How Net Neutrality Affects Your E-commerce Business

What is Net Neutrality?

Imagine that the websites you access most often suddenly begin to charge subscription fees. Some of these fees you may opt into— online news subscriptions, video streaming, etc. Other fees you may not even notice you are paying— the shoes you want become more expensive as Nike is coerced to pay an increased fee for online advertising.

Net Neutrality is the idea that Internet Service Providers (ISPs) are forbidden from selectively restricting internet access or discriminating against certain users by charging a fee for certain websites or content. Under current net neutrality rules, all internet users have the right to an equal experience of the internet, independent of regulation. These rules enforce equal access to all brands online.

Why is Net Neutrality in the News?

Ajit Pai, current chairman of the FCC, is working to progress a proposal that will roll back existing net neutrality laws. If Pai’s proposal is passed, it will free ISPs to dictate internet speed based on the criteria of their choosing— meaning, users or websites who don’t pay to play are likely to receive a diminished experience. Essentially, the internet would be divided into “fast lanes” and “slow lanes.”

While this has obvious ethical and political considerations (ISPs could, in essence, disrupt the performance of sites that don’t align with their business or political interests), the focus in this writing will be to discuss the effect that the potential repeal of net neutrality would have on E-commerce.

E-commerce is More Than Just Internet Surfing

Since the dot com boom, E-commerce has evolved into a cornerstone of our economy. More than 50% of Americans have cited a preference for online shopping, while 80% of US consumers are estimated to have shopped online in the last thirty days.[1] Even traditional brick-and-mortar outlets are now incorporating digital elements into their in-store consumer engagement strategies— all things equal in regard to net neutrality, E-commerce shows signs of continued expansion.

How Would a Net Neutrality Rollback Affect My Digital Sales?

Just as a net neutrality rollback would allow ISPs to censor certain content, it would grant them power to set restrictions on access to any competitor services. Should this situation arise, organizations will face a definitive choice—play ball with the ISPs, or don’t.

Forgoing the Alliance with ISPs

For those organizations that decide not to align with ISPs, or refuse to pay the cost to operate in the “fast lane,” the consequences are material. There would be no regulations in place to prevent ISPs from throttling site traffic, forcing consumers to migrate to sites that have aligned with ISP demands.

The same study referenced above, conducted by Big Commerce and Kelton Global, has found that for more than 20% of all internet users worldwide, a slow, clunky, or inaccessible website experience would affect their decision to purchase a product. A separate study has shown that about half of a given website’s potential visitors will leave the site if their page doesn’t load in three seconds.[2] It results that a rollback of net neutrality would pose significant barriers to entry for entrepreneurs.

Aligning with the ISPs

Larger organizations who can afford to pay to play with ISPs will nonetheless be affected by a net neutrality rollback. Before we discuss, let’s make two key assumptions:

  • Said organization is not in direct competition with the ISPs in any way.
  • Upon contracting with an ISP, the relationship is such that the ISP will not enforce a “hostage situation,” in which the ISP demands increased payment in exchange for greater bandwidth.

Assuming the above are both true, E-commerce figures can still be affected. For one, as alluded to above in the hypothetical Nike example, an increase in costs associated with an organization’s online experience will result in the need to recover costs elsewhere. Even those brands for which cost is a competitive advantage will likely have to transfer these costs to consumers.. The more direct effect, however, lives outside of organizational control.

Open communication with other consumers is one of the most significant factors in influencing consumers to shop online. In fact, nearly a quarter of all shoppers have cited social media and online reviews as a significant source of influence in choosing where to spend.[3] Consumers want to hear from those they view as equals, and the internet provides an unparalleled channel for consumers to connect with each other and market on behalf of the organizations they support.

Alignment with an ISP can guarantee a good consumer experience once a consumer arrives to your website—it cannot guarantee that a consumer is piqued to navigate to your website in the first place.

How Should I Respond to the Net Neutrality Proposal?

The FCC is currently reviewing comments from the public on its proposal to roll back existing net neutrality regulations. If you’re interested in filing a comment, you can do so here.

Whether or not you choose to voice your opinion on the FCC’s proposal, it’s important that your organization stays abreast of this story, so that you can best prepare for any impact it may have upon your business.

 

For further discussion, contact Daniel at dkahan@wcapra.com.

 

[1] https://wearesocial.com/special-reports/digital-in-2017-global-overview

[2] https://blog.kissmetrics.com/loading-time/

[3] http://www.triplepundit.com/2017/07/net-neutrality-day-wasnt-just-internet-surfing/


Technology as An Accelerator: Petroleum C-Stores

Focusing on Moving Juice

The Petroleum Industry has a tremendous amount of fragmentation, from Brand representation, to supply chain economics, to terminal locations, dealer contracts, trucking and delivery, to promotions and retail operations. Within this fragmentation loop, technology, and the appreciation of technology, has been traditionally absent.

Distributors, or Jobbers, want to do one thing: sell. Whether that means selling to a new terminal, a new dealer location, or simply increasing raw gallons  the goal is to continually sell product to enhance ratability and gross profit. Within the distributor industry, it’s called moving juice.

