eCommerce Is Exploding In Rural China: 3 Reasons Every Business Leader Should Take Note

People living outside of China often think of the country in terms of its megacities. And it is true that storied places like Beijing, Shanghai and Shenzhen loom large in terms of economic and cultural influence.

But, did you know that the country’s rural villages (and smaller suburban enclaves) are also centers of economic growth and innovation?

Consumers in China’s third- and fourth-tier cities and vast rural areas are enjoying a rise in disposable income and new options for spending their dollars. Since 2012, consumption growth in these areas has been higher than in larger Tier 1 and Tier 2 cities, and analysts predict that rural China will account for two-thirds of the country’s consumption growth by 2030. China’s online retail market is expected to double in that time period, and that growth will also come disproportionately from rural areas.

Business leaders inside and outside of China should take note of rural China’s retail boom for three reasons.

• #1: It creates an unprecedented growth opportunity for companies of all types and sizes.

• #2: Rural China is a new frontier for retail innovation.

• #3: China’s rural economy provides an opportunity to see the inventive fusion of commerce and social good.

Since my arrival in Shanghai as PepsiCo Greater China Region’s (GCR) CEO, it has been a great learning experience for me to venture outside of China’s urbanized provincial centers into rural areas. I have been incredibly impressed by the fast-growing infrastructure and the ubiquitous signs of economic growth.

3 themes emerged in my visits to these small county cities:

Theme #1: An unprecedented growth opportunity for companies of all types and sizes.

We know the Internet is a transformative technology worldwide, and in China today it is empowering a new cohort of rural shoppers. According to the China Internet Report, in 2017, Internet penetration in rural China was 35%, with over 209 million users. This data point captures two opportunities. First, there are a huge number of Internet “newbies” in China. Second, there are millions more who have yet to come online. Infrastructure upgrades and the widespread adoption of mobile pay mean that rural China’s Internet users quickly turn into online shoppers. At least half of the population in even China’s most remote villages will be equipped with eCommerce capabilities by 2020.

This means that the race is on. As online retail growth in China’s megacities reaches a saturation point, eCommerce companies are eyeing small-cities and rural villages as the next frontiers for growth. They are aided by the fact that the Chinese government has poured millions into road and high-speed rail construction in the past decade, making the delivery of goods increasingly possible. Today, the average rural dweller can buy clothes from indie designers selling on Taobao, books from retailers like Amazon or DangDang, and home appliances, all from their mobile phone. I’ve seen this firsthand in my own visits, where one cannot miss the impact of growing access to technology and mushrooming retail options. For example, most farmers today have access to mobile phones and many have vehicles, two things that would have been unheard of even a decade ago.

Rural shoppers are exploring new categories, like baby goods and appliances, and determining what product features are important. They are trying new brands and forming their (often immutable) first impressions. They are experimenting with the ways things they buy can help them express their identities. At PepsiCo, we see our own products included in this cycle of discovery and trial. Beverages like Pepsi and Marinda were relatively unknown in many villages just 10 years ago. Today, consumers are trying them with zeal, and they often appear on their “must have” lists for holiday celebrations and family get-togethers.

(2018 Bring Happiness Home campaign photo)

In this dynamic setting, business leaders within China and around the world have an opportunity to ask themselves how their products and services can fit into this changing retail landscape.

Theme #2: A New Frontier for Retail Innovation.

Necessity is often the mother of invention, and this is certainly on display in rural China, where innovative retail solutions are everywhere. I’ll give you two great examples.

First, the booming rural market has inspired new retail job types. In the absence of physical stores, eCommerce giant JD has needed to think about new ways to connote luxury. One unique solution is their “White Glove Delivery Service,” which sends drivers smartly dressed in suits, ties, and the requisite white gloves to deliver expensive products like smartphones right to consumers’ doors. A visit from one of these “product chauffeurs” is a status symbol in rural China, and the drivers themselves can become village celebrities and influencers.

Image: China Daily

New business models are also emerging, as evidenced by the wild growth of Pinduoduo. I’ve written previously about this social shopping network, which works on the premise that the more people come together to purchase, the less they pay. The app has experienced massive growth, gaining over 300 million users in 2017 and reporting RMB $262.1 billion in revenue. Almost two-thirds of Pinduoduo’s revenue comes from Tier 3 cities and rural areas, where the company has found a sweet spot with female shoppers.

There is great potential for social shopping to help facilitate the discovery and adoption of new brands in places where inexperienced consumers may distrust formal marketing efforts.

The unique needs of rural China are sparking novel innovations, which are noteworthy in their own right. Equally interesting, I believe, is the possibility that some of these ideas could flow back into larger markets to inspire new retail approaches there as well.

Theme #3: Novel Fusion of Commerce and Social Good

The 2018 China Internet Report identified four overarching themes influencing China today, and one of these is that the Internet is empowering the rural population.

Growth in Internet access and eCommerce has had broad social impacts, like more access to media, education options and choices for mobility. It is estimated that at least 55 million students in rural schools are now reachable via live-streaming classes. And, over 78 million rural users get their news from one of the three primary news apps at least once a month.

One dimension of this rural empowerment is the unique fusion of commerce and social good. A great example is the rise of the Taobao Village. This term refers to any rural village where at least 10% of households sell goods online, with annual sales of at least $US 1.6 million.

In 2017, there are an estimated 2,100 such villages, creating an estimated 1.3 million new jobs throughout rural China. These portals into the global economy have transformed life in villages, providing new options for jobs and economic activity.

(Image Credit: China Internet Report, 2018)

On another front, Alibaba recently announced ambitious plans to alleviate rural poverty by investing over $US 700 million in the eCommerce platform Huitongda. The initiative uses technology to help poor farmers improve their business, for example through things like analyzing consumption data to upgrade planting schedules, using video recognition technology to improve animal survival rates and providing loans to help under-resourced villagers obtain operating capital for small business. Already, there are almost 10 million online shops run by rural farmers, with many more slated to follow.

Knitting the Threads Together

Signs of the retail explosion are everywhere, remaking life in rural China. Within PepsiCo GCR, our commitment to being 'In China, For China, with China' includes not only Tier 1 and Tier 2 cities but extends to these fast-changing rural areas as well where we are actively innovating to meet the needs of rural China. We are developing products to meet rural consumers’ growing interest in health and wellness products through our Quaker portfolio. And, are working to extend distribution reach to additional Tier-4 markets where Pepsi and Lay’s don’t yet serve consumers.

It is my great privilege to lead during this time of vast and fast-paced retail transformation. Thanks for traveling a part of this journey with me, and I hope you’ll keep this part of the world on your radar as an incubator for emerging retail trends.

Seniors Will Power a New Silver Economy: 3 Ways to Better Serve Them

In China And Around The World, More Seniors Than Ever Before

A curious headline caught my eye recently: “In A Chinese Village, Elderly Farmers Are Now Yogis.” In the rural hamlet of Yugouliang, where the average age is 65, a government-sponsored yoga program is all the rage and is credited with reenergizing senior citizen residents. The program leader, a senior himself, learned yoga using YouTube videos and touts ambitious plans to expand the program to neighboring villages.

This heart-warming story highlights an important demographic trend that is shaping business and tech culture here in China – the graying of the population. According to the United Nations, China is aging more rapidly than any other country in the world. By 2050, the number of people in China age 60 or older is expected to reach 487 million – more than one-third of the total population. This will be a huge shift from previous decades when younger people, with many working years ahead of them, formed the bulk of the population.

This staggering statistic is writ large in daily life here, and the trend is not unique to China. Countries around the globe are experiencing a similar growth of their senior populations, as the babies born during the post-WWII boom age into later life. By 2050, there will be 1.6 billion more seniors living on the planet than there are today. 

This trend fascinates me both personally and professionally. In my own family, I have seen firsthand how tech and eCommerce innovations like FaceTime and grocery delivery enrich the lives of my parents and in-laws. Bigger picture, I am interested in how the needs of this mushrooming senior cohort will inspire tech advances and drive economic growth around the globe.    

Seniors Will Power Global Retail Growth  

The growing number of senior shoppers will create a global “Silver Economy” that represents a vast economic opportunity, particularly in the retail sector. Consulting firm AT Kearney projects that the global spending power of the over-60s will reach $15 trillion USD by 2020. In China alone, the market for goods and services for elderly consumers will reach $17 trillion in 2050, making it one-third of China's economy.

This is a remarkable shift from previous decades, because the biggest spenders of the future will be the elderly, not the youthful Millennials who so often dominate boardroom conversations.

We are at a cultural turning point, and it is an important time for business leaders to recognize the elderly as the seasoned consumers that they are. Serving this demographic is an important strategic objective within PepsiCo China. As the company strives to continue our almost four-decade legacy of bringing delicious and nutritious products to consumers of all ages, we recognize that meeting aging shoppers’ needs means going well beyond “bolting on” a senior strategy to re-thinking every aspect of the business from a senior’s point of view.

Here are three ways to think about better serving senior shoppers.

Strategy 1: Create Retail Experiences that Put Seniors First

While retail buzzes with an emphasis on “experience,” we often think through a millennial lens (e.g., pop-up shops and social media-worthy merchandising.) What could happen if we defined “great experience” with Silver Shoppers in mind?

Japan is known for already having a sizable senior population, and the country’s retail sector provides some great thought-starters. For example, Japanese retailer Aeon recently remodeled stores to better accommodate senior shoppers, including exercise spaces, complimentary green tea stands, resting areas, and a curated assortment of items with senior appeal. I can 100% see my mother-in-law becoming a devotee of an in-store exercise group, how about yours?

In the grocery sector, 7-Eleven stores have broadened their assortment to become a one-stop-shop for elderly shoppers who may find it more difficult to visit multiple destinations. These so-called “hubs” of the senior community now offer an expanding array of items, including: meal kits, home goods, healthcare items, bill pay, ticket purchasing, and meal delivery services. 

I can only imagine that own my in-laws in Dallas would enthusiastically embrace a similar one-stop-shop solution.

Strategy 2: Make It Easy for Senior Shoppers (and their families too)

Companies can and should become an important link to ensure seniors do not end up on the wrong side of the digital tech divide. In China, NGOs and businesses have mobilized to make sure that older citizens are able to benefit from tech innovation.

In February, Alibaba’s Taobao launched a new shopping channel designed specifically for seniors. The company simplified their interface, stripping away a lot of what seniors didn’t need and making it easier to register, browse, and gain product recommendations.

Alibaba also recognized the difficulties that come with shopping for aging parents and built a family feature into the new platform. Senior parents can share products they want, ask questions, and consult with their adult children from within the app. For their part, the “kids” can use the “Pay for Me” option to digitally pay for purchases.

I applaud this initiative, which highlights the great transformation that can happen when a company aims to simplify with senior shoppers in mind.

Strategy 3: Innovate to Improve Seniors’ Quality of Life

I am inspired to think that sound initiatives for courting the lucrative senior market can serve the dual role of helping seniors live richer, happier lives. To fuel innovation, companies should keep in mind that silver shoppers are willing and ready to be inspired, challenged and counseled. In the aforementioned Drum study, 76% of senior respondents said that companies and brands should play a more important role in improving their quality of life, while 60% think that brands should play the role of life coach.

PepsiCo’s Quaker brand provides a nice example in this arena. As the #1 global oats brand, Quaker is committed to ensuring that the concept of whole grains is brought to more households across China, including those of seniors.

This mission comes to life through innovation and education. In 2018 Quaker is launching Chia Multi-Grain Instant Oatmeal, bringing enhanced nutrition to seniors. Quaker is also partnering for the first time with TangDou, a very popular app with over 50MM senior users that focuses on square dancing, a common activity for seniors to stay active and enabling Quaker to educate more around the importance of whole grains. All of these products meet and guide the needs and desires of senior shoppers, who have shown a robust and growing interest in healthier food options in recent years. We are also partnering with the CNS (Chinese Nutrition Society) to give senior shoppers access to good nutritional advice during the annual National Nutrition Week and through ongoing marketing activities. 

Further afield, innovations like drone delivery and mobile grocery trucks could help bring much-needed goods and services TO senior shoppers who struggle to frequent physical stores.

All of these examples inspire me to think about the huge potential for doing business with seniors while doing good in their lives.

