinner at a restaurant called Bisoux. At my table, and every other seat in the restaurant for that matter, was a tethered iPad and electrical outlet. So while my phone was recharging I pulled up the restaurant’s app on the iPad to order my meal. I paid for my food, including tip, by swiping my credit card through the credit card reader attached to the outlet and had the receipt emailed to my work address. While I waited for my food to arrive (about 15 minutes), I used the iPad to catch-up on some email (and Twitter once my food had arrived). After I was done eating I got up and left without having to track someone down for a bill and payment. Heading over to the seating area at my gate I was greeted by more iPads and outlets (in fact the entire Terminal D at LaGuardia is outfitted with iPads, credit card readers and electrical outlets thanks to OTG Management, an airline food service company) to catch up on my news feeds until it was time to board my flight. One more showing of my QR code boarding pass to the gate attendant and I was off for DC.

In total, during my 2 ½ hour experience that took me from Manhattan to LaGuardia:

  • I conducted 4 transactions (buying coffee, transportation to the airport, buying dinner and boarding a flight)
  • Used 5 physical items to complete these transactions (smartphone, driver’s license, iPad, credit card and credit card reader)
  • Paid for everything using 2 mechanisms (smartphone and credit card)
  • Used 2 wireless networks (Verizon’s mobile network and LaGuardia’s WiFi network)
  • And in only 2 of these instances could I not control the timing of the entire experience (ordering at Starbucks and waiting in the security line at the airport)

With a few realistic software updates and better planning though, these four transactions could have been completed using just one device, a driver’s license and one wireless network by (1) incorporating the payment mechanism directly into the restaurant’s ordering app from OTG Management and making the app available for my smartphone, (2) enabling drinks orders through the Starbuck’s app and (3) enrolling in TSA Pre√ to avoid the traditionally slow security line experience.

Some other insights about the future I came away with from this experience:

Battery Life: This continues to be a huge issue with smartphones, which are increasingly being instrumented to perform computer-like tasks as a result of apps, GPS utilization, mobile browsing and multi-tasking (I drained half of my phone’s battery in a matter of 3 hours due to my little experiment). Without quicker improvements in battery life technology or in the development of wireless charging capabilities, which uBeam is attempting to tackle, the adoption of many of these types of consumer applications, especially those that leverage location, will be hindered. Until batteries can meet the daily demand of consumers the proliferation of charging stations at airports are an adequate solution but needs to be more broadly deployed across additional public and retail spaces (coffee shops, malls, etc.) to be truly valuable.

WiFi Networks: Connecting to publicly identifiable WiFi hotspots is unnecessarily challenging for laptops, let alone smartphones as quickly degrading connections and networks that require “additional information to log on” are a drain on productivity. Add to this the disparate WiFi policies across venues, such as WiFi being free at Washington’s Dulles airport but not at New York’s LaGuardia, consumers’ ability to enter and complete transactions is severely curtailed when a wireless carrier network isn’t available (like in a building or subway for example). Ideally the wireless carriers would take it upon themselves to aggregate various WiFi networks and offer up access as part of a mobile plan. Until there are better, more consistent solutions, companies like Connectify, which aggregates multiple broadband connections into a single high-bandwidth link, and Open Garden, which provides crowd-sourced mobile connectivity, are attempting to meet consumer demands for greater availability and throughput by leveraging the current publicly WiFi infrastructure.

Payments: Two types of mobile payment experiences are emerging in the real world depending on whether you are purchasing a product or service. When buying physical goods, like a cup of coffee, QR and barcodes are being used to facilitate digital payments at the register or provide proof of purchase. In these scenarios services like LevelUp from SCVNGR and Square, which recently announced a deal with Starbucks, are providing the underlying payment processing and generating the associated user codes. For transactions that involve purchasing a service, like a car ride, the entire payment experience can occur within the mobile app itself with companies like Braintree, which is used by Uber, and Stripe providing the transaction processing and merchant notification. At the end of the day what all these companies are vying for is a piece of the worldwide mobile payment transaction market which is expected to reach $1.3 trillion in 2017 according to Juniper Research.

