The Swiss retail sector has been under pressure for years. The most frequently proclaimed reasons are (1) a shift to online shopping as well as (2) cross-border shopping. (NZZ)
(Domestic) E-commerce however should not be isolated and therefore identified as a driver for the sector recession: Every retailer is free to sell online and benefit from this shift!
The cross-border shopping on the other hand is definitely a huge challenge. This is especially true for the online cross-border shopping as the personal effort/cost and time invested to travel cross-border is negligible. And this impact is huge: Some 40% of Swiss fashion exports (!) in Q1 2017 were return shipments of goods bought online aboard. (Source: Bloomberg)
In addition the VAT arbitrage benefit of up to 19% (eg Germany, products below CHF 62), the original prices are also much lower in neighbouring countries. One of the often proclaimed main reasons hindering Swiss retailers’ competitiveness were the higher labour costs. According to a recent study by the Swiss Retail Institute, Swiss retailers indeed operate at a more than 50% higher overall cost base on average compared to their European peers.
However the main cost driver is not labour cost, but mainly the higher costs of goods sourcing / COGS* and preliminary services.
*Note: The higher labour cost level is obviously impacting the COGS costs as well, so there’s a multiplier effect. But still, the labour cost differences are significantly smaller than the other cost disadvantages.
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Kürzlich wurde mir eine wahrheitsgetreue Geschichte einer absolut unverlässlichen Quelle bei Grosskonzern AG zugetragen. Stereotypisch dafür, wie es garantiert in keinen einzigem Konzern in der Schweiz niemals auch nur ansatzweise abläuft.
VR: Soeben mit 6-2 Stimmen entschieden, Innovation ist ein SEHR wichtiger Teil unserer Strategie. Wegen digitaler Disruption.
CEO: Verstanden. Aber wir sind schon innovativ.
VR: Ah ja, nachweislich?
CEO: Klar, wir sind CHF 5 Mio im Jahr innovativ.
VR: OK. Verlieren sie noch mehr. Machen sie 10 Mio draus, dann sind wir SEHR innovativ.
CEO: Das wird schwierig. Wissen jetzt schon nicht mehr wohin mit dem Geld…
VR: Wie wär’s wenn wir jemanden explizit dafür einstellen? Möglichst senior, proven track record, ein richtiger Rainmaker: min. 10 Folien pro Tag, Schriftgrösse 8
CEO: Dazu super Bonus basierend auf modernen Internet KPIs wie Anzahl Likes seiner Ferienfotos auf Instagram!
VR: Genial. Wir finden sicher noch jemanden, dem wir einen Gefallen schulden. Andere Ideen?
CEO: Sämtliche Verluste in diesem Budget werden wir maximieren; gratis Mittagessen im InnoLab und die obersten drei Führungsetagen gehen 10 Tage in Kalifornien äh Sillicon Valley golfen.
VR: Können wir das bilanzieren? Wir müssen ja auch kurzfristig denken, nicht nur nachhaltig!
CEO: Top Idee, sehr kreativ der Herr VR heute. Werde ich abklären.
VR: Und wichtig, habe ich bereits in zwei andern VRs beobachtet: Verschwenden Sie unbedingt auch noch die Zeit von ein paar Stärtöppern, das wirft diese zurück und bringt uns gute Schlagzeilen.
CEO: Auf jeden Fall. Passt perfekt zu unserem entrepreneurial thinking, wir agieren schon sehr lean, schreiben z.B. die MM bereits bevor wir wissen, was wir überhaupt machen. Übrigens, hat mir kürzlich der Partner einer grossen Strategieberatung aufschwatzen wollen: Wie wär’s mit einem Bot?
VR: Nein, seit dem letzten Einlauf ist Wasserski bei mir kein Thema mehr. Oder wäre es ein Segelboot?
CEO: Nein Nein. Ich rede von einem Roboter, der mit Kunden kommuniziert – automatisch, virtuell und künstlich intelligent.
VR: Ist ja verrückt. Sackstark. Mit diesen Beratern würden wir vielleicht sogar zusammenarbeiten, wenn wir beide keine Alumni wären! Lassen sie mich zuerst noch meinen Enkel konsultieren. Der nutzt die digitalen Medien mindestens täglich und hat sogar schon mal Pizza im Internet bestellt.