Approaching the “Silver Economy” with Optimism

I am excited to continue to find new and innovative ways to serve Silver Shoppers. As we collectively plan for the tremendous opportunity the Silver Economy provides, let’s see beyond the data point of this huge demographic trend to serve the people, finding ways to meet their unique needs along the way.

GUEST POST: OBSERVATIONS FROM CANNES 2018 BY AMY CHEN

Bonjour!

I’m Amy Chen, and I’m the CMO of PepsiCo’s Snacks business in China. A few weeks ago, I spent an incredible few days at the Cannes Lions “International Festival of Creativity”. (https://www.canneslions.com/). The annual event – now in its 65th year – brings together thousands of marketers, agencies, and creative communicators from around the world to “learn, network, and celebrate.”

The festival features hundreds of panels and presentations, as well as tailored programs like the CMO Accelerator that I attended, all geared towards discussing and defining the future of creativity. https://www.fastcompany.com/40584295/what-cannes-lions-2018-will-tell-us-about-the-attention-industry

Here are a few of the biggest themes from the week:

1.     Social responsibility, purpose, and morality come to the fore. In the era of #MeToo, it’s no surprise that there was much grappling with gender inequality and the (lack of) diversity in the creative world. http://www.alistdaily.com/entertainment/cannes-lions-activism/. “Creativity needs diversity” became a rallying cry for a more diverse future, as well as an acknowledgement of the critical role that diversity plays in driving creative breakthroughs in the first place. There was a broader undercurrent as well this year about the responsibility of advertisers and businesses to create the world that we want to live in. It’s a good challenge for all of us to think about! “Goodvertising” became a term of art, and the “Change for Good” Hackathon ran throughout the week. The United Nations mobilized creative support for the Sustainable Development Goals and unveiled a new “Lion’s Share” program to protect wildlife. Parkland, Florida, school shooting survivors shared the power of conviction in driving meaningful change. And Unilever’s Paul Polman, who was awarded the “Lion Heart” award, gave a clear and impassioned call to action: “poverty is not a sustainable business strategy for anyone”, he said, and “it is becoming increasingly clear that sustainable, purpose-led growth is the best way to meet the long-term needs of consumers and society.”

2.    From science vs. art to science and art – the ongoing (over-hyped) debate about data, technology, and creativity. I knew this would be a big topic when I saw the huge billboard at the entrance to the festival: “Remember when creatives didn’t ‘do’ data?” Once you turned the corner, you encountered a cheeky response: “Shift happens.” Speakers drummed up drama by debating whether data and technology would be the “downfall” or “savior” of creativity; one session even teased that it would “pit real-life audience members against the algorithms that run their lives”. By the end, I think most concluded that data and creativity is not an either/or, but rather a challenge of how to most effectively integrate the two. https://www.alistdaily.com/technology/cannes-lions-2018-how-technology-is-disrupting-the-creative-process/. A number of companies shared how they’ve approached this question, with inspiring case studies of how artificial intelligence is accelerating creative productivity, data is revealing deeper consumer insights, and technology is charting new creative frontiers in health and even beauty.

3.    (Too) Big tech? Between Cambridge Analytica, fake news scandals, and privacy breaches, the “golden child” shine of the tech industry has dulled a bit. NYU professor Scott Galloway continued his crusade to “break up big tech”, and there did seem to be a palpable anxiety about the control and influence that these companies have on our lives as individuals and as a society. At the same time, most people I talked to seemed deeply conflicted on the matter. Think of it this way: even if you know it’s bad for competition and are frustrated that Alexa systematically biases search results to favor Amazon’s house brands, you’ll probably decide that Amazon Prime is just too convenient to stop using. And even if you’re uneasy that Google has a near monopoly on search, you’ll probably keep googling regardless. And if you’re Cannes Lion, you’ll have panels debating the virtues of big technology companies, but still award Google the coveted Marketer of the Year!

4.  China on the Rise. Tech giants Alibaba and Tencent (and KFC, JD, Huawei, and a raft of other Chinese companies) were at the festival en masse, anchoring a “China Day” program that sought to dispel any doubt about China’s ascendance on the world stage of creativity and innovation. https://www.canneslions.com/the-festival/china-day.

China was the only country to have a dedicated forum, and the speakers covered a dizzying array of leading edge case studies on everything from breakthroughs in omnichannel commerce and marketing to “superapps” like WeChat; the emergence of the world’s largest market for e-sports and electric cars; and creative ways that brands are preserving thousands of years of cultural heritage by making them fresh again for new generations. Martin Sorrell (founder of WPP) went so far as to declare that China’s imminent dominance was undebatable

5.   The more things change, the more they stay the same… Creativity and innovation will still win the day. There was a lot of (inside baseball) chatter about the changing nature of the creative industry: the shake-up at WPP, the entry of consulting firms like Accenture and Deloitte into the creative space, the disruption caused by data and new technologies. But amidst all of this flux and chaos, my clearest takeaway from the festival was still the raw and tremendous power of creativity. Creativity inspires us, moves us to tears, makes us laugh, and allows us to believe that the future can be different than the present. https://www.adweek.com/creativity/check-out-all-30-grand-prix-winners-from-cannes-lions-2018/

As I’m sure you can tell from even this brief post, it was an incredible week in Cannes. I’m coming back to my team and business inspired to help create the future through brands, ideas and experiences that matter in the world… and I hope you will join me on this journey!

Au revoir,

Amy

===============

Amy Chen is the Chief Marketing Officer of PepsiCo’s Greater China Region (GCR) Snacks Category. Amy has been with PepsiCo for eleven years and has held a broad range of roles across functions and operating divisions, including sales and customer management, operations, innovation, and marketing. Amy is a passionate believer that business – and brands – can be a force for social good. She currently serves on PepsiCo’s Global Human Rights Operating Committee and is an executive sponsor for Food for Good, a PepsiCo initiative focused on inner city nutrition that she founded in 2009.   Before joining PepsiCo, Amy worked as a strategy consultant for McKinsey & Company. Amy has an M.B.A. and a J.D. from Stanford University, as well as an undergraduate degree in chemistry from Harvard.

Reflections from BOAO

You’ve heard of Davos, where the global intelligentsia gathers each January, but how about Boao? Each spring, this charming town on the southern Chinese island of Hainan hosts the Boao Forum for Asia (BFA), which brings together attendees from international political, business and academic circles.

I had the pleasure of participating in my first BFA recently, and I enjoyed the chance to step back from the hum of daily life and reflect on some of the big ideas shaping our world. The economy is a central topic at the conference, and there was no shortage of talk about trade policy, the Belt and Road Initiative, and the impact of emerging technologies.

Yet, one of the more interesting themes focused not on tech but on people and their role in the new economy. In particular, conference speakers highlighted the importance of valuing people, including people, and serving people at a personal level.

Dialog about the coming 4th Industrial Revolution can sometimes overwhelm with talk of automation and unemployment. Yet, I left the conference more certain than ever that human creativity and innovation will be as important in the next century as they have been over the past 100 years. Here are three conference insights that illustrate why:

#1: APPRECIATING PEOPLE: REDISCOVERING THE VALUE OF HUMAN WISDOM

The 2017 G20 Summit put the digital economy on the top of its agenda as one of the fundamental solutions & directions of the world economy. This term refers to the economic activity that results from the billions of online connections among people, businesses, devices and data. The scale of the digital economy is expanding, and its proportion of national GDPs is rising. In the U.S., the digital economy accounts for 58% of the GDP. In China, it accounts for 40% – a number that is growing.

Futurist and Wired founder Kevin Kelly told the forum that the digital economy will be driven by robots, VR, artificial intelligence, IoT, blockchain and other new technologies. However one of Kelly’s most profound insights was also incredibly low-tech: the digital economy is nothing without people. Rather, it is simply a new economic system that embodies age-old human intelligence and behavior. For example, AI and cloud computing are extensions of intelligence needed for solving the problem of ‘what we should do.’ The Internet of Things realizes communications between humans and the world and settles the problem of ‘how to do.’ And, the robot is an extension of specific human behaviors.

Kelly reminded conference-goers that amidst rapid innovation, humans remain superior at asking “why.” We continue to outperform machines when it comes to exploring, curating, inventing, innovating, and experiencing new things.

SO WHAT? As we contemplate the 4th Industrial Revolution, smart leaders will remember that people– not machines– lie at the heart of the digital economy. For organizations, this reinforces the need to pursue a strategy of people-first innovation. Even amidst rapid automation, leaders must prioritize efforts to attract and retain the best people. Increasingly, this will include hiring those with the soft skills (e.g., curiosity, empathy, creativity) necessary to imagine a machine-aided society. And, formalizing ways to train and incent leaders at all levels to value human collaboration as much as technological proficiency.

#2: INCLUDING PEOPLE: A MANDATE FOR “RADICAL INCLUSION"

The conference theme was “an open and innovative Asia,” and the related idea of inclusivity surfaced in many sessions.

Several speakers reminded conference-goers that the application of new technology is unbalanced around the world and, in many cases, causes polarization and marginalization. This inspired me to think deeply about our collective responsibility to make sure the digital divide doesn’t leave large segments of the population behind.

Israeli entrepreneur Yossi Vardi advocated for the need to change the idea that only government is responsible for solving these problems. He stressed that inclusive measures should be taken to allow all classes to join in and help marginalized groups gain access to resources as much as possible. The proceedings were peppered with specific examples, like Altimeter Capital partner Ram Parameswaran’s suggestion that providing internet access for the 5 billion people currently without it is the next blue ocean for Internet providers.

SO WHAT? This insight about inclusivity highlights the opportunity for companies to add the lens of “tech equity” to their current sustainability efforts. Doing this would bring organizational focus to the ways tech innovation will change a business and invite action. For example, emerging technology will undoubtedly burst open the already wide income gap between skilled and unskilled workers, while also leaving many without viable employment options. This suggests a clear mandate to prioritize initiatives aimed at reskilling and up-skilling an organization’s workforce. It also beckons companies to look further afield to support efforts that ensure the next generation has the skills to thrive in the automated workplace of the future.

#3: SERVING PEOPLE AT A PERSONAL LEVEL

The term “New Retail” was another one circulating often throughout the conference. For those less familiar, analysts use this moniker to refer to the use of technology, upgraded manufacturing, financial tools and data-backed logistics to reimagine the interplay between consumers, merchandise and the retail space.

While technology powers the New Retail economy, presenters emphasized the fact that it is knowledge of people (otherwise known as customers) that will ensure success. In the New Retail world, products will be designed based on the analysis of customer behavior and created before people even realize they have a need. Hans-Paul Burkner from BCG noted that the key to this future retail landscape is to really know your customers and create an experience beyond just purchasing, which requires constant experimentation via data mining and analysis.

SO WHAT? As I contemplate the “new retail” world, I am particularly interested in the ability to use data for mass personalization. How quickly can we move from leading companies that make products for the masses to leading companies that create a personalized offer for tomorrow based on what someone consumed yesterday? This critical path to success will emanate from a people-first approach.

ON REFLECTION

I greatly enjoyed the opportunity to meet, learn from, and exchange views with so many inspiring thinkers from around the globe. Among many other things I learned that: #1: People, not machines, will lie at the heart of the digital economy. We should shape our organizations to value the human in a high-tech world. #2: As we approach the 4th Industrial Revolution, companies can use the lens of “tech equity” to focus their sustainable business efforts, and #3: Tech innovation powers “new retail,” but success will go to the businesses that understand their customers at a personal level and tailor their offerings accordingly.

I am energized by these insights from Boao, and I hope you will be also!

A View from One Of WeChat’s 1 Billion Users

WeChat has been a hot topic in the news after recently reaching the milestone of 1 billion active monthly users. I became one of them after moving to Shanghai, and I have spent a lot of time learning the ins and outs of China’s most-used app. Several months into life as a Shanghainese, what can I tell you about WeChat?

First, a WeChat few basics for those who may not be familiar. The Chinese call the platform “Weixin.” It is the “jewel in the crown” of tech-giant Tencent’s growing empire. WeChat accounted for at least one-third of Tencent's $9.8 billion USD earnings ($65.2 billion RMB) in Q3 of 2017. Further, WeChat drove its huge user base and their cash into other Tencent services, like gaming.

Tencent launched WeChat in 2011 as a simple messaging platform, but it has since evolved into China’s “everything app.” It is a social network, messaging platform, mobile pay service, professional interface, eCommerce site, and national ID system– all rolled into one.

