Dear Restaurants/Retailers, Nobody Wants Your App, and Why That’s Good

14 Jul

Monkey See, Monkey Do is an idiomatic expression popularized in the 1920′s, thought to have originated in Mali, West Africa. In less colloquial terms, it refers to people that follow the actions of another, even if they have no idea why they’re doing it.

Much merger and acquisition (M&A) activity can be explained by the Monkey See, Monkey Do phenomena: a competitor made a move, so we must do something too. After all, what if they know something we don’t? This conversation takes place in board rooms much more frequently than an outsider could ever imagine. Bankers get paid on the deal, not the outcome, so of course the money folks are going to prey on a CEO’s insecurities. It should come as no surprise then that at least 70% of M&A fails.

Retailers and restaurants are likewise not immune to Monkey See, Monkey Do. Retailers and restaurants saw airlines, hotels and grocers developing apps and thought they needed an app too. I cringe at thinking how many billions of dollars merchants paid to have their own apps developed.

Unlike consolidated industries, there are hundreds of thousands (600,000, to be exact) of restaurants in the US. I mention this to put the below in perspective: every time I fly, a US airline has a 20% chance I will book with them. If you’re a grocery brand, there’s a 50% chance to be graced with my patronage based upon my local geography. Given this frequency, an app makes sense to manage my flight status or loyalty points. But I’ve eaten at hundreds of local restaurants, and maybe only five of them more than once. And there are thousands of others in Houston. I’ve never downloaded a restaurant app because my behavior, based on inherent market fragmentation, just doesn’t justify it…

If we follow the teachings of Takichi Toyoda, we’d learn about the Five Why method: ask why five times and you will arrive at an actionable solution. If you practiced Mr. Toyoda’s method with a merchant bent on app-domination, I’d be impressed if you heard a cohesive answer on even the first why. Yes, a merchant might regurgitate buzzwords like “data”, “loyalty”, or “convenience”, but no cohesion ever came from a Jackson Pollock either. Merchants simply don’t know why they have an app, except everyone else has one too. Monkey See, Monkey Do

But having a stand-alone app will to be detrimental to merchants going forward. 

Let’s examine online (mobile) ordering for a second. The value of online ordering is less about the device but more about the convenience. Can I order something on my phone, watch, connected car, VR contact lens (whatever’s next?) in a fraction of the time I would spend driving to the location, finding the item, queuing at the register, paying, and driving back? Whatever becomes most convenient with current technology – with price obviously under consideration – is what consumers will want. To stay on top of technology changes will merchants spend ever-more resources developing apps for all these different platforms?

The true convenience of online ordering does not require you to download a merchant’s specific, and thus definitionally, limited application. In fact it’s the opposite: cull the largest list of possible options via one data layer to drastically improve convenience. Today this has manifested as YelpFoursquareGoogleOpentable and other local discovery platforms that let you sort across a number of filters to find what suits your needs. As much as merchants don’t want to believe it, the market is saturated, and products/services are very much fungible. If you’re not on Yelp, you don’t exist, and a prospective customer can easily find a substitute.

As is becoming clearer, the future will be even less about apps and more about bots. A bot, in it’s simplest explanation, is but an artificial intelligence (AI), natural language processing (NLP) layer on top of data that prevents the user from the first-world “problem” of opening, loading and interacting with a specific app. With better speech recognition and access to relevant data, Apple’s SiriMicrosoft’s Cortana and Google’s Now will render any and all other bots redundant and inferior. Are we to believe restaurants and retailers – who haven’t figured out the value of data science to manage the basics of their inventory and labor – are suddenly going to build bots with advanced NLP libraries and compete with Google?

The answer to all these questions comes to one, natural conclusion: Cloud POS. Smart POS companies will become the aggregate portal for all brick and mortar merchant needs. They’ll already be collecting the data necessary via Cloud to empower bots and useful extensions for their merchants. Through the value of middle market players and data aggregators – not unlike data co-ops in grocery and retail – POS companies will be able to connect merchants with all of the third party, demand-generating platforms to help merchants grow.

How does this benefit merchants?

1. Merchants won’t need to waste money developing apps/bots for perpetually-changing technology. The market will come to POS partner networks to onboard merchant data. Now, with merchant permission, consumers can order from businesses via a bevy of consumer platforms without the merchant worrying about it.

2. Merchants will access more data than their own loyalty efforts could ever imagine. Because POS partner networks will represent more locations than any merchant’s four walls (or any single POS company’s install base for that matter), the data being collected will paint a massively better picture of customer behavior. As payments and POS naturally merge, a stand-alone merchant app will be woefully behind.

3. Merchants will see increased customer revenues without increased marketing spend. Third parties will work with POS partner networks to invent new ways to generate eyeballs, and thus customers for the merchant. Who knows what sorts of future commerce this entails, but startups are much, much more creative than you might think.

Naturally, there will still be large, laggardly merchants that insist on maintaining their own apps and mismanaging investor dollars. But as data becomes democratized, small merchants will outcompete those who don’t have access to the data platforms being created.

That, of course, will eventually engender boardroom discussions of a new Monkey See, Monkey Do at the larger merchants – even if nobody in the meeting knows why they’re discussing the change.