Changed Consumption

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Consumption is not new, nor are the technologies that enable it to change. These include ubiquitous technologies like the internet or mobile phones, and existing services, like Fedex. However, as these technologies become more ubiquitous, we see the activity of consumption evolving to accommodate, accept and expand upon, the capabilities that these technologies enable. At the same time, these changes are not new. In his book, entitled Funny Things, Computers (1983), Hutchings presents a comic of a customer in the ‘8 items or less’ lane with a transaction total of $673.80, and the caption reads “I suppose there’s a remote chance the computer could’ve malfunctioned” [1]. This comic identifies two important points of note. First, and foremost, it identifies three key roles that an entity can play in a transaction: a buyer, an enabler or a seller. While this comic shows both the buyer and seller are humans, while the enabler, the cash register, is a machine, there is nothing stopping technology from playing the other roles, and begs the question, ‘in the future, what role will technology play in the transaction?’. Second, the date of publication shows that these concerns have been present for over 30 years, and as our technology becomes more and more predictive, arguably remain. At this point it is important to point out the economic definition of consumption, as stated on Dictionary.com, is “the using up of goods and services having an exchangeable value”[2]. We would like to highlight that we feel that consumption also, in a broader sense, encompasses the actions involved in acquiring goods and services, and dealing with the results of their consumption.

Contents

Introduction

Where we were

Video 1 "Are you being served?", Season 1, Episode 3, entitled "Camping In". The first 30 seconds are relevant. [3]

For a moment, step back into the past, and consider how one used to acquire goods and services. This would involve going to a store or office, speaking to a company representative in their role as a sales clerk or advisor, and either handing over some form of payment, or signing an agreement that you will do so in the future. Shown in the clip to the right, you see an example of what shopping once consisted of: walking into a store, receiving help from the sales staff who all had their assigned counters and areas of expertise, gathering information about the product from the sales staff, and making your purchase. This clip is from a comedy program, however in her interview, Ann H. (personal communication, October 1, 2015) attested that the depiction is accurate for the time period. At first glance, this seems like an excellent way of doing business, but several important points emerge. First, one has to be physically able to go to the store, vastly limiting the range of options available to the average consumer. Second, the main source of product information is the sales staff. While they may be exceedingly knowledgable, it remains that the reliance is on a few people to have enough knowledge, with no gaps, to allow one to make a decision, and who may hold knowledge that they choose to withhold about alternatives based on their motivations. While one may go away and comparison shop by repeating the experience in other stores, or seek further information from either experts or people within one’s social circle, it remains that the reliance in on a small group of people that fall within a shopper’s social circle, and who often hold similar knowledge to our original shopper. In other words, there are obvious areas that this process can be improved.

Where we are today

Now, consider where we are today. When deciding to purchase a new product, most consumers turn to the web, and often to major online retailers without a brick-and-mortar presence, like Amazon. However, that is not to say that online is the location of the final purchase. In his article, Shoppers Still Prefer In-Store Over Online Shopping, Brooks explains, “nearly three quarters of those surveyed [in a PwC survey] spend time browsing products online before buying them at a physical store” [1]. As Steven Parr from PwC clarifies, we have seen a transition when consumers browse in stores and shop online, and we are seeing an emergence of the opposite trend, where shoppers gather information online prior to purchasing in-store [2]. In other words, it is not so much that online shopping has replaced the store, inasmuch that it has replaced the function of the sales clerk as an information source. At the same time, we have seen a multitude of new information streams evolve. These include social media, review sites, and the direct site for both the store & manufacturer, all of which often provide a wealth of knowledge about a product or service above and beyond that available to the sales staff. For example, if we look at a specific product page on Amazon, we see both a ‘product details’ section, and a ‘customer reviews’ section which have replaced the need for direct sales staff interaction, and in the case of digital media, no interaction is required for product delivery either.[3] Why should a consumer rely on imperfect memory, when the exact results are to be found a click away, at any time of day? At the same time, this trend of ‘always on, always available’, which the internet has enabled, and media purchases have shown is possible, fuels a desire for instantaneous product delivery. While we have not reach the era of a Star Trek replicator, advances in 3D printing may one day provide a similar solution.[4] Having removed the need for sales clerk interaction, we find that when making a purchase, we are faced with a ‘self-serve’ environment, pioneered by Walmart, in many stores. In addition, online sites have the ability to offer many more products, as well as presenting a display that can be individualized for each consumer and updated in real time. An example is an amazon search for ‘James Bond’ showing DVDs, toys, books and non-physical media in the same search[5].

