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An fulfillment center. The rate of domestic growth in e-commerce is declining.
An fulfillment center. The rate of domestic growth in e-commerce is declining.Credit Ross D. Franklin/Associated Press

For all of the noise and hype — drones! one-hour delivery! get more toilet paper painlessly! — e-commerce is showing the first signs of maturing as a business. Figures from the research firm eMarketer show the rate of domestic growth falling from 16.5 percent in 2013 to 14.2 percent this year to 11.6 percent in 2018. By that point, e-commerce in the United States will still be less than 10 percent of all retail. The death of the physical store, so widely anticipated in the last few years, is nowhere in sight.

“Not a lot of new e-commerce users in the U.S. these days,” said Dan Marcec, a spokesman for eMarketer. “Plus, we still love to shop and buy in stores. Retailers are trying to leverage mobile usage not only to push mobile commerce, but also (and maybe even more aggressively) to get people information to encourage buying in-store.”

That was one theme of the 11th annual Internet Retailer Conference and Exhibition, held in Chicago this week. People who make stuff were once content to let someone else sell it for them online. Now they increasingly realize they will be much better off capturing the customer themselves. The benefits: They retain more margin without a middleman. They have tighter control over packaging and shipping — the box promotes them, not the retailer. And, most important, they have the name and email address of someone who likes their stuff.

The problem, of course, is how to get that customer coming to the brand’s site in the first place. The whole point of Amazon or Overstock or eBay is that one account means one-stop shopping. Amazon Prime, which has tens of millions of customers for its $100-a-year shipping program, is doing all it can to build an ecosystem where the exit doors are impossible to find.

“Amazon is driving more people to buy online,” said Amy Heidersbach of Needle, a customer engagement platform with a big exhibit at IRCE. “That’s good for everyone selling online. But the problem is how do you compete, and not just be a showroom for Amazon?”

Amazon is not only the dominant figure in e-commerce but probably the most aggressive. It does not exhibit at IRCE, but it is never far from the mind of attendees — even those who did not attend the full-day convention workshop, “Amazon & Me.” Among the panels: “What all retailers need to know to compete against or cooperate with Amazon.”

“Sellers want to feed from every pond, and Amazon is not just a pond, it’s an ocean. Leaving it would not be a good idea,” said Eitan Zimerman of Act Bold Media Group, a consultant shop. “But developing some alternatives is.”

The alternatives begin at home. Amazon or another web merchant might charge a 15 percent fee for selling something. That gives the brand a few dollars to potentially pass on to the customer. One increasingly popular technique: allowing the customer to name his price.

Under a Coffee and Bacon Station sign, members of PriceWaiter, a Chattanooga, Tenn., start-up, were doling out snacks and explaining how letting customers of a website decide how much they are willing to pay (within, to be sure, a narrow range) works out for both parties. “The merchants win by keeping the sale, and the customer gets a psychological victory — it feels like a win,” said Brian Sibley.

Another customer retention method, this one somewhat more fraught with peril: Put reviews on your site. This, of course, is an attempt to take away or at least neutralize one of the features that drove Amazon’s initial success. “Reviews instill trust in your brand and keep the customer coming back,” said Alex Rosen of PowerReviews, a back-end platform to making reviewing easier. He added that brands like to know, must know, when they are getting bad reviews. But strong indeed is the brand that will keep bad reviews on its own site.

If many of the exhibitors at IRCE were trying to avoid Amazon, a few were taking it on directly. Justin Singletary said he spent $500,000 a few years ago to buy the web domain from eBay. “We saw a void in the marketplace — an opening to take care of the merchants themselves rather than the merchant’s customers,” he said. Asked who the merchants were, he demurred, saying they operated under nondisclosure agreements.With about 60 employees and one domestic warehouse, is still an early-stage start-up.

Newegg, founded way back in 2001, is by comparison practically an institution. It says it is the second-largest online retailer in North America, with 28 million registered customers, about a tenth of Amazon’s. “Amazon wants to do everything,” said a spokeswoman, Claire Lin. “We want to be really good at one thing: selling tech products.”

Amazon and Overstock and eBay and Google would presumably answer that they want to be good at selling everything. Which leads to the final realization of the convention, an inescapable lesson for the Age of Twitter and Facebook: Big or small, you gotta blow your own horn these days.

“Look at Apple,” said Mr. Zimerman, the consultant. “Everything about them is bold. It has the most aggressive marketing. It is always in the news. Brands are constantly pushing, constantly revealing. No one just sits back and watches anymore. Take Blackberry. They had the business mobile market and sat back and got swallowed up.”


