Why independent retailers should care about net neutrality

Net neutrality. Right now it’s a big focus in a particularly busy news cycle. But if you’re like most retailers this month—crazed with holiday marketing, merchandising and selling—net neutrality is probably not top of mind, no matter how many times the term is blasted by the news media.

But it should be—and likely not for the reasons you think.

On December 14th, the Federal Communications Commission (FCC) will vote to dismantle current net neutrality rules that require Internet service providers to treat all data on the Internet the same. And while freedom of speech and protecting the public's internet rights to stream movies and download music for free may be what people are talking about most, in reality, that’s not even the real story here.

The real story is about the telecom industry, and how killing net neutrality will give them license to charge new internet gateway premiums that accelerate their margins and discriminate against smaller players on the Internet.

You see, today the FCC legislation equalizes the playing field for everyone online. High volume, low volume, it doesn't matter. Big brands and entrepreneurs have the same access to the web, regardless of the scope of their products and services.

But if the net neutrality rules are struck down, that means the telecom giants can charge premiums any way they want. In theory, big, high traffic users like Amazon or Netflix would be charged more because they suck up a lot of bandwidth. But if you take a step back and think about the way business really works, we all know it’s pretty unlikely that the heavy hitters will be the ones actually taking the hit.

Big brands with massive leverage and enormous scale don't pay the tolls—the little guys do. Netflix, Google, Amazon and large retail chains engaged heavily in e-commerce will be able to keep their costs low as telecom giants instead hike up the fees for smaller internet users. Scale almost always rules in economic models, and this space is no different. 

The telecom industry runs gross margins in the 80%+ range, with net profits usually 11% or more. Do you really want independent retailers with net margins between 2 to 4% to help out the big telecom players?

It’s true that right now the grocery industry isn't heavily dependent on e-commerce. But that will change, probably faster than anyone thinks. And do we really want another situation where big brands like Walmart get yet another competitive advantage?

If you’re an independent retailer, you need to care about this issue, and do everything in your power to keep net neutrality alive.

Call your representatives and the FCC directly to tell them net neutrality rules are essential to the health of independent retailers. 

You have a powerful voice. Now’s the time to use it.

 

Why Amazon is good for the grocery industry

 

During a recent panel study, I listened to shoppers discuss their changing grocery habits. Adults from mid twenties to mid sixties discussed topics like loyalty, convenience, value. And it was hard to get them to stop talking about Amazon. 

As we have been seeing in research for years, shoppers generalize their expectations from one retail service to another.  If a person has a transformative experience with say a new, better way to order tickets, or pick their airline seats, or check into a hotel from their mobile phone, they begin to judge other kinds of retail experiences through this new lens. 

Think about how much banking has changed in the last ten years. How many times have you actually had to go into a physical branch? What about buying a car? Making reservations for dinner in a new city? Booking a European vacation? Checking to see what's playing at a local theater?

All of these experiences are radically different. And radically better. We are faster, more informed, better shoppers because of digital technology. And we could never go back. Remember looking in the newspaper for movie start times? Having to get your airline tickets mailed to your home? Or even stumbling through record stores, trying to find albums you might like based on just the recommendations of the kid at the counter? 

Now reflect on your grocery shopping habits. Certainly things have changed. Shoppers might be including a dollar store in their weekly routine, or expanding beyond just their grocer. And recently , we've seen direct to home meal services emerge, which certainly does impact shopping.

But for the vast majority of transactions, and the vast majority of shoppers, the grocery experience is remarkably unchanged from that of our parents. Same busy parking lot, same cart with a wobbly wheel, same hand written end cap signs, and even the same college football beer promotion sweepstakes. 

As industry insiders, we might bristle at that paragraph. We've invested billions in logistics improvements, self check out, electronic label printers, payment terminals and POS upgrades. 

But almost all of our capital has gone to inward-facing technology. To the shopper, these improvements are either invisible or marginal. To them, our industry seems amazingly stagnant.

To the shoppers in this recent panel, the innovator in our industry appeared to Amazon. They were amazed at same and next day; they loved the idea that they could find almost any product they wanted with just a few clicks; they appreciated that Amazon prompts them with items that other shoppers have bought; and they loved previous purchasers reviews. 

As a brick and mortar retailer by heritage, I admit that I cringe inwardly when shoppers praise a company that gets held to tech start up financial standards (they aren't expected to hit the same earnings goals as mature businesses) to a traditional retail brand. After all, physical retailers have to to increase market share year over year and do it *profitably*. The game doesn't really seem fair.

But then I reflect on what the consumers are saying. And the things they like about Amazon aren't really new at all. Product recommendations and "you might also like" suggestions - couldn't we figure out a way to do that in store, on shelf? What about previous purchaser reviews - would it really be that difficult to bring ratings to a tag, package or a shopper's phone when they tap an item? 

And even home delivery: We know it can be done. Retailer's core skill sets include merchandising and logistics... we are the people who know how to move products from one place to another fast, efficiently, safely. 

So yes, I think Amazon and its push into grocery is good for bricks and mortar retailers. It is a call to action, but it isn't Amazon that's calling; instead it's our owns shoppers saying, "serve me better, ramp up your game, service my needs in new, more creative ways."

Great retailers have always been great listeners. Like never before, it is time to seek out our shoppers, and tune into to what they are seeking. 

New site, new blog, new era

Welcome to the Fire in the Zoo website, and my blog. If you are here, you are already interested in the topic of shopper marketing. Whether you are from an agency, or a retailer or a brand, you spend your days trying to figure out how to get people to consider and buy your products. 

Shoppers today have more information, more access to product data, easier ways to learn about product choices than at any time before. And since many of those interaction are increasingly digital, we can see what they are doing. It;s like being able to hover over their shoulder, watch them make choices, and see what truly drives choices and what is simply noise in the system.

This blog will be a place to advance this dialog. Look for interviews with industry experts, conversations about emerging shopper science and new tools to listen to and respond to emerging shopper needs. 

I will also try and comment on marketing that seems to be shopper focused, directed toward the needs of those who are in the path to making a purchase decisions.