Topic: Better Ecommerce

Focus on Customers. Revenue Will Follow

Like every industry, e-commerce often finds itself buffeted by fads — the new shiny thing, the flavor of the week — pick your cliche.

But there are reasons some e-commerce themes stick and become almost a mantra among those trying to push online selling forward into the 21st century and beyond.

The latest is “artificial intelligence,” which we’ll get to in a minute.

But first, some history. Remember when omnichannel was all the rage? Sure you still hear about it, but not nearly as much as you once did. Is that because omnichannel no longer makes sense?

Hardly.

The reason the word “omnichannel” appears to have checked into the witness protection program is because it has become so widely adopted as a business goal and practice in e-commerce that it doesn’t need to be called out any more. It’s the way that language reflects the world in which it’s used. When was the last time you heard someone talk about a “high tech” solution? The phrase sounds ancient precisely because what was once considered high tech is now just considered technology — or just the way things are done.

As I said, e-commerce’s latest buzz phrase is “artificial intelligence,” or AI for those in the know. AI holds tremendous promise and has already significantly changed the face of retail. It relies on data— and lots of it — and smart algorithms that can act faster and across a far broader set of data than humans ever could.

But with the wonders of AI come the same dangers that accompany each leap forward in e-commerce. The challenge retailers face is the trick of embracing artificial intelligence without falling victim to the urge to deploy AI for the sake of AI.

I recently met with Justine Santa Cruz, of Satisfi Labs, a company that uses artificial intelligence to build retail chat bots to provide customer service. She had an interesting way of framing the contrast of the potential and pitfalls of AI, which she lays out in the video below.

At Shop.org earlier this year, Santa Cruz told me that retail was being upended in part by Amazon and other pure play e-commerce companies because those internet-first retailers know the true value of data and the tools that can tease insight from it. Some retailers are struggling, she said, because they’ve made the mistake of focusing too intently on increasing revenue at the expense of focusing on customers and what they want and need.

Obviously, making money is important to every retailer — and every business for that matter. But to put a fine point on Santa Cruz’s argument: If you genuinely focus on your customers and their needs, the revenue will follow.

Contact Mike Cassidy at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy. 

E-commerce Businesses Need to Cut Through the Vendor Noise

Too much of a good thing? Pretty much.

E-commerce professionals are bombarded by companies selling the latest cutting-edge technology to help them keep up with the competition and catch up with Amazon. At Shop.org this year hundreds of vendors staffed their booths in a cavernous hall. There were mind-boggling tech solutions and mind-numbing sales pitches.

Automation is the not just the future of e-commerce, it’s the now of e-commerce. Every step of a customer’s journey — from finding a retailer and product on the web, to contacting the retailer after an order has arrived — has a long list of tech tools promising to make it better.

It’s easy to become paralyzed or to make a snap decision that you’ll regret for years, if your boss or board allows you to stick around that long after you headed down the wrong path. Arthur McManus has seen the evolution of e-commerce; he’s seen fads come and go and he’s seen bona fide breakthroughs that have changed the game, as so many products promised to do.

McManus, senior vice president of the FitForCommerce’s provider program, agreed to talk to me at Shop.org. He offered some practical advice to those who find their heads swimming when it comes to trying to select the right company to tackle an e-commerce challenge in the right way.

The paradoxical problem of too much choice has been well documented. I wouldn’t be the first to use the supermarket analogy: that feeling when you face a shelf filled with dozens of varieties of jellies. Sometimes it just seems easier to get no jelly at all. But e-commerce executives can’t afford to arrive home without the jelly.

Competition is fierce and those who seize upon the right automation and the right technological solutions will be in the best position to survive and thrive. McManus’ approach might be the way to cut through the noise and figure out which jar of jelly will put you on the path to success. 

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com. Follow him on Twitter at @mikecassidy. 

 

How to Win the Fulfillment Hiring War

E-commerce fulfillment workers

Retailers and delivery services nationwide are deep into the annual scramble for talent, bulking up their e-commerce operations to make sure they can get the goods to millions of homes in time for the holidays.

While a lot is at stake, the competition for temporary work could be distracting from a more fundamental need faced by e-commerce operations and the companies that support them: The e-commerce fulfillment talent pool needed to lead, manage and run delivery operations is not keeping up with demand — no matter the time of year.

The evidence of the e-commerce fulfillment talent shortage runs from the bottom rung of the career ladder to the very top. Think of it as the problem of supplying talent for the supply chain.

For starters, look no further than the July labor report, which showed a record number of employees working in the package-delivery sector.  Christmas in July? Hardly. Instead, it’s a reflection of a new reality: As e-commerce continues to grow as a percentage of retail spending, more and more people are needed to move more and more products to more and more consumers. So even as record numbers fill entry-level jobs, more workers are needed in the e-commerce fulfillment field.

Likewise, more middle managers are needed to manage those workers and more executives are needed to build the strategy and execute on the ideas that are going to help keep digital retailers competitive.

Finding E-commerce fulfillment talent is tough

The pressure to find fulfillment talent, particularly at the managerial and executive level, was the subject of a recent webinar during which experts from PepsiCo and DHL joined consultant Lisa Harrington, who’s worked with Lennox International, to talk about how innovative companies have attacked the skill shortage in the supply chain industry.  

“Obviously we have a growing supply-chain management crisis,” Harrington, who is president of harrington group llc, said to open “Winning the War for Supply Chain Talent.” “For every graduate with supply chain skills, there are currently six holes to be filled, so six vacant jobs. So, competition is fierce.”

That fierce competition for e-commerce fulfillment talent has spawned its share of innovative ideas. Supply chain companies have launched internal academies to nurture future leaders. They’ve encouraged workers to temporarily try out different jobs, both as a way for employees to see new possibilities and as a way for employers to build a trained pool of people ready to step into new jobs.

The competition for talent has also pushed recruiting teams to turn to artificial intelligence and marketing tactics to find and nurture potential job candidates.

As with many jobs/skills mismatches, some of the issue comes down to a pipeline problem. A survey by DHL found that while only 26 percent of 300 companies polled said they had trouble finding entry-level employees, more than 50 percent said filling middle-management roles was a problem.

And where do middle managers generally come from? Yes, the entry-level ranks.

It turns out, the entry-level ranks are whitted in part by supply-chain’s image problem. Not “sexy,” is the way one panelist put it. Moreover, those who enter the field often can’t see how they’ll progress to bigger and better things. And so they leave before reaching middle management.

Meantime, the supply chain field is moving fast, as the story of e-commerce indicates. Shopping is migrating online at a steady clip and consumers’ expectations are rising. Customers want what they’re looking for to be in stock and delivered now, if not sooner.  

Supply chain management is rapidly evolving

“Supply chain is a fast-paced, changing industry and this shows up in the kind of skill sets that companies are looking for in the field,” said Harrington, who is also a senior research fellow at the Supply Chain Management Center at the University of Maryland.

That means that the top leaders in supply chain need to be a new breed, a reality that makes executive-level leaders the hardest to find, according to DHL’s research.

Sure, companies are looking for the traditional operational know-how — warehouse management and people management expertise is still necessary. But companies are looking for more in their supply chain executives.

In particular, Harrington said, companies want executives to be strategic thinkers, to understand analytics, to have a much wider view of the whole supply chain and how their operation fits into the bigger picture.

“You’re looking for a very robust skill set,” she said. “These people are fairly rare.”

All of which, Harrington said, raises the question: “Will we have enough talent to lead our supply chains in the future?”

Here’s what the panelists are doing to try to ensure that the answer to that question is “yes.”

Internal education programs: DHL has a certification program that teaches each employee what he or she needs to know to do his or her job — and also gives them the skills they need to move their career forward, DHL’s Louise Gennis said. After the initial course, employees can move on to other courses.

Lennox, a company that sells heating and cooling systems, starts employees out with an extensive program that prepares them to work in a world that is run by data and algorithms.

“New hires go through 18 months of education in data sciences, so they’re looking at learning tools like Hadoop, Tableau and SAS and others — just because technology is and is becoming so important to supply chain,” Harrington said. “The new hires, as well as everyone else, needs to know these tools and be facile with them.”

Demonstrating supply chain career paths: Lennox shows employees their career “lattice,” a map of the next and future logical moves up or over from their current position. It also runs a two-year program during which employees try out five or six different jobs and identify their various strengths.

“This is about keeping people excited and interested in learning,” Harrington said. “If you keep people engaged, they stay.”

Recruiting like a marketer: David Simmons, talent acquisition manager at Pepsico, said company recruiters have turned for inspiration to another department at the big multinational.

“We’re taking a look at, within our talent acquisition organization, how can we start to apply some of those marketing concepts to build and nurture talent pipelines for our organization?”If at First You Don’t Succeed at E-commerce Fulfillment, Try AgainJust as corporate marketers identify accounts that would be a good fit for products and services and then craft plans to win those accounts over, Simmons’ team identifies target candidates that they will nurture for years in the hopes of one day hiring them.

If at First You Don’t Succeed in E-commerce Fulfillment, Try Again

The company, for instance, focuses on job prospects who have previously expressed an interest in the company, but ultimately went to work elsewhere. They look at employees who have left Pepsico. And then they go to work with targeted email campaigns and personalized landing pages.

They’ll consider what stage in the job-searching or acquiring process their targets are at and tailor messages accordingly. The system has gotten the company close to what Simmons calls “zero days to hire” — a state where Pepsico is able to fill a position practically on the day it becomes open.

Simmons explains it this way: “We don’t have an open role, but we know in 60 days, so-and-so is going to move from A to B.”

At that point, he said, they are able to look at their talent pipeline, see an identified candidate and start the interview process. How is a company of more than 260,000 employees able to keep track of all that?

“We’re looking at a lot more automation, Simmons said. “There is a lot of AI out there in the talent-acquisition space. It’s how we continue to personalize that message, really automate that more, to continue to fill that pipeline.”

It makes sense to turn to automation when so many other parts of the supply chain and e-commerce already have. It will no doubt help give supply chain hiring managers a fighting chance to solve a problem that appears to exist from top to bottom.

Photo by iStock

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow  him on Twitter at @mikecassidy.

Hiring for the New Era of E-commerce

So much disruption has roiled the retail industry in recent years that upheaval is beginning to feel normal.The best e-commerce executives and manager, of course are not just on top of the trends, but actually out ahead of them. The trick, of course, is to figure out what’s coming next. 

One way to get a feel for what’s coming, or at least what the best brains in the business think is coming, is to attend one of the major e-commerce trade shows. At this year’s Shop.org, there was plenty of talk about the old standards — personalization, omnichannel, data-driven decision making etc.

There was also plenty of talk and plenty of exhibitors highlighting the role of machine learning, artificial intelligence and virtual and augmented reality. Yes, all of those technologies have been present at past Shop.org’s, but not in the same measure as this year’s show.

“That’s all your hearing here,” Arthur McManus, a senior vice president at consultancy FitForCommerce, told me. “A few years ago it was omnichannel. After that, it was personalization. Now, it’s AI and machine learning.” 

But one related topic has not risen about the noise about the latest technology: talent. In other words, what does the dramatic transformation of retail and e-commerce mean for hiring manager and entrepreneurs building an e-commerce business? It stands to reason that when an industry undergoes rapid change, the same, old workers with the same, old skills are not going to cut it. 

Brian Beck of e-commerce consultancy Guidance took a few minutes out from networking and sharing his expertise to talk to me about what the world of e-commerce looks like from a hiring perspective. No question, he said, it is time for a change. And those e-commerce retailers who change first and fastest are going to have a competitive edge.

Not just a competitive edge in selling goods, but a competitive edge in hiring the best, right people. 

I don’t mean to give anything away, but one thing that became abundantly clear from my talk with Beck is that e-commerce managers are not going to be the only ones looking for the sorts of people that he says e-commerce operations need. 

 

How to Expand E-commerce from B-to-B to B-to-C

With all the talk in retail about how the consumer is charge now — with unprecedented information, endless selection and choice of who to buy from — why in the world would a manufacturer or wholesaler want to expand into a direct-to-consumer selling model?

For all kinds of reasons, it turns out, according to an expert panel assembled recently for a webinar examining a key strategy for e-commerce growth. 

“At the end of the day, we’re all selling something,” Jordan Brannon, president of Coalition Technologies said during the presentation. “In e-commerce, it’s often the product and the brand. E-commerce companies that focus on the product exclusively and forget about the brand tend to have shorter life cycles or tend to see a lot more variance in their success.”

Short life cycles? Variance in success? Not good. 

There was, of course, wide agreement among panelists Brannon, Dan Fertig, of BigCommerce, and Lee Hadsock, of Signifyd, that retailers don’t want to go out of business. But beyond that, how do retailers expand their business? How do they grow? The question was at the heart of the discussion in the session “The Journey from Wholesale Brand to Direct-to-Consumer Retailer.”

Don’t Just Sell products; Sell Your Brand

Take the notion of not selling just products, but of also selling your brand. 

The key way to sell your brand is to be the entity that sells your products. When a brand is selling directly to customers, it creates stronger relationships with them. It also ensures that the brand is completely in charge of its message, its pricing, the way its products are presented and the entire customer experience — at least in its B-to-C sales channel. 

“We really try to get our customers to focus on their brand and how they can differentiate their customer experience and their unique selling proposition in a way that really helps them narrow their competitive market,” continued Brannon, president of the digital agency specializing in web design and search engine optimization. 