CEO: VRs wie sie bringen echte Mehrwerte, das nenne ich mal vernetztes Denken. Ausgezeichnet, bin gespannt.
VR: Freue mich auf den nächsten Digital Inovation Jam-Bam Hang mit ihnen.
Effortless 2-way authentication based on ambient sound
Even if you don’t know what two-factor/way authentication is you’re likely to have used it already in your e-banking or other online accounts. The idea is to incorporate an additional component to the login process beside a password, based on a manual user interaction. A team of researchers at Swiss Federal Institute of Technology in Zurich developed a method to allow effort- and painless two-factor authentication based on comparing ambient noise from your smartphone with the device you log-in. No additional software required.
What is two-factor authentication?
Two-factor authentication (also known as 2FA) is a technology patented in 1984 that provides identification of users by means of the combination of two different components. These components may be something that the user knows, something that the user possesses or something that is inseparable from the user. (Wikipedia)
If you have used any e-banking solution within last few years you are likely to have used 2FA to login: Either in the form of a cross-of list with codes or nowadays far more common via SMS as illustrated in the google example below.
image source: hangoutech
2FA is perceived to be the best way to protect online accounts even in the case of leaked or stolen passwords.
Most 2FA solutions are based on the idea of a manual user action - most commonly entering the verification code you previously received per SMS in the browser. This however means a manual extra step for the users and apparently too much friction: Most users prefer password only one-way authentication. They are willing to trade in an effortless login experience vs. security of their online accounts.
Effortless security without extra software
There are 2FA schemes that eliminate the user-phone interactions, but the deployment of additional software is required.
In a recently published paper, a team of researchers at ETH Zurich porpose "Sound-Proof, a usable and deployable two-factor authentication mechanism.”
From the abstract: “The a Sound-Proof does not require interaction between the user and his phone. In Sound-Proof the second authentication factor is the proximity of the user's phone to the device being used to log in. The proximity of the two devices is verified by comparing the ambient noise recorded by their microphones. Audio recording and comparison are transparent to the user, so that the user experience is similar to the one of password-only authentication. Sound-Proof can be easily deployed as it works with current phones and major browsers without plugins.”
The team has already built prototypes for iOS and Android and provides “empirical evidence that ambient noise is a robust discriminant to determine the proximity of two devices both indoors and outdoors, and even if the phone is in a pocket or purse.”
image source: sound-proof.ch
Users like it, algorithm is key
Further the team conducted usr studies in order to compare the usability of Sound-Proof with Google 2FA. The results claim that “participants ranked Sound-Proof as more usable and the majority would be willing to use Sound-Proof even for scenarios in which two-factor authentication is optional.”
In a wired article Sound-Poof is compared to Shazam, the mobile app that can identify songs playing in a bar or club by comparing the unique sonic qualities of different songs. However Claudio Marforio - one of the co-authors of the paper is quoted telling that the underlying algorithms are completely different - a similar approach (to Shazam) was not yielding in good results.
So whilst the idea sounds simple and is designed to relieve users from a prevalent pain often avoided at the cost of security - the execution is not that simple at all: The magic sauce is the algorithm.
<< Check out the demo-video on http://sound-proof.ch/ >>
Analysis and Evaluation of Mobile Payment Strategies in Switzerland
Mobile Payment has been a topic for quite a while in Switzerland - we’ve seen players coming and going. Basically there are three different strategies to build a mobile payment ecosystem. Either you start with P2P (per to peer) payments first, rolling out to merchants in a second wave. The other one-sided alternative ist to start with merchants first and bring the consumes on your system at a later stage. The third option is a two-sided rollout, acquiring consumers and merchants from the beginning allowing C2M (consumer to merchant) payments. All three strategies have systematic advantages and disadvantages - in this blog post we are going to scratch the surface of the different strategies chosen by the Swiss contestants for mobile payment domination. The focus will be on PayMit and Twint - the two largest initiatives. In a second step we will relate the strategies to examples and insights from other countries.
One-sided: Start with P2P
The approach to establish a user / consumer base first by enabling peer-to-peer payments is pursued by providers like PayMit, Klimpr (first-mover, stellar team by the way!) or Migros. The aim is to spark for for merchants to join the network in a later stage by providing access to a large user base.
