Just keep swimming...offline selling in the digital age

Retail commentator Leon Bailey-Green wrote a few weeks ago about the influx of opinions since the demise of HMV on what should have/could have/was stupid not to do with the business in the face of a period of significant change within it's vertical. Everyone all of a sudden had an opinion on why HMV failed, what they should have done and how slow they were to do it. That's kind of fair enough - events in our industry stimulate conversation and I wouldn't want it any other way. Yet Leon was right in saying that it's rare that before the demise anyone has any helpful suggestions, is this because we feel more confident criticising after the fact? Or are we all bandwagon jumpers who just like the HMV management team equally didn't see the real stinng of digital coming? Leon suggested those who criticised HMV for being slow to change should make some suggestions about Waterstones (widely considered another dead-int-the-water thanks to Amazon retailer). I thought about this a bit, and here's mine.

I'm caveat-ing this with the fact that I genuinely know nothing about the internal workings of their business, and that no doubt there are 'ooh but that's not profitable', 'that's too much cash', 'that's not possible with their debt/organisational/store structure' grumblings out there even as I'm writing this, and I'm fully aware this is likely not going to save anyone from going under but hell.,...I'm having a go at being creative instead of (just) critical...maybe more of us retailers should give THAT a try.

Not sure where the fishing references sprung from ...potentially my four week holiday in NZ with a fisherman was SLIGHTLY too long :-)

H x

Constant press around the inability of retailers to complete with online shopping suggests that Waterstones is teetering on the edge of being the next victim. Like an innocent lemming following it's friends along with no idea where it's going, it's almost inevitable that it's about to fall off the cliff, and we're all going to watch and nod our heads when that happens, and say to each other that "there goes another casualty...oops. who cares about buying books anyway...they're just like CD's, part of the past...." But I can't help thinking Waterstones has a number of strengths against the likes of Amazon, and that there is something there worth saving. If I was in charge of the business I'd be focusing on these three differentiating factors:

•  Hands on experience of the product - as any book lover will tell you, books have a smell, a feel, an emotion and buying them online doesn't always compensate for the joy of wandering around a bookstore touching and dipping in and out of books you might buy (get out of the big fish's pond)
•  It's reputation as a retailer which knows and is passionate about reading (build your own pond)
•  It's proximity to where people actually are, meaning ease, no delivery charge (get them in the pond (door) )

Get out of the big fish's pond (kinda)

Stop de-valuing books by trying to compete on price. Stop stacking them high and selling them cheap-  at least in store environments. Create spaces where people want to linger, and stock things they want to linger over. If you must give them ipads to linger on then FINE tick your omni-channel QR code box but for goodness sake do it soon. Shut down shed-like retail park stores if you have them, Focus on stores that are on the high street, in great locations, in University towns etc. Get everyone else online (that's the kinda bit). Make your store a brand space (NOT a showroom-  I hate that word), let people collect online orders there, let them order to their home their, use your stores as the foundations of your brand. If it isn't, get rid of it,

Pioneer the beautiful book - Mass produced, get it for 3 for £7 in Tesco, shiny paperbacks are never going to be the draw for someone to come to a book store (unless they're in the airport, or me... because I read so fast that those 3 for 2 deals are basically my life). What happened to the beauty of books? When was the last time you purchased a lovely hardback of your favourite novel? Or a signed copy of an author you admire? or gifted a hard backed copy of the Very Hungry Caterpillar to a newborn? Not for agea? Exactly. And where would you even get such a thing from? I resent the purchase of hardbacks - they take the same amount of time to read for me and then they take up room on my shelf, and you took £15 away from me for the pirvelege. but a lovely hardback of a Harry Potter book? Or The Shadow of the Wind? A limited edition? I'm there.....Books are a part of a person's home, their personality, their life....no one stacks Kindle books on their coffee table.....(well that's physically impossible but you get my sentiment)

Support the industry  - Partner with some small independent publishers, who don't partake in the neon-tinted 800 pager. Find them, Start one. Get them on your shelves. Create difference. yes still sell the neon bricks (I for one love them) but start editing, curating, bringing wonderful words to your customer.

Build your own pond

Remember your strengths - I'm not sure if they still do it now but at one point Waterstones had handwritten reviews of books taped to the front copy of a new release or hidden classic, written by the staff themselves. This is a great opportunity to utilise thoseb ook club people or their own staff and really sell their knowledge and insight. Customers love to discover something new, but to feel confident about their purchase  - this is the perfect way to help them do that in a store environment.