5 Tips for Expanding into B-to-C Selling

  1. Play nice: Sell some products exclusively through your retail channels to avoid becoming a threatening head-to-head competitor with your resale partners.
  2. Keep the human touch: Identify ways you can let consumers know there are human beings on the other side of the e-commerce transaction. Responsiveness, high-quality content and personalization all help.
  3. Customer experience is key: About half of site visitors have a low propensity to buy. A small percentage have a high propensity to buy. Great CX grabs the 30 to 40 percent who are waffling.
  4. Build trust: The average merchant wrongly declines 3 percent of orders for fear of fraud. Customers are insulted and wonder what else the merchant is getting wrong. 
  5. Quiz yourself: Make sure you can answer the five W’s. Who are you selling to? What products will you sell B-to-C? When do you want to sell (seasonally)? Where do you want to sell (own digital and own brick-and-mortar?) Why do you want to sell directly to consumers? If you can’t pass the quiz, regroup.

 

Opening a direct to consumer channel also helps B-to-B sellers get to know their end customers in ways that help build loyalty. Fertig, who’s a new father, explained that he used to buy diapers and baby wipes  (a lot of them) from the local drug store. But eventually he shifted to buying direct from Procter & Gamble’s digital sites. 

“It’s a strategically important initiative,” he said. “It enables them to start to build a dialog directly with their end customers. And it allows them to gather really valuable information on customers just like me.” 

Fertig explained that while he is benefiting by receiving promotions and high-quality child-rearing content, P&G is learning more about him — information that is highly valuable in the effort to sell him more P&G goods.

But the value of the data from direct-to-consumer sales goes far beyond marketing. 

“We’re finding a lot of manufacturers, wholesalers, distributors, finding a lot of success direct-to-consumer online,” Brannon said. “And the ones who seem to do the best with that are the ones who take that information and are able to carry that into their retail strategy. So, taking some of the direct-to-consumer sales data that they have from their own sales channels and then using that to provide feedback into their B-to-B strategies.”

Manufacturers and wholesalers gain insights into what’s working and what’s not, he says. They come up with products and product tweaks to roll out.

Expanding to B-to-C Isn’t Just More of the Same

Maybe it will come as no surprise that adding a business-to-consumer channel to your business-to-business model isn’t just doing more of the same with a different target market.

E-commerce has been evolving rapidly for years and the pace is only accelerating. The lines between B-to-B and B-to-C retailers is blurring, as Brian Beck, of Guidance, recently pointed out on the Future of Customer Engagement and Commerce blog.

There are some challenges. First off, you don’t want alienate the retailers who already sell your products. You should consider a different product mix in your B-to-C line to avoid head-to-head competition with your retail channel partners.

Second, as Hadsock, a fraud prevention expert, pointed out, when you open up your online store to consumers, you will have many customers that you haven’t seen before and that you don’t know much about. 

“Fraud is a major concern for merchants who are used to selling only to authenticated business buyers,” he said. “There is a much greater risk to selling to consumers when you don’t have all the data.”

Manufacturers and traditional wholesalers moving into consumer markets might not have the skills and tools to adequately protect themselves from fraud — and why would they? B-to-B customers are typically known and buy through established accounts. Consumers come to sites from anywhere at anytime.

Without some forethought, enterprises could find themselves spending hours and hours on manual reviews of orders to make sure those placing them are legitimate consumers. Those reviews squeeze already-thin margins and, just as important, it delays orders at a time when consumers are used to getting the goods fast.

“Thanks to Amazon Prime,” Hadsock said, “nobody is willing to wait anymore.” 

Moving into B-to-C selling — and expanding beyond selling to authorized commercial buyers — also exacerbates the problem of false declines, or “the insult rate,” as Hadsock calls it.

When a legitimate customer’s order is cancelled for fear of fraud, it does lasting damage to the relationship between seller and customer. 

“I can’t really think of a much worse customer experience than getting the buyer all the way to check out and then you don’t let them complete the purchase,” Hadsock said. “There is a  50-50 chance they’ll never come back.”

Expanding your audience can seem like a big step for a traditional manufacturer or wholesaler.  And while the webinar panel didn’t reach the conclusion that it’s not as hard as it looks, it did show how it can be done.

As for why do it? The answer is Willie Horton clear: That’s where the money is.

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

 

 

 

How AI Can Increase Customer Lifetime Value

You’d be forgiven if you thought that chatbots got their name for all the chatter that surrounds the talking AI technology.

The recent Shop.org trade show was a hotbed of chatbots. The learning machines have been the talk of e-commerce for some time. The conversation naturally tends to run toward what chatbots can do to move an e-commerce customer closer to buying.

The North Face, for instance, launched a feature last year that uses IBM’s Watson to conduct e-commerce conversations with customers regarding the kind of outdoor gear they’re looking for. The system relies on typed questions and written answers. And it’s limited in scope.

Voice search, of course, has been a thing in e-commerce for several years. And chatbots in the form of digital assistants like Siri, Alexa and Google Home have literally become household names in the field of finding and ordering products. 

Chatbots Move Beyond Being AI Sales Associates

But it was clear when I walked the exhibit floor at Shop.org that chatbots are moving well beyond the role of getting e-commerce shoppers into the digital store or giving them some help finding what they want once they are there. It was on the exhibit floor, in fact, that I met Justine Santa Cruz. Santa Cruz is the head of partnerships at Satisfi Labs, a New York-based company that builds AI-powered chatbots.

She talked with me about the role of chatbots in retail today. Her view goes well beyond the bot as personal shopper. 

No doubt the role of chatbots in e-commerce will only grow. They represent something of a win-win. For retail, chatbots represent an opportunity to shave costs and preserve margins. (I’ll talk more about that in a future post.) For customers, they represent the opportunity to be heard — literally. And, it turns out, chatbots also provide consumers with a little high.

eMarketer recently interviewed Jeff Malmad, of Mindshare North America. Malmad, who goes by the title managing director and head of Life+, said getting a response from a chatbot causes a human’s dopamine receptors to fire. The exchanges lead consumers to spend more time on a site and creates deeper engagement, he said.

One important condition: The chatbot experience has to be built in such a way that it is the customer’s choice to engage with the bot. No one, it seems, likes a pushy sales associate — whether it’s human or machine. 

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

How the Holiday Crush Provides Merchants With a Chance to Test Automated Solutions

As the already fast-paced, high-pressure, multichannel world of retail moves into the even faster-paced holiday shopping season, it can be easy to overlook one of the most powerful keys to success — simplicity.

 The thought struck me recently, listening to ShipStation’s Robert Gilbreath talk about what he’d learned from years in the e-commerce fulfillment trenches during the holiday season.

 “Understand your current process,” he said during the opening of a webinar chat with Webgility’s Rob McGrorty and Martin Truitt of FedEx. “Studies show if you write something down, you learn more about it. You uncover things that you don’t consciously think about.”

 It was an “All I Ever Needed to Know I Learned in Kindergarten” moment. School kids for generations have been writing things down in order to better learn them. The very act of writing gives the scribbler an opportunity to question every step: Why do we do that? Is there a better way? Can steps 6 and 7 be combined?

Two times when a package is truly fulfilled

 “There are two really happy times in the life of a package,” Gilbreath said, “when the customer buys something from you — yeah revenue — and when the customer opens that package and gets something from you.”

 Now think of all the things that happen in between. And chart every step, said Gilbreath, who built a rich e-commerce pedigree prior to his stop at ShipStation. The steps  include the physical procedures — such as gathering products and moving packages — and the digital steps, as in order processing, fraud vetting, customer communication etc.

 Of course, writing things down only gets you so far. Gilbreath, vice president of marketing and partnerships, had some other suggestions, too, like thinking of the holiday shopping (and shipping) season as a marathon. And just like any big sporting event, it never hurts to practice and analyze performance.

 “If you play sports, you practice, right? The shipping process is no different. And so what we like to preach there, is you do a little bit of a fire drill,” Gilbreath said.

 When he was running fulfillment operations, he and his team would time a group packing and fulfilling 100 orders.

 Automation can be a simple answer

 “You could do that and get that down and know how long it will take per order, and then say, ‘OK, if they can do 100 orders in X time, what’s going to happen if we get 1,000 orders or 10,000 orders? Then you can make decisions around what other kinds of help are you going to need.”

 Maybe you turn to an outside fulfillment company, Gilbreath said. Maybe you hire seasonal employees.  

 Once you’ve got your shipping procedures down and you understand the needs and how those needs scale up, it’s time to think about automation, he added. There are few aspects of e-commerce — from merchandising to call centers — that automation can’t play a role in.

 “That written-down procedure is going to have pieces in it that aren’t done by a piece of software or a computer or aided in some way,” Gilbreath said.

Automation is the key to holiday happiness

 Think about those and whether it makes sense to turn to machines to increase scale or efficiency. For example, he said, say you have two warehouses and one particular product is always in only one of the warehouses. You don’t want to have to manually determine what products are where every time an order comes in.

 “You would want to automate it,” he said. “If an order contains product X, send it to warehouse Y.”

 Automation, Gilbreath said, means you can do things at large scale — printing and affixing thousands of labels at a time. It means you can assign humans to the higher value tasks that don’t simply take brawn, but require human experience and intuition.

 And maybe best of all, when it comes to retail, given its seasonal spikes, automation allows you to handle big increases in volume. Automation can supplement existing processes and help get the bigger job done.

 In fact, using automation to ease the holiday load provides something of a test for merchants during the holiday season. They can see not only how machine learning tools perform in their particular businesses, but they can compare that performance with their existing ways of doing business.

 Automation sounds very difficult and hard to understand,” Gilbreath said. “It’s really about making fewer decisions.”

 In other words, automation is about simplicity — a way of thinking that can move things forward in surprising and delightful ways.

Photo by iStock.

Contact Mike Cassidy at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.


 

How Artificial Intelligence’s Role is Expanding in E-commerce

Michael Klein Adobe retail industry strategist

For years Adobe has been among those racing to deploy machine learning to personalize the web and drive faster and better e-commerce conversions across all digital devices.

The idea is to build a memorable customer experience that will not only lead to a sale today, but that will also bring that buyer back time and again, making him or her a valuable customer for life. As the head of industry strategy for retail, travel and CPG at Adobe, Michael Klein has been focused like a laser on machine learning’s power to revolutionize digital retail.

So when I chatted with Klein at Shop.org 2017 I wasn’t surprised to hear that he was bullish on what machine learning and artificial intelligence could do to help retail marketers and merchandisers build a meaningful customer experience leading up to a sale. But Klein’s vision doesn’t end there. (See video below.)

After all, the customer experience doesn’t end when a consumer clicks the buy button. Klein has some thoughts about how e-commerce retailers can use the vast amount of data produced by stocking, shopping and shipping to make sure that the customer experience is a superb one from the time a shopper hits a website, app or mobile site to the time a customer’s order arrives at their door — and beyond.

The end-to-end customer experience was a theme I heard repeatedly at Shop.org, an annual gathering of retailers and vendors who supply the tools that can make those retailers’ lives better and more profitable.

Artificial intelligence was center stage at this year’s version, as e-commerce operations grapple with customer expectations that grow by the day while struggling to scale the techniques that allow them to meet those needs.

Smart machines are widely seen as the answer, but while the answer is clear, it’s not simple. The vast exhibit hall at Shop.org was filled with companies offering AI solutions, meaning it could at times be hard to know where to start.

Klein covered some of the nuances of machine learning and even some of the limitations in terms of building a seamless end-to-end e-commerce platform incorporating everything from customer acquisition to ordering, fraud protection, fulfillment, delivery and post-purchase support.

I’ll get into those observations from Klein in a later installment of our Signifyd Ideas video series.

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

 

What Online Sellers Need to Know about Sales Tax Amnesty

blackboard that says all prices include sales tax

We turned to the sales tax experts at TaxJar to help sort out some of the more difficult questions surrounding the multistate offer of sales tax amnesty for marketplace merchants. TaxJar provided this guest blog post.

The good news: The commission in charge of the multi-state sales tax amnesty program for online merchants has extended the deadline for those who want to apply to Nov. 1.

The bad news: Nov. 1 is two weeks away.

Not to worry. We’ve got your back. We went to the experts, scoured the web and relied on our in-house tax knowledge at TaxJar to answer the burning questions concerning the sales tax amnesty program. Read on.

Q: What’s is the Amazon FBA Sales Tax Amnesty?

A: “The Multistate Tax Commission (MTC) is an intergovernmental state tax agency working on behalf of states and taxpayers to facilitate the equitable and efficient administration of state tax laws,” the commission explains on its website.

In this case, the MTC’s Amazon FBA Sales Tax Amnesty is designed to help Fulfillment by Amazon (FBA) sellers comply with sales tax laws, without facing the fines and penalties they ordinarily would for not collecting sales tax in the first place.

The idea is to benefit states by increasing sales tax revenue, while benefiting marketplace sellers who were not aware of their sales tax liability or who knew they were out of compliance, but were worried about the past tax, interest and other penalties they’d face by making good on their obligations.

Under the amnesty plan, FBA sellers can simply register for a sales tax permit and begin collecting sales tax. States will not look back at previous sales tax liability.

Q: Which states are participating in the Amazon FBA Sales Tax Amnesty?

FBA Sales tax amnesty states participating as of October 2017

A: Currently, the following states are participating in the Amnesty:

  • Alabama
  • Arkansas
  • Colorado (upcoming Amazon state; Colorado will waive sales and use tax, but will not waive income tax if you also owe back income tax. Read more here.)
  • Connecticut (Amazon state)
  • Florida (Amazon state)
  • Idaho
  • Iowa
  • Kansas (Amazon state)
  • Kentucky (Amazon state)
  • Louisiana
  • Massachusetts (Amazon state) (with provisions; read more here)
  • Missouri
  • Minnesota (Amazon state) (with provisions; read more here)
  • Nebraska (with provisions; read more here)
  • New Jersey (Amazon state)
  • North Carolina
  • Oklahoma
  • Rhode Island
  • South Dakota (with provisions; read more here)
  • Texas (Amazon state)
  • Tennessee (Amazon state) (with provisions; read more here)
  • Utah (upcoming Amazon state)
  • Vermont
  • Washington DC (may have a look back period, read more here.)
  • Wisconsin (Amazon state, with provisions including a limited look-back period. Read more here.)

