While making digital the main channel of customer engagement, banks are also looking to move beyond business as usual, says Amit Anand, a Vice President in Cognizant Consulting’s Banking and Financial Services.
COVID-19 made online channels indispensable for bank customers, including those who preferred in-person banking. This accelerated their digital strategies and created an opportunity to go beyond the basics and become partners in their customers’ pursuit of financial wellness.
As banks bet big on digital, they are looking at technologies such as AI, advanced analytics, and automation to provide personalization, prediction and speed in creating powerful customer experiences. Banks are also increasingly relying on machines to automate repetitive tasks and make complex decisions, creating demand for human skillsets that complement intelligent machines.
Cognizant’s Center for the Future of Work (CFoW), working with Oxford Economics, recently surveyed 4,000 C-level executives globally, including 287 senior banking and financial services executives to understand how banks are adapting to fast and dramatic changes.
The earliest forms of digital banking trace back to the advent of ATMs and cards launched in the 1960s. As the internet emerged in the 1980s with early broadband, digital networks began to connect retailers with suppliers and consumers to develop needs for early online catalogues and inventory software systems.
By the 1990s the Internet became widely available and online banking started becoming the norm. The improvement of broadband and ecommerce systems in the early 2000s led to what resembled the modern digital banking world today. The proliferation of smartphones through the next decade opened the door for transactions on the go beyond ATM machines. Over 60% of consumers now use their smartphones as the preferred method for digital banking.
The challenge for banks is now to facilitate demands that connect vendors with money through channels determined by the consumer. This dynamic shapes the basis of customer satisfaction, which can be nurtured with Customer Relationship Management (CRM) software. Therefore, CRM must be integrated into a digital banking system, since it provides means for banks to directly communicate with their customers.
There is a demand for end-to-end consistency and for services, optimized on convenience and user experience. The market provides cross platform front ends, enabling purchase decisions based on available technology such as mobile devices, with a desktop or Smart TV at home. In order for banks to meet consumer demands, they need to keep focusing on improving digital technology that provides agility, scalability and efficiency.
Seven Ways to Capitalize on Digital
Institute front-to-back digitization. Banks can effectively compete with fintech competitors by becoming digital institutions.
Explore new customer segments and business paradigms. Digital makes it easier than ever for banks to explore small business segments, even as they pursue existing markets.
Emphasize platform centricity and smart aggregation. Open banking standards can help banks to provide personalized products to customers in collaboration with third-party providers and fintechs.
Invest in personalizing the customer relationship. Banks should use personalized experiences to make customers’ lives as frictionless as possible.
Focus on re-building trust and resiliency. Banks need to eliminate any biases in decisions made by machines.
Enshrine inclusivity into your digital strategy. Banks should use digital to reach customers who are left out by being physically and cognitively challenged.
Balance machine-driven and human-centric work. Create sturdy human-machine collaboration by reevaluating jobs for a shared environment.
Amit Anand is Vice President and North American Practice Leader for Cognizant Consulting’s Banking and Financial Services. Amit has 20 years of experience with firms such as Accenture, Infosys and Cognizant. He has successfully led and managed large business transformation, digital and IT transformation, and associated organizational change management for several financial services clients. Amit is a recognized thought leader with more than 15 publications on topics such as Open Banking, Digital 2.0 and new-age operating models. He can be reached at Amit.Anand@cognizant.com
Manish Bahl leads the Cognizant Center for the Future of Work in Asia-Pacific and the Middle East. A respected speaker and thinker, Manish has guided many Fortune 500 companies into the future of their business with his thought-provoking research and advisory skills. Within Cognizant’s Center for the Future of Work, he helps ensure that the unit’s original research and analysis jibes with emerging business-technology trends and dynamics in APAC, and collaborates with a wide range of leading thinkers to understand and predict how the future of work will take shape. He most recently served as Vice President, Country Manager with Forrester Research in India. He can be reached at Manish.Bahl@cognizant.com
Shares of Chinese tech giants trading in the United States struggled to pare losses Friday amid intensifying concerns over China’s efforts to impose sweeping new regulations on its publicly traded companies over the next several years, yielding market value losses of more than $150 billion for the 10 largest U.S.-listed Chinese stocks this week alone.