Two emerging business models: Crowdfunding & The Sharing Economy

Video 2. What is the sharing economy?. [Relevant portion: 0:00 - 1:44] [6]

In addition to technological shifts, we see the emergence of alternative consumption streams. One such example is Crowdfunding, where products are paid for based on an idea that may or may not materialize. An example of product not materializing is the Zano drone, which after raising funding and informing backers that the product was nearly complete, has seen its creator cease operation [1] Another such example is the reemergence of the sharing economy, where people allow access to things that they own but which are sitting unused, like their guest bedroom through AirBNB.[2] The sharing economy is further explained in ‘Video 2’.

Mobile: A starting point example

As a starting point, while many of the technologies that enable this change are ubiquitous, there is one broad technology we would like to briefly highlight, mobile, which has great potential for changing how we consume and where we consume, and we provide one example of an unusual area when this technology has been put to use, which is combining mobile & sensors in the supply chain to aid cattle farmers.


Video 3 How mobile technology could shape the consumer goods sector in the future. [Relevant portion: 0:00 - 2:41][3]

The video to the right (Video 3) provides an excellent overview of how mobile has changed the way we interact with the world around us, not just as a communication tool, but as an information tool[1].The biggest change that has arisen from mobile is the proliferation of apps. As of July 2015, the two major players, Google and Apple, had 1.6 million and 1.5 million apps available respectively [2]. This proliferation has encouraged the development of apps that influence consumption before, during and after acquiring the product or services, often replacing a company's website or emails to deliver information to the consumer wherever they have cell service. Here are a few examples, but it should be noted that many of these apps can be considered to expand beyond their ‘classified’ influence period.

Before: These are apps that direct consumers towards specific purchases before then have made their decision or even before they had considered a specific product. Two examples include:

  • Checkout51: checkout51 is a modern take on coupons. Rather than requiring coupons cut out and presented at the store, provides a list that updates each Thursday with new offers, and then has offers disappear as they are used up. Once a qualifying purchase is made, the consumer simply opens the app and using the built-in camera, uploads an image of the receipt, and selects which offers were redeemed on the receipt. The system will analyze the receipt and credit the consumer for any offers redeemed. By going mobile, the company allows consumers to see which offers are still valid in the store, as well as allowing redemption as soon as a product is purchased. The website for checkout51 can be found at https://www.checkout51.com.
  • Coupon: Coupgon is an example of how technology allows us to solve the same problem in different ways. Coupgon involves digitally ‘clipping’ coupons within its mobile app, and then presenting a barcode on one’s mobile phone to the cashier to redeem any offers that were clipped and purchased.


During:
These apps are those that serve as the biggest replacement for the sales clerk, while ensuring that the wealth of knowledge of online shoppers is brought into the store to help in the decision making. They can be broken into two main categories, store specific apps, and price comparison apps.

  • Store specific apps: These apps can be separated between online & in-store, and online only.
  • Online & in-store store specific apps: help to bridge the gap between a specific retailer’s online and in-store experience. For example, the Apple Store app is listed as “Shop for Apple products and accessories and get the most from your visits to the Apple Store. Start your order on one device and finish it on another. Have items shipped to your door or choose to pick them up in store. Browse trending products. Read reviews for hundreds of accessories. Find the nearest Apple Store and check out upcoming events. And make reservations for the Genius Bar and workshops.”[3] In other words, one carries a sales staff member in the palm of your hand.
  • Online only store specific apps: these include the likes of Amazon, Kijiji & Ebay. These apps support the trend, known as ‘showrooming’, of checking out products in-store, and then buying the cheapest one available, which is often found online, either new or pre-owned. [4]
  • Price comparison apps: These apps allow for instant price comparison in-store, eliminating the need to drive around to compare prices, often linking to product reviews. As these are offered by third-parties, they are the most concern for retailers, as consumers can find a product they like, and instantly determine that it is 10% cheaper only a few kilometers away. While these apps are too numerous to mention them all, Steele with PC Mag lists their top ten as: RedLaser, ShopSavvy, BuyVia, Smoopa, The Find, PriceGrabber, Consumr, ScanLife, ShopAdvisor and the Walmart Savings Catcher.[5]