Like so many things in China, WeChat defies a simple East versus West comparison. It is a uniquely Chinese digital ecosystem that is best understood on its own terms. Here are a few ways WeChat is distinctive from the digital players that dominate in the West.

1) It’s Your Chinese Wallet

Mobile pay has experienced explosive growth in China over the past few years. 90% of consumers use some form of it, and the country is well on its way to becoming the world’s first cashless society. Chinese consumers spent $9 trillion USD via mobile payments in 2016, and this dwarfs the $112 million paid in the U.S. over the same period.

WeChat helped put mobile pay on the map in 2014, when the brand launched a campaign that allowed users to send digital versions of the red envelopes (hongbao) that Chinese traditionally exchange

during the Chinese New Year. The digital red packets were wildly popular, and Chinese of all ages scrambled to sign up for WeChat Pay so they could participate.

During the red packet promotion, the number of people using WeChat payments more than tripled, from 30 million to 100 million, and this user base continues to grow. Tencent now owns 40% of the mobile pay market, and is quickly gaining on rival Alibaba. Incidentally, the red envelope campaign continues to feed that growth; during this year’s Spring Festival, WeChat users exchanged a record 688 million virtual packets.

Big picture, this huge base of WeChat pay users are making mobile pay a way of life in China. Your phone is becoming the preferred, if not the only way, to pay for food, transportation and goods. Restaurants, from white tablecloth establishments to street vendors, only accept mobile pay. Taxis don’t take credit cards. Grocery stores feature scanners that allow one-touch mobile pay, and three-quarters of fast food purchases are paid for using mobile. In fact, 40% of consumers carry less than 100RMB ($15US), and many people I know can’t remember the last time they carried cash at all.

2) WeChat Is a One-Stop Shop

WeChat is your Chinese wallet, but it is so much more. Reporters use words like “embedded,” “revolutionized” and “operating system for your life,” to describe the role WeChat plays in Chinese culture.

Stratechery's Ben Thompson explained this well, noting that “for all intents and purposes WeChat is your phone, and to a far greater extent in China than anywhere else, your phone is everything.”

After living here a few months, I can attest that these comments are absolute truth versus journalistic hyperbole. 

On an average day, I can wake up to check my social media feed, pay for my green tea, join a video call conducted within the app, confer with colleagues, catch a cab to dinner, buy plane tickets for an upcoming vacation, make a doctor appointment, pay a few bills and order groceries – all without ever leaving the WeChat ecosystem.

This is quite different from the U.S., where I would need to toggle between a number of interfaces like Facebook, ApplePay, iMessage, LinkedIn, Slack, Skype, email, Uber, and several different websites, to complete the laundry list above.

I find myself spending increasing amounts of time within WeChat, something I have in common with my Chinese-born friends. Today, Chinese internet users spend one-third of all their time on mobile in WeChat. And, over one-third of WeChat subscribers use the WeChat app 30 times per day.

Currently, digital life is more fragmented in China than in the US. In fact, the average user installs 40 apps per year. However, Tencent is focused on adding new services that keep users within the WeChat ecosystem. The launch of mini programs in 2017 (more about those below) and a very recent foray into a mobile marketplace called WeShop means I’ll eventually be able to purchase almost anything I can think of from right within my WeChat account.

Tencent’s stated vision for WeChat is to connect “people to people, people to services, people to objects” – and they are fast achieving it.

3) WeChat Is Blurring the Lines Between the Online & Offline World

If universal connectivity is the name of Tencent’s game, “mini programs” are one principal way WeChat is achieving it.

Launched in 2017, these “light” applications allow users to find and use an application through WeChat without downloading the app or leaving the WeChat ecosystem.

For example, let’s say I spot a bike rental kiosk and decide I want to get some exercise instead of hailing a Didi. I simply scan a QR code on the bike to open the app within WeChat, sign up for the service and then pay using WeChat Pay. 

No waiting for a space-hogging app to download. No complicated registration and verification process. I just scan, touch and go.

A recent article calls Mini Programs “bookmarks dropped all over the physical world,” and that is an apt description. For sellers of all kinds of goods and services, they provide a link between the physical world and the digital world of WeChat and their users. I can access anything I see in the offline world by scanning a QR code. And, anything that provides a paid-for good or service can be finalized with WeChat Pay.

At current, I can use mini programs to check into a hotel, buy something on social commerce site Pinduoduo, or pick up food at KFC without waiting in line. Companies are just starting to experiment with the capabilities of mini programs, and new uses are appearing daily. For brands that have a significant presence in the physical world, these embedded apps provide an extremely powerful way to allow consumers to discover and interact with your offering in real-time.

What to Make of WeChat?

If it is almost unthinkable for an individual to navigate life in China without a WeChat account, the same is quickly becoming true for companies of all sizes.

As I embark on my journey to understand the nuances of WeChat marketing, the word seamless will guide me. WeChat makes it seamless to buy things, seamless to accomplish most any task, and creates an increasingly seamless link between the brick-and-mortar and the digital.

The frictionless world of WeChat is creating incredibly high expectations among Chinese consumers. They are accustomed to a hassle-free shopper experience and have a lot less patience for some of the hallmarks of the U.S. shopper experience. For example: interacting with an associate, verifying identity to pay, typing in a website, toggling between a social media app and a retail site, or even waiting in a line.

WeChat has made QR codes a ubiquitous part of life in China, and using them is second nature for Chinese consumers. They expect to use QR for payment, but also for a growing number of tasks like finding a company online, researching product information, or accessing how-to videos for physical products. A company not actively using QR codes to make life more convenient seems behind the times by Chinese standards.

Further, the WeChat ecosystem is driving a huge appetite for personalization. WeChat (and competitor AliPay) are amassing incredible amounts of data. With every transaction, they know what you buy, where, and how much you spend. They use that data to continually add new features and personalized recommendations within the app. Consumers across the globe expect personalized service, but Chinese consumers are taking this to a new level.

WeChat makes so many parts of daily life supremely easy, and Chinese consumers consequently have little patience for companies that don’t follow suit. This is important for business leaders looking to develop a China strategy and also a great inspiration to help us imagine what could be in the United States and throughout the west. Seamless experience is the name of the game.

Chinese New Year : Celebrating the Traditional & the Modern in the Year of the Dog

Chinese New Year Instore theater

Greetings from Shanghai where the pace of life is slowly returning to normal after the Chinese New Year festivities, which kicked off on February 16th.

I’ve long enjoyed CNY celebrations in cities around the world. However, the experience of my first Spring Festival in Shanghai is one I will not soon forget.

The 15-day festival is the most important holiday on China’s cultural and retail calendars. For reference, it's interesting to know that Chinese families spent close to $100B on CNY shopping and dining in 2014– almost double what was spent during American Thanksgiving.

A CULTURAL TENSION

Among other things, I observed the festival to be a study in contrasts. On the one hand, there is a strong cultural imperative to return home for a traditional celebration with family members. I still have a hard time wrapping my head around the fact that homeward-bound Chinese travelers make almost 3 billion trips annually during the New Year celebration, creating the world’s largest human migration.

However, the idea of duonian, or “escaping” from the Spring Festival is also gaining popularity throughout China. Growing numbers of urban professionals enjoy escaping the mainland for international vacations, while migrant workers are increasingly forgoing trips home to skip the financial burden of the gifts expected to accompany their arrival.

PepsiCo's Quaker Chinese New Year displays

Travel home or escape? Cook a traditional meal or dine out? Shop at customary markets or online?       Give time-honored gifts or foreign goods? Or even an English couplet?

The interplay between 4,000 years of tradition and a decidedly modern lifestyle was at play throughout CNY preparations and celebrations this year.

At many points during the festival, I encountered people expressing aspects of this duality – a deep yearning to honor tradition mixed with a desire to infuse their holiday celebrations with contemporary goods and experiences.

AN OPPORTUNITY FOR BRANDS

I also observed several companies actively helping Chinese consumers reconcile this cultural tension. They represent great examples of how a brand can deepen their relationship with consumers during moments that matter, by answering unmet needs and desires with delightful solutions.

WeChat:

Image: Caixin Global

I’d be remiss not to start with WeChat’s reinvention of the hongbao, or cash-filled red envelope customarily exchanged during CNY celebrations. In 2014, the company launched a Red Envelope App, which allowed users to digitally participate in the customary gifting. 

WeChat drew on the traditional iconography of the red packet, so the app felt familiar and rooted in tradition. However, a novel innovation allowed gifters to send a lump sum to a group to be dispersed in random amounts, adding a new element of surprise and luck.

By all accounts the idea was a cultural hit, and exchanging money via the Red Envelope app has become a modern tradition (and a clever way to drive WeChat trial and use). In 2017, approximately 46.6 billion red envelopes were exchanged – an incredible 33 envelopes for every person in China. Aptly, The China Post declared that, “even grandma is ditching hongbao for WeChat’s digital red envelopes.” 

TABAO:
Chinese New Year preparations customarily include family shopping trips to local markets to buy fabric for new clothing, décor items, gifts, candies, and the ingredients for holiday meals.

Today, consumer goods are abundant throughout the year, families live further apart, and shopping trips are rapidly shifting to hypermarkets and online. Yet, many still yearn for the time-honored market experience.

Last year, the eCommerce website Taobao acknowledged this tension with a beautiful redesign of their user interface for the CNY holiday. The seasonal overlay drew inspiration from a famous, Song-dynasty era painting of a traditional Chinese market, Along the River During the Qingming Festival. 

Image: Dragon Social 

Taobao created an animated, interactive interpretation of the art that became their homepage during the festival. Users could shop the animation, either by clicking parts of the picture corresponding to what they wanted to purchase or by using a search feature. 

This creative website redesign was an insightful solution to help shoppers reconcile a longing for the traditional market trip with the ease and convenience of accomplishing their holiday shopping online. 

NOKIA:
During the festival, there is no shortage of nostalgic advertising that explores the increasing difficulty of pausing one’s busy life to return home. 
(See here, here, and here, but have your tissues ready). 

Image: Nokia China

This year, Nokia did something less expected with their holiday advertising, which launched the Nokia 6 just ahead of the CNY. The campaign features a dutiful son who is a busy actor, unable to return home for the New Year. 

His mother, unsatisfied with a video call, surprises him on the set of his film with a home-cooked meal, and the pair enjoy a warm dinner together.

I love the way that Nokia suggests an unexpected solution to a common consumer dilemma, by reimagining the idea of the “return home” and opening up new paths to family togetherness.

PEPSI:

Pepsi’s “Bring Happiness Home” campaign is a fourth and final example of the insightful updating of CNY tradition. Each year, the brand partners with award-winning talent to produce a short film that celebrates CNY and explores the idea of a “happy family.” 

This year’s production, Thunderbolt Parents, is a musical comedy that tells the story of two generations of love and dreams. It sagely reminds “young people” across generations that we will find our parents much cooler (and more complicated) than we imagine if we only make an effort to understand them.

Image: Pepsi, 2018

Over the past 7 years, Pepsi’s launch of a short film has become a CNY tradition in its own right, signaling to consumers that the Spring Festival is near. 

This year’s project has already garnered over 600 million views, along with a noteworthy amount of social media buzz.

I appreciate the way that Pepsi, true to its fun-loving spirit, uses a star-studded cast and karaoke-worthy tunes to refresh the idea of the traditional reunion dinner. Pepsi joyfully reminds consumers that, with a little heart, celebrating the New Year with family can be a lively, modern affair. 

THE YIN & YANG OF MODERNITY AND TRADITION

These examples are four sparks that illuminate how an insightful blend of the customary and the contemporary can result in a delightful updating of tradition. 

Rapid technological innovation and increasing prosperity are contributing to moments of cultural change in cities around the globe. This is certainly true in China during the Spring Festival and at other times throughout the year as well. 

I believe brands, especially multinationals, are at their best when they can help consumers forge new ways forward while also helping them retain what is important from the past. 

The most successful will approach this opportunity with the perfect blend of fresh thinking and humility – a mandate that will be at the core of my work in the year ahead.

Happy Year of the Dog to all. Xin nian da ji! (Have a prosperous New Year.)

2018, A YEAR IN QUESTIONS

Have you ever heard of a “questionologist?” I had not, until I came across the word in a book by self-proclaimed question advocate Warren Berger. He posits that asking better questions can be a game-changer—sparking innovation and propelling us forward in our personal and professional lives.