Offer something more

Invest in staff - I am a true believer that as much as we love Amazon, we love the reviews, we love the speed etc - what amazon can NEVER do is give the type of one to one personal service that you get in a shop. And you might be thinking 'really? who would want that?'; but it's true - we have devalued shop work to a minimum wage, poor benefits  24/7 occupation which is absolutely in no way shape or form giving Amazon a run for their money on the one thing they cannot compete on. and maybe customers have stopped caring about that - but that's because we have let them stop caring. The French lady in Whistles in Blackheath was the only reason I ever used to shop there - she made me feel welcome in a store I'd never really been in before, helped me with styling and made me feel good about my purchasing. As someone who works in an online industry-  I'm telling you, that shit is pure retail gold, and almost impossible to replicate online. Invest in staff. Employ experts. Let them sell their passion to your customers.

Get them into the pond

Products like books lend themselves beautifully to being an impulse buy. People who read are generally quite emotionally attached to the whole experience of reading, and discovering a hidden gem is a real part of the literary culture. Those who aren't so passionate or not just in that mood today may find that actually once they're tempted inside price isn't a considerable difference when you factor in the wait and cost of delivery. Reasons to make your store a hub of literary activity are for me the key to being a genuine multi channel retailer instead of a website with some stores attached. 

I think sometimes we forget - most people are on (or on the brink of) the internet all day every day for work - essentially they're there anyway, they're not always on the high street. If they were, things might be slightly different.

Focus on Local   - Even if every local area doesn't have a famous author or part in literary history then there are significant ways the stores could 'personalise' their stock much more than they do now. The Richmond store for example if not only right over the road from our office but also near ebay, Paypal and Gumtree - there is a strong online community here and books which reflect the needs and tastes of the area would be perfect. Our town is also the home of the original William Curley store  - being able to get exclusive signed copies of the William Curley book would entice me into the door, ditto Petersham Nurseries is down the road and Lucy Boyd-Gray's book is just out...you're getting my point. Play on those strengths. Stock those collections, expand those themes,., get those authors in - not just for a single signing but for presentations, readings, speaking gigs...make your website a hub for events, readings, exclusive content on new releases, authors etc....

Better coffee shops. -  Some stores I understand have Costa concessions inside them - which I can absolutely see makes sense when you're considering investing in something like this which isn't your core strength - and thinking that a concession situation means your store gets the benefit of the coffee shop without you needing to do any real graft or invest any cash. But in reality I find this type of approach a bit poor from a real brand point of view - who after all is going to bother to go into Waterstones (and upstairs in some cases) to get a coffee from Costa when there is probably one about 5 doors away on street level. I wouldn't bother. Also - and I know Costa has literary associations with their own book awards but as a somewhere I'd want to dwell and read it doesn't really work for me - I find those coffee shops are there for quick, speedy pickups of a Christmas coffee, with a bookshop I want to while away the hours, not grab a dry mass produced cake in five minutes flat. Seriously, why bother? What I would do is go to a cafe which is unique to my area and that space -  related to books, with books there to borrow and read while I'm browsing, or chatting with friends.  In fact - why not make it a bar, bring in evening trade, have evening events, get an alcohol licence. now I would definitely go to that. And KEY point is I'd probably buy things while I was there (especially if there was wine...just a thought).

Support the community - Book clubs are a huge trend in recent years - but other than with your close friends, where do you find a good place to go to one? This is a prime opportunity for Waterstones to be a hub of book clubs in the local area - in the same way that Sweaty Betty run Yoga classes in the evenings-  this is a great way to get people comfortable and familiar with the space, buying books (in bulk groups!) and producing content for your web site or digital media instore.

Just keep swimming

None of this is rocket science, not is it terribly high tech - despite what my LinkedIn profile may say I'm not capable of fixing some of the wider issues in retail via the power of a magic wand, but I am a customer and I do know what I'd like to see from a store environment trying to stay afloat in the sea of digital successes. Perhaps if Waterstones turned to their customer, instead of their critics they would do too.

An Idiot's Guide to eCommerce Payments

It never fails to surprise me that despite it being the most critical part of any ecommerce transaction so few people within the industry really understand ecommerce payments. Yes it's true that the payment industry is extremely fragmented and notoriously disconnected - every bank has it's own way of doing things, every contract a loophole and every card scheme a set of different rules - but this is slowly beginning to change and to be quite honest in most cases ecommerce payment is the same and relatively unchanged across models. Even if you don't understand the concepts as a whole you should understand them in relation to your own business, if you don't then start, because this is in my opinion the key part of being a retailer online. If people can't pay you don't get profit- need I spell it out for you any more? (Plus card schemes fines are preeeeeettttttyyyyyyy large so you'll want to make sure all those profits aren't eaten up).

Hugest apologies if this is teaching anyone to suck eggs, but I still hear scary terminology banded around like 'ghosting' (on the list of least favourite words of all time), incorrect information being told to customers and a general lack of understanding about what things mean. I'm not a payment expert by any means and I've learned many of these things by trial and error so don't take my definitions and comments as gospel - these are merely the things I think I've managed to pick up along the way and have worked for me. The idiot in the title (as always) is me by the way....