As of 2:45 p.m. EDT, shares of e-commerce juggernaut Alibaba, the largest Chinese company listed in the U.S., were among the hardest hit, down more than 15% on the New York Stock Exchange over the past week to $157, deflating its market capitalization to $424 billion.
Fellow online retailers JD.com and Pinduoduo, posted similarly staggering losses, wiping out about $20 billion and $10 billion in market value this week, respectively, despite ticking up about 2% Friday.
“China remains a huge source of global concern,” market analyst Adam Crisafulli of Vital Knowledge Media wrote in a Friday email, pointing to the nation’s strengthening regulatory campaign against corporations and actions that last month included demanding online education companies end their for-profit business models.
This week, shares of Chinese stocks have crashed steadily since Tuesday, when President Xi Jinping vowed to redistribute wealth in the nation by regulating “excessively high incomes”—spurring a sell-off that crushed shares of European luxury companies that do big business in China, like LVMH and Gucci-parent Kering.
U.S.-listed shares of online-gaming company NetEase, electric carmaker NIO and Internet firm Baidu plunged 11%, 10% and 10%, respectively, this week.
All told, the 10 largest Chinese companies trading in the United States have lost about $153 billion in market value since last week—more than 15% of their combined market value of roughly $940 billion.
In a matter of weeks, China has introduced harsh regulations targeting wide swaths of its economy and showing investors how risky investing in its market can be, Tom Essaye, author of the Sevens Report, wrote in a recent note. “Yes, there’s a huge market and lots of growth potential, but obviously there are regulatory risks that seem to be growing larger with every passing month,” said Essaye.
Last week, officials released a sweeping five-year blueprint for the crackdown, covering virtually every sector in its market. Then on Wednesday, China’s market regulators published a long list of draft rules targeting tech companies, barring them from using data to influence consumer choices and “traffic hijacking activities,” among other things.
“This is all a stark reminder that the current regulatory crackdown from Beijing is not going to let up,” Wedbush analyst Dan Ives said in a Thursday note, forecasting U.S. tech stocks, which are outperforming the broader market Friday, should benefit from the tech-focused crackdown in China over the next year. “The fear with more regulation in China around the corner is a major worry that is hard for investors to digest, and it will ultimately cause more of a rotation from the China tech sector to U.S. tech.”
The Nasdaq Golden Dragon China index, which tracks Chinese businesses trading in the United States, is down 9% this week and has crashed 51% from a February all-time high.
Over the past year, many clients I’ve spoken with have been looking for ways to make processes smarter, more adaptable and more resilient. According to our recent research, many companies see the combination of AI and automation — or intelligent automation — as key to achieving these goals.
Despite the promise of better operational performance with intelligent automation, a common question is where to begin: with the process itself or with the data that will power the process? The answer lies in identifying which outcome you’re trying to achieve. Getting the sequence wrong could counteract the very goal you’re pursuing.
The right starting point
Here are two examples that distinguish when a process-led vs. data-led approach makes the most sense with intelligent automation:
How can we improve our operational efficiency?
Amid global uncertainty, supply chain disruptions and social distancing requirements, improving operational efficiency has become a priority for many businesses. The goal in this case is to improve speed and accuracy across the value chain, and achieve outcomes faster without cutting corners.
Adding data intelligence can significantly reduce errors, remove process hurdles and reveal where corrections are needed. But doing so requires a strong process automation backbone in order to shape when and how the data is applied. So in this case, a process-led approach is best.
For example, we’re working with a major insurance provider to improve customer lifecycle management. Typically, insurance customers who file a claim experience long decision times, a lack of visibility into decision making and repeated or disconnected requests for information submission.
Insurers can distinguish themselves by being fast, frictionless and responsive in how they handle claims. However, operating in a highly regulated industry and with overt risks around claims fraud, speed can never be a trade-off for accuracy and compliance.
A contributing factor to the insurer’s process challenges was the dependence on third-party systems and disparate data sources to make decisions. We helped the company implement an automated and fully integrated process for claims handling, which was then supported with AI and data modeling to segment customer profiles and personalize services.