Mobile Wallet: While every transaction I performed was through a specific app, the future of mobile payments is `all about the mobile wallet. Companies at every point in the mobile commerce value chain are joining forces to get their cut of the fast-growing mobile payment market by attempting to aggregate consumer activity and demand. Isis, the wireless carrier-backed initiative, is slated to debut next month on the heels of this month’s announcement from a group of brand name retailers and merchants regarding the launch of Merchant Customer Exchange, which is building its own consumer mobile payment application. Sitting between the carriers delivering the underlying mobile service and the retailers at the point of sale are mobile operating system providers Google, which provided an update on Google Wallet earlier this week, and Apple, which demoed Passbook this summer for the much rumored new iPhone, who are launching their own competitive mobile wallet initiatives. The key to the success of any of these services will be their ability to go beyond just providing a frictionless payment mechanism. The applications that seamlessly incorporate payment options, purchasing preferences, loyalty programs and promotional offers directly into the mobile app and transaction process will be the most successful wallet solutions.

Identification: While the mobile wallet has the ability to create a contact-less payment society, the one physical item it won’t eliminate any time soon is the government issued ID. A truly digital form of personal identification (be it a driver’s license or passport) would be too easy to forge or replicate by criminals and implementing fingerprint or retina scanning as an alternative form of identification is wrought with infrastructure and privacy concerns. So until biometrics can become a viable and cost-effective solution, the physical wallet is here to stay- unless you decide to use a mobile phone cases that doubles as a wallet.

It’s interesting to see how software development and hardware advancements are continually being leveraged to simplify and speed up the experience of completing transactions by challenging legacy models and removing manual steps in the process. Combined with business innovations, consumers are finally able to control when and how these activities are being executed which further enhances the overall experience. While not perfect, from what I was able to do over those few hours, I like where our future days are headed thanks to mobile.

Disrupting Retail Commerce and Real Estate

At last month’s TechCrunch Disrupt the best interview of the multi-day conference was that of Chi-Hua Chien, partner at venture capital firm Kleiner Perkins Caulfield and Byers (if you haven’t seen it yet, I urge you to put aside twenty minutes to watch it here– it’s that good). In the interview Chi-Hua discussed Kleiner’s investment thesis in the context of technology’s ability to democratize industries. Previously technology had been leveraged to disrupt information (through the internet and search), distribution (through social media) and computing (through PCs and mobile devices). Now he says we’re in an era where commerce is being democratized. Through the “unwinding of that aggregation of commerce” companies such as Home Depot, Safeway and Walmart, which have succeeded historically by aggregating consumer demand through credibility and inventory, now have to compete with new demand aggregators coming from smartphone apps. The effects of this are already being felt by the retail electronics industry as Best Buy recently announced it was in the process of shrinking its physical footprint due to a drop in same-store sales which some are attributing to internet retailers benefitting from ’showrooming’. This disruption isn’t just be limited to physical commerce though, as retail financial services are also undergoing their own transformation thanks to more activities (such as depositing checks) being performed via mobile devices, which is reducing the number of transactions taking place inside bank branches across the U.S.

As a result retail real estate is becoming less important as a marketing and demand generation vehicle. So what will become of big box stores and strip malls?

Chi-Hua, during his interview, and start-up founder/angel investor Chris Dixon on his blog recently,  both alluded to the answer- companies that can create differentiated and superior customer experiences and not just compete on price will be the ones that succeed in this new retail environment. Starbucks was the first modern-day brand to successfully build a business around creating an experience for mainstream consumers (even resulting in a book being written about The Starbucks Experience). Then there’s Apple, the best example of how to build a successful retail presence. In the 11 years since the first Apple Store was launched, the company has opened up over 360 retail outlets worldwide and has become the most profitable retailer in America in the process while competing with electronic retailers such as Best Buy.

New opportunities to disrupt commerce will open up as a result of this excess capacity in real estate and Amazon might just be one of the biggest benefactors of this. As the company continues to grow its Amazon Prime subscriber base and potentially extend its Kindle line of devices this will increase Amazon’s need to grow beyond its current 34 warehouses in an effort to get the most popular inventory closer to its customers for faster delivery (for Prime subscribers), in-location pick-up (for consumer convenience) and product testing (for newly launched Kindle devices). An even more likely scenario will be an increase in temporary retail store experiences (also known as ‘pop-up shops’) where brands can leverage physical presences for short periods of time in order to support the launch or promote new products or services, which Samsung is looking to do in order to better compete with Apple for example.

The most exciting opportunity that could further transformation the physical retail experience is the democratization of manufacturing through technology. This next wave of disruption will come courtesy of 3D printing, which aims to digitize manufacturing and enable individual production quantities of many objects at massive scale. Currently 3D printers from the likes of MakerBot and Shapeways are used primarily used by hobbyists to create single-compound objects (usually plastic or metal). From this you can imagine a point in time in the future where more complex objects (made of multiple compounds, colors, etc.) are offered by developers through specialized retail store-fronts where consumers can submit orders for pre-fabricated products or design their own specifications to be printed out and picked-up. Each 3D retailer could specialize by type of product (ie plastic toys such as action figures or Legos) or production capabilities (ie motors for remote control vehicles) depending on their capabilities and demand.