Let's start at the beginning of the customer payment. Seems as good a place as any to start.

Card details - probably one of the most sensitive pieces of data in your business, and the one customers least like to part with. As an online business you should be aware that you cannot under any circumstances store full customer card details - your PSP must do this on your behalf (they're like Level Ninja PCI Compliant, they have 6 ft thick walls and 24 hr security in their data centres, needless to say your average retailer -  not so much) . That means both in your database, on spreadsheets, in your customer service ticketing system or in fact on a post it note on your desk. That way goes pain and destruction my friend.

CVV/CV2 - People call it by both terms, for customers on the front end I prefer "Card Security Code" as it's easiest to understand but they're all the same thing. It's the three digits on the back of your card (or four on the front just to be confusing thanks Amex). It was introduced to add additional security - in theory to prove you had the card in your possession at the time of the transaction - in reality by and large these digits are utterly worthless once you've entered them once as they're now no longer secret. However this is a mandatory check you must do when authorising with the major card schemes (I'm mainly refering to Visa, Mastercards, Maestro and Amex when I talk about card schemes here, there's various others..Diners etc who may be different). Failure to do so can result in investigation and ultimate dismissal from the scheme (though only if you had a whole pile of chargebacks to be honest but if you did, and you didn't check CV2 - well I'd think you were the idiot). Now where this gets confusing is that some types of payment don't require CV2 checking.....ah told you this was fun. So mandatory - but also not :-)

PCI compliance - oh the joys of my world. As the resident PCI person in our business I get the fun job of trying to understand PCI compliance. If I was to give you any advice it would be this 1)  Don't leave it all for tech - it's business process as well 2) Keep on eye on the standards and not just the self cert questionnaire - it's a bit 'don't ask don't tell' on that questionnaire so I'd always go over the top and implement as much of the standards as you can 3) Watch your transaction levels - Amex have a much lower jump between levels of compliance than Visa and Mastercard, it's easy to hit Level 2 with not much effort for Amex. Remember also that PCI compliant refers to the certification part - just doing things right doesn't make you PCI compliant you have to be checked (by a trained PCI auditor in Level 1 or by self cert at other levels - this has just recently changed so that you must have someone who is trained in your organisation or hire a consultant to do it for you for some of the levels - check which one you are). Normally it takes a yearly full check and quarterly scans to stay compliant.


AVS - Address verification is a simple form of security online, and it merely checks a customer billing address that they're trying to check out with, matches the one on their statement. Format tends to matter here so if on your statement you mention a house name and on your online transaction you don't use it but use number instead the AVS can fail. It's important for a site product owner to understand this as it helps customers if you design your payment form with that in mind. I'd always check AVS first but it depends on your technical setup and your PSP.

 

3D Secure (The 3D stands for 3 domain  for those who wish to know)- if this isn't the bane of your checkout life then I don't know what is. Users hate it, Product owners hate it...banks love it, and it has reduced online fraud significantly since it was introduced.  It's important because it represents a liability shift - the bank authenticates the transaction so the liability for a chargeback (fraud ones anyway) lies with them and not the retailer. It's an optional check (notably John Lewis don't have it on their site) but again if you get a load of chargebacks and you don't have it the schemes are going to start getting pissy with you. Remember you can only use it on your online site - if you take transactions over the phone you have to skip 3DS as you can't ask a customer for their passwords. Like your PIN number it's just not done to share it. 3DS also isn't yet officially compatible with mobiles (the pesky iFrame sometimes loads but not much else).  The simplest way to describe it as online chip and PIN - the liability shift works in the same way. When you complete a  transaction online your payment services provider (psp) sends out a message to your bank to ask if you're enrolled in a 3DS scheme (Verified by Visa or Mastercard Secure Code - Amex have their own and I forget what it's called...SafeKey that's it) -  most cards now are so if you're not enrolled you'll be asked to do so there and then. If you are you'll have to enter your password or PIN (depending on the scheme) in the little box. The box is ALWAYS produced and hosted by your bank -hence the multiple domains bit - however it often looks what we call in the North " a right clip" (banks not being online usability/design gurus in general) and it's not the most reliable of things. This weekend we had a customer who actually thought it was a phishing scam, that's how shit it looked....Anyway, sometimes the 3DS box will flash in front of your eyes and then go away without asking for your password...that's a new shade of fun called.....


Adaptive authentication - which was introduced a while ago (with a fairly massive failure to communicate) by some of the card schemes who realised that 3DS was causing a usability and dropout issue (you'd hope they did anyway......maybe they just fancied a change?). Essentially what it means is that it's no longer the case that a 3DS enrolled card will ALWAYS request 3DS authentication. The bank can decide - based on a number of things like whether you've shopped at that site before, the value of your transaction etc - that you're a safe bet, so it doesn't ask. In these cases liability is with the banks still and not with the retailer so happy days. Annoyingly it's a tad inconsistent and customers have zero clue what is going on when the screen starts zipping from you to the bank and back to you in the blink of an eye.



