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Location based services? barcode comparison? … and other disruptive ideas

iPhone_barcode_scan

Barcode and location based price comparison services, including augmented reality applications which overlay information on top of the physical world, are about to become mainstream. This will have a profound impact on business models in retail, will in the long run affect the way we conduct transactions in public space and will impact urban planning …

going shopping with a camera

Lets cast our imagination a few, lets say ten years forward. You walk by your local deli and your GPS enabled mobile phone, or some other piece of location aware wearable technology vibrates. A few days ago you agreed to dinner with friends and set a reminder on a service like reQall, to pick up a bottle of wine in the case you are in the vicinity of the shop. You walk into the shop and pick up a nice looking bottle. You scan the barcode  with Redlaser and confirm that this is indeed a variety you might like based on previous purchases. Whilst you are glancing at an expert review of the bottle and compare the rating with an trustworthy online forum, you notice an alert that shows the prices and locations of nearby shops offering the same bottle of wine. It turns out that another shop down the road offers a three-for-two deal and you decide it is worth to walk the couple of minutes.

T-Mobile G1 Shop Savvy Demo

In this scenario the retailer who made the effort to inspire you to consider this particular bottle of wine, loses out on the deal. You’ve been to his store before, it’s in a convenient location, the store has a great ambience and on previous visits the staff seemed knowledgeable, but in the end the deal offered at the box selling warehouse merchant around the corner is too good to let go. For various reasons the deli on the high-street has to calculate higher margins to be able to offer the level of service that attracts customers, but is unable to compete once information on price is available freely. In German there’s even a term for this: “Beratungsddiebstahl”. Loosely translated as “Customer Advice Theft”.

This scenario can be played out with a variety of products in different markets. Retailers will consistently loose out on sales and have their customers pulled away, even if they offer better services, as soon as any unfavorable price differences exist. It’s not long before the shop offering additional service will have to close. Sounds familiar?  In fact over centuries, changing availability and access to information, together with increasing mobility have been the major forces to alter the functional lay-out of our cities.

Actually this scenario is about to become reality much sooner. Most underlying technologies have been around for a while and many similar applications are expected to appear on iPhone, Android, Nokia and other platforms within the coming year.

More interestingly … I believe the above scenario will never become common place in the form described, as it becomes obsolete as soon as it is realized.

The resulting closure of shops in this scenario has unintended effects for the winemaker, affecting distribution and in succession the availability of his wine. This effect is already noticeable on the UK high street where a variety of stores are squeezed out of existence. (Sure the winemaker has the opportunity to sell his wine online, but that is a different story)

A BBC Click recently reported in an interview with a German games developer, as the amount of independent stores on the high street is shrinking, that smaller computer and console game manufacturers have diminishing opportunities to reach out to customers. According to the report less than 50 independent buyers for computer and console games are left in the UK. Smaller manufacturers find less and less outlets, few are able to set up their own branded shops and find it increasingly difficult to compete with large global brands both on and off-line.

One common strategy is to make products incomparable in retail. Companies will revert to old tricks, differentiating virtually the same product, lets say a compact camera called Gotak CS-y03 and the similar Gotak BS-09 to offer exclusive deals to different retailers. The cameras are virtually the same whilst the BS-09 includes a seldom used auto-smile-detection software feature, added on firmware level, allowing to price this product with a slightly different margin to remain competitive. A variety of similar strategies are deployed by manufacturers that produce multiple brands on top of the same product platforms to diversify margins for their retailers.

Drive by advertising

Lets look at a similar scenario, but from a slightly different perspective. Instead of the proactive case, having intentionally set a location based reminder to buy wine, we now have a more passive approach; contextual advertisements based on your location, time of day, weather, social context, your diary, mood and any other measurable patterns.

In a recent discussion amongst friends, we were talking about the soon to emerge widespread application of location based services, especially the common scenarios of GPS type location tracking together with geo-coded data. This will allow for example menus of restaurants to pop up on your mobile phone as you drive through the city, receiving alerts in the form of vouchers as you pass hotspots in synch with the preferences set in your profile. This will include time and location limited deals, offering selective access through coupons, to content and products available in your proximity. You can expect every few hundred meters yet another attempt to sell you some perfume or wet your appetite  for the latest lunchtime pizza deal. You can easily picture yourself driving down your local high-street or approaching a shopping mall from the highway, being bombarded by the same Starbucks, Pizza Express, H&M, Footlocker ect messages on your phone.

We realized that many of these location aware scenarios anticipate a variety of choices from a diversity of retailers situated in brick and mortar locations, vying for our attention. Instead we will be seeing the same messages appear repeatedly on our mobile devices whilst we traverse our homogenized public environments.