The beauty in all this is that there will always be a need for retail real estate and technology will play a part in its evolution.

How Mobile and Real-Time are Helping Maximize Revenues and Utilization

Yesterday an interesting set of announcements hit the tech world that highlighted some of the early successes start-ups are seeing in helping businesses maximize revenue opportunities and service utilization.

  • Overnight, Uber, a provider of high-quality, on-demand car service officially announced the availability of is service in a second city- New York.
  • Then Gigwalk, which turns iPhone users into an instance mobile workforce announced that it had exited its beta period and raised $1.7 million in seed money in the process from an all-star list of early-stage investors.
  • Finally TaskRabbit, which offers a marketplace for people to outsource their errands announced its own $5 million Series A funding round to help expand its service beyond Boston and San Francisco.

Each of these companies is attempting to apply the same concept behind peer-to-peer computing projects, such as the search for alien life forms, in utilizing available bandwidth. But instead of leveraging unused computing power, these start-ups are leveraging excess capacity in service-oriented businesses. For any type of service business, time not allocated or used to generate revenues are opportunities that are lost forever, just like when an airplane takes off with empty seats on it. In the case of Uber, the company is trying to alleviate this problem by matching professionally licensed drivers who have idle time while at work with new, short-term, fare opportunities. Meanwhile Gigwalk is pairing people with availability in a specific location with large corporations that need specific, once again short-term, tasks completed in that area. In the case of TaskRabbit, it’s allowing consumers who have free time on their hands to run errands on behalf of other consumers who don’t.

The opportunity to provide a service and generate revenues in a given period of time isn’t limited to these types of jobs though as other capacity-based service industries are benefiting from real-time yield maximization as well. Daily deal service LivingSocial has already tested its Instant Deals in D.C. offering lunch at participating restaurants for $1.00, while industry leader Groupon is developing a similar service called Groupon Now that enables restaurants, spas, and other retailers to drive business to their establishments through the use of real-time incentives. This makes perfect sense when these service businesses are not operating at full capacity. Taking the same concept of driving utilization through discounts, Hotel Tonight has launched a mobile app for booking same-day hotel rooms in a number of cities across the U.S.

The underlying enabler of all of these start-up services is the smartphone. Without the ability for consumers and service providers to communicate in real-time based on one or both parties’ location and availability, the opportunity to match the two entities wouldn’t exist. This would leave service providers without a way to generate additional revenues or complete certain projects in real-time and consumers without a way to benefit financially- either through service discounts or by generating additional income for themselves. The economic potential for retail and capacity-based services will only grow as smartphones and tablets become more ubiquitous and enable new business opportunities and economics to be created around simple, short-term, service-oriented tasks.

I’m excited to see what other service industries (airlines, data collection in the real world, movie theaters, tourist attractions, etc.) will benefit from start-ups that can help bridge the gap between existing sales opportunities and maximizing a service providers revenue potential by creating what are essentially real-time exchanges for specific services. For established service industries, there will always be a market for start-ups that can bring new revenue opportunities to the table. For entities willing to pay consumers to perform services on their behalf, the key will be to make the task short and easy to complete to attract the widest applicant pool for these jobs.

Where the New Commerce Opportunities are in the Current Wave of Innovation

At TechCrunch’s Disrupt conference a few weeks ago legendary venture capitalist John Doerr of Kleiner Perkins Caufield & Byers spoke about what he considers to be the next, and third, great wave of innovation- the intersection of social, mobile and new commerce. Like swells in an ocean, technology innovation is not comprised of a single wave or event, but instead a series of them. Smaller, initial waves enable those in the middle of a set to generate the largest swell and associated impact, while the smaller waves at the end benefit from all the efforts of the preceding waves in the group.

While I would agree with GigaOM’s Om Malik that we are already in the throes of John Doerr’s third wave, the areas of social, mobile and commerce each represent a unique wave in time within this current innovation set. Social is an important, but early wave that will help mobile, the middle wave, generate the largest impact in this third technology wave. One of the benefactors of both the social and mobile innovation waves will be commerce, which well-known early stage investors Josh Kopelman of First Round Capital and Fred Wilson of Union Square Ventures have both identified in recent months as being areas of emerging opportunity.