Video 4. United breaks guitars. [6]

After:

  • Social media apps: There are many different apps to access the various types of social media accounts, but all of them allow users to share their product experience, either with friends or the world, in the blink of an eye. These apps also allows consumers to connect with the brands themselves, sharing both positive and negative experiences. A notable example of someone using social media in response to poor customer service is the ‘United Breaks Guitars’ song, shown in ‘Video 4’. As Tran explains in his blog post entitled, “Singer gets his revenge on United Airlines and Soars to fame”, Dave Carroll, a country and western singer, after failing to obtain compensation from the airline for a damaged guitar that he had sent in his checked luggage, posted a song to Youtube, which quickly went viral, prompting the company to offer compensation. Tran further explains that while the end result was positive for Dave Carroll, it has developed into a customer relations nightmare for United.[1]
    Examples of social media apps include the major players Facebook, Twitter, Instagram, and many others. Almost every platform as an official app and many unofficial versions that add additional features to the standard set.
  • Mobile, sensors & cows: While sensors within the supply chain abound, with much of the process tracked by barcodes, or increasingly by RFID, and encompassing metrics such as location tracking, temperature tracking or temporal tracking, among others, there less predictable examples. One such example is highlighted by Tom Jackson in a recent ‘BBC News’ article, where sensors & mobile provide the solution to a problem that farmers have long been aware of: the fact that the most likely time to lose a cow is when it is giving birth, and the farmer is not present, while at the same time, farmers have also noticed that cows wave their tails more often right before giving birth. He goes on to explain that the solution is a sensor that tracks tail movement and can also send a text message to a farmer’s mobile phone, altering them when the tail movement changes. He points out that this allows the farmer to normally be present and ensure a safe delivery for both the calf and the cow, saving the farmer money[2]. This is one example, but there are many others where technologies, but especially sensors & mobile are combining to produce a better supply chain.

Service Consumption

Video 12. The On-Demand Revolution: Byron Deeter at LA Tech Summit. [Relevant portion: 9:48 - 10:38][3]

The on demand service is wide spreading to different service industry, delivery, dry cleaning, even doctors on demand at a minimal cost. However, the on demand concept is not new, with company like Webvan attracting significant funding and valuations as far back as the late 1990s. Webvan was an online "credit and delivery" grocery business founded in 1996 by Louis Borders. When Webvan first came out, the company raised $374 million in an initial public offering and was valued at more than $4.8 billion in November 1999[1] However, the company went bankrupt in 2001. So the million dollar question is what started the age of on-demand service and shaped the evironoment for it to prosper? In a tech summit at Los Angeles, Byron Deeter, summarized the fundamental law of on-demand service, and implied that entrepreneurs should design and build their products around it. The law of on-demand revolution is listed below.

  1. customer want and expect now
  2. always on, always available
  3. moving from ownership to subscription
  4. sharing economy across consumer
  5. mobile is intrinsic to all of this

Some new examples of on-demand service

There are many examples of companies that are creating new on-demand services. Here are four examples in categories that may re-define existing business: door-to-door grocery, premium travel service, scalable bandwidth and text message based concierge service:

  • Door-to-door grocery: Instacart allows you to order your grocery with a few taps on your phone and have it delivered to your door steps without leaving your house[2].
  • Premium travel service: Dufl stores your clothes in your personal Dufl closet and allows your to pack you baggage by selecting your clothing item with your phone and have it sent to your destination[3].
  • Scalable bandwidth: AT&T Network on Demand service eliminates network delays by adjusting your bandwidth according to your daily usage demands. It is now only limited to enterprise[4].
  • Text message based concierge service: Magic allows you to get whatever you desire with no hassle through texting a number. It is a new kind of service that focus on "laziness as a service"[5].
Video 15. US start up Instacart offers grocery deliveries in an hour [2]
Video 14. What $500 Can Get You on Magic [1]

Product Consumption

Video 5. The Science of Shopping and Future of Retail: Devora Rogers at TEDxWakeForestU. [Relevant portion: 0:00 - 3:00] [1]