Advantages
PayMit can leverage the participating banks’ customer base, kick-starting the user-base (currently 70k)
Frictionless on-boarding and immediate usage: everyone has a mobile number you can send money to and a bank account to link
Rollout to merchants can be extensive and fast-paced: SIX daughter company SIX payment solutions to serve as a catalyst: The company has already thousands of payment terminals deployed with merchants (requested public number from SIX)
The step from P2P to “consumer to small merchants” is nearly frictionless: All you need to accept payments (at a flee market, in a beauty studio or ebay auction) is a mobile number linked to your bank account via paymit. (This pattern can be observed already in Denmark, see image from Mocca in Copenhagen below).
Disadvantages
In the case of PayMit, the system is open loop: Every transaction crosses the network borders twice (credit card or bank account transfers) and causes external costs. These costs may be tiny but could well add up once the system experiences serious traction.
The provider needs deep pockets and long breath as P2P payments are hard to monetize (users won’t pay for it), but this is given with SIX / UBS.
One-sided: Start with Merchants
To my knowledge there’s no fully fledged “payment ecosystem” being built with this strategy in Switzerland yet. There are certain services like SumUp that allow merchants to accept credit card payments with their smartphones. One of the large advantages is that you don’t have to acquire and educate the users: They just continue to pay with their credit card. On the other hand merchants have a real alternative to current payment terminal solutions.
Two-sided: Start with C2M
Twint, a subsidiary of PostFinance is entering the market with a Consumer to Merchant payments first approach. P2P is planned for the near future according to the company.
Advantages
PostFinance has a sales crew with nearly 200 sales people on the ground that can help to spread the system with local merchants as fast as possible.
The merchants that sign up will (hopefully) serve as multipliers by promoting the payment system at their POS.
Monetization is much easier as merchants are already used to give away a transaction fee for non-cash payment.
Disadvantages
Twint is facing the Chicken-egg dilemma: To achieve network effects you need both a strong user base as well as a critically high penetration of merchants accepting the solution. Why would someone download and set up a payment app that can only be used in a dozen shops? On the other hand, why should a shop integrate a payment system if no users are using it? This problem in mobile payment has (to my knowledge) not been solved with the P2M approach so far. It’s a huge challenge to “educate” both users as well as merchants at the same time.
It has not been proven so far that there actually is a consumer-sided need / problem with current payment processes at POS to be solved with mobile payment. (Link) But additional up-/downstream services are expected to release the value in combination with mobile payment: (pre-) ordering, home delivery, loyalty cards.
The Bluetooth Beacon devices to be set up at the point of sale come at a cost.
Insights from other markets: Square properly executed, Denmark shows us the mobile payment way
Two-sided approach - is it possible at all?
This will be a huge challenge for Twint, to build up a two sided network from scratch and mastering the chicken-egg dilemma. I’m curious to see how they do an wish Thierry and his team all the best.
Also I am not aware of any mobile payment providers that successfully and sustainably entered the market with this strategy. Please come forward if you are aware of any examples!!!
One-sided merchant-first: Excellent execution by Square in the US
Square was the first company to launch credit card readers for smartphones experienced impressive growth in the US as well as copycats all over the world: The best proof of success.
One-sided P2P-approach: Denmark shows the way
I spent a few days in Copenhagen about a year ago and was blown away by the widespread acceptance and natural usage of mobile payments:
MobilePay was launched by DanskeBank in May 2013 and has currently about 2 million users. This means the App is installed on every second smartphone in Denmark (Source)
In May 2013 DanskeBank launched MobilePay in Denmark. By Nov 2014 the solution had reached 1.8 Mio users: this means MobilePay is installed on every second smartphone in Denmark.
In the meantime the system has evolved from a P2P service to a mobile payment ecosystem with solutions for small businesses (7’000 merchants, unconfirmed), online shopping and payments through third-party apps. Further co-operations with large retailers are in place.