In 2007, two events helped propel this commerce wave forward more than any others- the launch of Facebook’s platform and Apple’s release of the iPhone. Though Friendster and MySpace preceded Facebook in the area of social networking, the ability to create and extend the social graph of what is now 500 million users to third-party websites and services has enabled Facebook to become the social identity layer for the worldwide web today. Meanwhile Apple changed the mobile landscape forever by enabling applications to be developed for the iPhone that leveraged the smartphone’s capabilities as well as those of the wireless carriers’ networks. The traditional insular, walled-garden approach to third-party content and services on carrier data networks and mobile handsets has been replaced by innovation around the mobile internet and applications. This has resulted in enhanced functionality and value to consumers from not only the iPhone but other smartphones and mobile operating systems looking to benefit from this new ecosystem- all while driving additional data revenues for wireless carriers in the process.

The Social Wave

Internet commerce websites like Amazon were actually early adopters of social technologies- empowering their customers to post reviews and ratings on product pages to help other Amazon shoppers determine whether or not to buy a particular item. This crowd-sourcing feedback model hasn’t evolved much since first being launched though, keeping the relationship between reviewers and shoppers fairly anonymous and thus limiting consumers’ trust factor. Allowing users to layer their social graph on top of the commerce experience would enable potential buyers to see feedback from family and friends or their extended social network first, further enhancing the shopping experience for consumers and inevitably driving better revenues for commerce sites.

Recently launched Blippy and Swipely both aim to capitalize on this theme by enabling their users to share purchase transactions with their social graph. While these companies are focused on creating a discussion around purchases post-transaction, there is an opportunity in being able to curate this commentary and incorporate it into product feedback loops across commerce sites, making the shopping experience even more personal and dynamic.

Probably the hottest area in online commerce though has been the group buying segment with the likes of Groupon and LivingSocial raising $135 million and $39 million respectively this year alone. While the business model isn’t new (Mercata and MobShop, founded in the late 1990’s were the original group buying platforms that became casualties of the internet bubble), the ability to tap into consumers’ social graph to enable the group buying mechanics to work is.

The Mobile Wave

After years of promises, mobile finally seems ready to deliver on the cliché “get-a-Starbucks-coupon-on-your-phone-when-you-walk-nearby.” With the ramp in mobile internet subscribers already exceeding the speed of traditional desktop internet adoption and global smartphone sales expected to surpass personal computing in 2012 according to Morgan Stanley Internet analyst Mary Meeker, how mobile is being thought of and used in commerce is changing dramatically. With most commerce companies already having a mobile version of their website and native applications available across various mobile app platforms, the biggest opportunities in mobile going forward are in bringing real-world and digital experiences together via augmented reality and enabling a variety of payment capabilities through mobile phones.

Augmented reality brings information from the web into the real world in real-time. This can be accomplished by (1) adding visual data elements to the visible world (i.e. through Layar’s Reality Browser) while looking at something through a mobile phone camera, (2) leveraging QR (quick response) codes located on storefront decals (which Google makes available through Google Places) or outdoor ads to access additional information about a place or item via the mobile internet and (3) adding data to physical objects via bar codes (the idea behind recently launched StickyBits) or associating data with locations people have visited (a la Foursquare ‘tips’). In each of these instances the opportunity is to quickly and conveniently provide additional information to help consumers make more informed decisions.

Mobile payments represent the largest, albeit most fragmented, opportunity as Generator Research predicts the market will grow almost ten-fold from last year to $633 billion in worldwide revenues by 2014, driven by nearly 500 million users. The types of payments users are able to initiate vary from physical dongles like Square that allow phones to function as cash registers for merchants, to buying virtual goods for apps through Boku or Zong using a consumers’ mobile phone bill instead of a credit card, to paying friends through platforms such as PayPal or Venmo.

How can commerce make the best use of these innovations?

The underlying theme with many of these commerce examples, from aggregating audiences for sales to sending users mobile coupons, is their focus on addressing the supply-side of the commerce equation. Instead of trying to find new ways to incentivize demand for products and services through price elasticity or information overload, the more interesting and challenging opportunity in commerce is creating solutions to identify demand pre-transaction. If consumers had efficient ways to signal their intent on an individual or aggregate basis prior to making a purchase, a whole new commerce paradigm could be created around real-time demand fulfillment. Some possibilities include:

  • A group of co-workers decide to go out and have lunch together and broadcast their intent to restaurants at the local mall who in turn have the ability to offer coupons or discounts to these consumers before they make their decision;
  • A family on vacation in New York City is interested in sight-seeing as well as catching a show on Broadway. The father sends out a prioritized list of attractions and a budget to local travel agents, which respond with multiple itineraries based on the given parameters.
  • Several people in the same city are looking to buy the same toy. They query their phone to find the cheapest price. Participating stores are notified of inquiry and are given the ability to offer a discount if a minimum number of these consumers buy today, which can be completed on the phone and the toy held for pick-up.