As you can see from the section above, the line between product consumption and service consumption has begun to blur. There is a fundamental change in product consumption that has begun to emerge and change the model in which we consume products. First, we need to define the term ‘shopping’. In a TEDx presentation at Wake Forest U, Devora Rogers, Inmar’s Senior Director of Retail Marketing Insights, asks the question “[what is] a shopper anyway?”. She argues that limiting the definition of shopping to just purchasing goods is wrong, and she presents the argument that shopping should be defined as much more, in that it is about decision making, and that in turn makes so many more things fall under the definition of shopping. She then presents the question faced by the seller, “what does it take to get someone to say yes?”. Finally, she compares the information sources available in the past, comparing the limited sources available then, and which for most part, are still available now, to the possibilities of today, which are now available online. [1] For both consumers and businesses, this definition narrows the interaction down to what exactly is being targeted: companies take aim at a consumer’s choice.

Once we accept that companies are targeting a consumer's choice, the question becomes how can we use this definition to modify existing business model in order to capture more value from the consumer. In other words, once we have gotten to a ‘yes’, how can we eliminate the need for the consumer to revisit their decision? Take, for example, grocery shopping. In the most common situation today, we find someone going to the store a couple times a week, comparing prices in flyers to get the best deal, and changing brands based on both perception and price. But what if a company could reduce the number of choices involved from a choice for each individual item to a choice of which meal the consumer wants? As Elizabeth Segran puts it in the Fast Company article entitled 'Out of the box', “Enter the meal-kit subscription service: a box full of pre-measured ingredients, with recipes included”, or in other words, the solution is to change the choice from “which meal, which store, and which product”, to “simply, which company do I subscribe to?”.[2] A subscription model is not new, especially in the world of media. Newspapers and magazines have shown that the model can work, although more recent developments may herald the end of the model’s dominance, as platforms like Craigslist, available through the internet, and the response speed offered by online news outlets, threaten conventional newspaper wisdom.[3] More recently, we have seen both video streaming, for example, Netflix, and music streaming, for example, Apple Music or Spotify, all of which are subscription options, rise in popularity, while at the expense of physical video rentals and digital music purchases. [4]


Some new examples of subscription products

There are many examples of companies that are creating subscription offerings. Here are three examples in categories that may initially come as a surprise: personal care products, clothing, and food:

  • Personal Care Products: Dollar Shave Club allows you to choose your razor blade type, the company sends a handle and your first month’s blades, and then each month you received your blades in the mail. [5]
  • Clothing: Five Four Club: For $60 dollars a month, members receive several clothing items that match their clothing profile, with free exchanges, and included delivery. [6]
  • Food: Blue Apron: As we referred to above, Blue Apron allows users to choose which recipes they would like to receive, and whether they want to be on the two person plan, which offers 3 recipes per week, or the family plan, which serves four people, and has the option of 2 or 4 recipes per week, with costs ranging from $59.94US to $139.84USD. Recipes never repeat in the same year, ingredients are pre-measured, and the boxes are delivered to your door based on your schedule. [7] [8]
Video 6. DollarShaveClub.com - Our Blades Are F***ing Great. [Relevant portion: 0:00 - 3:00] [9]
Video 7. How Blue Apron Works. [1]

Implications

Privacy

Video 11. Glenn Greenwald Why Privacy Matters. [1]

The debate over privacy is very wide, and very polarizing, but there are three privacy implications that can be derived from the trends above: data concentration, data control & mobile tracking

First, the fact that as we transition to more subscription or service based products, we are placing an ever growing amount of data with fewer and fewer companies, or in other words, engaging in data concentration. As an example, consider how consuming movies has changed. There used to be, in addition to those offered on TV, several options for renting (Blockbuster, Rogers, TV on-demand, etc.), and a variety of options for buying, including physical copies online (Amazon, etc.), or in-store (Walmart, BestBuy, etc.), and digital copies (Apple, etc.). While many of those options still exist today, many consumers are increasingly turning to services like Netflix that offer a massive catalog for one monthly fee. The point being that in-order to track a person’s complete movie consumption, a company needed to combine a variety of sources. However, as we have moved to streaming, and the subscription model offered by the major player, Netflix, we see companies that hold an ever increasing amount of the data on our movie consumption. A similar example is possible with Blue Apron, where rather than needing data from a variety of grocery stores, and convenience stores, one company now has a good idea of, and the nutritional content of, what a family is eating several nights of the week. While this can appear innocuous, possibilities like health insurance premiums increasing because someone is choosing less healthy recipes could become a reality.