Q: What do these states mean by “amnesty?”

A: If you register for a sales tax permit and become sales tax compliant in one of the above states during the amnesty period, you will not be subject to a sales tax liability “look back,” or any associated fine and penalties. (Though some states have exceptions. Be sure to note the states in our list followed by “read more here.” Click on the links for more information.)

Q: When will the Amazon FBA sales tax amnesty take place?

A: Amnesty registration is taking place now. The commission started taking applications on Aug. 17, and it will stop accepting them on Nov. 1. Online sellers who wish to take advantage of the amnesty must apply by Nov. 1.

Q: Should I participate in the Amazon FBA sales tax amnesty?

A: As with every business decision, this one is up to you. If you’re concerned that past due sales tax will come back to harm your business, then the amnesty period could be the best possible time to become sales tax compliant with minimal consequences. The fact that these states are participating in an amnesty program demonstrates that they are aware of non-compliant Amazon sellers in their midst.

On the other hand, if you only make a handful of sales per year in a state like Kansas or South Carolina, it could be that the cost of complying with sales tax in one of those states is prohibitive compared to any fines or penalties you’d be forced to pay if the state ultimately catches you. This is your business and your decision. (To help decide, you can read “When to Register for a Sales Tax Permit.”)

Q: What do the experts say?

A: “I think this is a great opportunity for FBA sellers, especially in a state like Texas. Texas is generally in most sellers’ top three sales states. This program will now allow sellers to register going forward without having to worry about past exposure in the participating states. It is not all great news though, as not all states have chosen to participate. With the program shining a new light on the topic, we may see increased enforcement efforts from states not participating, especially in California and Washington. So while I think everyone should participate in this program, sellers must have a strategy for dealing with the balance of the states.” — Michael Fleming of Peisner Johnson.

Q: Are international sellers eligible for the amnesty?

A: Yes. Any seller, no matter where you are based, is eligible to participate in the sales tax amnesty if you have built up past sales tax liability. You can read more about dealing with FBA sales tax as an international seller here.

Q: What should I be wary of?

A: Before you elect to participate, there are some important thing to think about:

  • You are not eligible to participate in a state if a state has previously reached out to you about sales tax. If you’ve received a nexus questionnaire or other communication from the state, you are officially on their radar and not eligible to participate in the amnesty.
  • You are not eligible to participate if you have already registered to collect sales tax in a state.
  • You will be required to provide a good faith estimate of the last four years of back taxes that you owe to any state in which you’re applying for amnesty. Tread carefully here. While this is an “estimate,” Fleming warns that you should provide the most accurate estimate possible to avoid complications.

Q: Is there help out there?

A: If you have any questions about participating in the amnesty program, we recommend speaking with a sales tax expert like Peisner Johnson before you apply. (Here’s a list of other sales tax firms.)

Q: How do I know in which states I should register?

A: We recommend three steps to find out your sales tax liability:

  • Step 1: Determine where your business activity gives you nexus. Nexus is just a fancy way to say “significant connection” to a state. You can read more about the factors that create sales tax nexus for your business here.
  • Step 2: Get professional help. You can connect and share your transaction data with TaxJar, for instance. To determine how much in back taxes you owe (and help decide if you want to take advantage of the amnesty) connect your online shopping carts and marketplaces with TaxJar.
  • Step 3: Determine your potential sales tax liability in a state. Again, TaxJar is a potential solution. With TaxJar, you can view each state where you are not collecting sales tax on your TaxJar dashboard.

Q: How do I participate in the amnesty program?

A: You should fill out “Multistate Voluntary Disclosure” paperwork from the Multistate Tax Commission. They will then work with the states to help you obtain amnesty. Note: Only fill out the information the commission asks for. It will initially work with the state on your behalf, while you remain anonymous. Do not register with each individual state. The only way to participate in the amnesty to proceed through the Multistate Tax Commission.

Q: What happens if I don’t participate in the Amazon FBA sales tax amnesty?

That’s the million dollar question (maybe literally) and one we’ve been trying to get an answer to from the Multistate Tax Commission and various other sources. We suspect that in the worst case scenario, some or all of the above states will request sales tax nexus data from Amazon and then begin sending out requests for information, or even begin the audit process with some businesses.

Sales tax expert Fleming from Peisner Johnson said he expects most states to ramp up their sales tax collection efforts after the amnesty ends.

In the best case scenario, some states may not have the resources to pursue Amazon FBA sellers (at least for the time being), so they may be content with the new Amazon FBA sellers who register to collect and remit sales tax under this amnesty.

Q: Where can I find out more?

Please note: This blog is for informational purposes only. Be advised that sales tax rules and laws are subject to change at any time. For specific sales tax advice regarding your business, contact a sales tax expert.

Photo by Michael Allen Smith published under Creative Commons License.

Tax Amnesty and Other Steps to Help Merchants Tame Online Sales Tax Chaos

Pen, calculator: The tools of calculating online sales tax

This post was updated to reflect a vote on Oct. 12 that extended the deadline to apply for sales tax amnesty to Nov. 1.)

As if online retailers didn’t have enough to batten down before the holiday rush begins in earnest, tax specialists have one more thing for them to add to their lists before the madness begins: Conducting a thorough audit of their sales tax responsibilities and systems.

Talk about good times.

But like so much in life, sometimes it pays to just suck it up. Why now? First, two dozen states and Washington D.C. are offering e-commerce merchants a sales tax amnesty that could save some merchants thousands of dollars. The deadline to apply: Nov. 1. 

The amnesty is aimed at Fulfillment by Amazon merchants and other marketplace sellers. It’s structured slightly differently in different states and not all merchants are eligible, so look over the details carefully.

You’ll find a useful blog post, complete with webinar, on TaxJar’s website.

Reason No. 2 that dealing with this in October is a good idea? As Jennifer Dunn, chief of content at TaxJar, explains, there are certain things retailers just don’t want to deal with between Black Friday and Christmas Day.

“It gets crazy and you don’t want to have to deal with sales tax,” says Dunn, whose company automates sales tax tracking and filing for e-commerce businesses. “You want to be focusing solely on profit and not on administrative hassles that aren’t going to make you any money.”

When It Comes to Online Sales Tax: It’s Complicated

It’s a wonder that e-commerce merchants want to deal with sales taxes at any time of year. To say calculating how much tax to collect and pass on to various states is complicated is a little like saying the ceiling of the Sistine Chapel has a dope paint job.

“The biggest challenge is just that each state’s rules and laws are different and they were not made for e-commerce sellers,” Dunn says. “Most sales tax laws in the U.S. were created in the 1930s — a lot of them have not been updated to take e-commerce into account.”  

Unlike a brick-and-mortar store, which charges sales tax based on its physical location, e-commerce stores must collect sales tax based on the delivery address they ship to and whether they have a legal presence in that state, which is more complicated than simply where the company headquarters is located.

All that means that digital retailers live in a world where there are a mind-boggling number of different sales tax rates that they must charge their customers, depending on where their customers are.

What’s that, you say? There are only 50 states and not all of them charge sales tax, so how many rates could there possibly be?

A lot. Maybe more than anyone can count, because nobody seems to have an exact number. Dunn says Kansas alone has more than 1,000 tax jurisdictions, which is different from 1,000 different rates, but you get the idea.

In all, 45 states and Washington D.C. collect sales tax and 38 of those allow local sales taxes, which can mean taxes levied by counties, cities, school districts, sewer boards, transportation districts, library districts, health districts, mosquito control districts and on and on.

“You’re dealing with the government in kind of the worst possible way,” Dunn says.

Jennifer Dunn of TaxJar, who provided sales tax tips for online sellers

Jennifer Dunn, TaxJar

And yet, e-commerce retailers want to get their sales tax right — especially during the holiday period. Everything is magnified in the annual year-end stretch, when retailers can make 30 percent or more of their revenue.

Retailers who don’t collect the tax they should and are later audited and billed by some states could see their holiday windfall evaporate. Retailers who do collect sales tax that they shouldn’t could later face angry customers who were improperly charged for the goods they purchased.

Regarding the first problem, Dunn says states appear to be stepping up enforcement. Massachusetts, for instance, recently went to court to compel Amazon to turn over the names of marketplace sellers who are legally responsible for collecting sales tax in the state.

“It’s really only recently that this has been going on,” she says. “States, they’ve been behind, but they are catching on really fast — and states share information with each other.”

Dunn says that a sales tax consultant she talked to recently said that two years ago he received 15 calls about online sellers being audited. Last year, the number quadrupled, she said, to 60. And if history is a guide, states will get even tougher once the amnesty deadline passes.

Six Steps to More Sane Sales Tax Compliance

So, what to do? Dunn, in a webinar earlier this year, recommended that merchants review six crucial aspects of their sales tax responsibilities:

  1. Know your nexus: Find out what states you have legal presence in. That means the state out of which you run your business, sure. But a legal presence can also be established if you have a brick-and-mortar store in a state. You can have a nexus in a state if you have sales staff or employees in that state. You likely have a legal presence in a state if your inventory ends up in a warehouse in that state, even if you’re working with a third-party logistics firm or a service like Fulfillment by Amazon.
  2. Understand the taxability of your product: And understand that whether a product is subject to tax can be different from state to state or even depend on how that product is sold. Sometimes clothing and textbooks are not taxable; sometimes they are. A whole bagel in a bag is not taxable in New York, but if it’s sliced and served, it is. In California a printed book is taxable; an electronic book is not; over-the-counter pain medication is taxable; prescription pain medication is not; pine trees are; pear trees are not. You get the idea. And, oh yeah, states change the rules. Bottled water was once non-taxable in Washington state, Dunn explained, and then it was taxable.
  3. Find out your filing frequency: States have different cadences for filing sales taxes and sometimes the frequency is different depending on an online seller’s revenue. Some states are monthly, some quarterly, some bi-annually, some annually. Keep track of what needs to be filed where and when.
  4. Determine your filing deadline: Dunn says most states’ deadline is the 20th of the month. But, she says, other common days include the 15th, 25th, 23d and the final business day of the month.
  5. Track the tax rate in the states where you must file: More likely, “tax rates.” As we said, there are a gazillion different tax rates. Dunn says the total rate is basically the sum of state, local and other rates that apply to the address where an order was delivered. These rates, of course, change from time to time.
  6. Check your sales channels: Now that you’ve figured out where you need to collect, how your products are taxed, how often you need to file, when you need to file and what rates you’re expected to collect and pay, you need to make sure you apply all that information to all your sales channels. Maybe you sell on your own site and eBay and Amazon and Etsy or some combination. Make sure you’re collecting sales tax from all the sales on all your channels.

If you’re a merchant heading into the holiday season, those six steps should keep you in line and out of trouble. After all, how hard could it be?

Photo of Jennifer Dunn courtesy of TaxJar. Pen and calculator photo by iStock.

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

 

 

 

How Fulfillment Builds a Better Customer Experience

boxes on conveyor at e-commerce fulfillment center

By Mike Cassidy

Bowen Smith is in the business of delivering the goods — literally.

As a senior vice president at PFC fulfillment, Smith is among those who work to get the growing number of e-commerce orders to their intended customers. It’s one of those behind-the-scenes jobs that you don’t hear much about unless something is going wrong.

Much of the buzz around e-commerce focuses on marketing and merchandising, using rapidly evolving technology to get the right product in front of the right customer at the right time.

But the work of Iowa-based PFC — taking orders, packing products and getting them to the right place quickly — has been undergoing a technological transformation as dramatic as the one that is reimagining the front end of e-commerce that most consumers are much more familiar with.

Talking with Smith, which I did recently at Shop.org 2017, is a reminder of how involved the process of buying online is. While there is little doubt that the advances in personalization, site search and behavioral analytics has been a key to e-commerce’s growing prominence, they represent only the start of creating a memorable customer experience.

When a consumer hits the buy button, it triggers an intricate chain of events that moves money, assesses the potential for fraud, locates inventory and sees to it that the right product gets to the right customer.

When any part of that chain breaks, or if any of the processes that the chain represents are slowed down, customers become frustrated and less likely to visit that particular e-commerce retailer again — no matter who was at fault.

More and more, merchants are realizing that building a great customer experience requires paying as much attention to the back end of e-commerce as they do to the front-end efforts to attract customers to their sites and products in the first place.

Arik Levy, CEO of Luxer One, who was also at Shop.org in Los Angeles, has noticed the same trend that Smith talked to me about.

“Retailers are spending millions and millions of dollars on improving their e-commerce websites and that experience — ‘how  do we do retargeting and customize the experience? And how do we make the online experience fantastic?’” said Levy, whose Sacramento, Calif., company provides public-access package lockers for e-commerce deliveries.

But they often lose focus “when it comes to actually getting the package into the consumer’s hands,” he added.

Forward-thinking merchants are turning to technology to help them speed up and scale up their operations at a time when consumers’ expectations are rising and online competition from the likes of Amazon, Walmart and innovative online pure plays is increasing.

Bowen Smith and many of PFC’s competitors understand that they need to evolve quickly to keep pace with customers’ increasingly high standards. And many are turning to machine learning and other technology tools to help them keep up.

For those merchants, more than most, every day is a race against time.

Photo: iStock

Mike Cassidy is Signifyd’s storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

IKEA’s Purchase of TaskRabbit Points to Expanded Understanding of Customer Experience

IKEA store

By Mike Cassidy

If you’ve ever put together a piece of IKEA furniture, you don’t need to read one speck of analysis to understand why the Swedish retail giant went after gig-economy startupTaskRabbit.

It’s a match made in Arkelstorp heaven: A way for customers to order a moderately priced piece of furniture without having to sacrifice a weekend to assemble it. But the deal has a grander meaning in the world of retail.

