Amazon vs. Walmart

(This article was originally written by Mary Beth Quirk for Consumerist).

Amazon can now deliver many things in one or two days, so Walmart has to have lower prices for the many customers who can wait. Similarly, Amazon has to undercut Walmart’s grocery prices if it’s going to stake out any significant portion of that $800 billion market. For shoppers at either of these two retail giants, this can mean lower prices, but it’s also forcing manufacturers and suppliers to rethink how they do business.

Consumer brands have been increasingly dedicated to figuring out ways to deal with this pricing war, one executive told Re/code, noting that “it’s dominating the conversation every week.”

Though Amazon made headlines this week for gathering some of the biggest packaged food brands together to pitch them on the idea of frustration-free packaging, as part of a push to attract more customers to online shopping instead of buying in physical stores, Walmart has also been meeting with its suppliers in an effort to ramp up the battle for shoppers.

Last week, Walmart brought together major household brands at its headquarters for a pricing powwow. According to a presentation Re/code viewed, Walmart wants to have the lowest price on 80% of its sales, which means brands that sell through the retailer would have to cut costs elsewhere.

Some vendors say doing this will mean they’ll lose money on every sale — but if they don’t cooperate, they could find their distribution limited in comparison to those who do play along. Walmart could also develop new in-house brands and sell those products to consumers instead of using outside suppliers.

“Once every three or four years, Walmart tells you to take the money you’re spending on [marketing] initiatives and invest it in lower prices,” Jason Goldberg, head of SapientRazorfish, a digital agency that works with large brands and retailers, told Re/code. “They sweep all the chips off the table and drill you down on price.”

Amazon may not yet be the grocery powerhouse that Walmart is, but it still has significant leverage to push suppliers to keep their prices low. The online retailer is not only willing to lose money on certain products just to beat the competition on price, notes Re/code, but isn’t afraid of dumping brands or products when vendors don’t play along.

Re/code gives the example of Pampers diapers disappearing from Amazon last week, prompting speculation in the industry that the e-commerce giant booted Pampers in an effort to negotiate better prices.

Can Brick-and-Mortar Still Be Relevant?

(This article was originally written by Phil Wahba for Fortune).

After a tough holiday season, many big- box retailers went on a cost-cutting binge. J.C. Penney, Macy’s, and Sears all announced that they would shutter dozens of stores each as shoppers increasingly shift online. But the carnage could have been much worse. Oddly enough, it was that very shift to e-commerce—the one bright spot for most retailers during the holidays—that spared even more stores from the reject rack.

The counterintuitive strategy boils down to this: If traditional retailers have any hope of countering Amazon’s dominance, it’s by using their brick-and-mortar stores as local arms of their online businesses. Whether or not that’s ultimately successful, a number of retail CEOs touted the idea during recent earnings calls.

Kohl’s, which had record online sales over the holidays while its overall business slumped badly, says that one-third of online orders are now either picked up in its stores or shipped by one (shaving a half-day off its average delivery time).

At J.C. Penney, 90% of e-commerce returns are handled in a store, giving the company another chance to wring more sales from those customers.

And Target says three-quarters of Americans live within 10 miles of one of its stores, an edge that it claims will help it deliver online orders more quickly to shoppers who increasingly want their merchandise in a couple of hours, not a couple of days.

Kohl’s says it has data to back up the theory that brick-and-mortar stores help online sales. Last year, after closing 18 stores, it found that online sales at nearby addresses fell 10%, as some shoppers forgot about the chain altogether. Based on those findings, Kohl’s plans to shrink 200 stores instead of closing any of them.

Meanwhile, retailers like Best Buy believe that more technology will lift store sales. For example, Best Buy has armed workers with handheld ­devices that can show customers whether nearby stores have a particular TV that is otherwise out of stock. “In the stores, technology can be our best friend,” says Best Buy CEO Hubert Joly, whose company has avoided closing stores in recent years.

Still, the inescapable reality for retailers is that store sales are falling faster than e-commerce can make up for. In the end, retailers may only be postponing their day of reckoning.

