The Future Of Retailing

Imagine games here instead of pastries.

I've talked a lot about digital distribution and how that's the future of the game industry and the book industry. It's extremely important to note, though, that this does not mean that traditional retail stores and physical products are going away. The product mix at retailers will need to change, as will many aspects of their business. Surviving stores will take advantage of their physical location and the innate desire of people to get together, plus the fact that special editions of books and games can't be downloaded if they have nifty physical components.

Which is why this announcement from Square is so interesting. This is the company that introduced a little square gadget last year that plugs into the audio jack of an iPhone and allows you to swipe credit cards. Which is pretty nice, when there's no contract to worry about and the transaction fee is only 2.75%. They have been growing rapidly, and now they're processing $3 million a day in transactions. The next step is what's exciting; they are launching Square Register, a whole register/payment processing/customer interaction module function on an iPad.

Customers will be able to see their whole transaction history with a merchant, be able to make purchases with their smartphone, get special deals, find other Square-enabled merchants, and a whole slew of other features. Merchants will get Google Analytics-style data on all their customers and be able to analyze what specials are working, what items sell best to what type of customers, etc. Heady stuff for small local businesses.

This could give the small retailer (the Friendly Local Gaming Store or Bookstore) a real edge in the competition with the big chains. It's this sort of disruptive technology and service offering that can help the little guys flourish in the new digital era.

Best of all, this stuff is going to be cheaper than buying high-end cash registers, renting credit card machines, and dealing with ridiculous payment processing contracts. Sure, you'll need a cash register for the cash transactions, but you can use an inexpensive one for that. Read the whole article, it's a fascinating look at what retailing can be like for mom-and-pops who can embrace technology.

Google's Subscription Plan Plus

Google's new plan... no frills on the logo, at least.

It didn't take long for Google to respond to Apple's new subscription plan; one day, in fact. Google announced their One Pass system yesterday, and it looks like a direct shot at Apple's plan. Apple's been gathering some criticism for their plan for several reasons: Publishers don't like having to give up 30% of their subscription revenue, and they want all the customer data (Apple allows the customer to decide whether or not to give that data to the publisher). Streaming music services are complaining about the 30% cut because they don't have that much margin to give up; effectively Apple's plan means they can't offer their services. (Gee, I wonder if Apple's rumored new streaming music subscription plan might have something to do with this?)

Google now steps in with a streamlined plan that offers a very light footprint, both technically and financially. Google promises that it's easy to implement and doesn't weigh down your web site or application, while the financial cut is rumored to be only 10% instead of 30%. Plus, with Google's One Pass you can offer all sorts of payment plans:

"Publishers have control over how users can pay to access content and set their own prices. They can sell subscriptions of any length with auto-renewal, day passes (or other durations), individual articles or multiple-issue packages. Google One Pass also enables metered models, where a publisher can provide some content or a certain number of visits for free, but can charge frequent visitors or those interested in premium content based on the business model that the publisher prefers. It also allows publishers to grant access to existing subscribers through a coupon-based system — so it is easy to give full online access to current customers. Publishers can give their customers codes verifying their subscription status, or can seamlessly offer content to existing subscribers via solutions enabled by Google One Pass."

So the battle is joined. Android tablets and phones will have a competing option to Apple's. Better still, Google's One Pass works on web sites as well, offering a comprehensive solution. It's not clear if this takes in micropayments as PayPal's plan does; Google intends it to be used for subscriptions, but it's flexible enough to handle other types of content. Read more about it here. 

PayPal Opens Up Micropayments

PayPal's got some interesting developments for game developers and ebook authors: They've rolled out a micropayment system along with a digital goods payment system. Yes, you could sell digital goods and use PayPal before, but now you can take advantage of a special rate structure for charges at $12 or under. If you're selling a digital good (like, say, an ebook) PaypPal will charge you using their standard rates (30 cents per transaction plus 2.9% if your volume is under $3000 per month, lower percentages at higher volumes) or their new micropayment rates of 5 cents + 5%, whichever is lower.

Before, you obviously wouldn't want to sell digital goods for less than a dollar or so, because the fees would become to large. Now, a digital good costing $1 costs you only 10 cents in fees, which seems pretty reasonable. Heck, you can charge 50 cents for a short story and still do OK, losing only 7.5 cents for the transaction.

I'm not sure if consumers will go for this sort of nickel-and-diming for all types of content, though. It would be pretty annoying if you were looking at a web site and going to read interesting articles only to encounter little mini-paywalls. "Oh, you want to read that interview? 50 cents please."

Still, it would be an interesting experiment for a writer to charge separately for short stories, as well as a single price for a collection of short stories, and see what sells.

Of course, I think PayPal's really trying to get a piece of the in-game purchasing action, especially when you look at their examples of micropayments (which are all gaming-related). They have APIs to let you neatly integrate their micropayments into your game (browser or PC based). They are also touting the fact that they are enabling these micropayments for Android in-app purchasing. So if you've been waiting for Google to get around to in-app purchasing, you can go ahead now with PayPal's solution.

From my review of various payment processing methods, PayPal is the obvious choice for anyone at the low end of the sales volume (a few thousand a month or less). When you get into $5,000 or $10,000 a month volumes, then merchant card processing starts to look better since the transaction costs are cheaper (depends on you transaction size, too, though). But that does come at some added costs which have to be factored in. When your volume gets high enough you can afford some accounting help to sort this all out and deal with the ongoing issues of high sales volume (chargebacks and the like).

If you're a small developer or a writer looking to sell things on the Internet, PayPal is where is you should start off. And they've just made things even easier and less expensive, and opened up some new options.