Retailers are embracing the notion that the vaunted e-commerce “customer experience” extends well beyond the marketing and merchandising that spurs a consumer to buy a product. In the digital world there has been a tremendous focus for years on embracing new technology to improve things like personalization, product rankings and site-search performance.

In the years to come, that focus will expand well beyond the functions that inspire a customer to click the buy button. Artificial Intelligence and machine learning will take a bigger role in payments, fraud protection, shipping, delivery and post-purchase customer support. That post-purchase love will even extend to the sort of support that sends Allen-wrench-wielding workers to your house to put together your Hasselvika bed frame — making it a Hassel-free experience.

At this week’s Shop.org, an annual gathering of e-commerce professionals, a gaggle of vendors were selling the vision of further injecting artificial intelligence and machine learning into the backend of e-commerce. After all, what good is it to provide an elegant customer experience leading up to an online sale only to screw up on getting the product to your customer on time?

“I think one of the themes of this is going to be so much more than product recommendations and search optimization. We’re going to see machine learning impact retail from end-to-end and across channels,” Dave Barrowman, vice president, innovation at Skava, said during a presentation on the role of machine learning in retail.

TaskRabbit’s Human Help Comes With a Helping of Machine

Adding services, like having a handy person show up to help you make your purchase worthwhile, just makes sense. And while there is no denying the service is very much human based, that doesn’t mean it doesn’t come with a strong helping of machine.

Think of TaskRabbit and other gig services as the Uber for getting stuff done. In fact, TaskRabbit uses algorithms to match workers with the work that someone wants accomplished. And so, last week’s deal is just another example of retail embracing technology to keep up with consumers’ expectations for e-commerce customer service.

Shop.org 2017 featured an area called the Tech Lab, where a couple of dozen startups seeking to disrupt retail with technology pitched their products. Among them was Handy, a matching platform that, you guessed it, for a fee sends workers to your house to do the things you can’t or don’t want to.

Handy has partnered with retailers, including online home furnishing and accessory giant Wayfair, to send people to your house to build the stuff that looked so good online, but looks a touch intimidating in a big brown box.

Alex Levin, vice president of expansion and partnerships with Handy, told me that such post-purchase services were fast becoming a must-have for retailers who want to compete in 2017.

“Amazon is pushing the way, as usual,” Levin said. “Now they’re offering installation and assembly. Retailers who don’t offer installation and assembly are going to be left behind.”

And he explained how the technology and strategy behind Handy can help preserve an online merchant’s profit margin by making the back-end e-commerce customer experience better.

Handy was among the vendors in Shop.org 2017's Tech Lab

Handy CEO Oisin Hanrahan talks about his company at Shop.org 2017.

 

Sure, he said, Wayfair (a Signifyd customer) has seen an increase in sales with Handy. That’s front-end stuff. But Wayfair has also seen a reduction in returns, he said. Given that returns are a major margin-killer for online retailers, with as much as 30 percent of orders coming back to the warehouse, minimizing returns is no small matter.

“What happens is, once the customer actually gets the product, it will sit there in a box,” Levin says.

IKEA is Reducing the Chance Customers Will Regret Their Furniture Purchases

Having furniture sit in a box gives a customer time to second-guess, to forget why he or she thought that couch would look so good along the living room wall in the first place. Having a piece of furniture built and ready to curl up on within hours of its arrival causes stickiness. Once something is part of your home, it becomes harder to part with it.

The IKEA/TaskRabbit deal comes with questions. The price of the deal hasn’t been announced, for starters. And IKEA hasn’t explained exactly how TaskRabbit will be integrated into the retailer’s business. Nor has anyone talked publicly about what the service will cost the buyer — either in fees or higher prices.

But the benefit seems clear — for retailers the potential for higher conversion rates and lower return rates. And for customers? The ability to get their Saturdays back.

Or in other words, a better customer experience that lasts well after the a consumer has clicked the buy button.

This post originally appeared on HuffPost. 

Photo of IKEA by iStock. Photo of Handy booth courtesy of the National Retail Federation.

Mike Cassidy is Signifyd’s lead storyteller and a contributor at HuffPost. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

Machine Learning Will Revolutionize E-commerce — End to End

Dave Barrowman of Skava talks about machine learning at Shop.org

by Mike Cassidy

It’s hard to talk to any retailer for more than four or five minutes without the phrase “customer experience” coming up.

And why not? Building great experiences for customers is not only how you get them to buy what you’re selling, it’s how you get them to come back again and again and buy some more. It’s why so many businesses pitching their products at Shop.org this week are promoting tools that provide personalization, better search, merchandising insights and new ways of shopping online.

It’s a great conversation to have — the one about how to turn to technology to do better marketing and merchandising. But it doesn’t go nearly far enough.

In fact, the curious thing about the customer-experience conversation happening at the annual gathering of e-commerce professionals is that it tends to stop at the point that the customer hits the “buy” button.

Think about all that happens after a customer converts on the web — payments, fraud detection, picking and packing, delivery, post-purchase customer support. And then think about what a lousy customer experience it is when any one of those steps breaks down.

Bowen Smith, who was manning his company’s booth Wednesday, says retailers spend all kinds of time and money trying to perfect the front-end of the customer experience — marketing and merchandising. But that’s just a start.

“It all gets down to getting the right item in the right box, processing the return as quickly as possible, having adequate inventory levels,” says Smith, a vice president with Promotion Fulfillment Center, a third-party logistics company.

None of which is to say that the discussion about the back-end of the customer experience and the technology tools to improve it was completely absent from Shop.org 2017. In the middle of the exhibit hall, Dave Barrowman, vice president, innovation for Skava, stood on a stage Wednesday morning and talked about how the discussion of machine learning in e-commerce had been too limited.

“In retail, a lot of it has been around product recommendations,” said Barrowman, who was a Netscape employee in its heyday and earned his retail chops at the Gap. “I think one of the themes of this is going to be so much more than product recommendations and search optimization. We’re going to see machine learning impact retail from end-to-end and across channels.”  

He pointed to no less an e-commerce expert than Jeff Bezos, who more than a year ago talked to Amazon shareholders about the importance of not limiting machine learning innovation to marketing and merchandising and instead setting it loose on back-end operations.

“At Amazon, we’ve been engaged in the practical application of machine learning for many years now. Some of this work is highly visible: our autonomous Prime Air delivery drones; the Amazon Go convenience store that uses machine vision to eliminate checkout lines; and Alexa, our cloud-based AI assistant,” Bezos wrote in his 2016 letter to shareholders.

“But much of what we do with machine learning happens beneath the surface. Machine learning drives our algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more. Though less visible, much of the impact of machine learning will be of this type – quietly but meaningfully improving core operations.”

Barrowman’s vision includes expanded machine learning technology on commerce sites and in brick and mortar stores. But it also counts on a number of machine-learning driven initiatives to improve back-end operations — including work on reducing returns and improving operations in customer call centers to benefit retailers and their customers. He’s hardly talking science fiction and some of what he talked about is being done, just not to the extent that it soon will be.

When it comes to returns, Barrowman said, data can be used to predict when an item is likely to be returned as soon as it’s ordered. With that knowledge, a merchant could recommend that a shopper go to a physical store to try the items on. Or it could offer a discount for final sales. Or it could send a return-prone shopper to product comparison pages, so he or she could get a better idea of what features and characteristics he or she actually wanted.

Call centers will also continue to deploy machine learning to answer consumers’ questions and direct them to information they desire. The machines will team with humans to increase customer satisfaction and therefore loyalty.

“You can bring natural language processing and chatbots forward to take a load off the call center agents, so they can focus on what requires human-to-human interaction,” Barrowman said.

Or consider the possibility of a smart machine following along in a conversation between a customer and an agent, he said. The machine would be able to point the agent to prompts and information that would help him or her help the retailer’s customer.

Yes, the phrase “customer experience” is used enough to elicit eye rolls from time to time. But the concept comes up repeatedly for a reason. Keeping customers happy is the key to customer loyalty and lifetime value.

And after three days at Shop.org, it’s hard not to conclude that embracing the right machine learning is a big step down the path to making that customer happiness happen.

Photo by Mike Cassidy

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

E-commerce innovation is the path to success

Walmart's Marc Lore interviewed by Fortune's Andrew Nusca

By Mike Cassidy

Given that Marc Lore works for one of the biggest companies in the world, his advice for those crowded into a meeting hall at Shop.org sounded a little strange: act like a small, nimble company no matter how large and unweildly you might become.

Lore was speaking during a session called “Act Like a Startup no Matter Your Size,” a message that has been trotted out enough that it could begin to sound a bit like a throw-away line. But from the exhibit hall at the annual gathering of e-commerce professionals, to the sessions featuring e-commerce leaders, to the hallways of the Los Angeles Convention Center, the wisdom of acting like a startup was evident.

The idea is to stay nimble and focused on the future in a world that is constantly changing — and there is no doubt that the e-commerce world is constantly changing, driven by the rapid evolution of technology and the increasing demands of consumers accustomed to life with Amazon.

Lore, CEO of Walmart E-commerce, acknowledged that it’s not easy to remain nimble, particularly when you’re a $486-billion company with 2.3 million sales associates. But the problem of becoming lethargic and resistant to change can plague any size e-commerce operation. Lore says building an atmosphere that inspires creativity is key.

Risk Taking Can Fuel E-commerce Success

“If you give people information and you trust them and empower them and let them run and let them know that they’re going to be rewarded for taking risks, that’s the kind of environment you need to create,” Lore told the roomful of retail professionals.  

In talking to others at the show, it became apparent that another key element in keeping up with e-commerce’s transformation is the willingness to seek out technology that provides a competitive edge or at least keeps your organization in the game.

It is the cost of doing business in a time when consumers have come to expect so much, given how much technology is able to provide — personalized recommendation, one-click ordering, two-day delivery, pinpoint package tracking, customer service by phone, email, text or bot.

Doug Rappoport, vice president of Visa Commerce Solutions, hosted a morning tour of the Tech Lab at Shop.org, an area where two dozen companies were showing off technological solutions for retail challenges. He acknowledged that retailers have a lot to handle in a very competitive business, even without launching programs based on cutting-edge innovation.

“I think what’s important is finding the right partner,” he said, adding that there is no reason for a retailer to become an expert in every technology it deploys.

“A retailer might not be an expert on (virtual reality). They might not be an expert on payment,” he said. “And they shouldn’t have to be.”  

The same could be said for payments, fraud prevention, fulfillment, customer support and other aspects of the business that become vital pillars of the customer experience once a consumer has clicked on the buy button and ordered.

Brian Beck a retail consultant with Guidance said Tuesday that there is no doubt that the marketing and merchandising efforts and tools that encourage consumers to click or tap on “buy” are critical to success. But what happens after that purchase is equally important, he said.

“If you look at Amazon, they are a monster. And they’re a monster for a reason,” Beck said. “They do a great job with personalizing the experience, meeting and beating the expectations across the entire customer experience, including post purchase.”

How to Decide Which Tech Solutions to Deploy

The tricky part for merchants, of course, is figuring out what technologies will actually help them succeed and which partners they should turn to help them automate and innovate.

“There is such a wide variety of technology available for businesses of all sizes. I think they really have to do their homework,” said Joe Beninato, founder of Banter, a natural language processing chatbot system for retail.

Part of that homework, he said, is to ask trusted partners for recommendations, while realizing that sometimes if you want to get ahead of the curve, there will be experimentation involved.

“So finding a company that is nimble and can help support them throughout, is important as well,” Beninato said.

As for what technologies to embrace? Walmart’s Lore had some advice there, too. He said most of what he’d been seeing and reading about was viable technology. Yes, he added, some of it is closer to being ready for prime time than others. It’s really a matter of determining what technology will be useful in the near term and lining that up with the needs of your operation.

Oh, and Lore didn’t say it, he didn’t have to: Be prepared to move in another direction if the technology answer you decided on didn’t turn out to be what you thought it would be.

Photo of Marc Lore and Fortune’s Andrew Nusca courtesy of the National Retail Federation.

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

 

Shop.org focuses on artificial intelligence in e-commerce

Shop.org sign in Los Angeles

By Mike Cassidy

Like any big trade show, the annual celebration of digital retail that is Shop.org is a chance for industry professionals to scout out the competition, learn new ways of doing business, size up possible partners and vendors and do a little networking should the need for a new job arise.

But the gathering of the e-commerce tribe is also an opportunity to pause and ponder not only how much the rapidly changing world of digital commerce has changed in a year, but also to envision where it is heading.

In that regard, you could argue that Shop.org 2017, kicking off today in Los Angeles, is a sign that e-commerce has matured to the point that executing on consumers’ high expectations has become an end-to-end project for every retailer selling online.

The National Retail Federation officials who are organizing the show have obviously kept a close eye on how retail is shifting and plan to address that this week.

“We’ve worked diligently to cultivate an event lineup that reflects the spirit of innovation and reinvention the digital retail industry is experiencing,” NRF Senior Vice President for Conferences Susan Newman said in a news release.

Customer expectations are driving e-commerce innovation

Consumers have been driving the e-commerce bus for some time. Living in a world of Amazon, customers expect to be able to buy whatever they want whenever they want and to have it delivered, like yesterday. More than that, they expect retailers to know them; to know what products they’re interested in and to know that shopping doesn’t happen on one channel; it happens on all channels — mobile desktop and even in a store.

Retailers, analysts, vendors and the media have paid a lot of attention to how marketing and merchandising shape the customer experience. But e-commerce operators understand that the back end of e-commerce — orders, payments, fraud prevention, fulfillment, post-purchase customer service etc. — plays every bit as important a role.