High real estate costs in prime locations make it expensive to keep stores open, says Joel Bines, cohead of retail for consulting firm AlixPartners. E-commerce warehouses, in contrast, are typically built on cheap land and where wages are low.

Says Bines: “The wave of store closings we’ve been predicting for years is upon us, and it’s going to last for many, many years.”

A $50 Million Dollar Postcard Empire

(This article originally appeared in Entrepreneur).

Even some of the smartest moguls alive take for granted a truth that is just plain wrong: Direct mail is dead. No, we’re not making this up: Sending physical mail to prospects and customers can actually work — and pay off big-time.

While digital hogs the headlines, direct mail has made a quiet comeback, representing a huge opportunity for the businesses that do it right. Don’t take our word for it, though. Real businesses are benefitting from direct mail.

One real estate agent makes $5,000 to $20,000 in commissions every time she runs a direct mail campaign. A Texas dentist added six figures in new revenue thanks to one mailing. And a financial services firm spent a few thousand dollars to net dozens of new clients with an average value of $1,500 each.

This kind of success is typical for Joy Gendusa, founder of PostcardMania, a company that does nearly $50 million per year selling incredibly successful direct mail campaigns to thousands of small businesses.

Given her stunning success, we had to sit down with Gendusa to find out how to do direct mail right.

Born from a customer service experience from hell.

Gendusa started out small enough. She ran a graphic design business and tried to keep up with the market. “I started making more money brokering printing services than selling actual graphic designs,” Gendusa says.

Gendusa had two toddlers while working 70-hour weeks. The business was making some money, but nothing life-changing given the time she was investing. Even then, she still didn’t think about starting a large venture. That only happened when she had a customer service experience from hell.

She designed a postcard to promote her business and FedEx’d the art off to be made into postcards. When she got the proof back, it had the postcard company’s own phone number on the bottom in tiny five-point font.

“They told me I had to pay $50 to remove their branding on my postcard,” Gendusa says. She dodged the charge, but was furious about the bait-and-switch.

“I decided to start PostcardMania and that we’d sell direct to business owners. Nobody was doing that.” And a new industry was born. That was in 1998, and Gendusa hasn’t looked back since.

Why direct mail and why now?

It’s 2017 and someone is making tens of millions of dollars mailing postcards. How is this even possible?

According to UnitedMail, 79 percent of people act on direct mail immediately; only 45 percent do the same for email. More than two-thirds of consumers open all of their mail, even easily recognizable junk. If you think this only applies to your grandparents, think again. According to the U.S. Postal Service, 36 percent of people under the age of 30 look forward to checking their mail. Thirty-seven percent of the coveted 25- to 35-year-old demographic immediately read their mail.

Gendusa’s numbers validate direct mail’s appeal. Her company made $45.7 million in 2015 almost exclusively by sending 135 million postcards that sell products and services for more than 13,000 customers.

Gendusa’s enthusiasm for direct mail doesn’t mean she shuns digital. Her postcards marry the best of both worlds. Her company’s mailings are optimized for conversion through strategic design and innovative tracking codes that provide levels of delivery precision.

In fact, Gendusa sees a valuable role for PostcardMania in a digital landscape. “Google advertising isn’t very user friendly,” she says. “People set budget for $500, it’s suddenly gone and they have no idea what happened to clicks and leads. Google doesn’t teach things like remarketing well. It’s not just about getting someone to click, but what they do when they arrive.”

Gendusa and her team understand these challenges because they’re marketers first. In addition to selling postcards, the company makes it dead simple for clients to convert postcard traffic by building landing pages and Wordpress sites that non-programmer clients can then customize.

Welcome to the modern mail campaign.

Modern direct mail campaigns are well-oiled machines that marry the best of direct and digital marketing. On one hand, the cards have crisp calls to action on their physical surface; on the other, the actions that the consumer takes are tracked and enhanced using online technologies like retargeting.

Here’s how it works. PostcardMania crafts clear, eye-catching copy on the postcard design for, say, a dance school client. The copy offers a free day of dance to local moms in the hopes of bringing in new students. Then, the card continues with carefully defined bullet points that speak to the dance school’s benefits on the back. These include items like “teaches discipline” and “fun and entertaining.” The card is sent to a highly targeted list of mothers with an annual income over $100,000 and daughters ages five to 12.

