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Retail is dead. Long live, retail! In case the rock under which you’ve been living doesn’t have internet access, let me be the first to tell you that Amazon bought Whole Foods. Selfishly, this is good news for me. I have a Prime membership and the walk to Whole Foods, while manageable, is just a little too far for large scale beverage purchases. But retailers are taking the news less well. It is becoming increasingly clear that Amazon and their arch nemesis Walmart (powered by Jet) have no intention of leaving any aspect of retail to the old chains that have dominated the post-World War Two era. Bain partner Darrell Rigby writing in the Harvard Business Review sounds the alarm for legacy retailers and it’s, well, alarming. Amazon spends close to $16 billion on technology and content and has been a driving force for innovation in ecommerce technology. If they can export that innovative energy to physical Whole Foods locations, they get a digital/physical one-two punch to rival Walmart. These companies are both sharks and suddenly everyone else in retail is looking like chum in the water. Retailers archaic business practices and window-dressing digital efforts are not going to be enough to hold on to consumers who place convenience over loyalty. Why does this matter? During the Halcyon days of Web 1.0, I remember someone explaining the concept behind Webvan to me. Webvan was one of many grocery delivery companies that was soaking up VC money at a shocking (and unsustainable) rate in those days. However, unlike its more pedestrian competitors, Webvan had an end-game far beyond groceries. They were working on a system to make an entire distribution network that was light years more efficient than anyone else’s. Groceries were merely a proof point. After all, if you could deliver fresh ice or milk or butter to someone’s apartment, you could be trusted to deliver anything. Webvan was ultimately a victim of their own ambitions, but other companies have learned to apply these lessons, notably Amazon and Jet. The mistake that retailers have made in confronting these companies has been to imagine they can survive by holding on to most of their customers. In order to completely disrupt retail, Amazon and Jet don’t need to win all customers. They just need to peel off enough customers and the right customers to tip retailers into the red. Margins were already paper-thin. The current, much-hyped “retail apocalypse” is like a vast Antarctic ice sheet shaking loose. When the full impact of the loss of a few percentage points becomes clear, a lot of companies are going to drown. In a nutshell: Bad time to be Shoprite. Read More Not Ransomware. Worse. What a super-fun week for cyber crime! Tuesday’s malware outbreak has been forcing businesses around the world to shut down and figure out how to recover their data. Things were not helped by the fact that the media reported the incident as a malware attack, similar in form to the Petya attack in 2016. Unfortunately, security researchers looking into the code have discovered it is something much worse. This is actually a cyber weapon called a disk wiper, masquerading as a ransomware attack. In a ransomware attack, victim’s computers can be decrypted after they pay a ransom. But this attack was designed to permanently wipe the computers, regardless of whether or not a ransom was paid. In fact, the email address for the supposed ransom was disabled soon after the attack began. So who was behind this attack? Well, the code was designed to exploit a vulnerability in a file format used exclusively by the Ukrainian government. It just happened to be exceptionally sophisticated and virulent, so it seems to have spread beyond its intended target. Now, I personally would never accuse any specific state actor of having sophisticated cyber warfare capabilities and having a grudge against the government of the Ukraine. Just as I would never imply that such a state actor might hobble a geopolitical rival by undermining its election process, thereby preventing it from responding effectively to an undeclared cyberwar. Nope. Because that’s just not my style. Why does this matter? Wars are messy with lots of collateral damage. Cyber war is no different. If you work for the advertising holding company WPP or one of the other multinationals currently crippled by this attack, you might be wondering why Russia (or someone?) can’t just politely attack the Ukraine and leave you alone. But cyber weapons are like biological agents, they can easily spread beyond their intended target. As certain state actors (cough) are emboldened, they may seek to spread chaos indiscriminately since their resource-based economy prospers under chaotic global conditions. Large multinationals do not currently possess a sophisticated defense against this type of attack. What they should perhaps consider is some sort of insurance against the financial losses associated with cyber attacks. In a nutshell: These things are just going to get more common. Read More The Death of Brand Equity I'm finding Scott Galloway intensely annoying. It’s always annoying when someone says something you have been thinking, buts says it better and clearer than you ever could. Scott Galloway is the founder of business intelligence firm L2 and he teaches brand strategy and digital marketing at the NYU Stern School of Business. In a recent interview with Kara Swisher of Recode (link below), Scott talks about the decimation of brands in our changing retail environment. (Paraphrasing Mr. Galloway here:) Brands have always served as a proxy for a certain level of quality. I would comfortably stay at a hotel in an unfamiliar city if the brand was one I knew and trusted. But social and digital media offer us the opportunity to make high-information purchase decisions without relying on brands. Your social graph offers more trustworthy and more trusted information on product quality than brand advertising offers. Scott believes that the old practice of using brand as a kind of air-cover to sell product will fade over time. Product quality will be the determinant of purchase behavior because we can get information on product quality through our peer network. Why does this matter? I spent fifteen years of my life as a creative director at advertising agencies promoting brands. I might have left that world behind, but brands and branding are still a huge industry. Don’t get me wrong. Brands will always matter. But they will matter less and less as purchase decisions are made increasingly through Alexa or through Instagram. The brand was a representation of the company and its products. It was a projection we sent out into the world. But tomorrow’s brands will collapse back into the products themselves and the experience around the products. Apple has a powerful brand because everything contributes to one, central customer experience. “1984” may be an iconic ad, but it doesn’t affect my technology purchase decisions. I buy from Apple because I love their physical retail and ecommerce environments. I could not care less about their ads. I have Apple TV. I don’t watch ads. But if you’re still creating advertising as a representation of a brand, rather than as one small ingredient in a larger customer experience, you have all the vitality of the Diplodocus. In a nutshell: The customer experience of your products is your brand. Everything else is literally window-dressing. Read More

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