Starbuck locations in central London

Or am I wrong and these technologies will enable retailers to compete again on a local level; shops can now be “discovered” away from the well trodden paths of the high-street pavements, disperse footfall to side alleys by pointing potential customers to walk “around the corner”. This might diminish the value of “location, location, location” and level the real estate prices, so independent shops can manage their margins on a more competitive level with out of town online warehouses? The high-street will increasingly become a proxy to the online world and we expect new types of retail hospitality type of environments to start populating the the spaces vacated by retailers relying on traditional transactions.

golfsale

from Flickr group

Augmented reality applications

This is not an argument against the development and commercialization of these technologies. To the contrary we are excited about for example  Augmented Reality applications, which currently start appearing on consumer level devices. for example Layar Wikitude by  Mobilizy and Delicious Monster using registration barcodes on books. cds and dvds creates a seemless link between books owned on your bookshelf and online recommendations from Amazon. These technologies and affiliated services emerge as part of the evolving nature of our networked society. Many of these applications are being realized on a “can do” basis. Relatively cheap and computationally powerful mobile platforms are now sufficiently distributed in the population. Online access to rich geo-tagged databases is rapidly growing. The time is ripe for services to come out of labs and offer opportunities for many start-ups to grab a piece of a potentially huge market.

What will happen?

It’s not surprising that retailers wont be too happy with people holding their mobiles too close to products on shelves and will want to prevent taking pictures inside their shops. Currently many places forbid photography, citing the right to “privacy” of fellow customers. But how will shops be able to enforce this? “Checking” your phone whilst taking a picture and running a price comparison app is hardly detectable by security staff. It’s a lost game similar to the early days of digital cameras, when concert visitors were told to leave their camera’s by the entrance because of possible copyright infringement. Now, a few years later, we are instead encouraged to take as many pictures as we like and upload them as soon as possible to a Facebook fan page. In the long run we will need a way of dealing with a situation were many products, including digital spectacles and brooches, will have camera type technology build-in and continuously store and compare image data online. This will lead to a situation where brand outlets will be inviting people to publish as many pictures as they want, to demonstrate brand loyalty , whilst department type stores who aggregate products through buyers who negotiate purchase and sales prices with the manufacturers and suppliers, will want to avoid people comparing prices.

Price aggregator sites serve a self defeating purpose. Once a site emerges the price differences between comparable products will run down to bare minimum levels, just about covering margins to sustain the cost of warehousing and delivery. A situation only maintainable by companies operating on sheer volume . At some point most prices will become almost similar and the reason to exist, the very purpose of the site, makes itself obsolete.

What’s next?

Location based price comparison technologies, if applied straight out of the lab to the current retail environment, are plain naive from a business point of view. We can and will not be able to run them successfully for any length of time unless we develop radically different business models that take into account how products are introduced and exposed across all communication channels and customer touch-points.

The emergence of these technologies is is unstoppable. The effect of these will be different, in different geographic locations, none the less the impact will be profound. We need to reconsider business models considering new forms of pricing, sales strategies, haggling, financing and distribution. We will need to understand the role of up- and especially cross-selling in these new sales environments. It will affect how we will encounter public spaces in the near future and we better prepare for it. Already now many traditional retail typologies are vanishing from the high street e.g. The Bookstores, Music-stores, travel agents, electric retailers are all becoming extinct. I don’t believe we should keep these types artificially alive in a wave of nostalgia. Instead we should actively encourage projects that consider how pubic space will be affected by new technologies and how we can take this massive opportunity to design appropriate solutions around innovative business models. We should not make yet again the mistake of watching and condemning something like music piracy, in the mean time ignoring to develop alternative business and experience models that match the sign of the times. Whilst these technologies will have considerable impact on the way communities interact in the near future, politicians are probably still ignorant of what is emerging. Once we planned cities for cars, now we might require complete new approaches to urban planning, based on integrating brick and mortar with an overlay of the virtual.

further reading:

ShopSavvy by Big in Japan for Google Android

The Future of Retail: Instant Price Match, Ad Lab

Stores Clueless About Mobile Barcode Scanning Applications?, Read Write Web

Barcode Shopping – The Future Of mCommerce?, Lester Madden

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1 Comment

  1. One of the largest Mail-order catalog in the Netherlands operates a mobile prototype during a four day event to, for example, check and compare prices when on the shopfloor at Mediamarkt. I am looking forward to the reaction of the staff.

    http://www.retailactueel.com/r3130/wehkamp-gaat-strijd-aan-in-winkelstraat

    Middels een innovatieve toepassing van location based marketing bindt Wehkamp in de winkelstraat de strijd aan met diverse winkelketens en -formules. Mobiele bestellers in fysieke vestigingen van concurrenten hebben de afgelopen dagen tijdelijk minstens tien procent korting gekregen. Wehkamp gebruikte daarvoor W.APP; een applicatie voor smartphones.

    Met deze applicatie krijgt de gebruiker extra korting op basis van zijn GPS-locatie. Hiertoe heeft Wehkamp meer dan vijfduizend kortinglocaties aangewezen in winkels- en winkelstraten verspreid over Nederland. RetailNews meldt dat het ondere andere gaat om winkels van Mediamarkt, IKEA, Hema, Bart Smit en Dixons. De consument kan dus vanaf de winkelvloer van de Mediamarkt kijken of het product bij Wehkamp met korting wordt verkocht. De shopper kan via de knop `Krijg ik op deze locatie extra korting?` bekijken of ze op de mobiele site van Wehkamp voordeliger uit zijn. Wanneer dit het geval is kan de gebruiker de korting inschakelen, waarna deze wordt verrekend op een mobiele bestelling. Vooralsnog betrof het een proefperiode gedurende de korting4daagse van Wehkamp, die duurde van donderdag 22 t/m zondag 25 april.

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