After all, getting a customer to click “buy,” is only the beginning. Retailers then need to be able to accept all manner of payment, instantly verify that the order is not fraudulent, route the order to the right warehouse and pick and pack the order quickly. Then, on to the customer’s home and perhaps on to interacting with customers who have questions or want additional items or what to return what they purchased.

All that needs to get done without slowing the order down. Not surprisingly, part of the answer is technology. The words “artificial intelligence,” “machine learning” and “automation” will be ringing through meeting rooms at the Los Angeles Convention Center as more than 2,500 e-commerce professionals meet.

And while Shop.org 2017 will still focus on marketing and merchandising, a number of sessions and exhibitors will be featuring technology that seeks to improve back-end operations.

“That all is very important,” retail consultant Brian Beck, of Guidance, recently said of automating and optimizing e-commerce’s back-end operations. “It’s tied to the same kind of trends that you see in e-commerce front-end marketing. And it has a lot to do with Amazon again setting the bar for everyone. I think as you look at customer expectations, they continue to go up. Everyone expects an Amazon or better experience. And one of their competitive advantages is operational efficiency and distribution. It’s all about the customer for them and meeting that expectation. Operations is a huge part of that.”

Technology is revolutionizing e-commerce operations

And technology is a huge part of revolutionizing operations. To that end, Shop.org for the first time will feature a Technology Lab consisting of companies that are working on every aspect of the customer experience. The conference has also teamed with Fast Company and its journalists to conduct on-stage interviews, a sign that the conference will focus on forward-looking content.

Hearing about what is possible and what is coming will no doubt inspire many of those who have made the trip to Los Angeles to add to their knowledge and skills. But there is still plenty of work to do. E-commerce professionals have to pick through virtually thousands of technology tools and solutions and figure out which ones make sense — and what is the right time to unleash them.

But that is as it should be. No matter how far technology can take e-commerce, the fact remains that retail is about people buying products from people. The human element will always be key.

A version of this post originally appeared on HuffPost.

Photo by Mike Cassidy.

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com. Follow him on Twitter at @mikecassidy.

E-commerce Returns: Transforming Pain Into Opportunity

UPS truck picking up e-commerce returns

By Mike Cassidy

Guillaume Racine seems perfectly sane in every respect.

But you could understand if the typical online retailer would start to have doubts when Racine begins talking about how returned orders present tremendous opportunity for e-commerce businesses.

After all, as we noted earlier, the cost of returns is a major challenge for retailers facing thin margins and counting every sale as a small victory. Consider, for instance, that returns from online clothes purchases alone reach billions of dollars a year and estimates of overall returns range as high as 30 percent of all online orders.

Each return represents not only a lost sale, but often also includes the cost of shipping the product back to the retailer and whatever work has to be done to prepare the returned goods for resale.

Racine, the co-founder of recently launched Return Magic, sees returns in a whole different light. Yes, there are costs involved. And yes, thanks to Amazon’s free return policy, no-cost returns are what consumers expect.

But rather than thinking of returns as a cost, he says, retailers should think of the cost of returns as an investment.

“Returns are an opportunity more than a problem,” says Racine, who before Return Magic worked at Amazon and a UK-based firm that worked to reduce cart abandonment. “There are definitely a few things that retailers can do to really make the most of it. They can really offer an engaging customer experience without having to spend a lot more money, necessarily.”

There is research to back Racine’s thinking. A University of California, Berkeley, study said that 90 percent of customers will shop again where they’ve had a positive return experience. Furthermore, the study says those who have good return experiences spend significantly more on return trips than other customers.

A 2015 study in the Journal of Marketing Research found that when digital customers who return products are targeted as potential long-term customers, they become more likely to buy. The reason: They know they won’t get stuck with products they don’t want. In fact, customers who were creatively marketed to, spent nearly 50 percent more over six months than customers on the receiving end of traditional marketing efforts, a Science Daily summary of the research said.

Return orders don’t have to drag down profits

A survey by Narvar, a post-purchase solutions company, also found opportunities in returns. Like UC-Berkeley, Narvar concluded that 95 percent of customers who have a good return experience say they will shop with that merchant again.

Narvar also found that more than half of consumers replaced the returned item. The trick, of course, is to get them to replace the item with a purchase from you. As it is now, Narvar reported, of the 57 percent who replace a returned item, about 40 percent buy the replacement from the original retailer.

Evan Fript, co-founder and CEO of Paul Evans, an online seller of high-quality, hand-crafted men’s shoes, understood the value of a generous return policy from the beginning. The e-commerce retailer gives customers 365 days to decide on a pair of shoes.

The policy, Fript said in an email interview, reduces the number of returns and builds a higher customer lifetime value.

“The longer a customer has a product in their possession, the more committed they become to keeping it,” Fript said. “So, by offering a 365-day return policy, I am increasing the likelihood a customer keeps the shoes. if merchants require 14- or 30-day returns, then the customer only has so much time to test out the product. With a full year to evaluate my shoes, there’s no rush.”

Paul Evans, which is a Signifyd customer, actually encourages shoppers to order multiple styles, sizes and colors and return the ones that they don’t want to keep. The store sees about a 30 percent return rate, Fript says, which is typical among apparel retailers.

But, he added, because the store doesn’t offer straight exchanges, about half those customers purchase another pair of shoes to replace the returned pair.

“The idea is convenience and the ability to view the shoes with a multitude of outfits,” Fript said.

Return Magic's Guillaume Racine

Return Magic’s Guillaume Racine

Beyond building customer loyalty and value, Racine says returns provide rich merchandising and marketing opportunities. Merchants should pay attention to what items are being returned, he advises. Do patterns emerge around style, size, color or the product itself that’s being returned? Consider using rich return data with machine learning to spot merchandising trends at scale.

For instance, it could be that certain items have fallen out of favor with consumers or don’t appeal to a certain demographic or region. Or maybe gray is the new black and returns show it, given the frequency with which black apparel comes back.

And then there is the marketing potential of returns. Racine says returns are an untapped marketing channel.

When customers return an item online, they go back to the website and go through the checkout process in reverse, he says. So, if someone who bought two shirts is returning one, the merchant knows that shopper is keeping one of the shirts. Why not nudge them to buy more?

“You have that real estate to use that recommendation engine and say, ‘With that shirt you might want this hat.’ You can upsell and cross sell, either directly on the site or by email.”

Racine adds that if you include a recommendation in an email containing information about a customer’s return, you can be pretty sure that customer is going to open the email.

Consumers are calling the shots when it comes to returns

As with so much in retail, consumers are driving the trends in returns.

When it comes to consumers, e-commerce return policies are hardly an afterthought. The Business-2-Community blog says 67 percent of consumers read an e-tailer’s return policy before making a purchase. And 74 percent of those surveyed by Narvar, a post-purchase solution company, said they would not buy from a merchant who charges for returns.

And, of course, there is the Amazon effect. The company known for offering free, two-day shipping through Prime, also provides free returns. The result: 47 percent of consumers surveyed by Narvar said they’d returned an item to Amazon. And 75 percent of Narvar’s respondents said they were satisfied with their Amazon return experience.

So, what’s an online retailer to do? Racine, who helped found Return Magic, has given this some thought. He and co-founder Raff Paquin decided to take a data-centric approach to making returns easier for consumers and more of an opportunity for merchants. The API-based platform provides the kind of data that retailers can use to understand the overall cost of returns, the value of inventory in transit, the top reasons for returns and the products that are most likely to be returned because they were damaged in transit, for instance.

He says that in order to transform returns from a cost to a value, merchants need to:

Be deliberate. Returns are not an afterthought for your customers and they shouldn’t be an afterthought for you. Be bold, Racine says. Advertise your return policy prominently on your website and mobile sites.

“Even if you don’t want to offer free returns,” he says, “you can still advertise ‘Easy Returns.’”

And stand by that “easy” claim.

“If you’re trying to create friction and create additional steps or a really restrictive policy, customers know what they can expect,” Racine says. “And if you’re not easily willing to engage positively with the customer, it’s a very, very fast way to lose customers forever, really.”

Give customers options when it comes to returning items. Sure, they can box the item up and send it back. And, yes, returning in store is a good option. But why not create drop off points, say at neighborhood convenience stores or at Amazon locker-type facilities? Or how about offering a courier service, like Uber Rush, that will come pick up a return at a customer’s door, Racine suggests.  

Be flexible when it comes to the form of refund given for a return. Crediting a credit card is probably the least valuable option for a merchant. The sale is lost. The revenue is gone. Offering only store credit is probably the least satisfying for your customer. They feel backed into a corner. Now they resent you.

Why not offer either a credit card reimbursement or a store credit for future purchase? Racine says in such cases, it’s fine to add a financial incentive for customers to choose the store credit. Offer free returns for store credit, for instance, while charging a few dollars for a cash refund.

Segment, segment, segment. When it comes to returns, not all customers, products or reasons for sending something back are created equal, Racine says

You might offer free returns for damaged goods, but levy a charge for customers returning because of style or color preference. You might offer free returns to a “highly engaged, loyal, frequent customer,” while charging for returns from “someone who’s a first-time buyer, buying at a 50 percent discount.”

And, you might tell a customer to just keep a product that will cost more to return than it is worth, while you would never do that with an expensive product. Think of it as the RORI — return on return investment.

U.S. customers returning goods to a U.S. location is one thing. International customers returning products back to the United States is a whole other thing. Consider providing free return shipping within the United States while asking international customers to pay the return freight, which is undoubtedly higher than a shipment entirely within the United States.

Maybe you have serial returners — customers who very frequently return items. You might want to consider a disincentive, such as charging for shipping, once a customer has returned items from five orders or 10 orders or some other number.

Racine’s advice has two main goals: To make returns easy for consumers (“frictionless” is the word the industry likes) and to protect retailers’ margins.  

By being thoughtful about returns, Racine says, “you protect your profit and you know where to invest.”

In other words, look at returns as you would any other part of your business. If you look at them that way, you’ll soon begin to see them not as a necessary evil, but as a potential profit center.

How do you view returns: As a pain in the neck or as an opportunity to build customer loyalty? Let us know in the comments section below.

Photo of Guillaume Racine courtesy of Guillaume Racine. Photo of UPS truck by Mike Cassidy.

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

 

Five Supply Chain Management Tips to Weather the Amazon Effect

e-commerce packages at a resident's door

There are few corners of life — and certainly few corners of e-commerce life — that have not been upended by Amazon and it’s omnipresence.

For those running retail supply chains, the rise of Amazon means that, more than ever, a shipment’s final destination isn’t a store’s back dock, but a customer’s front door.

It’s a big change and a big challenge. And if retailers want to keep up with Amazon and customers’ expectations, they need to move away from old-school supply chain tactics to tactics made for what Tom Kretschmer calls “the Now Economy.”

Kretschmer, a vice president overseeing retail at Ryder Systems Inc., spoke recently during “The Amazon Effect and Your Supply Chain,” a webinar moderated by Bob Trebilcock, editorial director of Supply Chain Management Review. The discussion focused on the rapid transformation of the supply chain field, given the way Amazon has empowered consumers and raised expectations. It also included a few ideas about how those not named Amazon might compete. We’ll get to those in a minute.

“It’s the Now Economy,” Kretschmer explained. “And it’s driven largely by the Amazon Effect. Our complexity in the supply-chain business has skyrocketed exponentially. To keep pace with the Amazon Effect, supply chain folks and managers are forced to change strategies so they don’t lose loyal customers.”

Much has been written about the crushing pressure that Amazon is exerting on competing merchandisers, marketers, executives and brick-and-mortar stores themselves. But the behemoth from Seattle is also turning the world of fulfillment upside down.

Instead of delivering from point A to point B, retail supply chain operations now must deliver from point A to points B, C, D, E, F and on and on, with each point now a home address.

“Now, shipments are smaller and more frequent,” Kretschmer said. “In order to fulfill customer demand and keep up with the Amazon Effect. Everyone at every stage of the supply chain is trying to keep up.”

5 tips for keeping up with Amazon fulfillment

 

The Amazon Effect drives consumer expectations

A quick review: Amazon with its mountains of data, years of e-commerce experience and beyond-vast inventory has changed everything about retail. Amazon dictates consumers’ expectations.

“They want the order now. They want it at the doorstep when they want it. It’s got to be perfect. The expectation is on time and in full.”

No doubt Amazon has radically recast consumer culture. 

“The way we shop now is around how fast our fingertips can press the checkout button,” Kretschmer said. 

And there is mobile commerce, the Internet of Things and Alexa, which (who?) is literally at our beck and call.

But the way consumers think about shopping also has changed dramatically. No longer do those doing the selling have all the information. No longer do they dole it out as it suits their needs. The internet has opened up shopping to transparency.

Now that every human comes with a smartphone attached, comparison shopping is much more common. But, Kretschmer said, “people are not just comparison shopping on cost. They are shopping on service — how quickly can I get my new washing machine to my house?”

So, no pressure.

“We’ve gone from seven-to-10 days delivery, to two hours,’’ Kretschmer said.

Or maybe we’ve gone from seven-to-10 days to 39 minutes, as demonstrated by this YouTube video that Amazon Prime Now executive Stephenie Landry showed at Shoptalk last year.

Retailers’ best bet in the face of Amazon, Kretschmer said, is to embrace innovation — and not just in a gauzy, mission-statement kind of way. Retailers need to be investing in the future.

“Amazon is constantly driving changes in the way products are delivered,” he said. “They simply have a relentless pursuit of innovation. Companies that will succeed are companies that will mirror that relentless pursuit of innovation.”

Without saying so directly, Kretschmer said retailers need to act like a Silicon Valley startup: They need to invest and embrace innovation, he said. They need to iterate, fail fast and analyze the data to see what works and what doesn’t.

“We’ve got to get to test, learn and scale, quick — quicker now than we ever have before.”