This idea inspired me to frame up some thought-provoking questions for the year ahead of me. I’ve jotted down three queries, shaped by my observations about the significant cultural themes of 2017. I hope they will be thought-starters I can come back to throughout what promises to be an exhilarating year ahead.

 #1: CAN WE BE SMARTER ABOUT OUR SMART PHONES?
(Alt: Are Smart Phones Ruining Our Lives?)

 In 2017, a growing body of research illuminated the negative effects of our digital culture. We learned that we touch our phones a shocking 2,617 times per day, that the majority of Americans feel near-constant anxiety about how their social life stacks up (#FOMO), and that “phubbing” is weakening our relationships.

A steady stream of cultural influencers voiced concerns about the all-consuming powers of social media, with Deloitte dubbing mobile addiction a “real phenomenon,” and more than one of Facebook’s founders are publicly criticizing the platform for exploiting human psychology while weakening social bonds. This movement is perhaps best summarized by Justin Rosenstein‘s provocative statement that “all of our minds can be hijacked.”

People didn’t sit idly by as the realization set in that our screens make us less happy and reduce our brainpower. Rather, a growing awareness of the toll of near-constant scrolling, liking and swiping prompted cultural responses like the 72-hour tech cleanse, DIY hacks to help you use your phone less, and even the idea that you can become a “conscientious objector” to social media.

In the year ahead, I foresee the dialog about the potentially detrimental results of the “attention economy” continuing and reaching a broader audience. Even Facebook engaged this month, with the company’s first acknowledgment of the ways the platform can harm mental health.

In particular, I think we will see a growing number of people looking to companies and brands to help them re-evaluate the role of digital and social technology in their everyday lives. Undoubtedly, business leaders will continue to offer tech tools to connect with their customers. However, these efforts will be influenced by a cultural desire for more tech-free spaces – physical and mental.

This will include growing interest in tech tools that can help limit or modify existing habits and behaviors.

And, increased value placed on solutions that help bring some focus back to tangible experiences and relationships.  For example, travel providers predict the digital detox vacation will be a 2018 trend. And, Nokia punctuated this year’s holiday marketing campaign with the call to “Switch Off” for Christmas.

This tees up the first question to ponder in the year ahead:

How is my company suited to participate in the reappraisal of our smartphone-centric culture? How can we help people maintain the upper hand in their relationship with smartphones and create spaces for analog thoughts?

 WHAT LIES OUTSIDE MY FILTER BUBBLE?

 The events of 2017 also underscored the incredible power of technology (social media in particular) to divide versus unite.

Eli Paiser coined the term “filter bubble” in 2011 to describe the intellectual isolation that occurs when algorithms selectively tailor everything we see to align with what we already believe.

However, the concept experienced a true cultural inflection point this year, when it became clear that heavy filtered (and fraudulent) online content likely played a significant role in surprising election outcomes in both the U.S. and the U.K.

These revelations led to a productive cultural conversation about the ways that self-selecting algorithms have the potential to filter diverse viewpoints out of a growing number of aspects of our lives (what we watch, where we go, what we buy, who we meet, even how we get to work).

In the year ahead, I look for the movement to “break out” of filter bubbles to gain steam, with people actively seeking perspectives that challenge or at the very least broaden, what they already believe.

We are already seeing cultural signs of this including: public calls for more understanding (see article: “The Other Side is Not Dumb”), tech applications like Escape Your Bubble, and marketing calls for greater cultural acceptance á la this beautiful ad from HP.

From this space of recognizing and challenging bubble boundaries, comes a second question:

How can we help people better understand their own biases and cultivate a broad range of perspectives in their everyday lives?

 WHAT MAKES US HUMAN IN 2018?

 Before you write this last one off as coming out of some sort of phenomenological left-field, hear me out.

It is a safe bet that the word “robot” appeared in mainstream media content more in 2017 than in any prior year. In fact, Wired calls this the year robotsu really, truly arrived. We know that in the not-so-distant future machines will cook our meals, teach our kids, care for our aging loved ones and maybe even steal our jobs.

We also know that machine learning is quickly blurring the lines between what it even means to be a human or a robot. Over the past year, technologists have created algorithms that can design symphony halls, indiscernibly mimic human voices, and even pass college courses.

Futurist Kevin Kelly goes so far as to say that by 2025, technological advances will bring a convergence of humans and machines that will rework the planet’s sphere of consciousness.

In the year ahead, I would not be surprised to see a cultural identity crisis of sorts, as more of us stop to consider exactly what it is that separates humans from machines.

Thus far, I have seen this inquiry result in more interest in traits like creativity, imagination, and the capacity to empathize – all areas where humans still have (and are likely to maintain) the upper hand.

Additionally, I expect to see more cultural exploration—and possibly also governmental action— around the ethical implications of human/robot interactions.

I’ve also been pleased to see companies take a more active role in considering and investing in new educational formats that will help ensure that future generations will be able to stay one step ahead of our technological counterparts.

And so, a final question for leaders:

What am I doing to ensure that my company creates an environment where current and future generations can survive—and thrive—in a machine-powered world?

WISHING YOU AN INSPIRED YEAR AHEAD

There we have it. Three seemingly simple questions; very few concrete answers. I hope they will inspire unconventional ideas in my own work, and that they might spark new thoughts for you as well.

In the meantime, happy New Year, and best wishes for a fulfilling and productive season ahead.

There are fairly big changes on my horizon, as I prepare to move my family (dog included!) to Shanghai and assume a new leadership role. Please drop me a line if you find yourself in my new home city, where you’ll find me setting aside my mobile more often and looking to burst my filter bubble, while remaining ultimately thankful for the capacity of technology to help us build a better world.

Holiday Cheers for Inclusive Advertising

‘Tis the season for holiday ads. I always look forward to the parade of new efforts that dot the marketing landscape this time of year.

I love that the annual holiday “adstravaganza” has been elevated to a cultural event in the UK. (And, I am intrigued by the fact that some British marketers now monetize their holiday ads through the sale of related merchandise!)

These holiday messages surely exist to build brand equity and make the register ring. But taken together, I think they can also serve as a nice mirror that reflects back important themes on our current cultural landscape.

This year, I am heartened to see several ads (and their omnichannel extensions of course) veer beyond the more expected holiday motifs to celebrate moments of connection and inclusivity across differences.

From British grocery retailer Tesco, we see a celebration of the ways families from different walks of life and religious traditions participate in the shared ritual of the turkey roast. The spot, titled “Turkey every which way,” closes with the affirmation “Everyone is Welcome” at Tesco.

From Lego Australia comes a story of what can happen when Santa and the Asian martial arts archetype Sensei Wu team up to save Christmas. In addition to reflecting the spirit of imagination foundational to the brand, the whimsical tale delivers the charming sentiment that we are better when we work across cultural perspectives to “build together.”

From Sonos, the lively message that a shared musical celebration is just what is needed to transform a dull holiday gathering into an epic, multicultural and multigenerational holiday dance party.

And, from Samsung a poignant statement about the universal power of gratitude compliments a diverse group of building tenants who come together to thank the doorman who has gone the extra mile to make each of their holiday celebrations– from Diwali, to Christmas, to Chinese New Year –extra special.

In a year when the news headlines have been dominated by the many issues that divide us, it is refreshing to see marketers choose to hold up a cultural mirror that celebrates the potential for connection across boundaries, be they ethnic, religious, generational or otherwise.

Around the globe, our cities are diverse and becoming more so every day. Millennial consumers are particularly comfortable in this heterogeneous world and deserve credit for encouraging companies to stand up for inclusivity. Cheers to these advertisers who have taken note of this cultural shift and chosen to emphasize what unites rather than what divides this holiday season.

Happy holidays, and may each of you enjoy your own simple moments of simple connection amidst the year-end bustle.

Beyond Cryptocurrency: What’s the promise of blockchain for marketers & their consumers?

BLOCKCHAIN & BITCOIN: WHY ALL THE HYPE?

If your news feed is anything like mine, you’ve seen a lot of buzz about blockchain and the cryptocurrencies it supports over the last few months.

I am fascinated by this technology, and the predictions that it could transform life, as we know it. For a provocative glimpse of the blockchain-supported future, I recommend Taylor Pearson’s Ribbonfarm piece. In it, Pearson explores how blockchain technology could disrupt not only the internet, but just about every facet of life as we know it, changing: the capacity of nation-states to govern, how and why we choose to pay attention to things, the concept of a career, how we are compensated, and even how we get where we need to go.

Taking a more practical view, it is interesting to think about how blockchain is poised to revolutionize the nature of transactions in industries like finance, healthcare, and shipping – making them faster, cheaper, and more secure.

And of course, I am following the currently exploding investor interest in cryptocurrency. Revolutionary idea or bubble bound to burst? Financial leaders around the world say it’s too early to tell.

Yet, all the emphasis on these faceless transactions has me wondering – what about the people? What will the rapid expansion of blockchain technology mean in the life of the average consumer over the next few years?

THE TRUTH ABOUT BLOCKCHAIN: POWER TO THE PEOPLE

At it’s heart, blockchain technology has the power to transfer information from the hands of large organizations back to average people, and that is what I find most interesting about it.

For purposes of tracking with my thinking, it is helpful to conceptualize blockchain in its simplest terms, as a decentralized database that keeps a ledger of digital exchanges. Transactions are lumped into time-stamped “blocks,” locked into a chain of complex algorithms and then verified by a global network of independent ‘miners’ (working for digital payments, of course).

Once a block is added to the chain, it is almost impossible to change. As one expert describes, “meddling with a blockchain would be like trying to tamper with a fraction of a tapestry – “for the full picture to remain plausible you’d have to rewrite the whole thing.”

Thus, what “happens on the blockchain stays on the blockchain,” prompting The Economist to deem it a “trust machine.”

It’s not a stretch to see why someone in an industry like finance might wax poetic about this tech-enabled transparency. It has the potential to revolutionize currently time- and cost-consuming transactions like buying a home, notarizing a document, crowd-funding a company, or maintaining medical records. Banks, for example, could save $20B a year by 2022, simply by using blockchain technology to reduce the need for expensive and time-consuming audits and record-keeping processes.

Further afield, the blockchain will bring transaction costs down an “order of magnitude” to enable business models (particularly outside of large corporations) that haven’t even been imagined yet.

But, there are non-financial applications too, and this is where the technologist and marketer in me get most excited.

Consider the fact that the internet, despite all its democratic promise, has actually become a tool to consolidate control. As Pearson notes, “instead of a decentralized, open network, the Internet today is made up of a handful of applications that have leveraged their network effects to re-centralize information through the creation of walled gardens. Facebook, Google, and Amazon lead the pack.” Power, in the form of “data” and “information” is increasingly consolidated in the hands of a few, which become more omnipotent everyday. This is not lost on everyday people, who have growing concerns about protection of their personal information as well as the transparency of the tech giants, but few avenues for recourse.

The simple human truth about blockchain is that it could rebalance the scales, by transferring the control of information from companies back to consumers.

(An interesting side note here: Bitcoin’s anonymous creator, Satoshi Nakamoto, was purportedly inspired by a 1997 book called The Sovereign Individual, which forecast that a new technology of money would decentralize and dis-intermediate society in the way many originally hoped the internet would.)

SOUNDS GOOD, BUT HOW WOULD THAT WORK?

Because blockchain enables the rapid transfer of verifiable, incorruptible information, it has the potential to give everyday people greater control over information – their own data as well as what they receive from the companies with which they do business.

In the future, blockchain could be a valuable “trust machine” – or way for companies to deliver the accountability and responsibility that consumers increasingly demand.

To illustrate, here are three examples of companies experimenting with the transparency-enabling power of blockchain.

#1: London-based startup Provenance designed a tool to track a product through every part of its journey, including where it starts, where it goes, who has it, and for how long. Their current applications focus on food and clothing. For example, tracking tuna fish from hook to grocery store shelf. Ultimately, the company offers a “mind-boggling” amount of provenance information all tied together in one package that can be universally accessed via smart phone. It differs from the dozens of existing applications because the information is transparently recorded in the immutable blockchain. Founder and CEO Jessi Baker told Wired it is a “much-needed mechanism to broker brand trust,” and I have to agree.

