As is evident when travelling on public transport, people spend a lot of their idle time on mobile phones. But according to Stephan Schambach, the serial entrepreneur behind several major innovations in e-commerce, retailers have been slow to recognise that the future of their industry lies in mobile technology. Customers will increasingly demand the online experience available in other consumer industries such as travel and tourism, and the retail brands that are first to provide it will reap the rewards.
Having created enormous value by capitalising on the major turning points in e-commerce over the last three decades, Stephan Schambach has launched a new company to take advantage of this latest inflexion point. NewStore’s aim is to create the world’s first Omnichannel-as-a- Service platform which allows stores to be run entirely on mobile phones through smartphone apps.
And making that transition would allow retailers to do something they have long wanted to achieve, which is ‘omnichannel’: the ability to take orders online, allow customers to pick up their purchases in a branch of the store, or deliver them to their home within an hour in metropolitan areas. It would also allow store staff to access all the retailer’s stock wherever if might be, so that if their branch of the store was out of a colour/size combination a customer wanted to buy, it could be delivered from a branch which still had it in stock.
Stephan Schambach realised in 2014 that the mobile revolution was the key to making this transition happen. ‘In the first quarter, customers were mainly shopping from desktop web browsers, with only 10 per cent using mobile – and that was mostly on tablets. By the end of 2014, 65 per cent were using mobiles and that was mostly on smartphones.
‘I concluded that not only would this change e-commerce, but that it would change retailing. If fewer people go into a store because they can shop all day on their mobile, then visitor traffic will decline. But if store staff have smartphones, they can serve customers even when they are not in store, collecting charges online. And they can establish long-term relationships with customers by ‘clienteling’ – using the data preferences and purchases collected by the platform to suggest other products customers might be interested in.’
Clienteling increases average sales per member of staff by about 30 per cent, he says, helped by the data collected with every interaction. Customer retention rises by as much as 20 per cent because staff can stay in touch with customers even when they are not in the store. And the average annual spend of individual customers can rise up to four times, especially by those loyal to the brand.
He founded NewStore in 2015, and started to roll out the new platform in 2016. He says it will provide the retail industry with the mobile tools backed by a cloud-based system, similar to what Uber has provided for the taxi industry. But he also warns that omnichannel is not just an IT project: it requires a wholesale change of culture, procedures and organisational structure.
‘The retail systems used by many retailers are often old-fashioned – in some cases, running on old hardware such as mainframe computers. Some even use different point-of-sale systems in different regions. Nothing fits together and none of them talk to each other – it’s impossible to turn these old systems into fluid, real-time businesses that work like Amazon, so we provide the NewStore platform as a cloud-based service.’
He has written his first book, Makeover: How Mobile Flipped the Shopping Cart, as a guide to how to go about these changes. For example, the silos between the departments in big retailers need to be broken down and compensation structures changed. They also need IT systems which allow staff to access stock held in their other stores and crosscharge for stock in one branch sold by another.
Stephan Schambach has come a long way from his origins in East Germany, where he was on his way to a major in physics when the Berlin wall came down. ‘Physics wasn’t what I really wanted to do, so I started a company on the side which took precedence over everything else in my life. I dropped out of university in 1990, became an entrepreneur and have never been employed since.’
He founded NetConsult, the first successful software company in East Germany where software had never been purchased, only copied. It developed software for document imaging, targeting the needs of restructured government institutions after German reunification. At the time, the only way to get online from his Eastern base in Jena was using a dial-up modem to access it through a university in West Germany, at a cost of DM2 a minute.
‘There were no net browsers yet, but at a tradeshow in Berlin a guy walked by our stand and gave us a floppy disk which he said would give access to the worldwide web. He turned out to be Tim Berners-Lee and he installed it on our computer. There were only databases and scientific research on the internet then, but we could see the potential for e-commerce. We built and ran one of the first e-commerce sites for a leading computer parts distributor in Germany, whose sales immediately increased.’
In late 1995, he moved to the San Francisco Bay area where he founded Intershop Communications, one of the first and largest software companies dedicated to e-commerce. It attracted large clients such as Siemens Nixdorf and Hewlett Packard before going public on the Neuer Markt, the high-tech segment of the Frankfurt Stock Exchange. Intershop invented many of the base technologies of e-commerce and ultimately reached a market value of USD14 billion.
He left the company in 2004 to found Demandware in Boston, creating the first cloud-based e-commerce service. ‘The first online retailing had been done on software installed in data centres by retailers, but I thought it would be better for retailers to use software as a service off the internet. This was very different from the Intershop technology, so I started Demandware to build it from scratch. It had comparable or lower costs to those of retailers running software in-house, with automatic updates and new features installed.’
The company serviced more than 1,000 branded websites for brands such as Adidas, L’Oréal, Procter & Gamble and Panasonic and went public on the New York Stock Exchange in 2012. Stephan Schambach left in 2015 to found NewStore, and Demandware was sold for USD2.8 billion in 2016 to Salesforce.com – now known as Salesforce Commerce Cloud.
He sees NewStore as a way of saving great brands in the age of Amazon, which he describes as a giant vending machine. ‘Companies that put their brands on Amazon often regret it, because they get compared with a gazillion competitors who do the same thing and may find themselves put next to inappropriate products. Amazon’s advantages are that it’s very easy to order things on it because everyone has its app, consumers need to register only once to buy different products, and it is very convenient to get them delivered because of its logistic capabilities.
‘But our NewStore platform can now compete with Amazon on these aspects while building the brands of users. It equips retailers to collect payment with smartphone systems such as Apple Pay, PayPal One Touch and Asian or Chinese equivalents. It can ship products 30 minutes after an online order has been placed. And there are demand delivery services that can deliver even faster than Amazon.’
Many consumer brands created recently started online only, he says, but are now opening stores at an astonishing rate because they are better able to disrupt their much larger competitors. ‘If you want to build a consumer brand that’s unique, you need to be able to control your environment. That’s what a retail presence lets you do, and NewStore’s mobile platform helps brand owners to take advantage of it.’