“It’s easy to make big money when you get to keep all the profits,” the Glass Balcony post points out, before complaining about the impact of these low-outlay ways on real people:

“Relying on automated support systems is no longer adequate. As the amount of online fraud grows over the years, automated systems are becoming less efficient. There is no accurate measure for that, however it’s anecdotally known that it’s more common nowadays for Google to shut down perfectly well-standing and long-standing AdSense accounts for invalid activity without providing the actual reasons for shutdown. Ditto for PayPal withholding the funds of customers.”

We all marvel at how quickly these companies grow and at their bounteous financials, but we don’t often enough sit back and consider why it is these companies can perform so well.

A huge part of that is down to enabling technologies, from the web itself to cloud computing and, yes, natural language processing and other technologies that will make automated customer service more useful and reliable. But that’s only part of the picture.

At this stage in the game, these companies are playing by different rules to everyone else. In the context of the post I mentioned above, customers are not customers: instead, they are users. If the exchange of money isn’t central to the relationship, as it is with an e-commerce operation such as Amazon, then customer support becomes an afterthought – after all, most of the users aren’t paying with anything more than their personal data anyway, so what should they expect?

But that’s only one facet. Pull back, and this iconoclasm becomes even more concerning.

Taxing times

I’m not suggesting that Amazon, Google and Facebook are breaking any laws, but they certainly don’t pay much tax either, relative to their revenues. In Europe, this is becoming a big issue, which is unsurprising given our current age of austerity. After all, if small businesses are struggling in this economic and technological environment, is it really fair that the megacorps taking their business away (particularly in retail) are so big and international that they don’t have to play by the same rules?

Bear in mind that Amazon is supposedly operating at a loss. The company’s margins are so low that it can destroy most competition, yet it somehow continues to expand. If the company paid taxes at the rate that small businesses need to, this situation would be entirely unsustainable.

The economic benefits for anyone other than Amazon are sometimes hard to see. Small businesses that would have paid their taxes in full are going under, and those public revenues are not being replaced. Of course these web giants are based somewhere – usually the U.S. – but their money often goes through a dizzying series of countries before it finds some tax haven where it can rest quietly. And from the companies’ perspective, why not? They operate everywhere; they can pick and choose.

That can sometimes lead to a sense that the web giants don’t feel beholden to any particular society. Consider these extraordinary quotes from Larry Page at yesterday’s Google I/O Q&A session:

“The pace of change in the world is increasing… We haven’t adapted mechanisms to deal with that. Maybe some of our old institutions like the law and so on aren’t keeping up with the rate of change that we’ve caused through technology. The laws when we went public were 50 years old. The law can’t be right if it’s 50 years old, that’s before the internet…

“We also haven’t built mechanisms to allow experimentation. There’s many exciting things you can do that you just can’t do because they’re illegal or against regulation. That makes sense, we don’t want our world to change too fast, but maybe we should set aside a small part of the world. I like going to Burning Man, for example, that’s an environment where people can try different things.”

Some have mocked Page for “wanting to start his own country”, but that risks missing Page’s point. He just sees Google as a special case that should enjoy at least limited exemptions from the rules that apply to smaller, pre-internet-style concerns. “If your rules weren’t written for us,” he seemed to say, “they shouldn’t apply to us.”

Competition

I sympathize with this view to a very limited extent: the pace of technological change does mean that regulators and legislators need to speed up their own operations if they want to keep up. Where Page and I part company, though, is that he wants Google to be hassled less and I want to see, for example, new data privacy laws that put meaningful and practical limitations on what companies such as his can do.

The great benefits of the free market system are supposed to be its enabling of genuine, merit-based competition and the resulting benefits to society. What we’re seeing here is a reduction in competition and variety, the concentration of wealth in the hands of a few giants, and the rise of players so big as to feel untouchable. The lack of genuine customer service mentioned at the start of this article is both symptomatic of this situation and one of its many drivers.

That sense of invulnerability and entitlement will affect us all, not only in terms of public finances, but in other fields too, such as data protection. These companies are worth more than many countries, and you can tell they know it.

In short, I’m worried about where this industry is going. I’m all for progress – I’d have chosen a strange field of journalism if that wasn’t the case – but perhaps it’s time to aim for a wider evaluation of what’s going on here. It’s not about being positive or negative. It’s about making sure that the massive societal changes this industry is effecting work out for the benefit of society as a whole.

After all, that’s why many of us are in this game to start with.

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As we bring more data into all aspects of our shopping lives, consumers may suddenly face the same conundrum in restaurants or stores. As data collection and predictions improve, stores are better able to anticipate the value of a customer and reward them accordingly. This leads me to wonder two things, how does this change customer service? And will it drive consumers to greater loyalty by making the cost of switching providers higher?