#2: Everledger offers a product similar to that of Provenance, but one that creates a global ledger for diamonds and other high-value assets. The application tracks diamonds to confirm their authenticity and also ensure they are not conflict diamonds. It is unique because origins and shipping information belongs not to a certification house that consumers need to “trust” but is encrypted onto the immutable blockchain.

#3: Entrepreneur Mark Cuban recently unveiled a new project called Mercury Protocol, which seeks to create a next-generation social networking site, built atop the Ethereum blockchain. The team hopes that messaging apps like Facebook and WhatsApp will adopt the software, which showcases two innovations: 1) users can sign in without turning over any of their personal information, and 2) the platform generates tokens for constructive behavior, hopefully deterring the behavior of fake-news creators and trolls.

#4: Furthest afield but perhaps most interesting is Lotus, a global Buddhist community employing blockchain technology to ensure temples around the world use funds transparently. A ledger, visible to a global community of members, records and displays how funds are allocated and then spent. It is not hard to imagine how a for-profit company could apply this same technology to add a similar layer of transparency to their philanthropic giving or sustainability efforts.

Each of these ventures is leaning into the budding promise of blockchain technology to be a tool with which to offer transparent information. I can imagine a future where marketers of all shapes and sizes employ blockchain to help their customers know more about the things they buy.

Want to claim your product is handcrafted? From a unique or single source? Made of only sustainable or recycled materials? In the blockchain future, marketers will not just claim these attributes but be able to offer buyers verifiable proof.

Consumers are hungry for transparency, and the blockchain will help companies provide information it in its most unadulterated form. This makes it an incredibly powerful tool for brokering brand trust. That – cryptocurrency trading boom aside – will be blockchain’s true promise for marketers in the years ahead.

WILL PREDICTIVE MARKETING MAKE RETAIL LESS FUN?

Every retail leader has “build a better predictive marketing program” on their to-do list this fall. Savvy marketers are using their growing troves of shopper data to predict what customers might want to buy next,  and then merchandising these items at every touchpoint.

In many categories, it is beginning to feel like shoppers no longer need to stop and consider what they actually might want to buy; they just refresh their social media feeds and let retargeted ads remind them what is on their list. Author Kevin Kelly calls this the “filtering effect,” and he identifies it as one of a dozen technocultural trends that will reshape society by 2050. He predicts that in the coming years the retail landscape will shift from “mass personalization” to “mass customization.”

 In this not-so-distant future, shoppers will look to filters (brands, curators, friends) and algorithm-powered recommendation engines to deliver customized clothing, food, transportation, and more–on demand. In retail, this could mean that most if not all experiences will involve browsing and selecting from a highly customized set of options that past selections suggest a shopper will like. As Kelly notes, “the filters have been watching us for years; they anticipate what we will ask. They can almost autocomplete it right now...To some degree we will rely on the filters to tell us what we want.”

WILL DATA CREATE A RETAIL FILTER BUBBLE?

 This incredible ability to individualize the retail offer sounds great at first blush. Shoppers have too little time to wade through too many choices, and data-driven marketing is a powerful solution. But the promise of such a hyper-curated universe also begs the question: if the filters narrow everything, what is being left out?

As retailers get better and better at offering customers only things they are highly likely to want – are we building a retail filter bubble? One that may eventually diminish the retail experience?

 The concept of the “filter bubble” describes the result when a constant personalization of (mostly online) content isolates people from news and information that does not align with their existing beliefs and search habits. Many argue that putting on such blinders – knowingly or unwittingly – can create tunnel vision, narrow one’s worldview and foster a negative “groupthink.” This has led to a movement to encourage individuals to “pop” the news filter bubble and preserve the diversity of online news and content, and even tech players like Google have joined the effort.

While the consequences for retail may not be quite so dire, it is troubling to imagine a retail world where shoppers mostly browse and purchase items that an algorithm has determined they will probably like.

At best, that sounds boring and staid in a category and culture that values the novel and unique. At worst, it could leave shoppers feeling dispassionate and uninspired. In a heavily filtered retail world, it is not a stretch to imagine retailers will see less brand and product diversity in shopper baskets, lower trial of new brands, and have fewer opportunities to surprise customers with an unexpectedly satisfying product.

That last point is the stickiest for me. Research supports the idea that unexpected discoveries are a critical element of the retail experience. In a large global study conducted by McCann Truth Central a few years, two-thirds (66%) of respondents said that they are looking to be inspired while shopping and over half (57%) worried that they will discover fewer new things if companies always show them exactly what they are looking for.

Culturally speaking, we know that deciding to buy something (or not) is a way for shoppers to define themselves and express their values. Do we really think customers will be happy to cede the bulk of their purchase decisions to a faceless algorithm, no matter how sophisticated or precise?

CAN SERENDIPITY SAVE THE RETAIL EXPERIENCE?

 So if we worry that too much data will make the retail offering predictable and uninspired, what’s the solution? Serendipity.

Serendipity is the unexpected discovery of something you had no idea you’d want, in a time or place when you were actively looking for it. Like my new Blackwing pencil collection – the perfect gift for an upcoming wedding anniversary, discovered cleverly merchandised at the checkout counter of my neighborhood bookstore. Or the Mr. Davis undershirt brand I bumped into while browsing a high-end watch site. (Editorial note to my wife: Just looking, I promise.)

The thrill of the find has historically been a key part of the brick and mortar retail experience. It’s the invitation to browse the storefront window, the thrill of the hunt during a flash sale, or the unexpected find in the holiday catalog. However, the move to data-driven transactions is crowding it out.

I recently heard the President of Chronicle Books describe an emphasis on serendipity as a key part of the retail strategy that has helped the company thrive where competitors struggle. “Our books have to be discovered,” she noted, underscoring the fact that simply battling it out on the shelves of Barnes and Noble or building a better recommendation algorithm would not cut it for the brand.

There is a kernel of wisdom in this strategy for all retailers. Besides pushing for more sophisticated big data competencies (which we surely should continue), it’s time to consider how to design a little bit of serendipity into the retail experience. It will keep shoppers out of a retail filter bubble and ensure that we continue to find ways to surprise and delight them.

A few real-world examples hint at attempts to design an element of discovery into a brand experience. Square recently opened curated showrooms. Havianas launched a series of summer pop-up shops in unexpected locations like a New York Ferry. And, Nordstrom launched Olivia Kim pop-up shops that introduced shoppers to a novel Korean eyewear brand.

These all facilitated finds in the physical world, but there is an opportunity to bring an element of surprise discovery into the online shopping experience too. I’ve challenged myself to think about how to weave online serendipity into my strategic thinking for 2018 and beyond.  Could a retailer or brand:

1.       Allow customers who are increasingly mindful of the filter bubble effect to opt-in to random email recommendations?
Real World Inspiration: New York Times writer Steph Yin subscribes to a handful of science-themed Twitter bots to provide “serendipitous notes that take me out of my day, if only fleetingly.”

2.      Build a bot that facilitates serendipitous discoveries on an eCommerce website?
Real World Inspiration: The SF MOMA developed an app that makes contextual recommendations, guiding visitors to unexpected works of art based on their physical location within the museum.

3.       Create their own monthly subscription service, offering an assortment of unexpected products that surprise & delight?
Real World Inspiration: Bespoke Post provides men a themed box of novel products, true to the brand personality but not curated to an individual’s taste and purchase history

At the end of the day, the march to a data-driven retail landscape is inevitable, and more personalized retail offers provide benefits for retailers and their customers.

However, in a world where shopper data work against the joy of discovery, there will also be value in preserving the power of the unexpected find. In the months and years ahead, let’s plan to deliver more serendipity, shall we?

Reflections From Berlin: The 4th Generation of Retail is Coming – Are You Ready?

“The future of retail will be led by sophisticated technology companies who happen to have a retail business.”

This quote lit a fire in me at a recent Consumer Goods Forum Summit presentation in Berlin, where pervasive topic of conversation was the fast-approaching 4th generation of retail (“4G Retail”).

Dan O’Connor, a fellow at Harvard’s Advanced Leadership Institute, spoke about the impending shift. In his conceptualization, the past 100 years saw three iterations of the retail model and the landscape today is being disrupted by a fourth new model.

O’Connor preaches that companies which function between innovation curves are best positioned for success. He cites Netflix as a great example, noting their ability to leverage one declining business model (the DVD) while anticipating and preparing for the next (digital content).

My key takeaway from his impassioned overview: in today’s retail environment, visionary leadership means optimizing for the world we know while preparing for the 4G Retail future.

Thinking about where retail has been helps us see more clearly where we are headed, so let’s dive in at the beginning!

The first wave, 1G Retail, was mediated through small, community-driven trade networks. In 1G Retail – which still accounts for 50% of the global retail pie – proximity, localization, and relationships are everything. This is the domain of the small family-owned shop where everyone knows your name and your buying habits.

Retail consolidation marked the beginning of the 2G Retail era. Starting in the 1960s and 1970s, large retailers (think: Wal-Mart) created new economies of scale by merging fragmented supply chains. These pioneers offered both convenience and cost savings, creating a juggernaut model that comprises 30% of the global retail pie today.

The rise of the online marketplace ushered in the third generation– 3G Retail. In this model, transactions take place on “platforms,” like Amazon or Alibaba’s Taobao. And, through what O’Connor calls “intermediaries” like Facebook, Google, or WeChat. Amazon’s IPO took place less than two decades ago. Yet, 3G Retail already accounts for at least 20% of global retail dollars.

Driven by real-time data analytics and rapid innovation (e.g., subscription pricing, mobile ordering, same-day delivery), the digital store model disrupted almost every aspect of the retail landscape. 3G Retail also prompted a shift in the very pace of the business, from a 52-week planning cycle to an environment that requires near-constant response to real-time developments.

 O’Connor dubs the next era 4G Retail or the age of “Real Time Retail.” In this 4G landscape, he predicts that a significant part of commerce will take place on a small handful of large digital value networks,” or digital platforms that serve a widening variety of functions including commerce, search, and social. Notably, technology companies and not traditional retailers will own these networks. In the U.S., we immediately think of Amazon, but around the globe, other platforms like Alibaba, Flipkart, and JD come to mind.

Tech innovation notoriously empowers consumers, and the Age of “Real Time” Retail will be no different. Imagine the 4G landscape like today’s retail on steroids – with interactions increasingly fast and frictionless. Transactions will take place on a few digital platforms, seamlessly along the spectrum between online and offline.

Same-hour delivery via driverless truck. Check. Personalized offers based on yesterday’s purchase behavior. Yep. A content-rich environment where everything you see is for sale? You got it. The 4G world will push the era of consumer control to its infinite boundaries, fueled by innovations around things like robotics, AI, driverless delivery, and 3D printing.

So now that we know that a 4G world is coming, what should we do about it?

 Here are three implications. In a 4G Retail World: 1. Data is table stakes 2. Retail platforms > media platforms 3. Success requires inventing new moments of consumer discovery.

#1: Data Is Table Stakes

In the 4G Retail future, the companies who control the data will rule the world. Success in the 4G retail world will require “big data collaboration” – both within organizations and across new (unconventional) manufacturer + retailer alliances.

This was illustrated in a recent Financial Times piece about Alibaba, which noted the company’s transformation into a growing “big data conglomerate.” Their massive data stream informs everything they do including merchant strategy, marketing, inventory management and even the layout of physical stores.

Despite the importance of data-driven insights, most traditional retail companies still face significant organizational and technical challenges to integrating and analyzing their own data. These issues compound when companies try to look further afield to think about how to work together with digital platform partners (e.g., Amazon) to optimize.

Getting their data house in order is an urgent matter for current retailers, since even simple data transformation efforts can take many years to launch.

#2: Retail Platforms > Media Platforms

My hypothesis is that in the 4G Retail landscape, the importance of large retail platforms will ultimately dwarf that of traditional media publishers. In fact, I am not sure the traditional standalone media content players survive in this future.

Think this sounds radical? Consider the similar tale of digital consolidation playing out in two very different retail markets, the U.S. and China.

In the U.S., Amazon is steadily reducing the need for online consumers to venture far from their site. They dominate commerce, with over half of shoppers starting every online shopping trip on the site and a full 90% cross-shopping Amazon even if they find what they are looking for on a retailer site. Amazon Prime Video is tripling their production of original content series over the next few years. Amazon Spark – curated retail in a social media format – looks poised to change the way we shop. In a retail future where consumers can shop, view content and socialize all within the Amazon platform, traditional publishers start to look much less relevant. 