Kretschmer said digital retailers are hungry for technical solutions that can help them anticipate changes and needs in their supply chains.

“Rapid technological advances are occurring in data analytics, predictive, prescriptive, mobility, APIs, cloud computing,” he said.”

Automation is working across e-commerce operations

And why not? Digital retail has been bulking up on automation and data-driven strategies. Retailers want to know what’s going to happen before something happens. The desire is stretched across the retail operation, from wanting to know what brand of shirt that customer wants to buy, to knowing which summer dress should be placed in the top position on a web page, to knowing where incoming inventory is and when it will arrive, to knowing whether an order was placed by a legitimate customer or someone scamming the system, to knowing when an order will arrive at a home.

Leading retailers have turned to machines to tackle the need to know on a scale that can’t be maintained by humans.

“I think we’re reaching an inflection point with robots and artificial intelligence and the shared economy,” Kretschmer said.

There is no slowing down. If you think digital retail and the way consumers shop has transformed radically in the last decade or so, wait until you see what is coming. 3D printing could usher in an era where consumers not only order from home, but actually manufacture at home the products they’re buying.

“Of course,” Kretschmer cracked, “you’d have to order the material cartridge from Amazon.”

Robots, as you know, are here and Kretschmer said Amazon is running away from the pack in terms of using them in fulfillment. And drones? Well, regular drone deliveries might seem a ways off, but Amazon is famously on it.

“I can’t see a love seat flying over my house, or a refrigerator anytime soon,” he said.

But smaller deliveries might be here before we know it. And if anybody does figure out how to fly a fridge to you, it’s likely to be Amazon.

“Given what they’ve done,” Kretschmer said, “I wouldn’t put anything past them.”

No doubt the pace of change in supply chain and retail in general will continue to accelerate, pushed along in large part by Amazon. It’s a fact of retail life and a reason for competitors to constantly raise their game.

Photo by iStock.

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

Embracing Machine Learning and the Future of E-commerce

Server room with a technician checking things out

The truth is you can’t go through a day without hearing another twist on the wonders of artificial intelligence and machine learning in the world of e-commerce.

AI is B-I-G — whether it’s self-driving cars, playing Go, diagnosing disease or writing news stories.

In fact, the machine learning and AI buzz around e-commerce has been so pervasive for so long that it sometimes feels like we’ve been talking about this forever. But it’s helpful at times to slow down and consider not only how far we’ve come, but how far we have to go when it comes to automating digital commerce.

Let’s start by separating the hype from reality with the help of an AI expert who’s seen this happen before (in the digital advertising field).

Long-Ji Lin is Signifyd’s chief scientist and a guy who thinks about machine learning a lot. He holds a doctorate in computer science and artificial intelligence and has been working in the field for years. He’s a big believer in the power of machine learning to augment human intelligence and, naturally, he’s especially bullish on the technology’s ability to improve fraud prevention.

Think of the problem: many millions of online orders flooding into merchants daily. Fraudsters lurking, constantly upping their game in an attempt to beat the barriers to fraud that merchants erect. And so how do you comb through the orders and determine which are legitimate and which are fraudulent?

“There are so many people out there trying to cheat,” Lin says of the fraudsters who prey on e-commerce merchants. “It’s not feasible to hire a lot of humans to review orders and make decisions. It’s just too much work.”

And so humans devise the models that can spot trouble. They teach the machines to do the big, repetitive tasks and then work alongside them. The machine issues a thumbs up or thumbs down on the overwhelming majority of orders. The trickier cases are referred to a fraud analyst who can turn to human instinct, experience, reasoning and research to make a decision.

Machine learning is our friend, really

Of course Lin is familiar with the school of thought that the rise of the machines will one day be detrimental to the human race. Elon Musk is a well-known machine-learning worrier and MIT physicist Max Tegmark is out with a compelling book, “Life 3.0,” which envisions a world in which machines do not play nice.

“Think drones the size of bumblebees that could be programmed to kill certain people, or certain categories of people, by grabbing their skulls with tiny metal talons and drilling into their heads,” is the way a Wall Street Journal review of the book describes Tegmark’s machine-crazy future.

Of course, machine learning and artificial intelligence haven’t achieved anything close to the kind of sophistication to create such a nightmare scenario. We’ll take that as good news.

Even a less dystopian view — a time when machines in a sophisticated way teach machines to get better at what they do — is a ways off, Lin says.

“We still have challenges teaching machines, let alone teaching machines to teach machines,”  he says.

Machine learning today isn’t about the scary rise of the machines that tech luminaries like Musk worry about. Machine learning today is a way of scaling a business. It’s a way for digital retailers to increase revenue while providing a better shopping experience for their customers.

Increase revenue and better the shopping experience how, you ask?

Consider fraud protection, just one slice of the machine-learning revolution as it relates to e-commerce and one that Signifyd is particularly interested in. How can a human-powered or a rules-based system keep up with fraudsters who are constantly changing and improving their tactics and techniques? How can merchants using traditional systems keep up with rapid growth in orders — the kind of growth that’s good for business, as long as the orders are legitimate.

A well-crafted, machine-learning-based fraud prevention system allows a business to scale. It dramatically reduces the number of orders that need to be manually reviewed, while also dramatically reducing the number of orders that are incorrectly declined for fear of fraud.

Fewer declined orders and real-time decisions on whether to ship mean fewer disappointed and frustrated customers wondering why their stuff never came or took so long to arrive.

And yet, the proliferation of machine learning technologies in a broad swath of industries is relatively new. As always, change requires new thinking. But it’s fair to say that among the leading themes in retail today is the need to embrace innovation, to behave like a startup, to be willing to try, fail and iterate.

Fraud prevention has turned to machine learning

Even big consultancies are paying increasing attention to machine learning’s role in fraud prevention. Forrester in its June 2017 “The Total Economic Impact of Guaranteed Fraud Protection,” a commissioned study conducted by Forrester Consulting on behalf of Signifyd, looked at how machine learning, paired with a financial guarantee for approved orders, can bulk up a retailer’s bottom line.

Others have suggested that such systems can run in parallel with legacy rules-based systems to help merchants handle seasonal spikes, such as the holiday shopping season. And they’ve noted that running the machine-learning models in parallel provides an opportunity to test the efficacy of the cutting-edge tools.

Consultants have noted the huge buzz around machine learning and warned retailers to carefully evaluate the alternatives, making sure vendors can explain exactly what they mean by machine learning. And then, of course, comes the work of determining whether their technology is worthy of the phrase.

“All these companies are saying they have AI,” Lin says. “But some have real AI. Some have fake AI.”

His advice? Remember that the quality of a machine learning technology comes down to the quality of the algorithms and the quality of the data. Bigger companies have more data. More data means more revenue. More revenue means better talent and better algorithms.

And of course, the companies selling AI have a track record and a list of customers. Learn what you can from them.

And after all that, if you’re still uncertain, just ask the nearest smart machine.

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

 

Tips for Expanding Your E-commerce Business Globally

Air cargo for global e-commerce

By Mike Cassidy

There is a reason that international markets remain a vast untapped opportunity for U.S.-based e-commerce merchants to increase sales: Selling internationally is really, really hard.

Probably not what you wanted to hear. But wait, as they say, there’s more.

When it comes to selling globally, you don’t have to go it alone. In fact, the work behind expanding into international markets has been getting a lot of attention lately — first at a recent panel discussion in Seattle and more recently in a webinar presented by Signifyd and ThreatMetrix, two firms that protect e-commerce businesses from fraud.

“I’m not going to sugarcoat it,” Signifyd’s Head of Partnerships Lee Hadsock said at the “Path to Growth” panel discussion in Seattle recently. “Selling internationally is not easy. There are a lot of challenges involved. But it’s a great way to expand your business.”

It’s the payoff that successful online businesses need to focus on. The United States is a fantastic market. But if you’ve been selling domestically, you’ve no doubt attracted a customer base. Sure, you can grow that base, but the pace of growth will naturally slow. And the vast majority of new customers live beyond our borders.

Globally, e-commerce is a nearly $2 trillion business today. By 2020, it will more than double to $4.06 trillion, research firm eMarketer says. While the United States will continue to be a considerable driver of that growth, the fastest growth (31.5 percent) will be happening in the Asia-Pacific region, eMarketer says.

E-commerce operators simply can’t ignore those numbers, said Lauryn Spence, panel moderator and BigCommerce channel account manager.  

“There is a huge opportunity for us to share our product with them,” she said. “There is huge demand. Most are going to argue it’s definitely a necessity.”

Easy to say. But going international can mean dealing with different languages, currencies, taxes, duties and customs — as in at the border and as in how people behave and expect others to behave.

Shipping is a big enough challenge within the U.S.’s borders without adding the drama of an international order. And there is the fear of fraud, given that it’s even harder to know who a customer is from a world away.

Global E-commerce is a Team Sport

Again, you don’t have to go it alone.

“We have partners now who are building applications specifically dedicated to enabling merchants to sell internationally,” said panelist Dan Fertig, global director of agency partnerships for BigCommerce. “There are different ways you can do that.”

Keys to Taking E-Commerce International tips

Just as automation and innovation have shrunk the world in areas including travel, communication and finance,  so too are they shrinking the world in terms of e-commerce. No one needs to build their individual e-commerce infrastructure and storefront from the ground up.

“Nobody got into the business of e-commerce to fight fraud,” Hadsock said. “Nobody got in it to be a payments expert or a shipping expert or taxes or what have you. They would like to sell their widgets.”  

Automated programs can  deal with translation, currency conversion and tax calculations. Machine learning and data science can spot potential fraud and ferret out digital devices that have been used for evil in the past.

“The tools are out there right now,” said panelist Jordan Brannon, president of Coalition Technologies. “They anticipate you going international.”

And when you decide to take on the world, no one is saying you have to take on the whole world all at once.

“You take inventory again of what you do well,” Brannon said. “For a lot of U.S. merchants, English language is kind of their first step out of the gate.” So, he said, consider English-speaking countries as a first move.

A thoughtful approach is the way to go, Fertig agreed.

“Be deliberate about where you want to expand, where there might actually be demand for your product,” he said. “Don’t just go international because it sounds cool. Test the market. “We’ve seen international expansion done well when the organization doing it is very deliberate.”

For instance, think about your average order value and the duty structure of your target country.

As for shipping, Brannon said he’s seen plenty of e-commerce operators who see shipping as so daunting because they make the mistake of thinking that have to keep up with Amazon.

Maybe Free is More Important than Fast in Global Shipping

“They assume they have to do the two-day shipping thing and they can’t,” he said. “The reality is, most customers buy based on free shipping. That’s the priority. Free shipping. Not so much two-day, free shipping.”

So, consider baking the cost of shipping into your products and take a little more time to get there. Customers can be patient, particularly if they’re waiting for an item that Amazon doesn’t sell, Hadsock said.

Which brings us to fear of fraud, which Hadsock acknowledged is something for e-commerce retailers with international ambitions to think about.

“Fraud is much more rampant internationally, especially when you move into Africa and Asia,” he said.

But again, merchants don’t have to tackle fraud on their own. Hadsock pointed out that Signifyd provides a financial guarantee that means if Signifyd approves an order and it results in a chargeback, Signifyd will reimburse the merchants for the loss, the fees, the shipping and taxes.

Hadsock ran through a couple of examples of Signifyd customers featured in the August “Expanding into International Markets” webinar. The webinar looks at five online businesses who are growing internationally while reducing their fraud losses.

The two Hadsock emphasized in Seattle included a perfume and cosmetic company that had dramatically reduced declined orders in the United Arab Emirates and a jewelry retailer that increased its revenue by 61 percent by selling into Nigeria.

“Who the hell would sell to Nigeria?” Hadsock asked.

The answer, apparently, is a company that wants to see a significant increase in sales. And that, in a broader sense, was pretty much the conclusion the panel landed on after a lively discussion.

“If you’re thinking about moving international, to borrow a line from a local brand,” Hadsock said toward the end of the Seattle event, “just do it. If you’re not thinking of doing it, if you’re not doing it, your competition is. So, move ahead and find the right people to work with who can help get you there.”

Photo: iStock

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

 

 

Amazon vs. the World — Tips on How New E-commerce Companies Can Stay Competitive

Amazon locker with logo

By Mike Cassidy and Amanda K. Hirsch

The first rule of competing with Amazon: You’re not Amazon and maybe you don’t want to be. 

No doubt Amazon is in an enviable position. And yes, you and every other new merchant does have something in common with Amazon —the fact that the mammoth company was once a new merchant itself.

If Jeff Bezos could build a world-changing business from his Seattle-based garage in 1994, it’s possible the next e-commerce genius is somewhere out there, destined for a similar path. But with 55 percent of online product searches starting on Amazon.com, it’s safe to say that Amazon is going to be hard to catch at its own game.

How big is Amazon’s head start? Consider that with a market capitalization approaching $500 billion, the company’s value is higher than the total market value of the eight largest traditional retailers combined.

Amazon has a big head start

So, if you’re launching a business, hoping to be the next Amazon, chances are you’re setting yourself up for disappointment. As the first of its kind, Amazon had timing on its side.

And it has clearly doubled down on that advantage.

Amazon has relentlessly focused on the future, at times operating at a 0.1 percent profit margin to reinvest and experiment with new revenue streams. That’s how it evolved from an online bookstore to the largest internet retailer in the world and a player in cloud computing, consumer devices, entertainment and groceries. The company now offers a smorgasbord of products available with free, expedited shipping for its estimated 60 to 85 million Prime members, who enjoy additional benefits such as music and video streaming and now special deals at Whole Foods Market.

Sure, Amazon’s success can be intimidating, but new businesses have the flexibility to build a loyal following within a niche market by finding creative ways to set themselves apart.

“Nothing is inevitable,” Yory Wurmser, a digital retail analyst for eMarketer, reminded us in an interview late last year. “It’s impossible to say that Amazon is going to crush everyone else.”