This ties into the second implication, data control. One company that holds a lot of user data is Uber, and as Video 8 explains, this includes “God View, or a real time aerial view of its cars”.[1] This is in addition to the transaction data that Uber collects from its regular business. Uber provides a stark contrast of how this data can be used in both positive and negative ways: Video 9 explains that one Uber executive tracked a BuzzFeed journalist, and mentions a senior Uber executive has considered discrediting journalists that covered anti-Uber ideas,[2] while Video 10 explains how Uber wants to use the data it has collected to give Boston an idea of traffic & trip patterns, allowing Boston to develop plans to deal with issues like congestion.[3] End users do not know what is going to happen to their data, beyond the extensive 'Terms & Conditions' present for almost any customer interaction today. The Uber examples highlight that while using anonymized data is great for sharing social problems, companies need not only control against unsanctioned data access by exterior parties, but must also rigorously control data access within their own company to ensure that no unauthorized activity is occurring.

Finally, the third implication is the prominence of mobile in the consumption process, and by extension, the potential for mobile tracking. The majority of users have become accustomed to being tacked online, with the plus side being personalized ads as you move from site to site, and most mobile users have seen the permission screen for GPS access when installing apps which then allows personalized suggestions appear to the user dependent on geographic location. While these systems remain to a certain extent in the control of the consumer, in that they can either be blocked or turned off, systems now exist which can track a cellphone without the holders knowledge, and can even link up a customer's cell phone to their existing profile, again without explicit consent.[4] This can be used to build or expand a customer profile, which can be maintained over time as the device is detected returning to the store on subsequent occasions. While many people may still cling to the idea of privacy, it can be seen that most technology users give up more and more of their privacy each and every day without much thought, as they access the internet, apps or even just their mobile device. As Glenn Greenwald puts it, many people who are unconcerned about privacy claim “I don’t have anything to hide”.[5]


Video 8 Uber Says Only Some Employees Have Access to 'God View'. [1]
Video 9. Report: Uber Probing New York City Exec for Tracking Journalist. [1]
Video 10 Uber to Share Customers' Data With Boston to Ease Congestion. [1]

Labour Policy

There has been a long lasting debate building around the 1099 start-ups (1099 refers to the tax form companies fill out when they hire contractors). As of recent, 1099 start-ups are finding themselves facing increased number of lawsuits from contractors for worker misclassification. Contractors claim that the 1099 start-ups are classifying them as contractors when they are really employees. For instance, in June, a group of drivers joined a class-action lawsuit against Uber in California.

Like Uber, many of these start-ups hire the people who provided the on-demand service as contractors rather than employees. The reason is simple: contractors are a lot cheaper than employees. However, most 1099 start-ups require contractors to obey certain company regulations for quality control. For example, Uber will deactivate a drivers account if his or her rating drops below 4.6 out of 5 [1]. It turns out that treating contractors as employees is against the law, and switching to an employee model could be costly. MyClean, a New York-based on-demand cleaning service, saw a 40% increased in its labor cost after switching treating its cleaners as employees. [2] Therefore the threat to lots of rich 1099 startups is that if they may have to start reclassifying contractors as employees if they lean on cheap contractors and require them to act like full time employees too much. This could seriously spike costs for many startups and make their business model untenable [3].

Business Model Sustainability

Whether this business model will survive the test of time remains to be seen. However, there are certain concerning aspects that should be noted. The first aspect is longevity. The recent struggles of the newspapers and magazines show that even a dominant player can struggle if other companies find alternative models that deliver greater value to the consumer.[4] We also continue to see major players shift their strategy to discover what will and will not work as consumer tastes develop and demographics change. As Stedman explains, Netflix has recently chosen not renew a major deal that allowed it to stream main stream films like Hunger Games, as it seeks exclusive content, but the content will be offered on competitor Hulu as of Oct. 1, 2015. [5] A similar example can be found in the case of AmazonPrime Fresh, for as Tuttle explains, after “extended free trial periods”, “Amazon is now enforcing the $299[USD] annual fee [for Prime Fresh]”.[6] It remains to be seen how consumers will react to these modifications, in particular paying the same for less, or paying for something they were accustomed to getting for free. These business model changes tie into the second aspect, which is cost.

