the internet is broken
TRANSCRIPT
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Free Business Support for IT Retailers & Resellers Workshops | Mentoring | Blog | Opinion | Forum | Research
Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Broken?Is The Internet
Web of Intrigue – 1: The Internet Is Broken
2Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Everything You
Believe
Is Wrong
Web of Intrigue – 1: The Internet Is Broken
3Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Growth isNOT
Happening
Web of Intrigue – 1: The Internet Is Broken
4Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Growth is
SLOWING EARLY and
ABRUPTY
Web of Intrigue – 1: The Internet Is Broken
5Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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The Bubble Has
NOT YETBurst
Web of Intrigue – 1: The Internet Is Broken
6Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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INTERNET GROWTH IS NOT MATERIALISING
Web of Intrigue – 1: Internet Growth Is Not Materialising
7Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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UK Online 2006 - 2013
% Population Purchasing on InternetWeb of Intrigue – 1: Internet Growth Is Not Materialising
8Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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36m Brits Use the Internet Daily…
2006 2007 2008 2009 2010 2011 2012 20130
1020304050607080
Daily At least weeklyLess than weekly Not used in the last 3 months
35.7million
7.4million4.2m
1.6m
UK Online 2006 - 2013
% UK Population
Web of Intrigue – 1: Internet Growth Is Not Materialising
9Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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…What Are They All Doing?Em
ailing
Products
/servi
ces
News
Socia
lTra
vel
Bankin
gHea
lthW
ikis
Course in
foSo
ftwareSe
lling s
tuff
Calls
Job se
arch
Networki
ngPo
litica
l
Online c
ourse
Surve
ys/vo
ting
020406080
100
16-2425-3435-4445-5455-6465+
UK Online 2006 - 2013
% AgeGroup
Web of Intrigue – 1: Internet Growth Is Not Materialising
10Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Surely Everyone is Buying Stuff?
2008 2009 2010 2011 2012 20130
102030405060708090
100
16-2425-3435-4445-5455-6465+
UK Online 2006 - 2013
% AgeGroup
Web of Intrigue – 1: Internet Growth Is Not Materialising
11Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Web of Intrigue – 1: Internet Growth Is Not Materialising
12Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Surely Everyone’s Buying Computers?
Clothes, sports
goods
Household goods
Films, m
usic
Books, m
ags, n
ews
Holiday
lodgin
gsTrav
el
Tickets
for eve
nts
Food or g
rocerie
s
Electronic g
oods
Games s
oftware
Share
s, insu
rance
Other software
Teleco se
rvice
s
Computer h/w
are
Medicine
E-learn
ing mate
rial
0
20
40
60
80
16-2425-3435-4445-5455-6465+All
UK Online 2006 - 2013Significant mail-order persists
% AgeGroup
Web of Intrigue – 1: Internet Growth Is Not Materialising
13Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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% Category Total Captured 2012Web of Intrigue – 1: Internet Growth Is Not Materialising
14Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Drivers of Internet GrowthDriver1. Non-store sales (66%)
– Mail order, TV shopping, Insurance
2. Branded commodities– Branded electricals (not
bespoke systems)3. Grocery4. Digital goods
– Music, video, software, ebooks
Reason• Channel displacement
– aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa
• Price comparison• aaaaaaaaaaaaaaaaaaaaaaaaaaaaaa
aaaaaaaaaaaaaaaaaa• Competitive response• Electronically transferrable• aaaaaaaaaaaaaaaaaaaaaaaaaaaaaa
Web of Intrigue – 1: Internet Growth Is Not Materialising
15Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Death of the High-Street?
Chain branch trendsNet shedding mainly in services such • Banks• Building societies• Post offices• Travel agencies etc.• Also easy-capture retailing
such as music, video, software etc.
