Flailing Barnes & Noble Turns to Google to Help Fend Off Amazon

Some Barnes & Noble customers in Manhattan, West Los Angeles, and the San Francisco Bay Area will be able to get same-day delivery of their purchases through Google Shopping Express, according to media reports that surfaced Thursday.

Barnes & Noble CEO Michael Huseby described the teamup as a test and a way to increase book sales both online and from its brick-and-mortar stores.

B&N is floundering, having closed 63 stores in the past five years, and “could use any additional sales they could garner,” Scott Strawn, a program director at IDC, told the E-Commerce Times.

“But I don’t think this will save them,” Strawn added. “If they’re looking to this to fend off Amazon, they’re going to be very surprised.”

Barnes & Noble did not respond to our request to comment for this story.

How the Partnership Will Work

B&N stores participating in the program reportedly include the Union Square store in Manhattan; the Marina del Rey store near Los Angeles; and a store on Stevens Creek Boulevard in San Jose. They will have someone on site to handle online orders for items including books, toys, games and magazines.

Google will collate the orders and hand over the items to a courier for delivery.

B&N will not process Google Shopping orders on its website; the idea is for the bookseller to pick up incremental sales from Google Shopping customers.

Google spokesperson Anaik Weid provided a canned statement for the media about Google being “excited” that B&N is “joining our existing retail partners like Target, Costco and Staples,” in response to a request for comment by the E-Commerce Times.

And there’s the rub: B&N is just another partner for Google.

“This is actually B&N being added to the really long list of companies that are partnering with Google to a certain degree to allow customers to buy certain items and have them delivered the same day,” IDC’s Strawn remarked.

What’s in It for Google?

It’s generally acknowledged that Google is trying to get a piece of the online marketing action, which is dominated by Amazon and other giants such as eBay.

“Amazon is facilitating the sale of goods and services online, and that’s what Google does,” Strawn said.

From Google’s perspective, the partnerships with B&N and other companies “may be the beginning of a service to match Amazon more broadly,” suggested Rob Enderle, principal analyst at the Enderle Group.

It’s All About the Search

However, the real threat to Google is Amazon’s introduction of its Firefly visual search feature, available on the Fire Phone the company launched in June, Enderle said.

Firefly’s product recognition function lets users identify and get price checks on more than 70 million items and order them directly from Amazon. It can scan barcodes. It lets users scan and tag songs, films and TV programs. It also lets users identify text and phone numbers printed on paper.

“Effectively, [Firefly] is a technology that bypasses search, rendering it invisible,” Enderle told the E-Commerce Times. “At some point, it could eliminate a significant amount from Google Search if it spreads more broadly.”

That could cut sharply into Google’s online advertising revenue, which already is threatened by Facebook.

The Possible Effect of the Partnership

Google Shopping Express “is not operating at a large enough scale to have any meaningful impact on B&N, but it’s certainly Google’s ambition to have the service operating on a larger scale, at which point it will have a significant impact on all Google’s partners,” IDC’s Strawn said.

On the other hand, “part of what keeps B&N around is that people like going into their stores to browse, read and socialize,” Enderle pointed out.

“Once you get people to instead focus on fast delivery, where e-books have a huge advantage, you are effectively blowing away your major advantage and fighting Amazon’s fight,” Enderle continued. “This might turn out to be a colossal mistake for B&N.”

Richard Adhikari has written about high-tech for leading industry publications since the 1990s and wonders where it's all leading to. Will implanted RFID chips in humans be the Mark of the Beast? Will nanotech solve our coming food crisis? Does Sturgeon's Law still hold true? You can connect with Richard on Google+.

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EXCLUSIVE INTERVIEW

B2B Funding Firms Banking on Embedded Finance

accounting and finance

Embedded finance is on the rise in both the business and consumer payments markets. Analysts project its revenue will reach $1.91 trillion as adoption expands by 2028.

This steady acceptance is opening fintech operations to a wide range of marketplace opportunities. At the same time, it is forcing banks to morph their traditional catbird seat domain in doling out loans and bill paying services to partnerships with a variety of e-commerce platforms. This disruptive transition spans industries catering to both business-to-business and business-to-consumer transactions.

By integrating a financial task or function into a business’s infrastructure, embedded finance streamlines access to financial services such as lending, insurance, or payment processing. It does this without redirecting the customer to third-party destinations.

The embedded finance concept took root years ago with money handling operations such as PayPal and Stripe. Users could conveniently pay bills and deliver money to individuals and companies without individually handling such matters through their banks or postal services.

Banking as a Service

Finance platforms called banking as a service, or BaaS, are becoming an integral part of online transactions for both individual consumers and businesses. A dual industry is developing around the two processes.

These BaaS platforms enable digital banks — and even non-banks — to build various financial services into their online transactions, exclusive of product purchases. They operate with back-end banking functionality; whereas the broader category of embedded finance is more of a front-end access to financial services.