A subscription is only cost effective when one uses more than if one had purchased the items as needed individually. In the Blue Apron example above, for their two person plan, they are priced at $59.94USD, which provides three meals a week, with a price per serving of $9.99USD.[7] However, in her article, Elizabeth Segran states that “the average American family spends $151 on groceries for the whole week, or $21 for an entire day”.[8] Assuming that this is for an average family size of two people, the cost becomes $3.50 per person per meal. In other words, Blue Apron is banking that the convenience and experience that they offer is worth $6.49 per person per meal. While that may seem worthwhile in the short term, it remains to be seen if consumers find it financially prudent in the long term. A similar conundrum arises when costing out amazonPrime & amazonPrime Fresh service. As Tuttle concludes, once the $50USD minimum order, limitations on free shipping, and $99USD annual membership for amazonPrime or $299USD annual membership for amazonPrime Fresh is factored in, cheaper alternatives like Jet.com become very attractive.[6] The third aspect is market segment. With a cost so much higher than the average cost without their service, companies like Blue Apron or its competitor Plated are targeting a very specific demographic. According to Elizabeth Segran, “Nick Taranto, Plated’s co-CEO and cofounder, describes his target demographic as the “evolved eater” - which is…[a] segment of the American population that cares deeply about the quality of their food and has enough disposable income to invest in eating well”.[8] This narrow demographic, in particular with the need for a higher disposable income, may ensure that these services remain in a niche, unless they can reach a more realistic price point. All of these considerations can only be tried through a test of time, but raise serious concerns about whether the model will ever become mainstream.

Future Potential

Predictive

Have you ever thought about the idea of Siri automatically ordering dinner for you? Imaging the following situation. It is late in the afternoon, you call up Siri and state that your are hungry. After checking through your medical records through your on-demand health agent, dinning preference from your food order history and daily active calories measured by a smart watch on your wrist, Siri concludes that you lack exercise and should avoid consuming fat to trigger potential stroke. Therefore, Siri orders a diet meal plan from Blue Apron, a subscription based "Do It Yourself" meal service. This ensures you to not only eat health but also meet the exercise goal for the day by doing some cooking. This might sound like a scenery in a science fiction movie, but could be right around the corner, as technology giants like Google and Apple are aiming to make their voice recognition system similar to the Star Trek computer, which understood the speaker's intentions[9].

The on-demand revolution

Video 13. The On Demand Revolution. [10]

The smartphone revolution has created an on-demand economy. Premium service that used to be for the wealthiest- personal drivers, personal shoppers and even butlers are now available to the common mass. As described by the economist, "The on-demand economy allows society to tap into its under-used resources: thus Uber gets people to rent their own cars, and InnoCentive lets them rent their spare brain capacity."[1] We are living in an age when access is more important than ownership. As stated by Kevin Kelly, "For many people this type of instant universal access is better than owning."[2] Anyone with a smartphone can literally summon for the ability to fulfill your request. For instance, when using service like Uber and Airbnb, you are summoning the ability to travel to somewhere and stay there. The video from Jason Silva, The On-Demand Revolution,[3] describes a near future where the on-demand revolution creates a technologically mediated flow where most of the world becomes an extension of our agency.