How to beat Amazon at your own game

Here, then, are four e-commerce tips on how to thrive by being the unAmazon:

  • Sell a unique product: People go to Amazon to find certain items, but 70% of Amazon consumers browse for the same items on other sites as well. By offering a unique product that can’t be duplicated easily, or one that is sold exclusively through your store, it forces consumers to think beyond traditional shopping priorities like price or shipping and consider your overall buying experience. Consider Ulta Beauty CEO Mary Dillon, who launched a deliberate campaign to make her company “less Amazonable.” When Dillon arrived in 2013, she began by re-evaluating the 75 percent of its catalogue that is also available on Amazon, according to Forbes. She very deliberately began stocking items that were available only at Ulta.
  • Provide quality content: Amazon provides the bare minimum of information when it comes to product explanations and reviews. So retailers can build loyalty by offering original content that helps customers see the benefits of their products, or provides them with detailed instructions, or conveys useful information that they can incorporate into their daily lives. If you are helping consumers in their daily lives, it doesn’t matter how big or small your company is.
  • Provide exceptional customer service: From incorporating a brick-and-mortar experience that allows your customers to engage with your products physically, to providing easy shipping and return policies, exceptional customer service can be a significant differentiator when faced with a question of who to shop with. Small businesses have the luxury of being able to provide personalized attention, such as answering live inquiries via phone or chat and resolving issues quickly.
  • Incorporate email campaigns and social media: Use email and social media to proactively target your audience on the channels they are most fluent in. Without the need for approval on every social media post, new small and mid-size businesses can use targeted campaigns that might engage customers with humor or offer direct-to-consumer promotions or rewards. Make consumers feel that they are a part of something — something that is not Amazon.

Winning is relative when it comes to the larger game

For those launching or thinking about launching an e-commerce venture, ignoring Amazon is not a wise strategy. But obsessing over Amazon isn’t the way to go either. Think of Amazon as a guide: Yes, it set the tone for risk and innovation. And it’s setting the bar for customer expectations while showing the way to meet those expectations. It provides e-commerce tips by example. But as big as Amazon is, it’s left room for competition — competition from those, in particular, who figure out how to be what Amazon isn’t.

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy. Amada K. Hirsch is a digital content writer and author.

Returns: E-commerce Can’t Live With Them; Can’t Live Without Them

UPS truck pickup returns

By Mike Cassidy

It’s tempting in the e-commerce world to do a little happy dance with each sale.

After all, it’s a rough-and-tumble business of intense competition and low margins. A sale means revenue and potentially a customer that will return again and again. But the sale is just the beginning, isn’t it?

Every retailer knows that a key to building customer loyalty is the after-sale customer service that an enterprise provides. And no part of the after-sale relationship is more fraught with peril than the reality of e-commerce returns.

“Think about the pure e-commerce model,” says Tadd Wilson, vice president of business development for ShopRunner, a subscription service that provides retailers with customers and provides customers with free, expedited shipping. “For every dollar of revenue, you’ve probably got 20 to 25 cents in returns. It’s a huge bite. And that could potentially get worse, because you have things like Zappos or what Amazon is doing with apparel.”

Yeah. Worse. As it is now, eMarketer reports that 75 percent of retailers surveyed say online costs have risen as a percentage of sales “some” or “significantly.” And 74 percent also said that returns are hurting profit to a “great extent” or to “some extent.”

The return bite now, which the National Retail Federation and Forrester put at 12 percent of sales for all verticals and which others have described as 30 percent of all products ordered online, will only grow as e-commerce grows and consumers come to expect free and easy returns.

The trend is likely to hit apparel sellers particularly hard, given that post-purchase solution company Narvar found that 43 percent of all online returns involve apparel. The University of California at Berkeley found that as many as 30 percent of all apparel orders are returned, with each return costing between $3 and $12 for repackaging, shipping and restocking.

Amazon is dropping a bomb into the apparel returns world

And then there is Amazon and as Wilson puts it, “what Amazon is doing with apparel.” What Amazon is doing with apparel is dropping an Amazon-sized bomb into the world of returns by encouraging its Prime members to order more clothes than they intend to keep, try the items on, pay for and keep what they want, and return what they don’t want — at no cost.

It’s a digital shopping habit that many consumers have already adopted. Wilson calls it “wardrobing” and Narvar refers to it as “bracketing,” buying a shirt in three sizes, for instance, to see which fits best.

In a survey of nearly 700 consumers, Narvar found that overall, 40 percent of consumers order more than they intend to buy and ship back the goods that don’t make the cut. When it comes to those shopping for apparel, the number rises to 48 percent.

Amazon’s Prime Wardrobe service formalizes the practice and encourages consumers to keep more of what they order by giving a 10 percent discount to shoppers who keep three to four ordered items. Those who keep five or more items get a 20 percent break. Shipping is free in both directions and shoppers don’t pay for anything until they make their selections.

And just as Amazon has made two-day, free delivery and one-click ordering a common experience, its move to make returns cheap and easy means that other retailers are going to have to consider following suit — unless they want to be left behind.

“It’s an arms race,” ShopRunner’s Wilson says. “The question that I think a lot of retailers are asking, though, is how do you do it intelligently? Amazon is very good at things like this.”

For one thing, Wilson says, Amazon considers the value of the item that a customer wants to return.

Tadd Wilson of ShopRunner

Tadd Wilson, ShopRunner’s vice president of business development

“I’ve ordered cables from them and one of the cables didn’t work,” he says. “It just had a fault in it. They said, ‘We don’t want you to return that. Just throw it away.’ Because the margin that they’re earning on that, as soon as I put it in the mail they’re losing money on it.”

It’s cheaper in the end to simply send a new cable to replace the faulty one.

Or, Wilson says, Amazon will consider the customer and how valuable the customer is to Amazon.

“They see this guy spends a ton of money on Prime, so we don’t care about this cable,’” he says is the online behemoth’s philosophy. “That’s a little hard for small retailers, because they just don’t have the same volume. You’re not making as many purchases with them as you are on Prime.”  

Returns are at the forefront of shoppers’ minds

There is no question that consumers in the age of Amazon have high expectations for returns. Narvar’s June 2017 study, “Making Returns a Competitive Advantage,” laid out the mood of the shopper in statistics:

  • 48 percent of shoppers returned an online purchase in the year leading up to the report’s publication.
  • 49 percent said they look into a retailer’s return policy before buying online.
  • 84 percent said restocking fees are a deal-killer.
  • 74 percent said return shipping fees would stop them from making a purchase.
  • 38 percent said they’d rather return an online purchase to a local store; and 22 percent said they wouldn’t even make an online purchase if they couldn’t return it to a brick-and-mortar store.
  • 47 percent of those who’d returned something had returned it to Amazon.
  • 75 percent of those who returned items to Amazon were satisfied with the experience.

And so there is little doubt that e-commerce operators need to be on top of their return game. So, what can they do? Retailers over the years have experimented with innovations to cut back on returns in the first place.

  • Rue La La described to the Wall Street Journal its practice of charging customers $9.95 (WSJ subscription required) for their first order to cover deliveries and any returns resulting in a store credit for a 30-day period. The retailer also created notices that would point out to a consumer, for instance, that when they’ve ordered an item in two different sizes that they’ve always sent back the small size.
  • For it’s part, lingerie startup ThirdLove deployed imaging technology that allowed women to get accurate bra-size measurements, meaning ill-fitting bras weren’t delivered in the first place, so no need for dissatisfied customers to return them. Others have tried similar solutions.

For his part, Wilson said digital retailers should focus on a few areas in particular regarding returns:

  • Keep it simple: “Some of the return policies are a little Byzantine,” he says. There might be limits on how long after a purchase a refund will be granted. Make them reasonable. Narvar found that 53 percent of consumers believe a 30-day return policy is fair. And, in fact, its survey said, 74 percent of shoppers return an item within a week. Furthermore, 81 percent of consumers want a simplified returns process, according to a University of California, Berkeley study of online apparel returns. Wilson says he’s personally struggled with requirements that the original packaging not be damaged. The best-in-class retailers make returns obvious. Including pre-printed mailing labels and instructions with shipped orders is good. Offering an online resource center with clear information and easy-to-print labels is better. Some consumers, when faced with complicated or labor-intensive return procedures, will simply keep the item and ask their credit card companies for a refund, according to the Q1 2017 Global Fraud Index. That refund ultimately will be charged back to the retailer.
  • Be strategic: Retailers know what their return rates are by product category or even SKUs. Consider incorporating that knowledge into your return policy. Do you want to have different policies for high-return-rate items and low-return-rate items — policies that seek to change return behavior? “They kind of have to be able to have a philosophical or religious discussion around do we want to have a differentiated return policy or a blanket policy or a blanket policy with exceptions?” Or do you want to have different policies based on customer value or loyalty?
  • Be mindfully generous: Consumers appreciate liberal return policies, but make sure your leniency is conscious. Shrewd shoppers will exploit any inadvertent loopholes. “There are these communities that pop up around specific retailers,” Wilson says. “If there’s a flaw or a loophole in return policies, they’re going to get found and published. If you’re going to be generous, be generous on purpose.”
  • Encourage in-store returns: “If you’re a multichannel retailer, you have stores. Using returns as a way to clawback revenue is very, very important,” Wilson says. “You’re rolling the dice, but you’ve got a chance of someone buying something additional. And logistics tend to be easier.” In fact, according to UPS, 70 percent of shoppers returning an item to a store make an additional purchase while they are there.

No question, returns are painful and can be expensive for digital retailers. But there are steps retailers can take to ease the pain and bring that happy dance back when a customer clicks “buy.”

Photo of UPS truck by Mike Cassidy. Tad Wilson portrait courtesy of Tad Wilson.

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

Guaranteed Fraud Protection Saves Time, Money and Customers

TEI on Guaranteed Fraud Protection

By Mike Cassidy

While every e-commerce enterprise can turn to its balance sheet to see the cost of fraud in dollars and cents, the numbers on the page go only so far in telling the whole story.

As Forrester points out in its June 2017 “Total Economic Impact of Guaranteed Fraud Protection,” a commissioned study conducted by Forrester Consulting on behalf of Signifyd, the costs can bleed into nearly all aspects of a business. For businesses without an automated system to detect fraud and manage bad orders, the identifiable costs alone include:

  • Fines charged by banks when a fraudulent order results in a credit card company refunding a consumer’s money — known in the industry as a chargeback.
  • Administrative time related to accounting for and paying the chargeback.
  • Time employees spend monitoring suspicious orders in an effort to prevent fraud — especially when such monitoring falls outside of their core responsibilities.
  • Revenue lost when an order is cancelled for fear of fraud, even though the order was actually legitimate.
  • Revenue lost when a legitimate customer cancels his or her order because it’s been delayed due to a manual review.

And those are only the identifiable costs. Consider related costs, such as the morale-crushing effect of assigning customer-support employees to fraud monitoring tasks when what they want to do is help customers. Or consider those legitimate customers who cancel orders delayed by a manual review? What becomes of their lifetime value to the company? Do they ever order again? Do they order less frequently?

The commissioned Forrester Consulting report underscores the point by explaining that customer satisfaction scores among consumers who receive their orders in a timely fashion are considerably higher than those among customers whose orders are delayed by reviews. And it notes:

“That metric can be further extrapolated for items like customer retention, churn, lifetime value, and likelihood to promote or detract.”

Fraud-fighting struggles are familiar to retailers of all sizes

Forrester Consulting, of course, doesn’t deal in the theoretical. Its “Total Economic Impact of Guaranteed Fraud Protection,” report, subtitled “Incremental Earnings, Chargeback Cost Avoidance, And Fraud Management Efficiency Enabled by Signifyd,” examines a real-life example of a Signifyd customer that has nearly $100 million in annual online revenue.

The large retailer’s struggles with fraud will be familiar to digital commerce operations of all sizes. The company relied on a rules-based fraud system that required humans to review every suspect order. The retailer, which agreed to share proprietary information if it was not named, assigned customer support workers without fraud training to sort the good from the bad orders.

The work amounted to a “part-time” task for a group of workers who then couldn’t focus full-time on giving customers the kind of help and information they needed for an ideal customer experience.

Moreover, the system did not scale and was easily disrupted by personnel changes and a shift in fulfillment strategy that brought a drop-shipper into the picture — and a new order stream that wasn’t subject to the retailer’s existing fraud-prevention program.

The patched-together system resulted in fraudulent orders going through and — just as bad — led to legitimate orders being denied for fear of fraud.

Signifyd, which relies on a machine-learning system to identify fraudulent orders and green-light good ones, provided another way. The system considers a vast pool of data from Signifyd’s 5,000 merchant customers and from third party data sets that surface signs that something in a particular order is amiss.

Switching to Signifyd and accepting the company’s Guaranteed Fraud Protection saved the retailer $2.7 million over three years by avoiding chargebacks due to fraud, according to the commissioned report conducted independently by Forrester Consulting.

More importantly, the constantly learning technology allowed the company over three years  to fill $3.2 million in good orders that previously would have been denied as potentially fraudulent, according to the commissioned report.

Signifyd saved retailer $1 million in operational efficiencies alone

Together the increased volume of accepted orders and the decrease in fraudulent orders leading to chargebacks accounted for most of the increased revenue and savings that the retailer realized by turning to Signifyd to battle fraud. The retailer generated slightly more than another $1 million in revenue and savings by filling orders faster and by avoiding the cost of hiring a team of fraud experts. In all, the retailer saw a three-times return on investment, according to Forrester Consulting’s commissioned report.

Like many things retail, the fraud-prevention infrastructure is a complex tangle of related causes and effects resulting in the difference between increased revenue and mounting losses. Getting it right is crucial, but conducting the necessary research and work isn’t necessarily the best use of time for those running a retail business.