The system has helped reduce the turnaround on claims capture by as much as 80% and shorten overall claims procedure times from 14 days to just two, all while maintaining the necessary high levels of accuracy and regulatory compliance. The insurer has also received positive customer feedback on the effectiveness and quality of services.
How can we be more agile in our product and service offerings?
Leading retailers have an impressive ability to recommend relevant products and anticipate customers’ next actions. Whether shoppers search for a needed item, browse relevant sites or interact with brands across different channels, digitally savvy retailers can connect the dots in real-time and make recommendations with a high degree of precision.
With so many factors and variables at play in dynamic online customer environments, companies need an agile approach that allows them to test the market, gather feedback and continuously improve in order to meet customer needs.
We’re working with an online fashion retailer to deliver this level of personalization. The company is well aware of the speed at which consumers’ tastes and styles change, and realized it needed to move swiftly to gain and keep customers’ attention.
Because it was vital to gain insights into consumer preferences, we took a data-led approach. We helped the retailer use existing data to gain a deeper consumer understanding. Using this insight, we then designed a process that segmented the brand’s customer base and enabled all interactions and product recommendations across channels like chatbots, email and social media to have the highest degree of relevance, timeliness and usefulness.
The combination of process improvements and data insights allowed for an integrated digital thread to run through all phases of the customer lifecycle, including product design and development, sales and after-sales. As a result, the retailer can now drive more relevant customer interactions and next-best offers, which in turn has improved customer mindshare, loyalty and revenue.
Accelerating the path to Intelligent Automation
To get the most out of intelligent automation, process and data need to work in harmony. Automated processes enable greater efficiency, while data enables better decision-making.
By coordinating these attributes — and having a clear outcome in mind — businesses can add intelligence to how and where they automate processes in a way that accelerates business outcomes while ensuring the quality of service is enhanced.
Chakradhar “Gooty” Agraharam is VP and Commercial Head of EMEA for Cognizant’s Digital Business Operations’ IPA Practice. In this role, he leads advisory, consulting, automation and analytics growth and delivery within the region, helping clients navigate and scale their automation and digital transformation journeys. He has over 25 years of consulting experience, working with clients on large systems integration, program management and transformation consulting programs across Asia, Europe and the Americas. Gooty holds an MBA from IIM, Calcutta (India’s Premier B school), and has executive management certifications from Rutgers, Henley Business School. Gooty has won reputed industry awards with MCA for his contribution to the digital industry in the UK and is a member of various industry forums. He can be reached at Gooty.Agraharam@cognizant.com
If you know you have an old bitcoin or dogecoin account somewhere but haven’t gotten around the digging up your login information, you may have a nasty surprise waiting for you. With the rise of cryptocurrency, nine states have now adopted rules that include it as a form of unclaimed property and several more are requiring or recommending that companies report their unclaimed virtual currency.
That means that this fall, when banks, insurers, retailers and state government agencies are required to annually report and remit any unclaimed funds, your old cryptocurrency account could be liquidated and turned in to the state’s unclaimed property office.
There are a lot of concerns about this possibility, not the least of which is the fact that liquidating a cryptocurrency account prevents the owner from realizing any future gains. But there’s also a larger economic issue, says Kristine Butterbaugh a solution principal, at the tax firm Sovos.
“Some of our clients don’t want to liquidate these accounts because it could have an impact on the market as a whole,” she says. “We’re talking millions of accounts, potentially, across the country.”
What’s muddling things is a lack of clarity on the rules around cryptocurrency. Unclaimed property law is written for traditional property but now it’s being enforced for non-traditional property.
Here’s how unclaimed property law usually works: Every fall, businesses are required to remit any unclaimed property to the state. For accounts and other financial instruments to be considered unclaimed, they have to be dormant for three to five years, depending on the state. That means the account holder hasn’t accessed the account or responded to any communications. Once the account is deemed unclaimed, it gets transferred to the state’s general fund.
That’s all well and good when we’re talking about a traditional bank account that is sitting around earning minimal — if any — interest. But states aren’t equipped to hold cryptocurrency, so they’re telling firms to turn those accounts into cash before handing them over.
Now let’s say you watched the meteoric rise of dogecoin this past spring and decided to go hunting for those coins you invested in on a whim a few years ago. And when you finally tracked them down you discovered your account was liquidated back in November, robbing you of thousands of dollars in potential earnings? You’d probably be pretty angry.