Web of Intrigue – 1: Internet Growth Is Not Materialising
16Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Sales Forecasts Grossly Over-Stated
• Growth reporting flawed: fails to differentiate– Canabalisation v non-store – Home delivery v click-and-collect
• Diversion from shops far lower than predicted– Shopping hinges on ‘see, touch, feel, experience’
• On current trajectory UK 2020 internet sales– 14-15% total retail sales
Web of Intrigue – 1: Internet Growth Is Not Materialising
17Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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GROWTH UNDER 50% PREDICTEDClear Evidence of Hype, Hysteria, Puff, Denial
Web of Intrigue – 1: Internet Growth Is Not Materialising
18Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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GROWTH IS SLOWINGEARLY AND ABRUPTY
Web of Intrigue – 1: Internet Growth Is Slowing Early & Abruptly
19Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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% Category Total Captured 2012
• Failing to penetrate markets 15 times the size• Significant bricks-and-mortar fulfilment remains
Web of Intrigue – 1: Internet Growth Is Slowing Early & Abruptly
20Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Dramatic Unexpected Asymmetry
66% 8%No logistical barriersElectronically transferrable goodsOnline suits buyers
Logistical barriersComplex salesExperiential sales
Web of Intrigue – 1: Internet Growth Is Slowing Early & Abruptly
21Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Home Delivery Trails Sales Growth
Electronically transferrable displacement
‘Click-and-collect’
Online grocery shopping ‘irregular’
Web of Intrigue – 1: Internet Growth Is Slowing Early & Abruptly
22Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Behind the Headlines
• Growth overwhelmingly from electronically transferrable goods
• The bulk of trade is from services not retailing
• Reports include misclassified sales – especially travel
• Home delivery growth shows its just a selling channel
Web of Intrigue – 1: Internet Growth Is Slowing Early & Abruptly
23Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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The Glory Days Are Past
• Downloadable market captured–Music, Film, Software…
• Non-store trade captured years ago
Web of Intrigue – 1: Internet Growth Is Slowing Early & Abruptly
24Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Internet Growth is CrashingSales Growth Online vs All-Retail (%)
Web of Intrigue – 1: Internet Growth Is Slowing Early & Abruptly
25Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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THE DOT.COM BUBBLE HAS NOT YET BURST
Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
26Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Once Upon a Time…It’s peanuts to set up a business seen by billions of eyeballs everyday…
Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
27Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Is Being Online Easy Money?
• Legions of entrants make price competition fierce– Many inexperienced even naïve
• Business seem profitable but are transient– Few plan adequate margin for sustainable profits
• Increased logistics costs– Prohibitive as item value decreases– Incremental picking and logistics (supermarkets)
• Very few successful pureplays– Those that are, are increasing margins (eBuyer, Scan)
Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
28Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Anyone Can Be a Millionaire?Firm Size Average Value of
Sales via InternetOnline Revenue as % of
Total Turnover
Micro (<10 employees) £1,000 0.6%
Small (11 to 49 employees) £175,000 4.6%
Medium (50 to 249 employees) £2,500,000 13.1%
Large enterprises (250+ employees) £69,000,000 18.7%
2010 Average Annual Online SalesSource: Cebr analytics; Office for National Statistics
Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
29Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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• Founded ’95• $10.5Bn invested by
2012• IPO ’97• P/E ratio of 400• Jeff Bezos worth $29.7Bn
• No dividend since IPO ‘97• Quarterly results July 2014
– 23% rise in sales to $19.3Bn– Net loss of $126M
• Since ‘97 cumulative– Sales $315 billion– Profits $2 billion or 0.6%
(Wal-Mart is 3.4%)
Even the Biggest Find it Tough
Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
30Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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A strategy of ‘buying’ market share then raising prices is NOT working
Stock Decline 201417%
Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
31Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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The Internet Is Funded By Advertising Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
32Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Traditional Advertising is Failing
• 95% Don’t trust advertising• 8% Trust what companies say about themselves• 58% Believe "companies are only interested in selling
products and services to me, not necessarily the product or service that is right for me“
• 17% Believe companies take what they say seriously
Source: “Your Brand: At Risk or Ready for Growth”, Alterian plc by Lancaster University 2010
Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
33Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Killing The Golden Goose?
• ‘Interruption’ being used to shore up ROI– Pop-ups– Lead generation (data gathering)
• Yet when the internet delivers so much choice, how can it be a good thing to annoy customers?
Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
34Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Social Endorsement
Social Media presents an opportunity BUT ‘old-school’ marketing is prevailing
Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
35Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Is the Internet Morally Bankrupt?
• Those with the biggest servers will win– Wealth will be concentrated with the few
• Relentless falling prices means– Increased unemployment– Impoverished consumers
Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
36Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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A Crisis Is Emerging• Inequalities drive public opinion• Governments will respond
– Taxes will follow (are?)– Tax avoidance will be addressed
• Price advantages will cease• The internet could go into
reverse
Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
37Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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• Google paid just £935,000 on £239m for 2011 and £8m between 2004 and 2010
• Amazon made £3.3bn sales in 2011, but paid no corporation tax in the UK
• Starbucks paid just £8.6m in its 14 years of trading in the UK
Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
38Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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SummaryWeb of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
39Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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The Chickens Are Coming
• Realities confound forecasts• Investments will never be recouped• Huge vested interests are at play• Moralities are being confronted• A correction is inevitable
Web of Intrigue – 1: The Dot.Com Bubble Has Not Yet Burst
40Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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BrokenThe Internet Is
Web of Intrigue – 1: The Internet Is Broken
41Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Web of Intrigue – 1: The Internet Is Broken
42Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK
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Free Business Support for IT Retailers & Resellers Workshops | Mentoring | Blog | Opinion | Forum | Research
Web of Intrigue – 1: The Internet Is Broken
43Target Open Day Sep 19, 2014 | The Village Hotel, Leeds, UK