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A user of Amazon’s Alexa voice assistant in Germany got access to more than a thousand recordings from another user because of “a human error” by the company.

The customer had asked to listen back to recordings of his own activities made by Alexa but he was also able to access 1,700 audio files from a stranger when Amazon sent him a link, German trade publication c’t reported.

“This unfortunate case was the result of a human error and an isolated single case,” an Amazon spokesman said.

The first customer had initially got no reply when he told Amazon about the access to the other recordings, the report said. The files were then deleted from the link provided by Amazon but he had already downloaded them on to his computer, added the report from c’t, part of German tech publisher Heise.


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Cryptocurrency exchanges and traders in Asia are struggling to insure themselves against the risk of hacks and theft, a factor they claim is deterring large fund managers from investing in a nascent market yet to be embraced by regulators.

Getting the buy-in from insurers would mark an important step in crypto industry efforts to show that it has solved the problem of storing digital assets safely following the reputational damage of a series of thefts, and allow it to attract investment from mainstream asset managers.

“Most institutionally minded crypto firms want to buy proper insurance, and in many cases, getting adequate insurance coverage is a regulatory or legal requirement,” said Henri Arslanian, PwC fintech and crypto leader for Asia.

“However, getting such coverage is almost impossible despite their best efforts.”

Many asset managers are interested in digital assets. A Greenwich Associates survey, published in September, said 72% of institutional investors who responded to the research firm believe crypto has a place in the future.

Last month, Mohamed El-Erian, Allianz’s chief economic adviser said that cryptocurrencies would gain wider acceptance as institutions began to invest in the space.

Most have held off investing so far however, citing regulatory uncertainty and a lack of faith in existing market infrastructure for storing and trading digital assets following a series of hacks, as well the plunge in prices.

The total market capitalisation of crypto currencies is currently estimated at approximately US$120bil (RM502bil) compared to over US$800bil (RM3.3tril) at its peak in January.

“Institutional investors who are interested in investing in crypto will have various requirements, including reliable custody and risk management arrangements,” said Hoi Tak Leung, a senior lawyer in Ashurst’s digital economy practice.

“Insufficient insurance coverage, particularly in a volatile industry such as crypto, will be a significant impediment to greater ‘institutionalisation’ of crypto investments.”

Regulatory uncertainty is another problem for large asset managers. While crypto currencies raise a number of concerns for regulators, including money laundering risks, few have set out clear frameworks for how cryptocurrencies should be traded, and by whom.

Insurance might allay some of the regulators’ concerns around cyber security. Hong Kong’s Securities and Futures Commission recently said it was exploring regulating crypto exchanges, and signalled that the vast majority of the virtual assets held by a regulated exchange would need insurance cover.

Custody challenge

Keeping crypto assets secure involves storing a 64 character alphanumeric private key. If the key is lost, the assets are effectively lost too.

Assets can be stored online, in so-called hot wallets, which are convenient to trade though vulnerable to being hacked, or in ‘cold’ offline storage solutions, safe from hacks, but often inconvenient to access frequently.

Over US$800mil worth of crypto currencies were stolen in the first half of this year according to data from Autonomous NEXT, a financial research firm.

Some institutions have started working to solve this problem, and may provide fierce competition to the incumbent players.

This year, Fidelity, and a group including Japanese investment bank Nomura have launched platforms that will offer custody services for digital assets.

Despite the industry’s complaints, insurers say that they do offer cover. Risk advisor Aon, received some two dozen inquiries this year from exchanges and crypto vaults seeking insurance, according to Thomas Cain, regional director, commercial risk solutions, at Aon’s Asian financial services and professions group.

“It is not difficult to insure companies that hold large amounts of crypto assets, but given the newness of the asset class and the publicity some of the crypto breaches have received, applicants need to make an effort to distinguish themselves,” Cain said.

The industry also says it is getting closer to solving the custody problem.

“This year there have been a number of developments, and some providers have developed custody solutions suitable for institutional clients’ needs,” said Tony Gravanis, managing director investments at blockchain investment firm Kenetic Capital.

“Players at the top end of the market have also been able to get insurance,” he said.

But this is not the case for all.

One cryptocurrency broker, declining to be named because of the subject’s sensitivity, said insurers struggled to understand the new technology and its implications, and that even those who were prepared to provide insurance would only offer limited cover. “We’ve not yet found an insurer who will offer coverage of a meaningful enough size to make it worthwhile,” he said. – Reuters


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