I spoke yesterday with a company called Swipely that provides a payment system to small businesses. The company is now managing more than $500 million in annual sales — a number that has grown 100 percent the last three months in part because its customers get a side order of data with the payment processing.

One of the metrics Swipely offers is an estimated customer lifetime value (based on demographic data and the amount the customer has already spent). Seeing this gave me a bit of a chill, in part because it took the concept of customer service and turned it from a basic expectation to a cold calculation based on your potential worth as a customer.

That’s not to say that clerks or managers at restaurants will suddenly turn into jerks for customers who don’t shop there often, or will play it cool with new customers until the vendor determines how much that individual might be worth to the business. Heck, in many ways that already happens: shopkeepers often assess your likely purchasing habits by your demeanor, dress and other physical attributes.

But putting a number on your worth as a customer and cloaking it as data turns it from a hunch into something that feels rational and scientific, even if the algorithm behind that metric is unproven. And believing they are behaving rationally can drive businesses to make really inhumane decisions about humans. In an ideal world this data would be used to reward loyal shoppers (perhaps in the same way the Ritz Carlton rewards its loyal customers already), but what happens when this experience trickles down from a high-end hotel to a local toy store?

It’s one thing to eat every week at a nearby Mexican restaurant and have the manager know your name and set aside a table for you. It’s another when based on a few visits to an establishment, you’re lumped into a certain class of customer based on predicted spend than gives you substantial benefits. Can vendors offer enough perks to those “whales” that they might ignore a lapse in service to keep their free queso coming?

Does this added layer of data start to boost customer retention to the point where it’s harder for another restaurant to win business? This may seem almost silly, but in the cell phone industry things like early termination fees, contracts and (formerly) the inability to port a telephone number created such high switching costs that there are concerns about those practices making the market less competitive.

I would like to think that better data in loyalty programs wouldn’t distort the market for local goods and services, but I am curious if it will. Human nature is such that a free bowl of queso and someone knowing your name can overcome mediocre enchiladas and the occasional service lapse.

And if you’re opening a taqueria down the street getting those customers in the door might prove to be more expensive and have little to do with your fabulous tomatillo sauce.

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Kobo makes four devices: The 5-inch Kobo Mini e-reader, for $79.99; the touchscreen Kobo Touch e-reader, for $99.99; the front-lit Kobo Glo e-reader, for $129.99; and the Kobo Arc Android tablet, for $199.99. Last year, the company stopped selling them through its website and only made them available through chains like Target and Best Buy as well as the independent bookstores that Kobo partners with through the American Booksellers Association.

A Kobo spokesman told me that last year, the company’s “top priority” was to “meet the demand of holiday shoppers around the world. As such, we paid close attention to our distribution channels to ensure that our retail partners were fully stocked for the busy buying season.We established a distribution process that runs very well, and were very happy with our end-of-year results, with Kobo’s E Ink eReader sales up nearly 150 percent in December. To further expand on our offerings and to provide customers with another place to purchase we are now offering our world-class devices and accessories through Kobo.com.”

Kobo says it has 13 million readers worldwide. The company launched in Brazil, Portugal, Italy, Japan, Spain, South Africa and the Netherlands in 2012 and plans to head to Russia, India and China in 2013. In the United States, its share of the ebook market is small and lags behind Amazon, Barnes & Noble and Apple.

An earlier version of this article implied that Kobo had begun selling devices through its website for the first time. In fact, The Digital Reader notes that the company had once sold devices on its website, stopped last year and has now started to do so again.

The piece was updated with a comment from Kobo on Tuesday afternoon.

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The locker method will debut this summer at fewer than a dozen stores, probably in one geographic region in the United States. “Really, it’s to test and learn,” said Jeff McAllister, senior vice president of Wal-Mart U.S. Innovations, during a media day at the company’s Wal-Mart eCommerce facility in San Bruno, Calif., on Tuesday. It’s also a way that retailer can match its online rival, Amazon.com. Amazon has been offering customers lockers in several cities, to serve customers who order goods but might not have doormen or a front porch where they can receive packages.

With this program, Wal-Mart will box up the items a customer purchases and squeeze the box into a locker that fits just right, McAllister said. Then Wal-Mart will send the customer a message with a code that will allow the customer to open the locker. The customer will initially have a couple of weeks to pick up the purchased items.

This is clearly a bid to burnish its online experience, because most people are close enough to visit a physical Wal-Mart store if they wanted to. Two thirds of people in the United States are within five miles of a Wal-Mart store.