Together, the two are tied to the digital marketplace and the efforts to simplify and streamline financial services for consumers and businesses alike. Though embedded finance and banking as a service appear similar, they differ slightly in that BaaS is needed to deliver embedded finance.

Invoice Factoring

One of the new trends in shaping B2B payment strategies, especially for non-financial companies, is the shift toward invoice funding, or factoring.

This solution is not a loan but a financing strategy where a company sells its invoices at a discount to a factoring company in exchange for a lump sum of cash. The factoring company then owns the invoices and gets paid when it collects from the invoiced customers, typically from 30 to 90 days.

FundThrough is an AI-powered invoice factoring platform with a big presence in the process of embedded finance in B2B payments. The company provides funding for a business based on the size of its outstanding invoices.

Online B2B transactions have three components — suppliers, buyers, and the platforms they use. Each component has its own set of needs that must be met to ensure a smooth payment process for all involved, according to Amanda Parker, chief growth officer at FundThrough.

An essential requirement for buyers is contentment with sellers’ payment methods and how their suppliers provide those services. Where suppliers are concerned, customer remittance intervals and delivery processes tend to vary by industry — and selling to B2B enterprises that have unreasonably long or inconsistent payment cycles can negatively impact the cash flow of suppliers, Parker noted.

Embedded finance, the larger umbrella category, encompasses all the different components of finance in the traditional sense. Embedded finance strategies can be built into whatever workflow that makes sense, explained Parker.

“It can be used right inside the workflow connected to a purchase of an item, a transaction, creation of an invoice, for example,” she told the E-Commerce Times. “It also includes embedded banking, embedded payments, lending insurance, you name it.”

Embedded Finance Unwrapped

The E-Commerce Times further discussed the inner workings of embedded finance with Amanda Parker. Following is that part of our conversation.

What more is involved in the process of embedded finance?

Amanda Parker: It varies and includes a connection to the customer, so you have some kind of connection to the data source.

Amanda Parker, chief growth officer at FundThrough
Amanda Parker, Chief Growth Officer
FundThrough

Let’s take an example from one of our partnerships. We are connecting to the user’s company inside QuickBooks for getting information on what their company is, what it does, as well as a level of identity verification.

We are doing something called KYC, which is “Know Your Customer,” so we are asking the user a series of questions or asking for a series of documents to confirm their identity.

Then we confirm that the transaction they are requesting is legitimate, the relationship that they have with the business on the other side is legitimate, and that their bank account details are legitimate.

So those are kind of the components. It is verification, confirmation, and then sending the funds required through various banks.

How does this process work for other use cases?

Parker: Our bread and butter is lending or invoice finance. In general, embedded finance has tons of other use cases. You have B2C, tax or business-to-consumer contacts, and you have payments insurance. This is the exact same but in a B2B context.

So, for us, the use case might involve suppliers that want to get paid immediately. Now they can do that beside any workflow; whether a transaction, invoice, or purchase is happening.

How does this process benefit consumers or is it more a benefit for businesses?

Parker: We focus on businesses, but for consumers and everybody it is the seamless integration they gain so they do not have to leave their workflow. It is far more convenient and automated.

You are not using six different systems to try to get something done. You can now do everything inside one system. So, if you think about the way that finances have leveraged or changed over time, consumers can essentially buy anything online.

But B2B is a very fragmented system. So now, embedded finance is taking over into B2B to apply that same kind of frictionless experience that consumers have online to a B2B context.

What factors are driving the transition to embedded finance?

Parker: Frictionless experiences at the consumer level have always led the way. Now that is coming through to businesses.

Another key thing is as millennials take over more of the workforce, they typically get frustrated with systems and workflows.

Integrated payments and lending are really unlocking a lot of new business models for software companies. This vastly improves the experience to make it a more consumer-like experience but in a business-to-business context.

How is the adoption of embedded finance progressing?

Parker: We see a growing number of estimates for the global embedded finance opportunity. [Reportedly] embedded finance will reach a $7 trillion value globally in the next 10 years.

PayPal and Stripe were leaders, particularly on the consumer side and e-commerce. Now we are getting on the cusp of explosion on the B2B side of things, which is very exciting. There is over $100 trillion of GMP (guaranteed maximum price) inside B2B. That is just kind of open for the taking.

I think you are going to see a lot more of that as players over the coming years come out and start to want to assist in that movement of those funds.

What is needed to encourage further adoption?

Parker: I would say one of the key things is bank adoption. More banks need to embrace open banking and banking as a service.

Application programming interface (API) architecture is ever evolving and getting better. A number of fintech players have come out to give the banks a run for their money. So, I think we will start to see a ton of innovation in that space in the coming years.

Why are some banks hesitant to come on board?

Parker: Banks really want to hold back that customer and hold that experience. They do not want their customers moving over to another experience. They want to try to service it all themselves.

Banks also have a big concern about security. But we invest in that now to ensure we give customers the best experience. Consumers are connecting their bank accounts to tons of different services. It’s in [everyone’s] best interest to ensure a secure and frictionless experience. That is one of the big areas where we hope to see continuing progress in the coming years.

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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