“Companies are in a really uncomfortable position because they’re unsure whether or not they should be liquidating for fear of owner retribution down the road,” says Butterbaugh. “And then you have the state saying, ‘You have to,’ even if it’s not explicitly in the statute.”
States are also motivated to enforce unclaimed property laws because it’s a revenue gain for them. Although the state keeps track of the amount due and the rightful owner can still eventually claim the money at any time, states in the meantime can use the money for their general operations. This may seem like a gamble, but only about 2% of unclaimed property ever gets returned to the true owner, according to Accounting Today.
Delaware — home to more than a million companies — is one of the most aggressive states when it comes to auditing companies on unclaimed property law compliance and has secured hundreds of millions of dollars over the last decade in unclaimed property and fines.
So, companies are stuck between not wanting to get dinged for noncompliance and being afraid to liquidate a cryptocurrency account. They want more clarity on what to do and Butterbaugh says two places — New York and Washington, D.C. — are working on a solution.
But in the meantime, she advises companies dealing in cryptocurrency to start addressing their dormant accounts now.
I am a fiscal policy expert, national journalist and public speaker who has spent more than 15 years writing about the many ways state and local governments collect and spend taxpayer money. I sift through that complicated information then break it down in quick ways that everyone can understand. I’m most known by policy wonks for my work at Governing magazine and for my fellowship at the Rockefeller Institute of Government where I write about the intersection of government and the future of work. My work is also in the Wall Street Journal, Bloomberg, CityLab and other national publications. Frequent and enthusiastic radio and podcast guest.
Let’s face it – retail is one of the most competitive industries out there. Consumer preferences are constantly changing and it takes a lot for these types of businesses to earn shoppers’ hard-earned cash. That’s one of the reasons why investing in specialty retail stocks can be a great long-term strategy if you choose wisely. Since specialty retailers focus on specific product categories, like office supplies, furniture, or men’s or women’s clothing, they are oftentimes able to carve out a unique niche and stand out among their competitors.
Thanks to all of the stimulus that has been added to the economy over the last year and the fact that a newly vaccinated population is getting back to shopping in person, we could see some strong sales coming out of the specialty retail space in the coming months. There are 2 specialty retail stocks that stand out as potential buys at this time given their unique brands and impressive earnings reports. Let’s take a further look at these intriguing stocks below.
RH, formerly known as Restoration Hardware, is a great specialty retail stock because it is doing something that is completely unique. While there are plenty of home furnishings stores out there, RH is distinctive in that it specializes in ultra-high-end luxury home goods and creating a unique shopping experience at every single store. Homeowners can find upscale products including furniture, lighting, bathware, outdoor & garden, tableware textiles, and décor at RH, and each one of the company’s showrooms offers an original and aesthetically pleasing experience.
The company counts Warren Buffett’s Berkshire Hathaway among its investors and is undoubtedly benefitting from a hot residential real estate market. With that said, RH has upside potential regardless of what’s going on in the economy, as the company doesn’t have exposure to seasonal inventory and caters to wealthy consumers that spend big year-round. The stock has been pulling back in recent months after a rally from $70 to $700 a share, but after the company’s latest earnings report it could be gearing up for more gains.
RH saw its Q1 revenues up 78% year-over-year to $860.8 million and delivered Q1 adjusted diluted earnings per share increase by 285% year-over-year to $4.89 per share. Other positives from the stellar report included an increased fiscal 2021 outlook and the fact that the company expects to be net debt-free by the end of the fiscal year. The bottom line here is that RH is a specialty retail company that is executing at a very high level, which is evident in both the earnings results and stock price.
There’s a lot to love about this specialty retailer, which designs and manufactures modular couches and beanbags. What really stands out about Lovesac is how it has created a brand and product lines that have quickly become the favorite furniture of an entire generation. Millennials are among Lovesac’s most frequent customers, as they love the idea of the company’s flagship product, a unique modular furniture piece known as a “sactional”.
These are couches that are easily assembled and disassembled in order to meet the needs of the consumer. There are literally dozens of different ways that sactionals can be rearranged to fit in someone’s home, and the fact that customers can continue adding on pieces and accessories over time is perfect for creating repeat buyers.