That “single platform” future is even one step closer to reality in China. Alibaba-owned Tmall already controls more than 60% of the Chinese eCommerce market. Their multi-faceted Alipay is a true “killer app” that lets users complete a wide variety of tasks (from bill pay, to calling a cab, to getting a loan) right within the app. Like Amazon, Alibaba is aggressively expanding into digital media and entertainment with ventures including Alibaba Music, Alibaba Pictures and video-streaming site Youku. With aspirations far beyond simple retail transactions, Alibaba is building a vast “social commerce” ecosystem that supports almost everything someone needs or wants to do online.

This shift to a world where commerce, content and social life seamlessly merge on a single platform will require marketers to rethink the 4P’s through the lens of ecommerce retail platforms. (These are the future “Digital Value Networks” in O’Connor’s G4 framework).

New alliances between retailers, manufacturers and social platform companies will be critically important. Retailers and manufacturers will succeed by viewing shoppers as more than “trips and baskets” and by understanding their increasingly wide array of behaviors on digital retail platforms. In a G4 world, an Amazon shopper could be binge watching her favorite show via Prime Video, purchasing the outfit the main character is wearing, while conversing with her friends about the plot twist that just happened. How will your product or service get in on the action?

Savvy industry leaders will benefit from thinking now about which partnerships matter and how to develop these.

#3: Success = Imagining New Moments Of Discovery

In a 4G world, the retail storefront will be “everywhere,” and it will be up to brands and retailers to create new times and places to engage shoppers.

Critical questions for retailers and manufacturers will include: Where and when are my consumers that my product could be? How can we bring our product or service experience TO them, as they come to us less frequently? How do we offer a personalized experience to every shopper?

A number of retailers and manufacturers have begun seamlessly integrating the retail and hospitality consumer categories by rolling out “buy what you see” lines available for purchase at boutique hotels. This seamless, arresting experience is a picture-perfect example of the thinking needed to succeed in the G4 Retail world.

The spoils will go to the companies with the vision to imagine and create the retail landscape of the future – where every space and moment of technological interaction with a consumer is a potential storefront. What can you do to create a more seamless, simple connection to your customers today?

At The End Of The Day, So What?

We’re at the early, nascent stage of the 4G Retail Age. Today, promise yourself that you will be one of the leaders with the vision to co-create the new, exciting, ready-to-be-built world of 4G retail that’s coming, whether we like it or not.

IN AN ERA OF NATIONALISM, WHAT’S A GLOBAL BRAND TO DO?

THE ERA OF THE LOCAL BRAND

One of my favorite things about my current job role is seeing firsthand the unique ways that global brands come to life around the world.

Take Quaker Oats, for example. The brand emanates from a universal product core but is expressed very differently in Dallas versus Shenzhen.

In my recent travels, I have seen thriving national and regional brands everywhere. There is Paper Boat Beverages in India, Oppo in China, and Casas Bahia in Brazil. The list could go on.

These aren’t just one-hit-wonders but part of a well-documented trend. Across countries and categories, global brands face increased pressure as domestic options give them a run for their money.

In China, foreign FMCG brands lost share in 16 out of 23 measured categories last year, facing pressure from nimble domestic companies. In India, domestic brands grew by 32%, while brands with global presence grew by only half that amount. A similar dynamic played out in Indonesia.

This trend is marked in growth economies but it affects mature consumer markets like the U.S. and U.K. too. In these locales, consumers increasingly trust smaller ‘craft’ brands, which command a price premium and garner intense loyalty based on the perception that they are more authentic or unique.

I can’t help but think that this growing ‘buy local’ sentiment is fueled – or at the very least enhanced – by the rise and growth of nationalist political movements around the globe.

In the United States, American Apparel will soon offer shoppers the option to pick a U.S.-produced version of their iconic t-shirts – a move the company says will cater to the segments of shoppers for which ‘buy American’ is critically important. China recently declared May 10 “Chinese Brand Day,” in an effort to help companies build strong domestic brands that will reinforce China’s status on the global stage.

The implications are clear for stewards of these regional and national challengers. The cultural wind is behind your sails and there is undoubtedly an opportunity to flourish and grow.

WHAT’S A GLOBAL BRAND TO DO?

The path is less clear for the larger global players. In an age of nationalism – what is a multinational brand to do?

I am intrigued by the idea that, in a world that feels increasingly divided, global brands are singularly positioned to connect.

The McCann Worldgroup conducted a global brand study that revealed two fascinating data points. First, 85% of respondents said they believe global brands have a role to play in making the world a better place. And, a full 81% said they believe global brands have more power to make change than governments. Wow.

I believe this view of global brand as positive change maker points to an opportunity for brand leaders to dig deep to consider what unique value they bring to the table.

As the mere value of being ‘international’ means less and less, what specific values can you bring to consumers’ lives? This is a two way street and companies have an opportunity to think both from the top down and bottom up. The most important thing for Global brands is not to blindly hinge their brands around western values. The value system might not cross boundaries in the turbulent geo-political world we live in.  

 ADDITIVE VALUE

Taking it from the top – what can you add to a local or national culture? Can you bring an idea, an offering, or an innovation that wasn’t there before?

Around the globe, retailer Ikea does an excellent job of communicating their unique Swedishness across consumer touchpoints. The brand’s value-add particularly shines through in the food space, where they offer authentic Scandinavian fare as a destination within retail stores and a category incremental to their core homegoods competency. An “astounding” 30% of Ikea shoppers head to the stores just for food and the company is considering expanding into standalone restaurants.

In a similar vein, consider retailer Muji’s offering of smartly and simply designed home and office goods. Their vast assortment of products shares a unique, Japanese design aesthetic that has created cult followings in cities around the world.

TRANSFORMATIVE VALUE

Working from the bottom, global brands and retailers need also to think about how the local context can enrich and transform their offerings.

For example, the Lay’s brand has done a great job adapting to local taste palates, introducing successful flavors like Magic Masala in India, Hot & Sour Fish Soup in China, Thai Sambal in Thailand, and Fish & Chips in the U.K.

Canadian athletic retailer Lululemon also understands that global success means thinking locally. The company chooses to sponsor not famous athletes but local community influencers through their local ambassadors program. The ambassadors receive skills training and business promotion (not to mention hefty merchandise discounts) in exchange for teaching classes in Lululemon retail locations and generally evangelizing the brand.

Fast-fashion retailer Uniqlo has also focused recently on making sure flagship stores express global ideas in local ways. This is achieved through the WearHouse program, which reserves significant floorspace in otherwise globally homogenous stores for local products and cultural events. Company leaders note that this is an important way to stay relevant while also delivering on the mandate to bring something back to local communities.

BRAND VALUE FOR GOOD

Finally, at the macro level, global brands should consider how they can leverage their scale for good. In this age of transparency, there is no hiding from one’s size or sweeping it under the rug. So, why not transform the elephant in the room to your largest asset?

Two great examples come to mind here:

First, PepsiCo’s Performance with Purpose Initiative, which aims to affect positive change on three fronts: product, planet, and people. The global organization has ambitious goals to re-engineer products to reduce less healthy ingredients, reduce their environmental impact and advance an agenda about respect for human rights and diversity. All of these efforts are driven by PepsiCo CEO’s belief that, in the 21st century, a good company must also be a good citizen.

Second is Dove’s Global Self Esteem Project. This initiative, activated in 100+ countries around the world, develops educational tools and programs to help young people build confidence and a healthy body image. Recently, the company has begun localizing content to understand and react to how body-image issues are different across countries.

THE BOTTOM LINE

In the retail category, there is much talk about today’s omni-channel consumer. As shoppers move seamlessly between retail environments, they expect brands to keep up by delivering a frictionless shopping experience.

Omni-channel consumers don’t distinguish between a brand’s website, storefront or mobile app. Technology has trained them to simply want it all. In consumer speak, ‘I want to purchase exactly what I want, when and where I want it.”

The reality is that today’s consumers are omni-cultural as well. They don’t see the retail world in the discrete categories of local vs. national vs. global brands. Rather, they are accustomed to a diverse range of options, and they move seamlessly between them choosing different brands to fill different needs.

At a Walmart in China, a shopper might choose several multinational food brands for their provenance, then add a national cosmetic brand appreciated for its use of traditional ingredients, then stop by their neighborhood wet market to pick up turtle meat for dinner. In India, shoppers have no problem ordering Paper Boat juice via Amazon and might throw in a pair of Nike’s while they are at it.

While large, international brands retain a role in this omni-cultural world, the new nationalism challenges the orthodoxy that global brands are always best. In increasingly competitive markets, global players are under new pressure to articulate and differentiate their offerings. Easily said but, how to do it?

At the end of the day, global brands have an opportunity – possibly even a mandate – to build bridges in an era of divisiveness. As a steward of a proudly international portfolio, I look forward to forging new paths in the name of omni-cultural consumption.

MARY MEEKER MUSINGS – 2017

I enjoy Mary Meeker’s internet trends report every June, and the 2017 version presented at last week’s Code conference did not disappoint. 

Meeker, a partner at VC firm Kleiner Perkins Caufield & Byers, touched on a wide array of topics via 355 slides delivered in under 35 minutes. Noteworthy themes included: the explosion of mobile, continued media disruption, the mainstreaming of gaming, China’s “golden age” of entertainment and transportation, and opportunities for disruption in healthcare.

This content sparked several ideas for me. I’ll share a few here and would love to know via comments what resonated with others. 
 

Spark 1: Who is a “technologist”? – Everyone

A key theme across the report was the pervasive role of tech in today’s culture. Sure, we intuitively know that tech makes the world go round. But the numbers Meeker presented are striking: 40 percent of the 20 largest companies – in terms of 2017 market capitalization – are tech companies, and 100 percent of the top five carry the same label. Further, Meeker highlighted dozens of noteworthy companies throughout her presentation, and all are thriving due to tech-driven innovations.

For me, this prompted a reappraisal of the word “technologist.” This is often a standalone job title within an organization or department, or a descriptor that people use to augment their “real” job title. Meeker’s numbers underscore the fact that this concept must evolve. 

Increasingly, all business leaders are technologists, or should be. The complete fusion of tech and business culture requires us to put tech thinking at the core of everything we do. Across industries, companies and job titles, all business leaders of the future will be "technologists."                                                                        

Spark 2: Two Corners for Marketers – Visual and Voice

Meeker also said that companies who thrive in this tech-driven era are able to “see around corners” to envision a future that others may not see coming. 

If I put on my marketing cap, I can identify two sharp corners around which marketing and retail leaders are beginning to peer. They can be summarized as the “Two Vs,”: voice and visual.

Corner 1 - VISUAL marketing:

Meeker noted that online ads (and all kinds of online content) are becoming digital storefronts. This simple statement is quite extraordinary if we stop to think about it. 

Tools like Pinterest’s “Shop the Look,” the shoppable Facebook feed, Snap’s “Swipe up to Buy,” and the curated email newsletter are fundamentally changing the way consumers shop and purchase. The newly launched Google Lens takes this to next level, and it will train people to expect to be able to take a picture of literally anything and buy it immediately.

As ads become transactional vehicles for click and purchase, marketers will need to find other ways to build brand relationships. To that end, they will need to re-imagine the role of retail stores. We know, and Meeker emphasized, that retail stores as a genre aren’t dying, but stores that don’t engage and enrich consumers are. 

It’s conceivable that the role of ads and stores may “flip” in the next decade, with ads becoming transactional storefronts and storefronts becoming spaces for building brand relationships.

Ironically, marketing teams who have spent the better part of the past decade refining their Search Engine Marketing strategies now need to contemplate a not-so-distant future where pictures matter much more than words.

Corner 2 - VOICE marketing:

Much as Visuals are replacing words, Meeker also pointed out that Voice is replacing typing. 

Already, 20% of mobile queries are made via voice, and this represents incredible growth for a genre that didn’t exist even five years ago. Further, she noted that the number of installed voice assistants and their use cases are increasing and that voice recognition accuracy continues to improve.

Why does this matter for brands? Consider the growing number of transactions in which consumers never see a package, a product design, a logo, or even a brand name. Marketing guru Scott Galloway recently called voice the “killer app” for brands, noting that a shopper can prompt a voice assistant to “buy batteries,” have Alexa return a result, buy something, and get a product delivered to their door – all without ever encountering a brand name.