“Too many business owners sacrifice clarity for cleverness,” says Gendusa. “We’re trying to get a response not a design award, so we make the postcard crystal clear.”

When prospective customers visit the dance school’s website using the URL on the postcard, PostcardMania uses cookies to add that prospective customer to their online follow-up list. Anyone on the follow-up list sees online ads promoting the free day of dance for 90 days while surfing online. The ads are designed just like the postcard, so the marketing stays consistent when it makes the jump from print to digital. Small businesses get access to branding that used to only be available to major marketers. And they are paying pennies on the dollar, thanks to PostcardMania’s partnership with the Google network.

PostcardMania’s website touts a number of case studies in dozens of industries where customers generate considerable revenue with a single direct mail campaign. Because of that, the business has grown over the last 18 years to employ more than 200 full-time staff and generate nearly $50 million in annual revenue, all while touting a culture more at home in Silicon Valley than its Tampa Bay, Fla., location.

And there will be millions to go around if her bet on software and subscriptions pays off.

Postcards, meet software.

To capitalize on her success, Gendusa started a software startup, DirectMail2.0, that offers a white label version of PostcardMania’s software to other printing and mailing companies. More than 50 partners have already bought in and the DirectMail2.0 product produced $1 million for PostcardMania the first year it launched. It has more than doubled in revenue since.

Gendusa’s also spearheading the postcard-as-a-service model. Her product “New In Town” is a follow-up system that mails an area’s new residents each month on behalf of PostcardMania’s customers, fully automatically. These introductory postcards are critical for local businesses: They introduce the business to new residents and lock in long-term customers by offering one-time promotions.

These successes have PostcardMania set to crack $100 million in the next 24 months, proving one simple truth: Anyone who says direct mail is dead should check the casket, because it represents a huge opportunity for the businesses that do it right.

Six steps to the perfect postcard marketing campaign.

There is art and science to postcard marketing. Gendusa shared with us what business owners and entrepreneurs must do to create campaigns that boost visibility and sales, based on the strategies she used to make millions off direct mail.

1. Get the right list. Postcard campaigns live and die by the quality of their mailing list. Gendusa suggests isolating a list of only your target market — even if you have fewer people on it.

2. Actually design with your audience in mind. Gendusa says that direct mail marketers make the same serious mistake over and over again: They assume their audience understands the terminology of their industry. “Financial advisors do this all the time,” she says. “Nobody knows what they mean and they don’t get responses.” And it happens in every industry.

3. Communicate what problem you solve — immediately. Too many business owners waste postcard space with unnecessary copy that no one ends up reading. Instead, they need to immediately communicate what problem the business solves in the headline (not buried in the body copy).

4. Don’t get cute with your images. The image used on the postcard should be “instantly recognizable,” Gendusa says. Too many business owners and entrepreneurs try to get cute or creative, and end up confusing their audience. You have seconds to communicate a value proposition and reinforce it with an image. If you fail, consumers won’t keep reading. More importantly, they won’t act.

5. Don’t neglect the back of the card. It’s just as important as the front. Once the reader turns over the card, you’ll want a sub-headline that transitions into text or bulleted items with the benefits of your product or service. Keep them simple, Gendusa says. People won’t read a bunch of text.

6. Create an authoritative call-to-action. “People enjoy being told what to do instead of just being given a phone number,” says Gendusa. The last item on the card you want them to see is a clear call-to-action that gives the reader directions: go to the site, download an offer or pick up the phone and call today.

It helps that Gendusa never loses sight of the mission behind even a simple postcard.

“We’re not just selling a commodity. Small businesses are the backbone of the U.S. economy and we want to help them grow.”

How Artificial Intelligence Is Changing Online Shopping

The writer William Gibson once said that the future is here, just not evenly distributed. That was the case with the World Wide Web 20 years ago, when some business models – notably e-commerce and new media – took off faster than others. Now a similar trend is happening with artificial intelligence, or AI.