Like other Wal-Mart eCommerce initiatives, if it works, it will expand. If it doesn’t, it won’t. Like similar locker experiments from Amazon, Overstock and others, it’s worth watching as a shot at making retail fit the digital age.

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This particular move, though, is a not-so-subtle signal to the marketplace that Google intends to become the dominant player in global ecommerce – which in the U.S. alone is already a $186 billion goldmine. Yes, for Google this is not just about going deeper into the ads business. The ever-expanding behemoth’s intention is to take a bite out of retailers margins too, starting first with those generated by ecommerce websites.

The first stop for shoppers

The Channel Intelligence purchase adds to the buzz that Google created back in October when it shifted its Google Shopping property to a fully paid ad marketplace, which by many accounts generated some $1 billion in the fourth quarter. And a Conductor study says that Google already influences over a quarter of all e-commerce transactions through its little search engine. These recent moves indicate that it seeks not only to go toe-to-toe with Amazon, but also to sneak up on other retail giants that sell both online and in stores.

Channel Intelligence (now part of Google) has a robust set of leading retail advertisers, which provides Google access to detailed retailer pricing and inventory data. Even more importantly, Google will get more valuable data on how those retailers convert browsers into customers. The ability to use its vast data resources to better understand retailer margins ultimately gives Google more pricing power for its ads.

Being able to offer retailers an easier way to deliver product inventory into its search engine will make Google a more formidable player in online shopping. Judging from the growing volume of retail-driven search on both Google and Amazon, it is clear that users are choosing to go to one of those spots to get the most up-to-date pricing and product availability. This is a two-way battle to be the consumer’s first stop. The winner of this battle will become the gatekeeper of the consumer through which all retailers will have to go to sell products.

Evolution to a digital store shelf

With the advent of today’s on-demand culture, Google is betting that it no longer matters who actually sells the product. Consumers are squarely in control and Google will increasingly help them find that product they are looking for, and do so at the right location for the right price. This was traditionally the role of ecommerce players like Amazon and massive offline retailers like Wal-Mart and Target.

However, with the growth of Google Shopping and the integration of those results into its core search engine, Google is quickly becoming the “digital store shelf” that it had always promised. For example, Google web search results today for retail queries tend to have at least 10 to 15 product images in addition to the traditional blue links. As Google starts to aggregate retailers’ local inventory – a probable next step on its roadmap with Channel Intelligence – it will be able to compete more aggressively in the mobile commerce space as well, directing consumers to physical stores in exchange for more ad dollars.

Not just ecommerce but all commerce

Make no mistake about it, Google is making a play for all retail with its recent moves and every retailer should be worried about the implications. (Rumors are swirling this week that the company has plans for its own branded retail outlets.) However, while Google is dominant in search, it is not the global ecommerce leader yet. It does not own significant pieces of the customer relationship (e.g. shipping, customer support, and retention marketing) and retailers can remain competitive by investing in areas that will stave off commoditization. Because as we all know, once you are a commodity, you will be traded like pork bellies and sold to the highest bidder. And that’s no place for a great retail brand to be.

The promise of e-commerce is having informed consumers finding the products they need from the brands that they love. Here are a few things marketers should employ to fend off Google’s advances:

• Focus on your brand’s value proposition and how it will be perceived in a Google search and other ad channels. Highlight what makes you unique so that you don’t become just another slot in a price list.
• Stay away from Google’s tools that track revenues/profits. Otherwise you’re simply handing over your business’s most valuable data.
• Develop mobile sites and apps that are a first stop for shoppers on the go, offering a better alternative to a Google search for prices.
• Devote resources to customer experience and personalization as a way of differentiating and bettering a basic search that’s more challenging for consumers.

Jason Lehmbeck is CEO and co-founder of DataPop, an online advertisement optimization company that works with retail, travel and automotive brands.

Photo courtesy of Anneka/Shutterstock.com.

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Well, to begin with, they’re not really hurting as a result. At least that’s what CEO Tim Cook explained during a Q&A session at Goldman Sachs’ analyst conference this week. Cook was effusive in his description of the stores, calling the in-store experience “Prozac” for him when he’s having a bad day.

And it’s not hard to see why they make him so happy. The average stores pulls in $50 million in yearly revenue, he said Tuesday. And the stores make about $6,000 per square foot of retail space — twice what next-closest retailer, Tiffany & Co. does.

And, as this chart from Horace Dediu at Asymco shows below, Apple Stores are more popular than ever:

Cook said there were 370 million people that walked through the doors of Apple stores during 2012 — the most ever. Besides just being a place where shoppers can pick up an iPhone or MacBook, the stores function as showrooms for the Apple experience, customer service centers, and places to educate new iPhone or Mac users.