Delivering products on-demand

While the idea of products on-demand seems great, it comes up against the large hurdle of “How is it going to get there?”. While ideally something is on the way before the consumer knows they want it, consumers are unpredictable enough that this is just not practical, nor do we have the computing power, or memory, to track every possible interaction a person has, and determine how it will impact their future decisions. This is especially troublesome for online retailers that find their customer base located across the globe, increasing both delivery time and therefore frustration in an on-demand world. For some ideas on what the future might look like, we can turn to Amazon, where they are trying to make the future of delivery happen today. In his article entitled ‘’Amazon’s Next Delivery Drone: You’’, Bensinger highlights some alternative methods that Amazon has investigated in order to deliver product faster. These include the idea of crowdsourcing delivery, where Amazon uses local residents to collect packages from holding locations and deliver them as they travel along their usual routes, “bike messengers for its Prime Now one-hour delivery”, “deliver[y]...via yellow cabs and Uber vehicles, paying about $5 per parcel”, and “delivery firms for its same-day Fresh grocery service”. He also notes “[Amazon] is building its own network to take on UPS and has enlisted the Postal Service for Sunday delivery and early-morning grocery drop-offs. And it is developing aerial drones for parcel delivery.” Focussing on the idea of crowdsourcing, Besinger notes that several other companies are developing or trialing a similar idea, namely Deliv Inc., Uber Technologies Inc., and Instacart Inc., as well as Google Inc. & Ebay Inc., while Walmart Inc. looked into the idea back in 2013. Bensinger further notes that the challenge with the crowdsourcing model is getting packages to a location where local residents can easily collect and deliver them, but he explains that the model implemented by UPS, using “dry-cleaners, convenience stores and other small retailers as pickup points so that customers don’t have to be home to sign for them”, where “UPS pays the retailers a per-package fee for the service” remains a possible illustration of how such a service might work. Besinger further notes that “Amazon has a network of lockers installed in 7-Eleven stores, parking garages and other locations where customers can pick up packages or make returns. Amazon rents the space in the store, and retailers benefit through increased foot traffic.”[4] In other words, it would be easy for Amazon to scale up this service in order to solve the pickup location problem for its crowdsourced delivery personnel. However, it remains concerning that that such a large rival, Walmart, looked into the idea of crowdsourcing delivery and abandoned it, given that Walmart is very good at keeping costs at a minimum. This indicates that they may have found the added benefits are not worth the costs to consumers.

It is important to note that at the same time that Amazon has been investigating methods to get products to customers faster, as can been seen in the ‘Financial Times’ article by Bond et al., they appear to have realized that there are times where the benefits of an old fashioned physical storefront outweigh the costs, for as a nod to the idea that physical storefront can complement the online experience, Amazon has recently opened a new physical bookstore in Seattle. As the article notes, in this bookstore “[t]here are no price stickers, as Amazon is matching its frequently changing online prices, and some titles are sorted by their popularity in its online reviews”, and as the article states, “...Jennifer Cast, vice-president of Amazon Books, [says] books to be sold in the store would be selected based on online data including customer ratings, pre-orders and sales”.[5] This combination of Amazon’s online data gathering and physical format offer an excellent glance at the future possibilities of the retail landscape, as companies seek to include customer engagement within their brick-and-mortar store experience the same way they have managed to capture it online. In particular, Amazon’s savvy use of the data at its disposal highlights what companies must be able to do with the data that they collect in order to realize its potential.

Amazon Dash & Amazon Dash Button

As an alternative means of connecting to their customers, and in support of an on-demand model, Amazon has created a different twist on the subscription model with their ‘Amazon Dash’ & ‘Amazon Dash Button’. As shown in Video 13, the ‘Amazon Dash’ is a wand with both a microphone and a barcode scanner, which allows one to order over 500,000 products through voice requests, or scanning the barcode of a relevant product. However, in Video 14, we see how Amazon has eliminated the need for the ‘Amazon Dash’ for common consumable products, with the ‘Amazon Dash Button’, which allows users to attach a button near a consumable product, like laundry detergent, and then instantly order more when needed by pressing the button. As Amazon states, both systems connect with the Amazon website & app to allow users to confirm or cancel orders, and the system has controls in place for when too many orders are placed in rapid succession.[6] While it may appear that Amazon has moved away from a subscription model, as each product is shown as paid for individually, upon closer examination, Amazon has actually combined the ideas of subscription and individual products, while finding a way to satisfy the desire for almost on-demand products.[7][8] This is accomplished because, as Tuttle describes in his Time article, ‘Amazon Dash’ requires an Amazon Prime Fresh account, which is $299USD annually, and the Amazon site states that ‘Amazon Dash Button’ requires an Amazon Prime membership, which is $99USD annually.[9][10] On its website, Amazon lists one of the major benefits of amazonPrime is its two-day shipping for many items, which is getting fairly close to instantaneous & on-demand.[11] While this technology requires human interaction today, one would expect to see Amazon one day combine the power of analytics with the data gathered by this program to begin ordering products before a customer is even aware that the product is going to run out. For example, if Amazon can determine that your laundry detergent gets re-ordered every four weeks, then it can start placing an automatic order every three and a half weeks, meaning by the time you realize that you are out of laundry detergent, more has arrived on your doorstep. Taking this a step further, Amazon could potentially roll out a system where all your weekly staple items are ordered regularly, reducing trip to the grocery store into trips for unusual items to spice up the menu.