While the company has 91 retail showrooms across the United States, investors should be impressed with the progress that it has made over the last year developing its digital sales channels. E-commerce sales were up over 250% in 2020 and although the company might not be able to keep up that torrid pace, Lovesac has proved it is more than capable of finding buyers online. Also, keep in mind that those showrooms are going to see foot traffic pick up as the pandemic winds down.
Lovesac just reported very strong Q1 2022 earnings results including net sales growth of 52.5% and diluted EPS of $0.13, up 122.1% year-over-year. Analysts also love the stock, as Lovesac recently got a price target increase from Craig Hallum on Thursday. Pandemic tailwinds are continuing to help this specialty retailer grow, and that narrative should remain in place for the foreseeable future. These are all great reasons why Lovesac is a great stock to consider adding to your shopping list.
Stock futures are contracts where the buyer is long, i.e., takes on the obligation to buy on the contract maturity date, and the seller is short, i.e., takes on the obligation to sell. Stock index futures are generally delivered by cash settlement.
A stock option is a class of option. Specifically, a call option is the right (not obligation) to buy stock in the future at a fixed price and a put option is the right (not obligation) to sell stock in the future at a fixed price. Thus, the value of a stock option changes in reaction to the underlying stock of which it is a derivative. The most popular method of valuing stock options is the Black–Scholes model. Apart from call options granted to employees, most stock options are transferable.
Stock price fluctuations
The price of a stock fluctuates fundamentally due to the theory of supply and demand. Like all commodities in the market, the price of a stock is sensitive to demand. However, there are many factors that influence the demand for a particular stock. The fields of fundamental analysis and technical analysis attempt to understand market conditions that lead to price changes, or even predict future price levels.
A recent study shows that customer satisfaction, as measured by the American Customer Satisfaction Index (ACSI), is significantly correlated to the market value of a stock.Stock price may be influenced by analysts’ business forecast for the company and outlooks for the company’s general market segment. Stocks can also fluctuate greatly due to pump and dump scams.
Over 30? Then you had better read on. Shein may not be a household name like e-commerce giants, Alibaba BABA-0.4%, Taobao, or JD.com, but as China’s newest retail Decacorn, its mystery-shrouded low profile is matched only by a single-minded ambition to become a global fast-fashion retailer.
Founded in 2008, Nanjing-based Shein is aimed squarely at Gen Z, luring young shoppers via Instagram and TikTok influencers and a barrage of discount codes for low-cost styles – with a dress costing just half that of a Zara equivalent, according to Societe Generale – uploading new products online in their hundreds every week.
Yet beyond its teen audience, ultra-publicity shy Shein remains largely unknown. But that anonymity could all be about to change after the Pearl River-based company became a surprise potential bidder for ailing U.K. fashion group Arcadia. While it failed in that attempt, the message is clear: Shein is ready to take on Main Street.
The story really starts at the beginning of 2012, when notoriously hard-working founder and CEO Chris Xu (sometimes known as Yangtian Xu) – an American-born graduate of Washington University – gave up his wedding dress business to acquire the domain Sheinside.com. Initially selling women’s clothing, in 2015 he renamed the company Shein, focused on overseas markets, and began snapping up fashion rivals.
Remember that age/awareness divide? Well, in the week starting September 27, Shein was apparently the most downloaded shopping app globally on iPhone, according to analytics platform App Annie. It ranked in the top 10 in the U.S., Brazil, Australia, the U.K., and Saudi Arabia.
To service the U.S. market, products are sent from Shein’s warehouse in Foshan, Guangdong province, to a warehouse near Los Angeles, Ca., and fulfillment can take over ten days, glacial by Amazon Prime’s AMZN+0.5% next-day delivery standards. But its affordability has ensured a loyal customer base, lured by an ever-changing roster of women’s clothing and accessories added at an average of 2,000 SKUs every day.
Shein is obsessed with identifying hot searches and trends in different countries to predict the colors, fabrics, and styles that will be popular, with an even faster cycle than Zara owner Inditex. It then promotes heavily with Instagram- and Weibo-friendly imagery, for accessible and attainable fashions across all its social platforms.