The promise of AI has seemingly been just on the horizon for years, with little evidence of change in the lives of most consumers. A few years ago, buzzwords like “big data” hinted at the potential, but ending up generating little actual impact. That’s now changing, thanks to advancements in AI like deep learning, in which software programs learn to perform sometimes complex tasks without active oversight from humans.

Deep learning algorithms have been powering self-driving cars and making quick progress in tasks like facial recognition. Now these innovations are beginning to find their way into the daily lives of consumers as well.

“For retail companies that want to compete and differentiate their sales from competitors, retail is a hotbed of analytics and machine learning,” says John Bates, a product manager with Adobe Marketing Cloud, which offers machine learning services in e-commerce and other industries. As with the early Web, travel and entertainment are also making early use of machine learning, according to Bates.

A spate of recent experiments and announcements underscore the trend in e-commerce. One notable example is Pinterest Lens, a Shazam-like service that conducts visual searches based on items in the everyday world. Just point your camera at, say, a piece of furniture or item of clothing and Lens can help you find it online.

Lens builds on earlier Pinterest innovations like Related Pins and Guided Search — both based on the idea that you sometimes don’t know what you’re looking for until you see it — as well as a visual search tool that can find similar images inside the billions of pins that Pinterest has collected. Related pins are served up according to a similarity score that Pinterest’s algorithms assign between images.

Lens expands on that earlier search tool beyond images to include things in the real world. Image-detection programs identify an object and visual search digs up similar images, making it easier to buy a coveted item online. The potential for this kind of product-search innovation is interesting: You can search for things that won’t fit in a standard search box, and more tightly connect things found offline with those found online.

“For shopping specifically, improvements to online discovery means new ways to find products you’re interested in but may not have the words for,” says Andrew Zhai, an engineer working on Pinterest’s visual search. “Visual discovery gives people a way to discover new brands and ways of styling that they never knew existed.”

Other e-commerce sites are also adopting deep learning to help shoppers more easily find what they seek. Gilt deploys it to search for similar items of clothing with different features like a longer sleeve or a different cut. Etsy bought Blackbird Technologies last fall to apply the firm’s image-recognition and natural-language processing to its search function.

And notably, Amazon is planning to use the AI technology it offers on its Web Services in its new Amazon Go grocery stores. The company is operating only one store in Seattle, but Chief Financial Officer Brian Olsavsky said during a February earnings call that “it’s using some of the same technologies you would see in self-driving cars: computer vision, sensor, fusion, deep learning.”

Adobe, meanwhile, is taking things a step further by letting people create images of their desired products. Working with researchers at UC Berkeley, Adobe developed an image-editing tool that can turn a crude sketch of a handbag or shoe into a photorealistic and easily tweakable image. The tool also draws on a deep database of related images to turn sketches into pictures.

Adobe’s marketing tools are also incorporating deep learning into offerings for retailers, using AI to predict customer behavior. Shoppers can choose to receive suggestions based on their shopping lists – a belt that matches a pair of pants, painting supplies to help with a can of paint, a wine paired to a dinner recipe. Programs can subtly nudge people along when they are making a big-ticket purchase online but are not ready to hit the buy button.

Subtlety is a key part of these AI-powered marketing tools. People can grow alienated if they feel retailers are snooping on their behaviors or if it comes across as a hard sell. Adobe’s AI learns from past behavior as well as trial and error to learn how to make a gentle nudge without being too pushy.

“That’s a bit of the art and science behind deep learning,” says Bates. “But that’s where a lot of these signals can be built into the algorithms. If it creates an unnatural signal or puts someone off, it can be built into the training itself.”

While deep learning is becoming a part of the retail experience, it’s happening in fits and starts, as Facebook found with chatbots. Touted as a tool that could automate customer-service functions and deepen human engagement, chatbots were added to Facebook Messenger, with more than 11,000 of them available last year. But last week, Facebook scaled back its chatbot ambitions after they clocked a 70% failure rate.

As with the early days of the Web, there remains much work to do before deep learning can be seamlessly integrated into the daily lives of consumers. Compared to expectations of even a few years ago, though, things are a lot farther along than many expected. And that suggests Silicon Valley may again be ready to change how we shop.