how data will replace discounting: lessons from uber, point 93 and orchard mile
TRANSCRIPT
How Data Will Replace Discounting: Lessons From Uber, Point 93 and
Orchard Mile
JENNIE BAIK, CEO and Co-Founder, Orchard MileSAMANTHA ZIRKIN, CEO, Point 93
GARRETT VAN RYZIN, Head of Marketplace Optimization Advanced Development, Uber
Samantha Zirkin, CEO, Point 93 Garrett van Ryzin, Head of Marketplace Optimization Advanced Development, Uber (Professor, Columbia Business School)
Jennie Baik, CEO, Orchard Mile
What You Will Learn
How to End Discounting by understanding your customers, what they want, their urgency to purchase, and what they are willing to pay
How to leverage shopper data to personalize content and increase sales
The role of dynamic, equitable pricing in creating real-time, relevant, shopping experiences
The rise of free market economics• Reduced government intervention in the
economy • Free trade policy• Free capital flows and foreign investment• Market-based wages and prices• Property rights
Not without backlash….
Technology is accelerating this trend• Information
– Increased quantity– Lower cost
• Transaction costs– Communication– Payments
• Cognitive power
Approaching perfect competition idealPerfect information, zero transactions costs, full rationality, full factor mobility, no exit/entrance barriers
Rise of marketplace firms Largest public firms
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* firms with significant marketplace component
Rise of marketplace firmsLargest private firms
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* firms with significant marketplace component
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A transformational example of marketplace technology
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• NOT transportation technology – New transport systems– Vehicle technology
• BUT marketplace technology– Mobile tech to track location of drivers and riders– Marketplace tech to run an efficient transport market
• Dynamic pricing• Intelligent dispatch• Driver positioning
• Today Uber is heavily investing in autonomous vehicles and other transportation tech.
What was Uber’s initial innovation?
A marketplace technology that ensures high availability and efficient allocation of service
Uber wouldn’t be Uber without surge pricing…..
“Push a button, get a ride”
“Transportation as reliable as running water”
Why does Uber use dynamic pricing?
Price-allocating demand while incentivizing supply
Srce: Hall, Kendrick and Nasko, U. of Chicago
Uber without dynamic pricing
Srce: Hall, Kendrick and Nasko, U. of Chicago
Pricing is how value is captured and shared
total potential value
supply
demand
cost
$
quantity
Uniform pricing results in lost value
retailer’s profit
$demand
supplycost
uniform price
sell through
consumersurplus
lost value
quantity
Customized pricing can capture this lost value
total potential value
supply
demand
cost
$
quantity
retailer profit
quantity
$demand
supply
More consumer surplus
Higher profits
cost
customized price
consumer surplus
Customized pricing can capture this lost value
Creating a win-win
But retailing is not transportation
• Durable products – no one “needs” a new dress in the next 5 minutes
• Longer decision making cycle– consumers may ponder decision for days
• Complex product attributes– fit, aesthetics, feel, quality, image
• Retailers commit to quantity in advance of selling– often over/under estimating demand
So what does a well engineered retail market look like?
A lot like …
How can traditional retailers compete?
An engineered market for physical retailing
mobility tech + marketplace tech
A transformational example of marketplace technology
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$1.1 Trillion
That’s how much American consumers spent last year on clothing, accessories, unique
homegoods, and unique electronics.
30% - 40%
That’s the discount by which retailers in these markets, on
average, are forced to sell their products.
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Market Share Capture 1% 3% 5%
Total Addressable Market $1,063,232 $1,063,232 $1,063,232
Total Sales Through Point 93 $10,632 $31,897 $53,162
Average Revenue Uplift 7.5% 7.5% 7.5%
Total Point 93 Revenue $797 $2,392 $3,987
Dollars in millions
If we capture only 1% of our target market in the US, we help retailers recover nearly $800 million annually.
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Retailers Are Leaving
Millions of Dollarson the Table
Here’s Howto Reclaim It
(646) [email protected]
T͠
Beyond the
Crystal Ball
Point 93
A Platform that Enables Personalized
Conversation at Scale Between Retailers and
Customers
When a customer walks into a store, thousands of
monetizable data pointsare lost.
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They are lost because the conversation is one-way and the customer is an
unknown entity.
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What She Would Have Told You
if only she had a way to…
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Who Walked In?
Marissa, 21, is a habitual sock buyer. She has 42,000 Snapchat followers.
Boykin, a 53 year-old tech titan, prefers not to interact
with employees on his $7,500 jaunt to Barneys.
I love this bathing suit, but the maximum I’d pay is $108.
I am willing to wait two months to receive my double
sueded couch.
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How it’s Done
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Arrival DateMax Price
Algorithm
Scan Tag Purchase
How it’s Done
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Who Chloe is
Use Point 93 to enable a conversation. Know exactly who your customer is and what she wants.
Build a reservoir of actual demand. Use
a precision tool instead of traditional
discounting.
Architect the ideal in-store experience for each customer.
Ace merchandising by choosing the
ideal product composition and never buying too
deep in a size.
Utilize the information she
shares in her profile to create content
she asks for.
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A transformational example of marketplace technology
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No one cares about your sales cycle
A latte… is a latte… is a latte?
You’re already playing this game…...but kinda not that well.
What is the “time value” of fashion?
Are you sure about that?
Why can’t everyone be a Korean blogger?
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Stop having first dates with your customers
We aren’t trying to “convert,” customers. We are cultivating and consummating a relationship.
Key Takeaways
Customization, including equitable pricing, captures value for both retailers and customers.