Acceleration is Lost in the Message

As a distributor, technology and other program initiatives are often viewed as an obstruction to the progress of selling more juice. Because of this, technology initiatives are often perceived as a chore. Very few industry personnel have a true appreciation for program research and execution. Sure, the Brands are “pushing” a distributor to execute a loyalty program, or a new image enhancement standard, or a technology stack that the distributor may not understand or appreciate, despite it being a part of the brand’s “agenda.”

There is significant value associated with these Brand programs that habitually receive sincere push-back. In truth, these programs are accelerators, but their power to accelerate is often not communicated clearly. As a result, distributors have focused solely on moving juice. There has been little effort to “fill up” these potential vehicles for growth, which results in the stalling of these programs.

If the goal of these programs were communicated clearly, distributors may recognize:

  • Brands are trying to enhance their image to accelerate subsequent programs and increase awareness, hoping to assist in gallon growth and gain fuel demand from their competitors.
  • Brands are generating loyalty programs to help retain customers and understand more of their habits or tendencies. They are doing this by offering customers incentives outside of price and/or location, through the use of loyalty programs.
  • Brands are developing a deeper technology stack— from Point Of Sale and Network devices, to ancillary components such as pin pads and NFC readers— to help accelerate consumer readiness. Technology updates are often required to enable new consumer engagement programs.

Understanding C-Store Technology: Brand Programs Are Often Accelerators

Understanding the technology stack upgrades takes a true understanding of what is coming in the near future. The technology on-site at gas stations has been relatively untouched for the balance of 15 years. In many sites, legacy equipment/hardware remained in place, while Brands and retailers pushed other products, promotions and incentives.

Consumers are changing, and changing quickly. Sure, EMV pushed some massive site technology upgrades, but consumers are looking for a “bump”. It seems like the retail fuel industry has been the only segment untouched by the retail revolution that has been enabled by the recent enhancements of mobile, omni-channel commerce, and data analytics.

The Petroleum Industry is simply trying to prepare for the consumers’ expectation. In an environment in which we order food, transfer money, pay bills, and buy meals through our phones, the Petroleum Industry needs to be ready to develop enhancements around what is already in place. That said, the industry needs to view technology as an accelerator. Sure large technology initiatives may slow down the short-term progress of selling more juice, but the larger overhaul within the industry has been viewed as extreme to many due to the fact that we have been viewing technology as an inhibitor to growth.

In the “new normal” of excess fuel supply and reduced fuel prices, C-stores must adapt to 1) control costs, and 2) increase sales of higher-margin C-store goods (both of which will be aided by the adoption of new technology) to remain profitable.

The sooner we can recognize technology as an accelerator, the sooner our industry will be on pace with general retail to understand how new technology enhancements will optimize the consumer experience, thus increasing gallons and profitability.

For further discussion, contact Jon at jcaddick@wcapra.com.


Celebrating Summer – Student Internships

The following has been re-posted from Convenience Store Decisions. The original article can be found here.

It’s almost back to school time for many young people including students who had an internship experience this summer. Recently I’ve seen several posts on LinkedIn reveling the work interns did for the companies they’ve brought eyes & hands and more importantly minds & hearts to.

For me, an internship is a two-way give and take – where the student grows and learns how to connect in many ways, while I clearly recall not only gaining energy from those that interned on my team but developing a commitment to support interns as they look to choose and move their careers along.

I reached out to some former interns and others that are about to go back to school after giving up their summer this year to work in a business. They summed up what went on well – “insightful, immersive, incredible and compelling.” As they learned the ins and outs of the companies they worked with they also connected with a lot of people; talking through problems and asking questions which helped others on the team to stay focused. They were the eyes that looked over work and helped improve a spreadsheet, hands that took notes or as one intern told me he did some “thinking with pen and paper.”

Technology is a natural for young people and an expectation. Whether it was used for research or confirming for them that it is an enabler for business, they discovered it made them more effective and helps achieve maximum results. Each of the interns I spoke with in the past week had a technical background and are pursuing degrees in various technology disciplines.Their minds were put to work – for the security guy he brought along his belief that we need to think not only about technology itself but how to make it more secure when using it, while the IT generalist’s Search Engine Optimization background and knowledge of how South American economies work helped the team provide guidance to the customers they were working with.

Despite being brick and mortar visitors, these Millennials admit they had no idea about the complexities of the retail world. As one intern told me, “I had no idea of the complexity of a ‘cash register’ or the amount of technology that was in use ‘behind the scenes’ of a convenience store. It seemed so simple and uncomplicated when I purchased gas at the pump or walked inside to grab a drink or snack before my internship. At the end of the summer I had an entirely different view of the convenience store industry and the technology involved.”

Others who were involved with retail payment projects were amazed by the inner workings of a customer transaction and “mind blown” by the extent of cards and interchange that had to be outlined in a cost of acceptance analysis project.

A good internship comes along with many types of experiences whether it’s an open and engaging conversation “over a beer,” as one intern told me or a bringing your heart to a community service event.

If you are an employer and haven’t had the chance to work with an intern – make plans with your local university for an opportunity that will make a difference to you, your employees and customers, and to the student yearning to share and gain experience. Everyone will celebrate each other’s achievements when it’s time for the intern to head back to school.

For further discussion, contact Ed at ecollupy@wcapra.com.