With currently over 200’000 transactions a day and an average transaction amount of approx CHF 33 the system experiences a daily turnover of nearly CHF 7 Mio. The usage is not limited to an certain amount: More than 500 transactions a day are in the range of a midclass car. (See full Report here)
Nowadays MobilePay is in a position to charge merchants a flat 1% fee (max. 5dkk)
Conclusion
As initially noted all strategies have advantages and disadvantages. Gathering from the experiences and observations in Denmark it is fair to say that PayMit is currently in the pole-position: Similar approach and backed by banking industry. And not for nothing the Telegraph headlines “Denmark is one of the first moving towards being a cashless country” in a comment covering the Danish government’s proposal to get rid of the obligation for certain retailers to accept payment in cash.
Zurich needs an on demand valet parking service (app)
Valet Parking Services are currently one of the hottest topics in the US startup ecosystem: Zirx technologies just raised $30m, Luxe inc $20m and Valet anywhere is still at the very start (WSJ).
Whilst the market in Switzerland with its fragmentation and limited size ist not attractive on a standalone basis for such kind of a service there certainly would be a demand.
How does it work?
When users request the service from within the app (like ordering an uber), a provider dispatches a valet to the location who takes the car, parks it at a nearby garage and returns it when requested. Additional services like gas fillup, car wash, oil change or tire exchange are provided as well for an extra fee.
Image source: Zirx on dribbble, see full video here >>
Analogue to other services in the “on demand” ecosystem technology leverages the business: Geolocation in smartphones to minimize wait time for users, to optimize the efficiency of despatching chauffeurs/valets and dynamic pricing (”surge pricing”) in busy times.
Why Zurich?
It’s obvious that Zurich is short of parking spaces and a lot of people would be willing to pay in order to “outsource the hassle of looking for a parking space”.
Parking fees are insanely expensive: 4 hours at Parkhaus Opéra = CHF 20
High density of cars: 50% of households in the city own at least one car, 10% two or more and 650k cars in the entire Kanton. (Source)
Given: Everyone has a Smartphone anyway..
Who could do it?
Switzerland whit it’s fragmented and limited market (small cities) is not perfect to start and scale such a business. Companies with an established network in a related field (for example AMAG or Autop, both have a network of service stations) however could tap this potential to unlock additional revenue streams - and increase the utilization of their service stations.
Who’s up for it?
Precondition of course that you believe car ownership will last for the future and customers will use services around their cars. In contrast to ride services providers (i.e. Uber and Lyft) prediction that car ownership will diminish in the future anyway...
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Bazaarvoice just published the most recent Conversation Index.
And why should one care?
Bazaarvoice "connects brands, retailers and consumers in the world's largest shopper network, delivering ROI through reviews, analytics and targeted media" and apparently they're good at it: Publicly traded and valued at around USD 700m. So let's see what they have to say..
More reviews mean more orders
Based on various product categories Bazaarvoice observed an impressive positive correlation between review volume and number of orders:
Reviews: Positive impact on SEO
Google likes fresh and product-specific = relevant content so this one does not come as a surprise. Also reviews positively impact the quote of unique sv static product related content. But still a lot of merchants appear not to capitalize on this low effort (customer written) content source. According to Bazaarvoice adding reviews to a product page typically results in a 15-25% increase in search traffic.
The myth of negative reviews
Skyrocketing conversion rates and SEO boost - reviews appear to be a quickwin. Still a lot of merchants refrain from review functionality. There's a sense of fear - reviews can also be negative!
Turns out even bad reviews have a positive side and are even favourable in terms of overall credibility. One crucial point is to reply to negative reviews (immediately). In the case of Bazaarvoice - to my understanding - the brand/producer can reply to reviews and not the merchant. So no costs for the merchant.
Further valuable feedback and product flaws can be gathered in order to improve the product. Comes handy...
You can find the entire presentation below. The findings appear to be obvious but still impressive and it interesting to see the empirical validation. Interpretation of the results up to the reader given that Bazzaarvoice may be biased given their business model...
As explained in my previous post (Link) new and disruptive "closed loop" business models are exerting increasingly pressure on traditional concepts - for example directories / yellow pages that just enforced a mobile interface on their existing platforms. The one-to-one digitalisation of the phonebook has been a success so far but translated into the mobile era. The fight for survival - without any value added or innovation - will be tough in the jungle with Google and heaps of hungry mobile focused, vertical and dedicated providers in the ODMS field.