Video 13. Introducing Amazon Dash. [7]
Video 14. Amazon Dash Button. [1]

RFID enabled tracking

One technology that can be expected to see increasing use in the future is RFID. In its current form, RFID is used in a variety of industries for a variety of uses, with essentially anything that requires a unique code is a potential use for RFID.[1] When it comes to tracking people, one provider of RFID technology, AllianceTech by Cvent, lists three tracking methods on its Intelligent ATTENDANCE features page: Enterprise, consisting of floor mats that automatically track badges that pass over them; Tap-n-go, where the attendee taps their badge to a specific point; & Handheld, where an employee scans the badge.[2] Taking this technology a step further, a youtube video by Reuters shows a company that has used RFID chips to optionally replace ID & access cards by implanting an RFID chip in any willing employee’s hand, which in turn allows passcode access to things like doors, or the photocopier, as well as the sharing of contact details.[3] This instant identification, especially its passive abilities, appears poised to support the on-demand revolution, as it eliminates the need for consumer intervention in the form of cards or phones: wherever they are, they can instantly be recognized, as well as tracking the products that they consume.

Buy buttons

In support of the on-demand revolution, one trend that we predict will only expand is the ‘buy button’. As Austin Carr describes in the ‘Fast Company’ article “Buy!Buy!Buy!”, we are surrounded by social media that offers suggestions on decorating tips and products, often with links to where the item can be purchased, but if the product or brand is no longer for sale, the challenge of buying them begins. Carr points out that Pinterest has introduced “buyable pins” in order to combat this conundrum.[4] However, we believe that the potential for a ‘buy button’ is much greater than Carr describes. By combining technologies like mobile tracking, RFID or similar technologies like NFC, and ‘buy button’s, as well as the payment processing potential on our person already, either through our phones, through methods like ApplePay, or through tap enabled credit & debit cards, companies have the potential to interact with their customers in much more personalized and immediate ways. For example, as customers look at a product display, a display screen that is part of the product display can offer a tailored offer, including an option to buy the product and ship it to the customer’s address based on the details provided by their mobile phone, no direct interaction with sales staff required. Alternatively, the display may show the number of friends that have also bought a product, along with their product reviews instead of a product offer. Through the use of passive RFID and other technologies, there is a large potential to gather even greater detail about how a customer is interacting with the products, which in turn leads to greater personalized experiences for individual shoppers. In addition, the potential savings offered by reducing inventory and square footage is immense, and may mean that the mall of tomorrow becomes a corridor for window shopping only. The idea of only a window display also opens up the potential for consumption in new locations, as companies weigh the cost of a static display sign against a product display in a transit station. Combining these technologies with improvements in 3D Printing may mean that the product is ready before the bus or subway arrives. Another alternative concept is stores with customer areas that are specifically designed for showrooming, with only a display model, but combining it with stock in an attached warehouse that can be available instantly if desired. In some ways it is surprising that Amazon has not chosen to adopt this model in their new bookstores. Obviously they must feel that allowing customers more interaction is fundamental to the bookstore experience. All of these changes combine to reduce the amount of decision making involved in saying 'Yes', and aim to encourage choice through personalization.

References

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  1. Wikipedia.org. (n.d.). Radio-frequency identification. Retrieved from https://en.wikipedia.org/wiki/Radio-frequency_identification
  2. AllianceTech. (n.d.). Intelligent ATTENDANCE features. Retrieved from http://www.alliancetech.com/solutions/attendee-tracking/intelligent-attendance/features
  3. Microchips implanted under the skin of office workers
  4. Carr, A. (2015, September). Buy!Buy!Buy!. Fast Company, 198, 25-28
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