The key distinction with these futuristic examples is that instead of making consumers proactively pull information from disparate sources to get answers, the information is pushed to consumers based on their stated intent. Pleet, which launched earlier this month out of the UK, looks to address this opportunity by “socializing vouchers” around consumers’ intended action in a specific location. Well-known tech blogger Robert Scoble also explores the possibilities of real-time, in-the-moment commerce that leverages context aware apps and services  in a guest post on TechCrunch this month. In either user case (pre-sale or during an event) the default requirement is that the consumer has control over which apps and services can share what type of data with one another and what information (updates, offers, etc.) is allowed to get pushed to users and their social graphs.

Mobile’s role in all this is to tie these web services to a user’s physical location to enable various types of commerce opportunities to occur as well as provide a way for consumers to add information in real-time to enhance the value of the data. For this reason augmented reality (AR) does have a viable future, despite some of the early hype around it. AR can pick up where intent-based, push-oriented commerce opportunities leave off by providing consumers with the ability to pull dynamic information from the internet into their real-world situations. That is why services like Foursquare and StickyBits that allow users to access data related to places and objects via barcodes respectively have a great chance to succeed- because they can generate a large network effect not only from social connections on the platform but also due to the information users are augmenting these respective services with. So for those instances where someone doesn’t have the ability to request offers and information from restaurants on lunch discounts they can instead leverage an augmented reality app that contains information on proximity to restaurants in the area as well as any reviews from friends, general feedback or coupons and make reservations in the process.

Some of the winners will be companies everyone knows…

Amazon– Even though Amazon has been accused of missing the boat on social commerce, they still have the very enviable position of being the largest pure-play ecommerce company, and fastest growing retailer, in the U.S. With all the product information and review data they have collected over the years and experience in managing online storefronts, Amazon could not only empower other sites and apps with this data but also manage the supply chain for consumers looking to transact via mobile yet pick up products at a physical location. The value of the company’s data set could be further enhanced for its own financial benefit by enabling Facebook users to access their social graph through the Amazon.com website.

Apple– The company’s inclusion is due to its recent acquisition of Siri, a voice-activated personal assistant application, rather than being the leading smartphone and app platform. Siri’s value to Apple is in its ability to integrate various APIs from a variety of restaurant, movie, weather, taxi and event services to enable voice-activated search which can lead to a variety of commerce opportunities. In the process of integrating Siri into the iPhone, Apple is also laying the groundwork for an entirely new user experience in mobile search.

Facebook– The company has already proven the power of combining the social graph with commerce by enabling a billion dollar economy in virtual goods to arise. With the launch of Credits, which could become one-third of the company’s revenues over the course of the next 12 months, Facebook has an opportunity to become a big player in mobile payments by enabling alternative payment options for its virtual currency. Combined with the fact that Facebook not only has the most popular mobile app out there but also provides authentication for a number of other mobile apps, there is tremendous upside in what the company can achieve in the commerce space.

Google– The launch of Android, Google Latitude, Google Maps and Google Places over the years are all efforts to bring location into the search equation. Being able to marry search intent with location data opens up a new revenue opportunity around local search advertising and commerce for Google, which despite their forays into display advertising, needs to continue to rely on search advertising to grow its business.

…While other are just getting started

Some of the aforementioned companies in the social transaction, group buying, augmented reality and mobile payments spaces all have opportunities to succeed in this new wave of commerce innovation. The broad category of augmented reality is the most interesting because it operates at the intersection of both worlds (real and digital) so is best suited to incorporate social and mobile features from these other businesses. While most success stories will be through acquisition, companies like Foursquare have the potential to succeed on their own by focusing on the demand and intent side of the commerce equation. Since the company has created a user experience around “checking-in” to locations and venues as well as leaving “tips”, it would require only a slight modification in behavior to have users instead display their intent by “pre-checkin” and aggregating the demand they already capture to drive additional utility around commerce. Even though the company has focused on the game mechanics of its service, the fact that it has nailed social and mobile interaction gives it a leg-up on other competitors.

While I can see why Josh Kopelman believes the past 10 months have shown greater innovation in online shopping than the past 10 years, I believe the wave has yet to come and that the next 18 months is where the greatest innovation will occur around real-time, intent-oriented commerce.

Photo credits: Madeleine1912/Photobucket, centralasian/Flickr and chizzachong/Flickr.

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