Image from: Mobile: Reshuffling the Customer Journay > Read more
This post is Switzerland focused. We have one of the highest (high end) smartphone penetration rates worldwide but due to
a limited appeal of a small and fragmented/multilingual market
dominated by two dinosaurs
high entry barriers and
risk aversion
the innovation in mobile has been surprisingly modest. The directory market is dominated by local.ch and search.ch both neck and neck, owned by large cos and deep advertising pockets. (Company profiles and numbers to be added later).
Premium listings presumably are the main revenue streams for both companies. And the value proposition to local businesses: Be found, attract new customers. Supported by the arguments of high usage of both mobile apps. But...
Diluted B2B value proposition: Be found, get new customers
Be found. To be found someone has to google for your business or related information in your search channel. Sorry, did I say "google"? I meant to search.. well if that's not the same:
Source: Our mobile planet, Link to Chart
So Google is used to search for information from a particular business I know already. Consumers looking for a new experience and aiming to discover e.g. a new restaurant opt for channels with added values (explore and decide): User reviews & pictures, ratings and derived rankings. For example foursquare, tripadvisor or a local directory like zuri.net.
Popular Apps, but for other reasons...
Their apps are always positioned among the top ranks, have numerous and positive reviews and wide functionality in addition to the directory: weather, travel, movies / entertainment and maps.
I personally use both apps for reverse phone number search only (missed calls) and for each other functionality "there's a particular app for that". And a quick (non-scientific) look at the reviews suggests that the popular functions are weather forecasts and public transport schedules:
Source: Random excerpt of recent iOS App reviews from one of the Apps, May 2014.
The directory is the suggested core function but it appears that it is not the main reason for people to download and use the apps. This gap could obviously become a structural issue: Local businesses pay to be promoted with premium profiles and high ranks in the directory - as they were in the good old phonebooks.
On Demand Mobile Services: New revenue model?
The obvious example in my introduction to the on demand mobile services post (go to post) was uber. The "uberification" of vertical models is not necessarily a threat: It can also be an opportunity. Or at least that's what Google thinks: The most recent Google Maps app update integrates Uber. When checking a route you have to options to ride, walk, take public transport or... get an uber:
Source: Engadget
Local.ch made a first move in a similar direction of a vertical integration: The restaurant booking service localina (acquired in 2012) is now integrated in the directory, allowing visitors to directly book within local.ch or the local.ch app (given the restaurant is a partner).
That's for transportation and restaurant booking. The future will tell (and I'm curious) what can be done in relation to health & beauty, delivery, logistics, home services, travel, hotel bookings...
Update January 2015: The uber integration in Google Maps is now also supported in Switzerland.
Conclusion
The main revenue stream for traditional directories / yellow pages are paid and promoted listings from local businesses. The phonbook business model has not yet translated into the mobile world: Most of the people use Google to search and directory / phonebook apps mainly for their satellite features. On the other hand there are opportunities for market leaders to integrate vertical services and capitalise on their reach.
Within the breakdown of Publigroupe - once proud and successful $bn turnover company - a turmoil and bidding war for local.ch (Publigroupe owns 49%) emerged and I came across a tweet of Dorian Selz (founder of local.ch) saying that local.ch as well as search.ch have "stagnated within the last few years":
@phogenkamp wohl wahr. Und genau da könnten beide noch einiges machen. Irgendwie sind beide in den letzten Jahren stehen geblieben. Leider.
— Dorian (@dselz) April 25, 2014
This tweet and the the mentioned breakdown of Publigroupe motivated me to write down my thoughts. And this very Publigroupe breakdown brought to proof once again: Being market leader but not innovation leader does not allow you to stand at the sideline and just watch...
Not only is there fast growing number of "on-demand mobile services" startups but these business models have a disruptive and structural impact on customer journeys and value chains.
Investor and entrepreneur Semil Shah defines "on-demand mobile services" as "apps which aggregate consumer demand on mobile devices, but fulfil that demand through offline services.” Steve Schlaf extends the definition as follows: "ODMS deliver a “closed loop” experience by collapsing the value chain including discovery, order, payment, fulfillment (offline but within owned network) and confirmation."