Pre-auth/Auth. Oh here it is, the rant about the word 'ghosting' -which people sometimes use to describe authorisation. I always try to stick to the real words for these things  - partly because you'll just find life easier when talking to third parties and I also find it adds huge confusion when people start assuming things are what they aren't. Most online transactions are made up of three major parts; auth (or pre-auth depending on your view), settlement and capture. In massively simplified terms auth is when you check the money is there, settlement is when you ask for it from the bank and capture is when it lands in your bank account. Settlement and capture and pretty close buddies. Auth tends to happen a larger time before the other two. As far as I'm aware it's rare than you would do a settlement and capture straight away - you have things like fraud checking that get in the way - though I'm sure that there are people who do, and it's called an automatic settlement when that happens, though like I say I wouldn't recommend it when you have fraud to be checking. What normally happens is that you check that the customer has the required amount of funds on their card and you auth for that amount - so the checkout is £200 - you let the customer's bank know that you'll be needing £200 thankyou very much. A couple of days later you may request settlement and capture from the bank once the order is dispatched, or confirmed or fraud has been checked (different companies do it differently), and then you take your £200. Now in order to make sure you get your £200 most banks will 'reserve' those funds in the customer's account. Now they don't go anywhere, it never shows as a transaction and the only time your customer will know it is when they look at their 'available balance' on internet banking (or more often when they run out of available balance :-) ). This is what can be called 'ghosting'. Auth tokens tend to expire - all banks are of course different (you know it!) so this an be anything from 48, or 72 hours to 10 days, to 28 days. You can try to reverse an auth but it's not massively relaible for the same reason. In exceptional circumstances where the auth lasts too long then the customer can notice and get annoyed, other times the auth could expire and you can't then take the funds based on that auth - and you can end up with a failed settlement. There is no real way around either of these, it's the nature of the beast.

1- Click Checkout - For a start this drives me insane because every C level exec I've ever worked for has asked me to do this. I shall repeat here for posterity what I say to them 1) It's proprietary Amazon terminology and functionality so no you can't and 2) it's a per item basis and not per basket so only really works if your site sells things people buy in 1's.

Express checkout on the other hand, or quick checkout, or whatever shade of grey you want to call it - that is OK. You can't store CV2 remember or any card details yourself so this is a bit of an invisible trickery whereby you auth the card the first time, store a token which links to that auth detail and then subqequently you say to yourself  'ah they were fine that last time, let's let them through again'. Typically for the payment industry this is technically a different type of transaction and therefore has a different rate structure. Sometimes your PSP will charge you for the storage of the card details so it sometimes adds a bit of cost there too. However it is one of the best ways to reduce dropoff and add convenience for customers.

Note that if you're "storing" card details for customers in their accounts you're not actually storing them - you're storing the last four digits, an expiry date and probably the name of the card. For this reason there is no such thing as 'Edit card details' - you have to delete them and re-add them. Drives me nuts when people say 'Edit' - what am I editing? Thin air?


Amazon - note this when dealing with payments, do not go and look and what they do and then copy it. Amazon are their own acquirer - basically they created their own bank, they're massive and probably own a fairly sizeable chunk of Visa and Mastercard's business - so they can get away with anything. You can't. Go elsewhere for your ideas.


Chargebacks - oooh nasty nasty, these are not your friend. A chargeback is what happens when a customer gets in touch with their bank and has any number of issues - it can range from their card has a fraudulent payment on it to the fact their item never arrived. Usually if it's fraud and you can prove you did the 3DS check and that you have a fraud checking process in place you can usually have the money re-credited (so the bank pays). There are however multiple reasons for chargebacks including products not being fit for purpose (Quality), refunds not being issued correctly (Clerical), or an incorrect amount being taken (Technical)  so it's important to check the code when assembling your case. You can see them all here and in various lists all over the internet. Some retailers choose to pay all chargebacks, some dispute them all-  it depends on various factors how your business deals with them. Most acquirers will penalise you for having a chargeback raised so in the main it's about doing all the checks up front to minimise them. As mentioned before - a large number of chargebacks will give you some unwanted attention from a number of payment organisations who are involved with your business so it's hugely in your interest to avoid them.


OK well that's my brain dumped out into a blog post. I really hope that's been helpful to someone, somewhere. Let me know in the comments if so (or if not indeed and I'll go back to writing fluff about how people are idiots :-) ), and of course feel free to correct me.



Useful Links

PCI DSS Standards
Visa Chargeback Codes
Wikipedia on AVS checks
Fraud Practice - some useful white papers etc