So, it’s good to know there is help out there. Help from vendors, sure. But also help from independent researchers such as Forrester Consulting, whose body of work, including “Total Economic Impact of Guaranteed Fraud Protection,” can help demystify the vital functions that are not central to a retailer’s mission, but which can leave that mission in tatters if not wisely addressed.

Read the full report.

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mkecassidy.

Five Fulfillment Lessons From the E-commerce Trenches

Fulfillment

By Mike Cassidy

Bob Trebilcock grew up on loading docks and in warehouses, tagging along on sales calls with his dad, who worked in the industrial packaging industry, an unglamorous field that is part of the backbone of U.S. manufacturing and distribution.

“I like to say that most dads took their kids to Disney World and my dad took me to the BorgWarner auto parts plant in Buffalo, New York,” Trebilcock says.

So, it’s not crazy that Trebilcock remains fascinated with supply chain and contemplating the challenges and solutions the backstage work presents for thousands of e-commerce retailers from California to Connecticut.

As editorial director of Supply Chain Management Review, Trebilcock has had an up-close view of the dizzying evolution of the process of moving goods and e-commerce orders from here to there. In the era of Amazon, when consumers expect retailers to deliver the goods fast and for free, the pressure on those mapping fulfillment strategy and those executing on those plans is ratcheted up every day.

We sat down with Trebilcock to talk about the changes he’s seen in supply chain and e-commerce delivery, where the fields are headed and how those working in e-commerce and distribution can keep up with the rocket ride of filling orders in the 21st century. This interview has been edited for length and clarity.

Q: You’ve been around distribution for years and have been leading Supply Chain Management Review for the past four years. What sorts of changes have you seen in supply chain and delivery in even the past five or 10 years?

A:  The biggest change, in broad strokes, is more automation. We’re seeing much more automation. And it doesn’t feel like that’s going away. Everything has been exponential. For years, whenever you went from one point to the next, there was sort of a long period of stability. Now, everything has really started changing at a much faster pace.

There is much more complexity. Things aren’t offered in one size. The same product is offered in 15 or 20 different sizes. And there’s complexity, because for a variety of reasons on the retail side, stores don’t want a lot of inventory. So they just want a pallet that’s got 50 different items on it, and one or two examples of each item, versus a pallet with just one item on it.

And there’s complexity because you and I don’t go to the store anymore. We order (online) a book and a wrench or something. And we want it tomorrow. Complexity in that sense has been driving a lot of the evolution.

Q: Are you seeing other big changes

A: Visibility, meaning whether it’s you or I placing an order or General Motors placing an order to one of its suppliers, everybody wants to know, “Where is my stuff? Where is my order? Did it ship?” If it went by UPS, I want to track it.

Q: Pretty much everybody in e-commerce recites a mantra about “optimizing the customer experience.” The discussion is often in the context of marketing and merchandising, but do the folks on the logistics and fulfillment side of e-commerce have a role to play?

E-commerce and supply chain expert Bob Trebilcock

Bob Trebilcock

A:  I still use this line every now and then, which is, sales and marketing is the promise-maker. Distribution and transportation, or the supply chain, we’re the promise-keeper. Amazon says, as an Amazon Prime member, you get free next-day delivery. That’s a marketing promise. Well, how are you going to keep that promise?

The way you keep that promise, is you have a system in place that when the order drops, the warehouse can quickly and efficiently pick it and get it onto the back of a truck that goes to the UPS or the FedEx or the post office depot. And then they have a system in place to unload your truck and put it on a conveyor and get it on their truck. That’s all supply chain and without that, that doesn’t happen.

Q: Another thing those in e-commerce talk about a lot — a real lot — is the Amazon effect.

It’s been huge. It’s been huge because Amazon knows how to do it and do it pretty reliably. Therefore, if I’m a customer who is used to shopping from Amazon, when I go to Macy’s or JCPenney or whoever is your favorite retailer, I have the same expectation. So, it’s driving other retailers to do what Amazon does. Other retailers trying to keep up with Amazon are under profit pressures, because it’s expensive. Free shipping, believe it or not, is not free.

Q: Why is Amazon so good at it?

A: I think they’ve been doing it longer than anybody. Many traditional businesses didn’t think that they had to be e-commerce companies in the early days. Think of Borders —what used to be my favorite bookstore and is no longer around. Borders initially was like, “There’s no reason for us to get into the e-commerce business.” And by the time they got into the e-commerce business, they were dead in the water.

Q: Where is supply chain and fulfillment innovation heading?

A: While there’s a lot of really exciting technologies out there, like drones and 3D printing and robots and things, a lot of companies, even big companies, struggle with the meat-and-potatoes, blocking-and-tackling kind of things, like visibility, like connecting their systems.

I think you’re seeing that software is becoming more important than ever. Second, data is the oil of the supply chain. And so, what you’re starting to see is more sensors, meaning devices that can collect data, more sensors at more points in the supply chain to report back. And this goes to that visibility thing, getting data at more and more points in the supply chain and more and more frequently.

A list of five keys to better e-commerce fulfillment

 

Q: So, software, data and a whole lot of better tracking. What else is coming?

A: I just visited, this week, a distribution center in Rochester, New York, that’s one of the first (distribution centers) I’m aware of implementing what are called piece-picking robots. That’s a robot that can go up and down, and all by itself, pick something from a shelf, put it in a basket and then take that basket to what’s called an induction zone, where somebody’s going to take the items in the basket and put it in a shipping container, put the shipping container on a conveyor and then the robot is going to go pick some more.

I don’t think you’re going to see robots tomorrow, other than early adopters. But I think three to five years out, you are going to see more and more robotics because of the labor issue. People are actually pretty good at doing warehouse and distribution work but it’s getting harder and harder to get people who are willing to do the work.

Q: A lot has been written about the role of returned merchandise in e-commerce and what a challenge and cost it is for retailers. Sometimes, when faced with complicated return policies, consumers decide to simply keep the item and get refunds through their credit card companies. Is there a role in the supply chain to reduce the number of returns or the cost?

A: It is a supply chain management problem. It’s called reverse logistics. So yes, it’s huge for, particularly, e-commerce. At one point, a stat that we used to see is like 30 percent of things ordered online were returned. We all want to get something tomorrow. If we return it, we don’t understand why it can’t be returned tomorrow and we can get our money back (tomorrow).

So yeah, returns are huge. And the other thing is, returns are hugely expensive for the retailer because often they’re paying the freight back and then they’ve got to have somebody unpack it and inspect it and figure out whether, is it in good shape, meaning can they resell it as is, or do they need to do something else with it. And going to the Amazon thing, I mean Amazon basically takes most stuff back for free. So it’s a major complication, particularly for retailers.

Q: But what can the distribution end of things do to reduce the likelihood of a return?

A: The only role supply chain has in terms of of preventing returns, is shipping the right product and then getting it there on time. But supply chain can put in automation or technology to speed up the returns process, so that they process it, they decide whether they can resell it, whether I’m owed (a refund) and then give me a refund in a timely fashion. That’s a supply chain issue.

Q: So you and your wife ran Dilly’s for Kids, a brick-and-mortar retail shop, for more than 32 years in Keene, N.H. Did you learn anything about retail from the experience?

A: My wife just retired. We closed the store March 1. She opened Sept. 1, 1984.

The thing that I think that we learned was: My wife really put an emphasis on customer service. Because of the recession, and because of the rise of e-commerce, we had to put a premium on selection. In other words, we carried a lot more inventory and a lot more stuff in the final years than we did in the early years. Because at the end, if they walked in and you didn’t have something they were looking for, they didn’t say, “What else do you got?” They just went online and ordered it.

UPS truck photo by Mike Cassidy. Trebilcock portrait courtesy of Supply Chain Management Review.

Mike Cassidy is Signifyd’s lead storyteller. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

 

Emerging Markets Provide Disruption Opportunities for Payments Systems

Emerging Markets Payments

With 80% of the world’s population living in Emerging Market economies (EMEs) like Brazil, India, Russia, China and Mexico, it’s important to note how consumers in these countries are shifting away from traditional cash payments and driving the growth of stronger infrastructure for electronic payments. EMEs represent almost 90% of people under the age of 30. For example, in India the primary age for users conducting transactions online ranges from 15 to 34. This generation craves technology and innovation to the point where digital solutions are becoming a necessity in their everyday lives. In fact, over the next 10 years, this drive for digital will cause the number of active users to rise by 15%. Similar statistics are emerging for countries like Malaysia, South Africa and the Philippines.
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Did We Miss a Payments Paradigm Shift Or Is It Yet to Come?

Payment Paradigm

This post summarizes a recent article by Karen Webster on PYMNTS.com.

In a recent in-depth article Karen Webster, President of PYMNTS.com, explains how much of what we’ve been waiting for in the payments industry may have already arrived without us noticing or how it may be just around the corner in 2017. The article is rich with examples of how these changes are coming about and where we’ll likely see these developments gain market share first. She lays out her observations in four parts, starting with a brief summary of how online shopping has changed.

1. The move to online shopping

While online shopping numbers have continued to rise year after year, Census still reports the average percentage of these transactions compared to in-store purchases is just 10%, which may be explained by lags between buyer behaviors and the time it takes to accurately track the data. But in certain industries the shift to online has been dramatic and is clearly a sign of what is yet to come for other verticals.

70% of book sales are now online and the majority are from Amazon. Barnes & Noble has consistently reported a steady decline in in-store sales as they struggle to compete against the leading internet retailer.

Non-perishable groceries like toilet paper, laundry detergent and cleansers are increasingly being purchased online. Brand-interchangeable bulk items like these clog up a shopping cart and ordering them online simplifies life.

While pets.com may have been ahead of their time in 1998, more and more pet owners are taking their business online to stores like PetFlow and Amazon. An added advantage of ordering online is access to prescription food or smart food dishes that automatically send a signal to reorder depending on how often and how much your pet eats.

There was a time when the idea of purchasing a car without a test drive seemed incredulous but by 2004 eBay Motors had sold a million, proving that photos, reviews and comparison portals could indeed disrupt the traditional car buying experience.

But what about those spur-of-the-moment needs we all have like cocktails for a last minute dinner party? Forget the liquor store. With sites like LiquorMart.com and AlchoholDelivery.com, you can conveniently order your spirits online and even have them delivered to your door within an hour.

2. Capacity to Buy Online and Pick-Up In Store

A combination Webster calls out as progressive are brands who have combined the benefits of in-store shopping (location, ambience, personal service) with the convenience of buying or paying online.

Starbucks has seen great success with the introduction of their app that not only allows people to avoid heavy wait times in store, but also offers incentives to earn free drinks and priority ordering. In just its first two years their app boasts more than 16 million users representing 20% of all Starbucks transactions within the United States.

Fuel suppliers have begun incorporating cloud and app payments at various gas stations, allowing drivers to keep cash and cards in their wallet while they fill up. This also gives station owners a feasible and affordable alternative to EMV chip adaption. Several chains like ExxonMobil and Chevron are partnering with mobile wallet apps like Apple Pay and Android Pay.

Major brand department stores like Walmart allow customers to link their credit card credentials with a QR code in-store, making it possible to purchase items on credit from the convenience of your mobile phone.

3. Embedded payments, emboldened partnerships

When Uber introduced the ability to pay for a ride through embedded payments, it sent a spark of disruption through the payments community. Riders simply had to link a payment method to the app and never had to reach for their wallet at the end of a trip or calculate a tip again.

As Uber has steadily improved, embedded payments within apps have become ubiquitous. Amazon’s Alexa can order a pizza and pay for it without you actually interacting with the restaurant. Apple’s Siri can order an Uber and send a friend money via SquareCash. Facebook Messenger lets users book flights with JetBlue using Masterpass. Can you spot the pattern?

Businesses are working together to create smooth, convenient purchase and payment options for customers by simplifying financial transactions with embedded payments. Behind the scenes, powerful partnerships are being formed that could change the economics of certain industries.

4. Application based payments over equipment based platforms

Webster takes a realistic perspective on application based payments noting that a heavy focus has been placed on equipment based payment methods like Apple Pay, Samsung Pay and Android Pay in recent years. Yet these have failed to take flight with the gusto each brand anticipated, mainly because there are too many pieces required to make the mechanism work. Users need to purchase new phones and apps while retailers need to invest in new equipment to accommodate each phone and app. With the increase in ecommerce sales, including online to in-store pick up, merchants can invest less in equipment while still enhancing their overall product and service offering across an omnichannel experience.

So Are We Late or Early?

The transition to an ecommerce-heavy ecosystem has opened a world of opportunities for merchants to reach their audience in new, holistic ways with non-invasive payment tools. They can help alleviate stress from the purchase process and form new partnerships that add value to their market position and the user. Considering the pace at which the industry is evolving, veterans like PayPal and Amazon may have an advantage, but there is still plenty of room for disruption and plenty of time before winners can be clearly declared. 2017 may be the year we see things come full circle or it may be 2020. The truth is, most of us have been watching this space for so long that we may not notice until it’s already happened.

Karen Webster is a leading expert on emerging payments and a strategic advisor to top-tier executives in the payments industry. She is CEO of Market Platform Dynamics, President of PYMNTS.com and an avid entrepreneur who also serves on the boards of a number of emerging companies. PYMNTS.com provides global coverage of the payments industry with breaking news and in-depth stories from leading experts in the field.

Charge Ahead Against Chargebacks

To proactively reduce or even completely eliminate chargebacks, you need to rethink some of your existing processes and best practices. A few small changes can help reduce chargebacks and free up funds and resources (more…)

Would You Sell To Him?

You’ve built a successful brand and optimized every aspect of your online business to find and retain loyal customers. Their repeat purchases drive a significant share of your revenue and (more importantly) your margin.

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