However, Shein’s ascent has not been without its problems. In July it was roundly condemned for having a swastika pendant available (an error for which it profusely apologized), while paid-for posts from celebrities and fashion influencers have elevated the brand’s image as well as slowly rebutting its low–cost, low–quality rap. The label even managed to sequester stars like Katy Perry, Lil Nas X, and Rita Ora for its May 2020 #SHEINTogether global streaming event.
The Emergence Of A Global Fashion Player
All this remember for a company that didn’t even have its own supply chain before 2014, preferring to buy directly from Guangzhou’s Shisanhang Garment Wholesale Market. However, faced with soaring demand, Xu created an in-house design team and within two years had assembled an 800-strong army dedicated to designs and prototyping for ultra-fast production. It also garnered a reputation for timely payment, something of a rarity in China, and as a result when Shein moved its supply chain operations center from Guangzhou to Panyu in 2015, almost all of the factories it worked with relocated.
In the same year, Shein entered the Middle East and sales soared, with revenues in 2016 rising to $617 million and exceeding $1.5 billion the year after.
Shein and the hundreds of factories that work with the company have coalesced in a production cluster bearing close similarities to A Coruña in north-east Spain, where Inditex’s headquarters are surrounded by its upstream and downstream suppliers. It has four R&D facilities in Nanjing, Shenzhen, Guangzhou, and Hangzhou, plus six logistics centers in Foshan, Nansha, Belgium, India, and on the East and West Coasts of the U.S. It also has seven customer service centers, based out of Los Angeles, Liege, Manila, Yiwu, and Nanjing, and employs more than 10,000 people.
Future plans are thought to include the development of new businesses in mobile payments, supply chain finance, advertising, and, of course, opening brick-and-mortar stores. Whatever happens, it’s likely to do it ultra-fast.
I am a global retail and real estate expert who looks behind the headlines to figure out what makes consumers tick. I work as editor-in-chief for MAPIC and editor for World Retail Congress, two of the biggest annual international retail business events. I also organise, speak at, and chair conferences all over the world, with a focus on how people are changing and what that means for the retail, food & beverage, and leisure industries. And it’s complicated! Forget the tired mantra that online killed the store and remember instead that retail has always been dog-eat-dog: star names rise and fall fast, and only retailers that embrace the madness will survive. Don’t think it’s not important, your pension funds own those malls!
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Right now, Jeff Bezos is the richest man in the world thanks to Amazon , his leading online sales company. However, retail expert Doug Stephens predicts that the giant could fall over the next decade, even going bankrupt.
“I think that in ten years Amazon is going to decline and these are just some of the reasons,” Stephens wrote.
Amazon follows in Walmart’s footsteps
One of the reasons for the possible bankruptcy of the online trading platform would be that it is following the same patterns as other companies. Stephens gives Walmart an example.
“Between 1962 and the early 2000s, Walmart led the retail business, beating out dozens of competitors large and small. By 2010, Walmart had opened a staggering 4,393 stores, of which more than 3,000 opened after 1990, ” explains the expert.
After suffering a big drop in sales in 2015, Walmart has failed to take off in online retail. “The decline of the once impenetrable giant has shown that even the most titanic companies can fall,” Stephens said.
Amazon offers efficiency, but no shopping experience
The specialist considers it dangerous that Bezos intends to maintain the same long-term operating model. “In our retail business, we know that customers want low prices, and I know that is going to be true 10 years from now. They want fast delivery; they want a wide selection, “ said the tycoon in statements taken up by Business of Fashion.
However, Stephens believes that people don’t just buy because they want the products as quickly as possible. They also want the full shopping experience : getting out of the house, touching the products, comparing them with each other, trying new things or getting inspired. In that sense, the disadvantage of Amazon is limited to online purchases.
Focus on customer service will be lost
When a company has a powerful leader like Jeff Bezos at the helm, it would hardly function without him. The expert predicts that, as Amazon continues its expansion, the figure of Bezos could dissipate or disappear. Then it would be possible that you lose your initial mission, which is customer satisfaction, to prioritize the optimization of processes based on figures and data.
He also anticipates that the company will innovate less. “The energy, once directed to improving the business, will be depleted in simply working to maintain the organizational infrastructure ,” Stephens noted.