It’s been almost four months since Browett’s exit, and there’s still no SVP of Retail. Cook has been overseeing the group, while Apple is said to be still actively looking for Browett’s replacement. It needs someone who knows retail, understands the value of Apple’s brand, and has international experience, since that’s where most of Apple’s sales growth is coming from. Apple’s at the top of its game in retail in these respects, but apparently the SVP slot remains an extraordinarily hard position to fill. Apple doesn’t appear to be looking inward: longtime VP of Retail Jerry McDougal recently left the company after presumably being passed over for the position. It appears instead to be looking outside the company again, despite the bad experience last time.

In all, the toughest thing about Apple retail is, as we learned from the Browett episode, that it’s extremely high profile with almost no leeway to make significant change. Whoever Cook brings in will likely have to accept simply managing the model that’s already in place; which for the ambitious type Apple usually hires, is probably a tough sell.

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Starting Thursday, Verizon stores will sell the device for $9.97, plus new users will get a $10 credit to their account, canceling out even that minimal up-front investment. Since Square only charges by the transaction (2.75 percent) and doesn’t require any minimum number of transactions, I can’t imagine it will take a very hard sell to convince a small business customer buying a smartphone to try out the reader.

AT&T also began selling Square’s card readers last year. In fact, the major carriers have been expanding their retail horizons beyond smartphones and modems. They’re marketing peripheral devices and gadgets that link to handsets, but don’t sport separate cellular connections. In AT&T’s new flagship store in Chicago you can find everything from smart watches to connected health and fitness monitors.

What’s more, Verizon and AT&T appear to have avoided their usual tendency to cash in on devices or services they distribute directly. Instead of trying to sell customers a “Square plan” or attempting to take a piece of each Square transaction, Verizon and AT&T seem content with the data traffic Square and other peripheral device makers drive over their networks.

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Belly is a Chicago-based startup backed by Lightbank and Andreessen Horowitz that is trying to take retail rewards programs down to the small business and the local level – while providing something much more sophisticated than the buy-10-get-one-free punch card. Belly users either use their Belly app or a QR code on a physical card to check in at a store’s iPad whenever they stop in at a participating business. That allows stores to track their customers’ purchases, award points and market more effectively to their most loyal customers.

The Belly Bites program adds a more active component to a normally passive rewards system. Instead of waiting on the customers, businesses can lure them in by offering a free tidbit, which is then highlighted in Belly’s app. In fact, customers can use the app as a sort of goodie radar, following the path of free treats and services around their neighborhoods. According to Belly, the free samples focus is much more manageable than a daily deal coupon campaign, while still introducing new customers to local businesses.

Belly also revealed today that it has revamped its Android app. The app is now compatible with all versions of the Google OS, but the biggest improvement is for frequent Belly users with the latest Android handset. The new Belly widget can be used to place a customer’s loyalty QR code on the home or lock screen of an Android 4.2 (Jelly Bean) device, turning it into a physical card.

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It happened last Friday, according to IFO Apple Store, which first reported the news. Apple has moved quickly to fill McDougal’s position, picking Jim Bean, 15-year Apple veteran who moves over from VP of Finance, Apple confirmed to AllThingsD.

Officially, McDougal is said to have left Apple to “spend more time with his family,” but there’s probably a little more to it than a mid-career executive wanting a break. McDougal was said to be a candidate to fill the SVP of Retail role that has been vacant since John Browett was let go in October. McDougal’s departure likely means he was passed over for the position for the second time since Ron Johnson left in late 2011. That could also signal that Tim Cook is getting closer to naming a permanent replacement.

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“We loved home because within that category there’s a lot you can do,” said co-founder Katia Beauchamp. “We felt that it wouldn’t become repetitive or boring — we could be creative with it.”

Items in the one-time box include home decor goods from designer Jonathan Adler, gourmet goodies from Dean & Deluca and stationery from Paperless Post. The home-themed box is $58, which is significantly more expensive than the $10 original box and $20 men’s box. But Beauchamp said the items included are valued at about $140 and that the company opted for a higher-priced package because they wanted to showcase the potential of a home-centric Birchbox. When the company launched a special-edition men’s box last holiday season, it was also on the pricier side but they lowered the cost when they decided to make it a monthly product.

The higher price tag could be a deterrent for some customers. But those who already look forward to their monthly beauty box could trust Birchbox’s taste enough to spring for limited edition offer.

For now, Birchbox, which says it has 300,000 subscribers and 400 brand partners worldwide, is focused on selling the thousands of one-time boxes it’s produced in time for the holidays. But as with the men’s box, if the response is positive, Birchbox Home could become a regular offering.

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