the democratization of local commerce | steven jacobs

@ 2014 Hyperlocal Industries LLC. @stevenhjacobs

the democratization of local commercesteven jacobs street fight

#endofbrand


this is the american marketplace.

why is it all the same?


Over the past century, the value of brand has led to the homogenization of the American marketplace.

It all starts with the business model.

equity/capital

brand

marketing/advertising

business equipment

business systems

labor

training/education


product/service

Each layer of the stack has a purpose.

brand

labor


Capital provides the foundation….

equity/capital

brand

labor

business systems

business equipment

training/education



product/service

Capital pays for labor, business equipment and systems….


equity/capital

brand

business systems

business equipment

labor

training/education


product/service

equity/capital


brand

business equipment

business systems

labor

training/education


product/service

equity/capital

Training and education turns those assets into a sellable product or service…


equity/capital

brand

business equipment

business systems

labor

training/education


product/serviceMarketing and advertising helps communicate the product to consumers, reinforcing brand…


We know that business models evolve as new technologies are introduced.


In each technological era, there’s one layer that thrives with scale…

We’ll call that layer the “scale layer.”

c


equity/capital

brand


business equipment

business systems

labor

training/education

product/service

First, the scale layer was capital.


equity/capital

brand

product/service

business systems

labor

training/education

marketing/advertisingThen, it was equipment.

(hint: access to the ‘means of production’)

cequity/capital

business equipment


brand

product/service

business equipment

business systems

labor

training/education


Most recently, it was all about brand

equity/capital


A brand is the perception of a business by a consumer.

brand


Brand has two functions…

brand

To shape the way we think…


To solve and information problem…


brand

As we started to work, live and relax in different places, we became more regional and national consumers.

brand


brand

In solving the information — helping us trust a place we’ve never been —

brand allowed us to become active and informed consumers wherever we went.


equity/capital

brand

business equipment

business systems

labor

training/education

product/service

The value of brand was so powerful that each layer of the stack helped to reinforced

a uniform experience…



The product needed to be standardized. A burger in Tulsa needed to be the same

as a burger in Toledo.

product/service


So did the messaging. One message, promoting one product, for

one consumer.



The entire model builds around centralized networks of consumption,

production, and media.


To make us happy…

But that “information problem” is under attack…


The web introduced a new network structure.


Peer-to-peer networks allow consumers and business to share

information with one another without going through a central point.


The centralized network — once at the core of what made brands valuable — is no longer relevant

customer a can tell consumer b what to expect about x business


brandMcDonald’s share price is flat…


brandMcDonald’s share price is flat…

But Yelp is killing it.


“The ability for consumers to access near perfect information means that traditional assets like brand... are becoming less important.”

- Itamar Simonson, Stanford

brand


As peer-to-peer networks erode the value of brand, they also have allowed for decentralization in other parts of the stack.

brand

product/service

business equipment

business systems

labor

training/education


equity/capital

@stevenhjacobs

You used to buy networks..



@stevenhjacobs

You used to buy networks..



Now, marketers buy audience…

@stevenhjacobs



By 2017, programmatic buying will account for 42%

of display ad spending.

42% of display advertising spending


Individualized customization appears to be within reach, says McKinsey.

product/service


So, which part of the stack will dominate next?

brand


business systems

business equipment

labor

training/education

product/service

equity/capital


Let’s look online.


The companies that grow help us create — they don’t create for us.


Over the next decade, business systems will be the “scale layer.”

brand


business systems

business equipment

labor

training/education

product/service

equity/capital


The introduction of cloud software has fundamentally changed the dynamics of the business software (systems) market, making the software

ubiquitous, integrated and networked.

business systems

There’s an estimated 13.9 million point-of-sale systems in the U.S. in 2014.


business systems

1) Ubiquitous


business systems

By 2020, the number is set to nearly double, driven primarily by the emergence of less expensive and mobile cloud-based software.

1) Ubiquitous


The new systems will integrate across the entire stack, allowing data to flow from capitalization to operations to marketing.

2) Integrated Point-of-sale

Compensation

Payroll

Marketing

Retention

Accounting


business systems

These systems typically functioned as independent networks.

3) Networked


business systems

In the cloud, these business now can share data — and potentially resources — with thousands of other business on its network.

3) Networked


Ubiquitous, integrated and networked business software will reduce the need

for standardization and scale across the business stack.

brand


business systems

business equipment

labor

training/education

product/service

equity/capital


Let’s take a look at the impact of business systems on four layers of the stack…

brand


business systems

business equipment

labor

training/education

product/service

equity/capital


business systemsequity/capital

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013small business share of all nonfarm, non residential loans

Over the past two decades, it’s become increasingly difficult for a small business to get a loan.

50%

25%

0%


Square Capital uses operating data from business across its network to

identify businesses well-suited for small loans.

business systemsequity/capital


Wholesale purchasing has served as an economy of scale for years, benefiting the

largest businesses.

business systemsproduct/service

price per item

quantity purchased

big brand A

small co. A


But this is an information problem.

Small business A, B and C are all purchasing the same goods. They just

cannot coordinate.


price per item

quantity purchased

big brand A

small co. A

small co. B

small co. C


If small co. A, B and C all use the same business software, they can purchase

collectively.


price per item

quantity purchased

small co. A small co. B small co. C


Loyalty programs have served as an bulwark against the dissolutions of scale

for brands.

business systemsbrand


By coordinating small businesses, software can begin to replicate the value

of brand through new systems.

business systemsbrand

These software companies become brands in their own right.


of small business are fined because of

incorrectly filing their taxes.

business systemslabor

40%A lack of payroll system ends up

costing small business in tax fines, many of whom apply through pen and

paper.


business systemslabor

“Payroll is set of rules — both internal and legal — and computers are much better at following rules than humans.”

— Joshua Reeves, Zenpayroll


These business systems networks will allow thousands of brands and products to flourish, adapting to the intricacies of the consumer rather than making the

consumer adapt to the brand.


instead of this…


we’ll see more of this…


steven jacobs deputy editorstreet fight

the democratization of local commerce | steven jacobs

Technology

hyperlocal industries

value of brand

stevenhjacobsa brand

scale layer

business models

national consumers

informed consumers

sellable product