March 21, 2011

Tuesday Mailbag

Remember, these are real questions from fake people.

Elizabeth in Tucson asks ... Is Groupon really worth $25,000,000,000?  I mean, let me get this straight.  Groupon is essentially a geo-targeted email marketing list where Groupon takes on no risk whatsoever and the retail brand gets absolutely railroaded about forty percent of the time, right?  First, will retailers succumb to this business model forever, and second, what in the name of is up with this new bubble?

Kevin:  Let's answer your question by evaluating the market cap of a series of companies.  Where would you value a geo-targeted email marketing list that is 100% dependent upon retailers craving sales increases sans profit, in comparison to this list?
  • Dell = $28,000,000,000.
  • Starbucks = $26,000,000,000.
  • Time Warner Cable = $24,000,000,000.
  • AFLAC = $24,000,000,000.
  • General Mills = $24,000,000,000.
  • Kellogs = $20,000,000,000.
  • Kohls = $16,000,000,000.
  • Kroger = $15,000,000,000.

Jasper in Mason City asks ... You have to believe in Social Commerce, right?  It's all the rage these days.  In these challenging economic times, brands are seeking deeper connections with customers who demand the right to join the conversation.  Social Commerce is HOT, don't you think?

Kevin:  Let's level-set things for a moment.  It is fun to see new business models emerge.  We were stuck in e-commerce integration mode from the day that failed.  Now, having said that, let us think about a couple of points.  Retail (in-store purchases) represent, what, 90% of total net sales?  Think about that for a moment.  We've been told about the importance of e-commerce for fifteen years, and it can't break through the fifteen percent level?  If e-commerce is so dramatically revolutionary, why isn't it 40% of total net sales?  And then, within e-commerce, what percentage of e-commerce is represented by "social commerce"?  Five percent?  I don't know, but it isn't much.  So 0.10 * 0.05 = nothing.  It's the biggest thing, and yet, it's nothing.  I believe in "social commerce", but let's just be realistic for five minutes.

Katelyn in Omaha asks ... Is there anything more important than integrating mobile and social with e-commerce?  I mean, customers demand a unified experience, right?  I recently read a report that said that savvy marketers are busily integrating all channels, in an effort to create a seamless experience.  Wow, that's cool.

Kevin:  What we're seeing is what I call "the frightening".  When an incumbent channel is "frightened" by new channels (or psuedo-new-channels), two things happen.  First, the incumbent channel demands that new channels are immediately integrated with incumbent channels.  This allows incumbent channels to maintain control.  We'll learn all about the peril of silos, we'll hear that the customer demands a holistic, integrated experience, based on a survey of 823 likely retail buyers.  It's the same line that catalogers and retailers threw at us when they went through "the frightening" in 1999.  Second, new channels offer us the "the rules have changed" argument ... as if everything is now completely different.  We'll learn that the "new rules of social commerce demand that brands establish deep, emotional connections with customers", and we'll learn that this requires savvy brands to immediately modernize, leaving traditional forms of organizational structure for those that are congruent with the social commerce manifesto.  We've been here before, we'll be here again ... history just keeps repeating.
  • Old School = "The Frightening" ... integrate all that is new with all that is old, resulting in old-school channels controlling new channels.  E-commerce is now in the "old-school" camp, demanding integration with social, mobile, and social commerce.
  • New Channels = "The Rules Have Changed" ... resulting in new channels demanding autonomy in order to allow innovation and to avoid the red-tape associated with old-school channels.  Social, mobile, and social commerce demand autonomy.  You don't read many articles where social commerce advocates argue for deep integration with existing channels, do you?  Hmmmm.

Offer your questions now ... email me here.

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