Support Out of Frame on Patreon: https://www.patreon.com/OutofFrameShow Watch our newest video, “The Social Dilemma Is Dangerously Wrong… Part II”: https://youtu.be/pOYxN_a7zL4 Check out our podcast, Out of Frame: Behind the Scenes: https://www.youtube.com/channel/UCiS5… Bob thinks we should just confiscate all the wealth from all the billionaires in America to pay for government programs. But even if that were possible… would it even work? ______________________________ CREDITS: Written by Seamus Coughlin & Jennifer Maffessanti Animated by Seamus Coughlin Produced by Sean W. Malone
Nearly a third (32%) of consumers would switch providers if a brand’s website is unavailable for more than 24 hours
A study released today reveals the scale of omni-channel pressure brands now faced as a result of the Covid-19 pandemic, as consumers flock to apps and websites to as the priority destination to transact with brands.
The UK has experienced a huge leap in use of online services thanks to lockdown, with the public appearing to have less concern for the availability of a brand’s physical location. Research by Sungard Availability Services (Sungard AS) uncovers a “window of availability” that UK businesses now have before consumer loyalty changes:
If a brand’s website is down for 24 hours – 32 percent of consumers would switch provider
If a brand’s app is down for 24 hours – 28 percent of consumers would switch provider
If a physical store is closed for 24 hours – 20 percent of consumers would switch provider
The results by industry paint an interesting picture of the availability timeframes brands are expected to adhere to:
For online retailers, excluding grocery retailers – 23 percent of consumers would switch provider if they could not access online services for 12 hours, rising to over a third (34 percent) after 24 hours
For financial services and entertainment streaming platforms – 21 percent of consumers would switch provider after 12 hours, rising to 33 percent after 24 hours
In the case of online grocery shopping – 20 percent would switch provider after 12 hours, rising to one third 33 percent after 24 hours
The findings also highlight that as digital reliance increases, so will consumer expectations towards availability in the future. Over the coming two years, a third (33 percent) of consumers expect online financial services to always be available, rising to 35 percent for streaming services.
“UK consumers have become reliant on the constant availability of online services, and lockdown has only served to heighten this,” comments Chris Huggett, SVP, EMEA at Sungard AS. “What used to be a choice between physical and digital has now firmly accelerated into digital environments across various industries. As online worlds continue to outpace bricks and mortar as the face of businesses, ensuring constant availability and clear communications on downtime will be key for brands to build trust and loyalty.
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N THE SUMMER of 1995 Jeff Bezos was a skinny obsessive working in a basement alongside his wife, packing paperbacks into boxes. Today, 25 years on, he is perhaps the 21st century’s most important tycoon: a muscle-ripped divorcé who finances space missions and newspapers for fun, and who receives adulation from Warren Buffett and abuse from Donald Trump. Amazon, his firm, is no longer just a bookseller but a digital conglomerate worth $1.3trn that consumers love, politicians love to hate, and investors and rivals have learned never to bet against.
Now the pandemic has fuelled a digital surge that shows how important Amazon is to ordinary life in America and Europe, because of its crucial role in e-commerce, logistics and cloud computing (see article). In response to the crisis, Mr Bezos has put aside his side-hustles and returned to day-to-day management. Superficially it could not be a better time, but the world’s fourth-most-valuable firm faces problems: a fraying social contract, financial bloating and re-energised competition.
The digital surge began with online “pantry-loading” as consumers bulk-ordered toilet rolls and pasta. Amazon’s first-quarter sales rose by 26% year on year. When stimulus cheques arrived in mid-April Americans let rip on a broader range of goods. Two rivals, eBay and Costco, say online activity accelerated in May. There has been a scramble to meet demand, with Mr Bezos doing daily inventory checks once again. Amazon has hired 175,000 staff, equipped its people with 34m gloves, and leased 12 new cargo aircraft, bringing its fleet to 82. Undergirding the e-commerce surge is an infrastructure of cloud computing and payments systems. Amazon owns a chunk of that, too, through AWS, its cloud arm, which saw first-quarter sales rise by 33%.
One question is whether the digital surge will subside. Shops are reopening, even if customers have to pay at tills shielded by Perspex. Yet the signs are that some of the boom will last, because it has involved not just the same people doing more of the same. A new cohort has taken to shopping online. In America “silver” customers in their 60s have set up digital-payment accounts. Many physical retailers have suffered fatal damage. Dozens have defaulted or are on the brink, including J Crew and Neiman Marcus. In the past year the shares of warehousing firms, which thrive on e-commerce, have outperformed those of shopping-mall landlords by 48 percentage points.
All this might appear to fit the script Mr Bezos has written over the years in his letters to shareholders, which are now pored over by investors as meticulously as those of Mr Buffett. He argues that Amazon is in a perpetual virtuous circle in which it spends money to win market share and expands into adjacent industries. From books it leapt to e-commerce, then opened its cloud and logistics arms to third-party retailers, making them vast new businesses in their own right. Customers are kept loyal by perks such as Prime, a subscription service, and Alexa, a voice-assistant. By this account, the new digital surge confirms Amazon’s inexorable rise. That is the view on Wall Street, where Amazon’s shares reached an all-time high on June 17th.
Yet from his ranch in west Texas, Mr Bezos has to wrestle with those tricky problems. Start with the fraying social contract. Some common criticisms of Amazon are simply misguided. Unlike, say, Google in search, it is not a monopoly. Last year Amazon had a 40% share of American e-commerce and 6% of all retail sales. There is little evidence that it kills jobs. Studies of the “Amazon effect” suggest that new warehouse and delivery jobs offset the decline in shop assistants, and the firm’s minimum hourly wage of $15 in America is above the median for the retail trade.
But Amazon’s strategy does imply huge creative disruption in the jobs market even as the economy reels. In addition, viral outbreaks at its warehouses have reignited fears about working conditions: 13 American state attorneys-general have voiced concern. And Amazon’s role as a digital jack-of-all-trades creates conflicts of interest. Does its platform, for example, treat third-party sellers on equal terms with its own products? Congress and the EU are investigating this. And how comfortable should other firms be about giving their sensitive data to AWS given that it is part of a larger conglomerate which competes with them?
Amazon’s second problem is bloating. As Mr Bezos has expanded into industry after industry, his firm has gone from being asset-light to having a balance-sheet heavier than a Soviet tractor factory. Today it has $104bn of plant, including leased assets, not far off the $119bn of its old-economy rival, Walmart. As a result, returns excluding AWS are puny and the pandemic is squeezing margins in e-commerce further. Mr Bezos says the firm can become more than the sum of its parts by harvesting data and selling ads and subscriptions. So far investors have taken this on trust. But the weak e-commerce margins make it harder for Amazon to spin off AWS. This would get regulators off its back and liberate AWS, but would deprive Amazon of the money-machine that funds everything else.
Mr Bezos’s last worry is competition. He has long said that he watches customers, not competitors, but he must have noticed how his rivals have been energised by the pandemic. Digital sales at Walmart, Target and Costco probably doubled or more in April, year on year. Independent digital firms are thriving. If you create a stockmarket clone of Amazon lookalikes, including Shopify, Netflix and UPS, it has outperformed Amazon this year. In much of the world regional competitors rule, not Amazon; among them are MercadoLibre in Latin America, Jio in India and Shopee in South-East Asia. China is dominated by Alibaba, JD.com and brash new contenders like Pinduoduo.
Imitation is the sincerest form of capitalism
The world’s most admired business is thus left having to solve several puzzles. If Amazon raises wages to placate politicians in a populist era, it will lose its low-cost edge. If it spins off AWS to please regulators, the rump will be financially fragile. And if it raises prices to satisfy shareholders its new competitors will win market share. Twenty-five years on, Mr Bezos’s vision of a world that shops, watches and reads online is coming true faster than ever. But the job of running Amazon has become no easier, even if it no longer involves packing boxes.
Tim Lesko of Granite Investment Advisors says it’s hard to imagine a better backdrop for Amazon, with the surge in online sales during the virus outbreak, and as for Apple, expectations weren’t very high for iPhone sales this year, even before the pandemic. Amazon reported its first-quarter earnings after the bell on Thursday, revealing the pandemic’s impact on the business that has been a rare bright spot on the stock market. The stock fell about 5% after hours after missing estimates on earnings while beating revenue expectations.