Of late, I’ve had a string of familiar in-store shopping experiences. I’d like X. I’d like X in color Y. I’d like X in color Y and size Z. The person helping me at the store, comes out from the back room with a disappointed look on his/her face and says, “I’m sorry, we don’t have it here, but we can order it for you and have it sent to your house at no charge.” Three years ago, this would have been the store going above and beyond, while filling a distribution gap and retaining my business. When Nordstrom first started offering this model, it was mind-blowing and revolutionary.
But, what worked 3 years ago, doesn’t satisfy the hunger for those of us living in the Now Economy. Want a song? Download it from a plethora of options. Want to watch a movie, fire up NetFlix, HBO Go, Amazon Video or another platform, click on it and stream away. Want dinner? Order it on your phone and have it delivered to you in 30 minutes from GrubHub. We are in a Now Economy. We want it now. And if you can’t satisfy the itch, that is now, we’ll find someone who will.
A few months back I stopped into the Nieman Marcus at King of Prussia mall. There was a jacket I’d lusted for, the past 2 years. Elliott, the salesman, who at this point, knew me by name because of all the times I’d stopped in to see the jacket, was there that day. I said to Elliott, “today’s the day I buy the jacket.” He smiled. Went over to the rack. We both had the same look. I’m a 40R and the smallest jacket was a 44R. That’s far too big to tailor. Now at this point, Elliott could have said, “I’m sorry, we don’t have it here, but we can order it for you and have it sent to your house at no charge.” But, he didn’t. He understood the Now Economy. Elliott did 3 things:
- He checked to see if there were other stores in the area that had the jacket in my size.
- He found one and called to confirm the data in the computer matched what was really there.
- He said, I can have it sent to your place today, via courier, for a nominal fee, if I wanted it today (aka now).
That’s pretty amazing service. There’s no denying that. But that amazing service stems from understanding that we were both operating in the Now Economy. Elliott knew he’d miss out on the commission if he didn’t sell it now and he knew I wasn’t going to wait. This wasn’t easy, I’m sure. I’m also sure, today, it would be nearly impossible to scale to 100s of 1000s of shoppers, every day. But, as Amazon teases the idea of drones that can bring you same day delivery, make no mistake, we’re all destined to be part of the Now Economy. ZipCar is the Now Economy. iTunes is the Now Economy. The food you see on the perimeter of grocery stores, is the Now Economy. Uber is the Now Economy. The XBOX One enabling you to download games instead of buying the in-store, is the Now Economy. It’s everywhere, if we only look.
The Now Economy brings about even more disruption for retailers and service providers. Specifically, I think there are three critical challenges they must solve for.
- Incorporating An On-Demand Service Model: This isn’t a new idea. Ever have dinner delivered, where there’s a delivery/service charge on top of the cost of goods? Great, then you’re familiar with an on-demand service model. When we get something on demand we usually pay a premium. In theory, this would be great for the retailer or service provider. In practice, it’s mayhem, because it brings about the need to create new models to support an on-demand consumer. For example, we’re all familiar with restaurants that simply won’t deliver. There are good reasons for them not to deliver. Some chefs will say the quality of the food experience is marginalized. That’s a fair reason not to deliver. But, a bigger reason is trying to figure out the business model around predicting demand and staffing for that demand.
- Surge/Value Pricing: People love to hate on Uber for their Surge Pricing model. For those not familiar, let me offer a quick explanation. Uber has a fixed pricing model for time/mileage. You request a Uber and the car ride is governed by those rates. This is similar to every cab you’ve ever taken. You pay a premium on those rates for a better car and having the car come to you. Simple enough. Well, during peak times, when there are more people requesting Uber rides, than there are drivers, Uber charges a massive up-charge. How massive? It could turn a ride that would normally cost $40, into a ride that costs $240. Folks, that’s economics. It’s the simple supply and demand concept. Nothing new. Even the surge pricing isn’t really a new concept; it’s just a slight modification of a “rush charge” associated with services like tailoring. But, let’s say you’re a clothing retailer. You have a shirt I really want. I call to see if you have it in my size. You do! If you’re like most stores, you might hold it to the side for an hour or a day. But, if it’s something that’s inherently in limited supply, it’s unlikely that you will. But, what if I offered to pay double your asking price? Crazy? Perhaps. But, if you have the financial means and value it at 2x the asking price, why wouldn’t you accept that? I can give you a great reason…your prices are governed at a corporate level and your point of sale system can accept a discount, but not an up-charge. Infrastructure, logistics and policy…all holding you back.
- Sourcing Logistics: Have you heard of Pappy Van Winkle? It’s a bourbon. But, not just any bourbon. It’s made in limited supply and without traditional distribution. Bottles are allotted to stores. Your store might get 4. It might get 12. It might get 1. The bottles retail for roughly $50.00. They’re re-sold on the secondary market (aka Craigslist) for 3X – 10X that amount. That’s the free market economy at work for you. Capitalism, at its finest. There’s an urban legend story about a Zappos customer care specialist going well above the call of duty. A woman had called to inquire about a pair of boots/shoes. Zappos didn’t have the size the customer needed. Rather than lose the sale, the specialist, ordered the shoes from Nordstrom, who had them in the size needed and then cross-shipped them to the consumer. It wouldn’t surprise me at all if this urban legend were 100% true. That’s the Zappos way and I think it represents the future. Auto Dealers are quite adept with this model. Let’s say you want a specific car with a specific set of features. It’s not uncommon for your dealer to trade a car on their lot with a dealer that has the car with your specifications. In fact, that’s exactly what happened when I purchased my last car. These dealers are simply swapping inventory. This works well when you’re all a part of the same family, but it’s much more difficult to do what Zappos may have done. I think organizations are going to need to grapple with a logistics model in which they don’t own all the inventory that they may sell you.
Speed is life, as Facebook says. I say, Speed wins. We live in an on demand world, where our phones hold more power than the computers from 10 years ago. The business, operating and logistics models of the past will not be able to support the Now Economy. Start rethinking about rewiring now. You don’t have time to wait.