Again, this calls for marketers to stop and re-think. In a world where brands become invisible at the point of purchase, brand stewards must reimagine new ways to maintain share of mind, drive brand preference and express brand identity. 

This movement to Visual and Voice is a major “corner” for business leaders to see around in the next few years. Are you ready?
 

Spark 3: Humans (not robots) will chart the course of our future

Meeker closed the report with a slide suggesting that the key drivers of growth in the 21st century will be “computing power and human potential”. 

This was a heartening idea. After all, it can be a stressful time to read the news. Meeker’s report nods to complex political environments, rising national debt and entitlement obligations, and the very real workforce disruption the next decade will bring. 

Meeker provided an important reminder that it is our humanity that will see us through the future. Even as we bring tech to the core of all we do, things like reading widely, traveling, pursuing broad education, feeding our curiosity, and honing the ability to connect the dots in news ways will continue to differentiate human intelligence. These are the skills that will usher us into the new tech-driven decades ahead.

I'm striving to be ready – are you?

Can Amazon be Beaten: How UK Grocery Retailer Ocado Is Holding Its Own

Imagine a retail grocery business run by a deep technology estate. No stores, only online deliveries from automated warehouses. Robots in those warehouses pick most items and send them via high-speed conveyor belt to human attendants for packing.

A human-like robotic hand is capable of handling over 50,000 products of all shapes, including delicate items like produce. This process is all monitored by technology that can alert the human attendants to packing errors. Other “collaborative robots” learn from and assist the human warehouse manager. An artificially intelligent warehouse system collects data and optimizes operations. A computer program even maps the best delivery routes for drivers.

This isn’t the grocery store of the future but a description of the present-day operations at Ocado. Ok, the robotic hand is still in development, but the rest is 100% operational.

I’ve recently returned from a UK market tour where colleagues were buzzing about this unique, online-only grocery retailer. They are the world’s largest and their team of technologists and techies has been working to change the way we shop for groceries for the past 16 years.

Amazon Fresh entered the UK market last summer, and many predicted Ocado’s demise. Yet, the retailer has survived, some might even say thrived. Their 2016 sales beat forecasts, rising 14.8% to £1.3B. This momentum has continued in 2017 with both sales and weekly orders increasing despite a sluggish British retail environment.

I have heard of other similar David vs. Goliath success stories. Earlier this year, I wrote about the fact that Amazon is surviving but not thriving in several other markets including China, India, and Mexico.

This most recent example got me thinking again about how and why homegrown retailers are able to give Amazon a run for their money.

In India, Amazon has struggled to win trial and loyalty in face of rival Flipkart’s entrenched awareness and strong seller relationships.

In Mexico, Amazon has fought to build trust in a market where the cultural defaults are cash payments and brick and mortar shopping. Meanwhile, local competitor Mercado Libre has leveraged a nuanced understanding of local culture to hold their own.

In the UK, Ocado’s impressive tech infrastructure is helping them keep Amazon at bay. The Independent calls the company “superlatively innovative” and they likely embody what the grocery category will look like in the age of the 4th Industrial Revolution.

Yet, Ocado has retained a strong compass for human values too. The company is testing delivery via more sustainable electric vehicles. They are partnering with underground urban farms with lower carbon footprints vs. traditional farming. And, they run a ‘Code for Life’ initiative designed to prepare the next generation of workers for the automated workplace.

I don’t want to overstate Ocado’s success. They still have a long road ahead; one that requires them to sustain their growth and license their tech infrastructure to an international grocery partner soon.

Nevertheless, I am heartened to see an innovative player succeed in the face of a powerful incumbent competitor.

Photo Credits: Business Insider, http://read.bi/2qJuvwE

The Rebirth of Consumer Curation

Well over a decade ago, savvy retailers started to offer edited assortments to shoppers dealing with a growing number of options. Remember Target’s collaboration with Issac Mizrahi or the growth of retail chain Anthropologie? Analysts dubbed this phenomenon ‘curated consumption,’ and it became a standard retail offering.

To “curate” means to "pull together, sift through, and select for presentation." There is a functional aspect to curation, as it requires the working through a volume of choices. It also requires the creative act of making selections that others see as unique or inspired.

In today's tech-enabled culture, I’ve noticed this editing process happening with a new scope and speed. A growing variety of things are being curated with increasingly sophisticated tools  – a dynamic I’ll call Curation 2.0.

The Dawn of Curation 2.0

Whether we are considering where to work, live, or vacation; how to eat, dress, or style a home; or what to listen to, watch, or read – the options available at our fingertips continue to grow. In this cultural landscape, the more technology offers us, the more we need new tools to curate the vast landscape of what is available.

This struck me while perusing a group of the most upvoted product ideas on the Product Hunt Website. (The site itself being, ironically, a curated selection of startup ideas.)

Entrepreneurs clearly recognize a cultural need for help dealing with option overload. Across the new product ideas, the offer of an edited selection of options was a recurrent theme.

I found products to curate everything under the sun: job postings from around the world, minimalist design objects, local spots for travelers, coffee shops for working, art, or weekend plans.

Many of these start-ups are business models yet to be proven, but they complement a litany of more established applications with curation elements like Netflix, Flipboard, and Apple Music. (And of course Pinterest, perhaps the grandfather of curation apps.)

Curation on the Retail Landscape

Curation 2.0 means you can find a great local dive or unique objet d’art, but it is also playing out on larger scale. Where there are masses of consumers, there are companies to help them navigate through a dizzying number of retail categories by choosing only from an edited assortment.

One only need begin with StitchFix for clothes, then move on to BlueApron for groceries, 99 chairs for furnishings, and Canopy for most everything else.

The fashion category is one particularly interesting example of how an industry can be revolutionized by Curation 2.0.

As the pace and scope of fashion has eclipsed the abilities of the average shopper, many have turned to editors for help.

Subscription services like Trunk Club (and the already-mentioned Stitch Fix) and curation websites like AHA and LiketoKnow.it have become an integral part of the way many consumers shop for and buy clothing.

Some of these applications use tech-powered curation. For example, Stitch Fix employs over 50 data scientists to create selections tailored to individual customer tastes. Others, like AHA, rely on human tastemakers to identify inspired options.

Whether guided by an algorithm or a living, breathing person, curated fashion doesn't seem to be a passing fad. One industry expert predicts that subscription services will become a full-fledged fashion retail channel in the coming years.

What’s Next?

As shoppers enjoy curated shopping experiences in a few pioneering categories, their decision-making muscles will atrophy. It is not a stretch to imagine they will desire – even expect – curated help across all their shopping experiences.

Retailers and brands sold at retail should ask themselves how they can leverage technology to become trusted editors. To start, consider a quick-fire brainstorm:

Q1: What do we sell that my consumers would like to consume in an edited assortment?

Q2: What type of curation do my consumers want? (Consider: Customized Combinations? Inspired suggestions from a tastemaker? Community-generated recommendations?)

Q3: Should my curated selections be generated by an algorithm? A human? Both?

What’s Even Further Afield?

Looking down the road, I predict a need for ‘meta-curators.’

As consumers come to rely on curated collections across many categories, the number of requisite websites and apps will once again explode. As a consumer, I would love to use many of the tools I’ve called out above – but who has the time?

The inevitable next step will be to pare down to a smaller number of broad curation tools that work across traditional categories.

Will the next wave of Silicon Valley darlings be applications that crack the meta-curation code?

Until then, good luck and happy editing!

Tax-Paying Robots May Be the Future of Work: Why Should We Care?

It’s not news that robots will replace large numbers of human workers over the next few years. For context, a 2016 WEF study found that 5 million jobs in 15 countries could go by 2020.

But, Bill Gates recently made headlines by calling for a tax on companies’ use of these new automated workers. His thought-provoking argument:

The shift to automation will leave many out of work and without meaningful re-employment prospects. For example, U.S. retail jobs are identified as one of the most at-risk for robot replacement. This pending disruption is evident in the customer-service robots popping up around the country. For example, Lowe’s LoweBot, Macy’s On-Call assistant, Pepper’s debut in California malls, and of course Amazon's cashier-free grocery store.

The reduction of paid labor will shrink the income and social security tax bases and limit governments' abilities to help those affected – at a time when they need a social safety net the most.

Gates maintains that we should take steps to plan for this automated future by instituting a tax on robot workers. Companies could fund the tax with some of the windfall from their labor reduction. Governments could use the proceeds to support displaced workers and retrain them for positions where human skills are still needed. Gates' examples include healthcare and education, but I also see opportunities for retailers to launch retraining efforts.

The robot tax is not a completely novel suggestion. Last month, European parliament considered and rejected a similar proposal, a decision hailed by the robotics industry.

It's no surprise that some economists and policy makers opposed the idea. The challenges are complex, but the main points are these: 1) slowing tech growth to keep humans in jobs delays the inevitable and will have unintended consequences, 2) automation created jobs throughout history and may do so again, and 3) automation is not happening fast enough, limited by an abundance of cheap human labor.

Net/net, critics argue that while the effect of widespread automation will be negative for some people, the economy will be better off as a result.

With compelling arguments on both sides, how to make sense of this issue?

In my view, Gates’ position is about highlighting the vast inequality created by tech innovation.

Today, the gap between rich and poor is at record levels in most of the developed world, and the U.S. leads the pack. In this country, the richest 10% of workers earn 16.5 times that of the poorest 10%. This ratio has more than doubled (up from 7 times) since 1980.

The impending automation revolution will further deepen the divide between rich and poor. Fortune magazine stated this well:

"Some people will see their jobs become obsolete and will need to acquire new skills in order to obtain well-paying work. Robots and artificial intelligence will exacerbate economic inequality and place a burden on many workers to learn new skills."

It is on behalf of the "some people" that Bill Gates speaks. He argues, I believe correctly, that it is the duty of business and government to plan for the displacement of millions of American workers – even if the net economic effect will be positive.

By extension, I believe it is the duty of business leaders to understand and improve the wide economic inequalities that exist today and will deepen in the years ahead.

Retail leaders, in particular, can be a part of the solution by imagining the future of the automated workforce.

We should explore how human workers might work alongside robot “colleagues” to deliver enhanced customer experiences.

We can identify opportunities to retrain displaced workers for these new roles, perhaps building on programs like Amazon's Career Choice.

And, before we get completely wrapped up in automation, we should identify points of human interaction worth preserving and consider how these might create new opportunities for differentiation or revenue. This might be akin to the way some consumers pay a premium today for artisanal food. (One scholar intriguingly posits that someday the act of getting a manicure from a human might be a service for only the very rich!)

The arrival of the automated workforce is a business issue, since inequality creates social, economic and political tension that does not foster a healthy environment for commerce.

But it is a human issue as well. As tech concentrates wealth, knowledge and power in the hands of a few, it is critical to think about broadening it's positive impact in the lives of the many.

What can we learn from Spider-Man at the Dawn of the 4th Industrial Revolution?

Members of the World Economic Forum meet in Davos, Switzerland in late January every year. I have always enjoyed the thought-provoking panels, specifically those that inspire us to consider implications for business leaders and marketers.

In 2016, I noted on the blog that much of the Davos agenda that year had focused on the 4th Industrial Revolution (4IR) and the complex ways it will transform lives and livelihoods.

At this year’s meeting, talk about the 4IR continued.  This year’s focus evolved to include broader discussions of the ethical implications of 4IR’s ubiquitous connectivity and fast-paced fusion of physical, digital, and biological worlds. This emphasis on ethical values was both compelling and reassuring. It is a subject that business leaders will do well to contemplate.

Unprecedented Power for Companies:

The need to think about ethics at all springs from the unique position of today's companies. Many lead private-sector R&D teams instead of partnering with academic institutions. Their rapid development of 4IR technology (think: cognitive computing, AI, blockchain) gives them unprecedented powers uncircumscribed by academic protocols and the rigors of peer review.

For-profit entities now have the ability to decide what news we see, track our movements, direct where we go, and even predict how we will think.

These abilities could be problematic because most companies exist to maximize profit and have little formal incentive to consider their impact on human life and society or the health of the planet.

Enter the B-Corp, or “benefit corporation”. This is a hybrid structure that requires a company to state a purpose beyond profit and creates accountability to comply.

The idea, of course, is to go beyond pithy corporate mission statements (like Google’s ‘Do the Right Thing’ mantra) to engineer ethics into the DNA of a business.

Imagine a company contemplating the algorithm for a self-driving vehicle. If an accident is unavoidable, does the car take the course with the fewest potential casualties even if this puts the driver at risk? This is an ethical quandary. Most would favor saving the greatest number of lives but few would buy a vehicle that puts a driver at risk.

There is no easy answer. Yet, we can imagine how a company with accountability for both ethics and the bottom line will be better positioned to work through the issues.

Some forward-thinking tech firms, like Singularity University, have already organized themselves as B-corps. In a world where technology invisibly shapes much of life, the move from profit-driven to benefit-driven corporations could be transformative.

Unprecedented Power for Consumers:

If companies need to reengineer themselves around ethical values, the great news is that citizens are already there.

The 4IR world offers consumers myriad ways to influence businesses and they are using their clout for good.

On issues ranging from sourcing and sustainable packaging to fair treatment of employees, consumers prefer – I'll venture to say demand – to do business with companies that make ethical choices.

Walmart CEO Doug McMillon wrote that, in the 4IR future, retailers will survive only if their business creates value for both shareholders and society. The most successful will build social and environmental sustainability into their systems because it is the right thing to do and because it is what consumers reward with their dollars.

It is exciting to see companies like Patagonia and eBay lead the charge. And, to know that firms like Facebook and Airbnb are grappling with ethics issues in real, visible ways.

 An Unprecedented Opportunity to Do More Good:

The dawn of the 4IR presents many more questions than answers: Will robots take our jobs? Will omnipresent tech somehow make us less human? Will AI-driven technology someday threaten our very existence? These questions are equal parts dystopian nightmare and sobering meditations on the fast-paced evolution of technology.

In light of the weighty issues, a recommitment to values – one of the things that make our endeavors most human – will be our best shot at navigating the 4IR world.

As I look toward the uncertain future, I’ll remember that Spider-Man's oft-repeated mantra isn't only for superheroes. The "great power" of the coming 4IR revolution does indeed bring "great responsibility".

Taking Stock Of Amazon Abroad

E-commerce giant Amazon has experienced soaring profits at home in recent years while consistently losing money internationally. This is counterintuitive, since the smaller business in expansion markets should have more room for growth.

I’ve recently spent time in Mexico and India – two countries where Amazon is surviving but not thriving.

Amazon’s journey in both is a good reminder that while the U.S. sets the pace for retail around much of the globe, companies also have to evolve (sometimes dramatically) to succeed in diverse markets.

Amazon learned this the hard way in China, where efforts to establish American practices did not end successfully. This makes strong performance in growth markets like India and Mexico even more important. India is the largest underdeveloped ecommerce market in the world, and Mexico is not far behind. With mushrooming middle classes and rapidly expanding access to broadband, both countries represent huge potential. However, there are also unique challenges since both are predominantly cash societies, where online commerce is not yet the cultural norm.

Amazon has had to actively customize their business model to survive in both, while contending with the fact that local players sometimes set the agenda.

In India, Amazon’s performance is still second to local player Flipkart (which owns 43% of the market). The Seattle-based giant is still investing heavily, to the tune of $1B per year, to build infrastructure and win trial and loyalty. A big part of their strategy has been finding ways to “localize” by adding cash-on-delivery payment options similar to those of competitors, a “Chai Cart” program to connect with small vendors over cups of tea, and a “seller university” to help small traders learn how to get online and growth their business.

In Mexico, Amazon has grown modestly since their 2015 launch, paralleling slow growth in online retail overall in the country. Here too, they have had to adapt to fit the local market.

Like in India, this has included following the lead of regional players like MercadoLibre and accepting cash-on-delivery payments. And, in a uniquely Mexican modification, Amazon accepting gift cards purchased from Mexico’s network of Oxxo c-stores. No doubt, Amazon would prefer their own offering but shoppers in Mexico’s largely cash economy have thus far preferred the already-trusted Oxxo name.

In both India and Mexico, Amazon has had to invest heavily in infrastructure to support fulfillment. Notably, this has included building warehouse locations to support Prime and same-day delivery. Despite their differences, international consumers across markets share a high level of expectations. All expect the same fast and free delivery now globally ubiquitous with the Amazon brand name.

Amazon has also had to contend in both markets with the fact that the cultural default is still brick-and-mortar shopping. (In Mexico, for example, 98% of retail sales still happen in physical stores).

The Amazon response has been two-pronged. First, the retailer has invested heavily in advertising to assuage concerns about the authenticity and quality of products ordered online. They have also created options that allow shoppers to pick up merchandise at the location of trusted brick and mortar retailers. This has created an interesting hybrid type of commerce, and it will be interesting to see how this might develop.

These modifications, and in fact Amazon’s very assertion that it is going to win new markets through “a lot more local market customization” underscore the magnitude to which cultural nuances still matter.

While it is very possible for global players like Amazon to succeed in international growth markets, they will need to find ways to stay carefully attuned to thinking global while acting local. 

Welcome 2017: Looking Forward & Back

It’s been unusually cold in Dallas and a great time to be introspective. Below I share a pair of insights I have percolating about the year ahead. Cheers to seeing these and other themes unfold in 2017.

 #1: Retail Brands Will Think So Consumers Don’t Have To

 In 2016:  I wrote about how Tesco’s IFTTT channel automates grocery shopping, paving the way for the ‘predictive grocery basket’ of the future.

In The Year Ahead:

To identify emerging trends, follow the money. AI applications are at a tipping point this year, with AI-generated retail revenue expected to skyrocket from $643.7 million in 2016 to $36.8 billion by 2025 according to Tractica.

Innovative retailers are already embracing their new AI-driven world. 2016 saw The North Face’s ‘expert shopper’ Lowe’s Pinterest-scraping interior decorator, and a Starbucks app that offers customized promotions by knowing when and where someone drives.

This march to AI-powered retail will fundamentally shift the role of brands and retailers in consumers’ lives from responsive to predictive.

Today, a brand (retail or otherwise) is a helper that makes it possible to fulfill my needs and wants. The best brands use data to offer curated selections or to delight with new, personalized suggestions.

As increasingly sophisticated bots and apps are launched in the year ahead, the role of retailer/brand will morph into that of a butler, which can proactively anticipate what I need and deliver. The most innovative will find ways to identify and fulfill needs and wants I didn’t even know I had yet.

This will shift the retail paradigm in diverse categories–from grocery to fashion, electronics and anything in between. Just ask Tesco’s grocery shoppers, whose carts are filled with items they are going to want–tomorrow.

There will be benefits for consumers, who will be able to shop more efficiently while offloading repetitive decisions. The upside for retailers and brands will be the ability to add true value to consumers while also driving frequency and desired purchase behaviors.

So, let’s look forward to a not-so-distant future in which we will all sit back while the bots do our shopping.

#2: Communities Will Find New Ways to Flourish

 In 2016:  Last year’s travels revealed that, even in our tech-driven culture, person-to-person communities are thriving around the globe. This is reflected in South Africa’s spazas, Brazil’s favelas, Shenzhen’s maker culture, and the social nature of global shopping days.

In The Year Ahead:

I will look for the ways in which the fundamental human need to connect and collaborate sparks new platforms and innovations.

Some suggest it will be the ‘year of the group chat,’ as people leave the increasingly corporate and drama-wrought spheres of Facebook and Twitter for smaller circles of virtual connections.

Because workers are people too, we will see the continued growth of enterprise-based communities like Slack. (Incredibly, the average user already spends 10 hours per day in app). While 2016 saw the office party go virtual, I wonder what other communal rituals might find online expressions in the year ahead?

The e-commerce sphere will continue to birth new commerce-based communities, like Amazon’s small-seller platforms, Handmade and Launchpad, and ShopClues, an Indian tech unicorn succeeding with a model that connects small-time sellers to rural communities.

And, I expect to see passion communities move from desktop to mobile, following so many other facets of daily life. This is something developer Amino Apps is banking on and investors are betting on their success.

Last year, seeing firsthand Detroit’s transformation from post-war auto hub to thriving tech town inspired me to think about how the digital world creates opportunities to reinvent community.

As we turn the page to 2017, retailers and brands – both established and emerging – will do well to think about how they can reimagine and facilitate communities for consumers craving authentic connections.

Best wishes for a healthy and happy new year to all. I’m off to get Alexa started on my to-do list…

International Discount Days: A View From Mexico City

I recently traveled to Mexico City, where the retail scene was just slowing down after a busy El Buen Fin.

The 3-day shopping holiday–loosely translating to ‘the good weekend’–was launched in 2011 by the Mexican government and the Council of Business Coordination in an effort to stimulate the national economy. Retailers throughout Mexico are encouraged to offer discounts and special payment plans during this late-November retail push.

By all accounts El Buen Fin has been a success. It has become the world’s third-largest shopping event (after American Black Friday and Chinese Single’s Day). In 2015 El Buen Fin sales grew more than 10% over the previous year, to over $10B USD. This year 11 retail centers and more than 6,000 businesses, double the number from last year, participated. These included not just retailers, but also service providers like restaurants, spas, travel agents, and pet hospitals.

While El Buen Fin is inspired by Black Friday, several characteristics make the Mexican holiday unique.

 It takes place over a long weekend vs. a single day like Black Friday. Typically falling just before U.S. Thanksgiving, it is pegged to Mexico’s Revolution Day.

This Mexican shopping holiday receives ongoing government backing. El Buen Fin is promoted as the “cheapest weekend of the year,” and it is supported by a dedicated website, Twitter account (#ElBuenFin2016) and Facebook page. During 2016, SHCP (Mexico’s tax collection agency) offered $27 million in cash prizes to shoppers who made purchases with a Mexican-issued credit or debit card.

While the number of participants continues to grow annually, the discounts tend to be smaller than those in the U.S. And, retailers often discount items that are not moving vs. the U.S. custom of offering hot, new merchandise.

Some Mexican retailers use El Buen Fin to preemptively capture sales from Mexican shoppers that might otherwise shop stateside during Black Friday or Cyber Monday. However, traffic flows the other way as well. Some businesses, especially those in border towns, seek to attract U.S. shoppers during the weekend–a feat made easier this year by the strong value of the dollar against the peso.

From a global perspective, El Buen Fin is one of many “discount days” now crowding the retail calendar. It joins Single’s Day, the Dubai Shopping Festival, Australia’s Boxing Day, and India’s Diwali Shopping Festival. Not to mention a litany of new contenders like Amazon Prime Day, Small Business Saturday, Green Monday, and Free Shipping Day, all driven largely by e-commerce.

These manufactured shopping days clearly play into shopper Psychology 101, combining the power of a deal with time scarcity to spur purchasing.

The rise of the “Discount Day” also provides an interesting view into the inherently social nature of the retail endeavor.

The proliferation of national shopping days comes at a time when myriad factors such as media fragmentation, waning civic engagement, and a growing economic divide–to name a few–have decreased the occurrence of truly ‘shared’ events in countries around the globe.

The strong collective interest in Discount Days reminds us that shopping remains a shared cultural event. Whether people come together around traditional shopping days or newly invented ones, in a physical or online environment, shoppers are ultimately social creatures that thrive on the ability to browse, select, and decide in the company of others. Retailers could gain insight from recognizing and furthering this dynamic when developing Discount Day programs and offerings.

The Discount Day dynamic also has implications for the future of global retail. Will these shopping days remain largely concentrated within their countries of origin? Or will they leap across political borders, as social phenomena are wont to do?

In recent years, we’ve seen the Black Friday tradition cross the Atlantic, prompted largely by Amazon’s introduction of online deals in the UK. For their part, British shoppers and brands are increasingly cashing in on Single’s Day deals. As shoppers become more aware of and open to shopping other country’s deal days, could this dynamic feed borderless trade and perhaps drive increased price transparency on a global scale?

These consequences would require retailers to do some focused analysis and soul-searching. Are discount days a profitable and sustainable long-term strategy? Or, do they merely compress demand, cannibalizing from other time periods and training consumers to buy only on deal?

The one certainty is that Discount Days continue to proliferate and thrive, making strategic calendar planning a must-have for manufacturers and retailers and lending additional dynamism to the complex global retailscape.