Let's focus on a popular example: Uber. In the pre mobile times the consumer had to approach a phone book / online directory, search for a taxi service, call the service, wait to be connected, schedule time and pick up location, hope the driver will be there on time, pay cash/cc and get a hard copy receipt.
The new ODMS Apps like uber let that value chain collapse and offer a frictionless experience, a closed loop:
The phenomenon of this new kind of customer journey convenient "one-stop-solutions" is a few years ahead of us in the US and not limited to transportation at all. Steve has done some brilliant research and published a collection of on demand services covering various branches:
The recent growth and popularity of vertical mobile on demand services signals a "fundamendal shift in the way that local services are discovered and fulfilled".
And some companies which have not yet fully adapted to the "new mobile planet" will face structural issues in the medium term. Especially directories / yellow pages which had a very easy life in Switzerland so far (and are feeling the pressure vom google anyway) are forced to revamp their business models -- maybe to at least postpone the fast approaching expiration date. More about the situation in Switzerland in my next post...
With the most recent update Google Chrome is hiding the URL in the bar. So you will only see the main name like example.com, no more exmaple.com/about-us or similar.
At the same time Facebook launched AppLinks , an open source standard for app-to-app linking and interactions. The project is backed by few big players including Dropbox, Spotify and Pinterest.
Allen Pike concludes and I share his feelings:
While Google is taking the web out of the browser, Facebook is putting the web into apps.
Perhaps URLs are just destined to be an implementation detail that the next generation of users won’t even know exists. Maybe I was crazy to think that URLs were a permanent part of our culture. Still, I’ll miss the damn things. Let’s pour one out for the URL.
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Two years ago Facebook acquired Instagram for $1 bn, when it had had +/- 30m users. Remember the "$ 1bn valuation with zero revenues" moaning and groaning?
Recently Instagram announced it had crossed the 200m user milestone - monthly active users to be clear.
Twitter passed 241m monthly active users in February 2014. If Instagram continues to grow at the same rate it will overtake Twitter in terms of userbase still in 2014.
And Twitter is currently trading at a $ 24.6bn Market Cap.
Interesting to see how messaging apps are more and more becoming distribution platforms for m-commerce. Especially considering the Facebook/What'sApp transaction that was causing turbulences - there's a lot of room for fantasy if you think about social messaging as a platform.
WeChat - a Chinese pendant of What'sApp - recently integrated the taxi ordering system from DidiDache on January 6. Meanwhile DiDiDache receives an average of 700,000 bookings per day via WeChat. Yes 700'000 taxi bookings through a social messaging App. Read more on Techinasia
Line - a Japanese pendant of What'sApp - recently ran a flash sale that picked up 5.5m shoppers of total 22m Line users in Thailand. That corresponds to an opt-in rate of 25% ... so there are roughly 450m What's App users and that would mean... 112.5m users that agree to receive offers and spend money via What's App?* Read more at acommerce or have a look at the infographic
* Not really: 89% of the visits were on a mobile device but in the end 42% of the transactions came in via Desktop.
Earlier today, Facebook announced its acquisition of WhatsApp for $16 billion. It’s a spectacular milestone for the company’s co-founders Jan Koum and Brian Acton, and their remarkable team.
From the moment they opened the doors of WhatsApp,...
Nokia's move to Android - Good for App/Startup Ecosystem
There have been rumours about Nokia moving to Android. But still Nokia's launch of a new family of Android devices comes as a surprise given the fact that Microsoft's acquisition of Nokia was meant to foster Microsoft's own smartphone platform.
Nokia and Microsoft are eagerly making out their case...
For the startup / App ecosystem this move is good news: So far the low penetration of Windows Phone did not justify the costs to serve this platform. But with Windows Phone gaining in market share (close to 10% in Europe) in late 2013 the opportunity cost of not supporting Windows Phone was growing alongside. The widespread approach of running a business with Android and iOS Apps only would have become debatable. The costs to develop and maintain (native!) apps for Windows Phone as a third platform would have been substantial.
So in the the long term it could/will mean less fraction in the mobile OS distribution and therefore less costs to build and run a (mobile) business.
In Switzerland - representing vast majority of our user base - the situation was still very comfortable as a recent study by Comparis shows:
