Analysis: Retailers look to click & collect online profits

1 of 5. A click and collect adverts are seen on a shopping trolley stand at Tesco store in Leicester, central England, August 29, 2013.

Credit: Reuters/Darren Staples

By Emma Thomasson and Dominique Vidalon

BERLIN/PARIS | Fri Sep 6, 2013 9:56am EDT

BERLIN/PARIS (Reuters) - European retailers have gone back to bricks and mortar in the hope of turning their online food businesses profitable - racing to build pick-up points to capitalize on shoppers' increasing demand for "click and collect" grocery options.

E-commerce has revolutionized trade in books, music, clothes and electronics in the last decade, but food has proved a tough segment to crack. Grocery represents almost 40 percent of retail sales, but providing a profitable internet option for a high-volume, low-margin business with products that must be chilled is more complex and pricey than for non-perishables.

Even Amazon has only made tentative steps into grocery, although it is now preparing to expand its "Fresh" business to 20 urban areas in 2014. If trials in Los Angeles and San Francisco work it says it may expand outside the United States, though has not specified where.

That's an alarming prospect for other grocery retailers already struggling with falling store sales as austerity drives, rising prices and wage stagnation hit shoppers.

So they are looking more closely at shopping habits and preparing to build in flexibility to boost their brands and profits. Busy customers often now prefer to collect an order, avoiding a delivery fee, than wait at home. A GMI survey commissioned by Mintel showed 39 percent of online shoppers in Britain and 33 percent in France collected goods in-store in the last 12 months. Mintel data shows young, affluent consumers - retailers' favorites - are most keen on click and collect.

Retailers are experimenting with different pick-up models, from "drive-thrus" adjoining existing stores that are popular in France, to refrigerated lockers at petrol stations and new warehouses dedicated to online known as "dark" stores. Click and collect also means they can spend less on home delivery, often prohibitively expensive outside densely-populated urban areas.

Food and consumer goods research group IGD predicts "drive-thru" will propel French online grocery sales to 10.6 billion euros ($13.98 billion) by 2016 from 6.7 billion in 2013, while it sees home delivery push UK online grocery to 11.4 billion euros in 2016 from 7.4 billion in 2013.

Stephen Mader, analyst at Kantar Retail, said retailers are moving "aggressively" to grab as much online share as possible.

"They are throwing caution to the wind in terms of profitability," Mader said, adding that once they had built scale: "They will need to pay more attention to how much money it generates."

Retailers are investing most in the easy-win of drive-thrus bolted on to existing stores, from which staff pick online orders, rather than warehouses with automated order selection, which are costly but set to be more efficient in the long run.

Europe's top retailers Tesco and Carrefour are building hundreds of collection points at stores, as well as a handful of online-only warehouses, but as neither breaks out numbers for online grocery profitability it is hard to see whether the method is working yet. Tesco, Europe's biggest online grocer, where e-commerce accounted for almost 5 percent of sales in 2012-13, says the business is profitable but experts believe that is because it does not account for the cost of having staff pick up online orders at stores.

"Picking from store is the easiest but it is disruptive to inventory forecasting. It is a short-term solution. I see a dedicated supply chain (for drive-thrus). Although it is capital intensive, it is a much more scalable solution," said Mader.

BRICKS AND CLICKS

So far France has moved fastest to capitalize on the trend. It now has 20 percent of the population already using drive-thru collection for groceries ordered online.

Leclerc, the market leader with 352 so-called "Drive"s, saw first-half sales in that segment jump 68 percent to 720 million euros, compared with overall French sales growth of 4.7 percent to 15.9 billion. The retailer estimates a Drive poaches a quarter of its sales from its own stores - but the rest comes from rivals' stores.

Carrefour is hurrying to catch up, building 283 Drives since 2010 and contributing to a boom that research firm Editions Dauvers says resulted in 920 new pick-up points being built in France over the last year, bringing the total to 2,278 by June.

The potential for growth is huge. In Britain, which has Europe's highest rate of grocery e-commerce, only 19 percent of people ordered food online in 2012. In Germany and France that figure was 9 percent and 7 percent respectively.

In Germany, "click and collect" is popular for electrical goods from Metro AG's Media-Saturn chain, but the country's dominant discounters, Lidl and Aldi, already operating on razor-thin margins, have not embraced e-commerce for grocery.

While e-commerce is marginal in southern Europe, where hard-pressed shoppers prefer local stores and markets, Carrefour has opened five Drives in Spain and one in Italy. The concept could also do well in the tech-friendly Nordics and the Netherlands.

Tesco has led the way with click and collect in Britain. Two-thirds of its non-food online orders are collected at 1,500 collection points. While most food is still home delivered, it plans some 300 grocery pick-up points by mid-2014. But it acknowledges online is taking longer than expected to make money. Though it did not break out costs, it said it wanted "a profitable, scalable model" before accelerating growth.

Wal-Mart's Asda, the UK's No 2, will offer grocery pick-up in 200 outlets by the year end, including from stores and lockers at its petrol stations. It is also trialing vans serving commuter car parks for delivery of online orders.

Collection trends can give supermarkets an advantage on pure online retailers because of their store network, warehouses and logistics, especially if they combine sales of grocery with higher-margin general merchandise and own-label goods. And a customer coming to collect will sometimes browse in-store.

"A dollar spent online doesn't necessarily mean a dollar less for the high street," said Kandar's Mader. "Smart retailers can take advantage of e-commerce to extend their brand and grow their overall share of the pie."

($1 = 0.7582 euros)

(Additional reporting by James Davey in London, Sarah Morris in Madrid, Isla Binnie in Milan, Victoria Bryan in Frankfurt, Robert-Jan Bartunek in Brussels; Editing by Sophie Walker)

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Race to get Obamacare online sites running goes to the wire

Get Covered America buttons are seen during a training session in Chicago, Illinois September 7, 2013 before volunteers canvas a Chicago neighborhood to talk with residents about the Affordable Care Act - also known as Obamacare. Picture taken September 7, 2013.

Credit: Reuters/John Gress

By Sharon Begley

NEW YORK | Sat Sep 28, 2013 11:52am EDT

NEW YORK (Reuters) - Just days before the launch of the new U.S. state health insurance exchanges that are the centerpiece of the Affordable Care Act, a nationwide push is still under way to test and patch the technology behind the online sites.

Officials working on the sites have acknowledged that information technology (IT) failures will prevent many of them from functioning fully for weeks, and perhaps longer. That will slow the government's drive to enroll millions of uninsured Americans under President Barack Obama's healthcare reform law starting Tuesday.

From a political standpoint, a successful opening day will shape perceptions of Obama's signature policy initiative. But the system's functioning is to a large extent beyond the control of politicians and policy experts, and instead sits in the hands of the battalions of coders working for IT sub-contractors.

Six months ago, people involved in setting up the exchanges were more hopeful that everything would be ready on time, said Cristine Vogel, an associate director at Navigant Consulting.

"I don't think there were enough hours in the day, or enough people with the skills," she said. "When we look back, I think we'll see that we missed an opportunity to share technology."

Opponents of the healthcare reform known as Obamacare say the computer problems bolster their view that the 2010 law is a "train wreck" and should be delayed or repealed. The Obama administration insists the exchanges will be open for business on October 1, even if some uninsured Americans may not be able to buy coverage right away. More importantly, they say, the new health plans will begin to provide health coverage on January 1, as planned.

"So long as the website is accessible and the plans and the plan information are displayed properly so a consumer can shop for coverage and compare the plans, they will claim victory," said Chris C1ondeluci, an employee benefits attorney at Venable LLP and a former staffer at the Senate Finance Committee who helped draft the Affordable Care Act.

FIRST-DAY CRASH?

This week, the Obama administration said its Spanish-language website would not be ready in time, and that it would be weeks before small businesses and their employees could sign up online for coverage on exchanges operated by the federal government.

The exchanges in Colorado and the District of Columbia, meanwhile, cannot calculate the amount of federal subsidies customers qualify for.

In New York, the exchange is not able to transfer data to some insurers instantaneously, as planned, one carrier told Reuters. Instead, the data will be sent in batches once a day or so. The glitch will not affect customers, but it raises questions that New York might have other IT problems.

Oregon had sufficient qualms about its online insurance marketplace that no one can enroll unless they use a trained, certified agent or other "community partner."

As late as this week, Oregon also had trouble correctly displaying information about insurance plans on a test site. The problem could mislead customers about deductibles, prices and other details if it occurs on the live site Tuesday.

In Ohio, Lieutenant Governor Mary Taylor, a fierce opponent of the healthcare law, said in a radio interview this week that her state's online exchange, which is being run by the federal government, could well crash on its first day.

In testing, she said, some plans filed by insurers "sat in a queue for the federal government for a week, so my concern is something similar is going to happen on October 1 because of the amount of (online) traffic."

WORKAROUNDS OFFERED, TAKE TIME

In most cases, exchanges will offer workarounds that will take time to execute. In Washington, D.C., off-line contractors will calculate federal subsidies and inform applicants what they qualify for in November, by which time the online calculator might be working.

In Colorado, until at least November, customers will have to call phone service centers, where representatives will manually take them through the calculations to determine what subsidies they qualify for.

Even before the exchanges open, the finger-pointing has begun, with states blaming contractors for glitches and contractors blaming states or other contractors.

The system to calculate federal subsidies for the D.C. exchange was built by Curam Software, which IBM acquired in 2011. In tests of complex family situations, the software was getting subsidies wrong 15 percent of the time, said exchange spokesman Richard Sorian.

In a statement, IBM spokesman Mitchell Derman said the city "decided that a phased-in approach best meets the needs of its citizens." He pointed out that Curam also built the eligibility software in Maryland and Minnesota, "two states that plan to have full functionality on October 1."

In other words, a company that achieved its goal on time in two states fell short in a third. The reasons, said outside experts, include relationships among contractors and the specifics of existing computer systems in a state.

In Washington, Infosys, the giant Bangalore, India,-based technology company, is the system integrator - the contractor that takes software from sub-contractors like Curam and puts it all together. The fact that Curam's calculation software is working on other exchanges suggests the glitch may not lie in its integration with the D.C. exchange's other IT.

"A software package like Curam's is put into the system by the system implementer, not the software provider," said an IT expert not involved in the D.C. exchange. A spokesman for Infosys was not able to comment on its D.C. work.

MEDICAID SYSTEMS POSE HUGE HURDLE

One of the most difficult IT jobs has been to integrate each health insurance exchange with its state Medicaid system. These legacy systems are typically decades old. In Massachusetts, for instance, the system runs on the COBOL programming language, which is to today's languages like a rotary phone is to an iPhone-5.

"These legacy systems are old and difficult to configure and re-configure," said Tom Dehner, managing principal at Health Management Associates, a healthcare consultant, in Boston and former director of Massachusetts Medicaid.

"To change how eligibility is calculated," as federal law now requires, he said, "you need to modify your Medicaid system, and that's not something you can do by buying software off the shelf."

The difficulty of interfacing with Medicaid will keep Colorado's exchange from calculating subsidies online.

To determine eligibility for federal subsidies, explained Nathan Wilkes, a member of the board of Connect for Health Colorado, the system "first goes through Medicaid determination. That means connecting to a legacy system," he said.

"Six or nine months ago we got an early warning that the way we wanted to integrate these systems wouldn't work, and then time got away from us."

Colorado's exchange tested 100,000 scenarios to see how its software calculated subsidies, and got error after error.

"It's an IT nightmare," Wilkes said.

(Additional reporting by Lewis Krauskopf and Caroline Humer; Editing by Michele Gershberg and Doina Chiacu)

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China threatens tough punishment for online rumor spreading

People use computers at an Internet cafe in Changzhi, north China's Shanxi province June 20, 2007.

Credit: Reuters/Stringer

BEIJING | Mon Sep 9, 2013 6:02am EDT

BEIJING (Reuters) - China unveiled on Monday tough measures to stop the spread of what the government calls irresponsible rumors, threatening three years in jail if untrue posts online are widely reposted, drawing an angry response from Chinese internet users.

China is in the middle of yet another crackdown on what it terms "online rumors", as the government tries to rein in social media, increasingly used by Chinese people to discuss politics, despite stringent censorship.

According to a judicial interpretation issued by China's top court and prosecutor, people will be charged with defamation if online rumors they create are visited by 5,000 internet users or reposted more than 500 times.

That could lead to three years in jail, state media reported, citing the judicial document. That is the standard sentence for defamation.

"People have been hurt and reaction in society has been strong, demanding with one voice serious punishment by the law for criminal activities like using the internet to spread rumors and defame people," said court spokesman Sun Jungong.

"No country would consider the slander of other people as 'freedom of speech'," Sun said at a news conference, carried live by the People's Daily website.

The interpretation also set out what is considered a "serious case" of spreading false information or rumors online, including those which cause mental anguish to the subjects of rumors.

Other serious cases involve the spreading of false information that causes protests, ethnic or religious unrest or has a "bad international effect".

Users of China's popular Twitter-like Sina Weibo microblogging site expressed anger about the new rules.

"It's far too easy for something to be reposted 500 times or get 5,000 views. Who is going to dare say anything now?" wrote one Weibo user.

"This interpretation is against the constitution and is robbing people of their freedom of speech," wrote another.

State media have reported dozens of detentions in recent weeks as the government pushes a crackdown on the spreading of rumors.

The campaign comes as President Xi Jinping's newly installed government steps up its harassment of dissidents, showing no sign of wanting to loosen the party's grip on power.

China says it has a genuine need to stop the spread of irresponsible rumors, pointing to some of what authorities say are patently ridiculous things said online of late, including a story that a soup made from dead babies had gone on sale in Guangdong province.

(Reporting by Ben Blanchard, Hui Li and Paul Carsten; Editing by Robert Birsel)

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NoSQL helps push the envelope of online advertising

The global online advertising market exceeded $94 billion last year, and nearly a quarter of that total can be attributed to sales of banner ads. The banner ad market is vast and complex; advertisers typically cut deals to buy banners in bulk from Web publishers (or aggregators), who may also bundle in sales leads, offline advertising, and more.

Alternatively, when publishers have been saddled with inventory they couldn't sell, they've often turned to ad exchanges, where advertisers bid for online ad space, typically paying a fraction of published ad rates. But as the targeting of online ads has improved, exchanges are becoming more viable as a first choice for both advertisers and publishers.

[ Download InfoWorld's Big Data Analytics Deep Dive for a comprehensive, practical overview of this booming field. | Harness the power of Hadoop with InfoWorld's 7 top tools for taming big data. | Get started with NoSQL -- these 10 standout NoSQL databases are worth a try. ]

A number of hot startups are taking this model a step further with real-time bidding (RTB) platforms, which enable advertisers to spread their ad purchases across multiple publishers easily -- and buy ads one at a time in real time at the most competitive price. The RTB market is scorching, with IDC predicting it'll capture 20 percent of the banner ad market by 2016.

One such RTB startup, Acuity, is using the Aerospike NoSQL key value store database as a competitive advantage, enabling the analysis and delivery of billions of ad impressions daily.

Acuity claims to have several advantages in a highly competitive market. To begin with, there's the company's database of 500 million consumer profiles, which include demographic info, online behavior, and so on. That data is fed to proprietary algorithms, which the company sees as its secret sauce to ensure ads reach the right visitors at the right moment to increase the ad click rate.

Finally, there's the brute force of the real-time horsepower and reliability under the hood. "Big data technologies are critical to drive the RTB platforms efficiently. To stand apart from the crowd, our real-time bidding system needs to be as fast as possible," explains Tal Hayek, AcuityAds co-founder and CEO. "It became absolutely critical that we identify a database, which would enable us to respond to opportunities in less than 50 milliseconds even as we analyze billions of ad impressions each day."

Acuity's platform has enabled the company to achieve that goal. In both of its data centers, Acuity has deployed a six-node Aerospike cluster, each of which features six dual-processor systems with Intel Xeon CPUs, 48GB of RAM, and four solid-state drives. The database clusters manage 4 terabytes of unique real-time data and process 60,000 transactions per second.

"We handle to close to 5 billion transactions per day, and we hit the Aerospike database multiple times for each of those transactions, so we count on the ability to talk to each Aerospike cluster in sub-millisecond time," Mr. Hayak notes. "That's one of the key things we look for."

With respect to reliability, Aerospike's shared-nothing architecture provides automatic fail-over and replication in case of node failure to guarantee no degradation in service. "Continuous availability is very important in supporting real-time bidding," Mr. Hayek says. He adds that the platform has exceeded expectations for both availability and performance.

By giving advertisers more power in the market place, RTB platforms like Acuity are sure to make this segment of online advertising even more competitive for publishers and advertisers alike. And with big data technology like Aerospike running on high-performance infrastructure, new benchmarks are being set for real-time Web interaction.

This article, "NoSQL helps push the envelope of online advertising," was originally published at InfoWorld.com. Read more of Andrew Lampitt's Think Big Data blog, and keep up on the latest developments in big data at InfoWorld.com For the latest business technology news, follow InfoWorld.com on Twitter.

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