Retail Planning Is More Complex Than Ever

Retailing: From A to Z

In this tough economic environment, retailers need all the help that they can get. So, an excellent article from Wilson Perumal & Company on “Complexity in Retail: Why Companies Must Adapt in Order to Survive” is particularly timely.
According to Wilson Perumal: “We’re living in a time of incredible business complexity. Retail was perhaps the industry most affected by growing complexity in recent years – retailers that learned to master good complexity and limit the impact of bad complexity, gained a competitive advantage and beat their competitors. In the past, retailing was a relatively simple business:   You selected the right product range, bought the selected products at the lowest possible price and at the right quantities, merchandized the products in your stores, managed stock availability with supply chain efficiency and marketing efforts, and at the end of the retail cycle you exited old lines with minimal cannibalization. Simple. This simplicity allowed companies…

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Google to open flagship retail stores by end of 2013

retail news

Apple and Microsoft both have their own, dedicated retail stores. Can Google be far behind? If the rumors are true, the answer is “not at all,” with the first Google stores due to open by the end of this year.

Citing “an extremely reliable source,” the gossipmongers at 9to5Google report that the Chocolate Factory is hard at work on plans to open its own flagship stores in “major metropolitan areas” in time for this year’s holiday season.

The stores will reportedly highlight Google’s Nexus devices, the Chrome browser, Chromebooks, and other new products to come, with an emphasis on giving prospective customers the chance to get hands-on with Googly kit before they buy.

About those aforementioned new products: according to 9to5Google’s source, foremost among them will be Glass, the Chocolate Factory’s much-ballyhooed experiment in wearable computing – which makes some sense, considering that few customers are likely to be willing…

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Retailers need to get an App, online isn’t enough

A recent survey conducted in the USA by Harris Interactive for Apigee, an online API management platform, has indicated that shoppers will be using their mobile phones more than ever.  Many smartphone users have come to expect more than just an online presence from retailers, especially the younger demographic – where a smartphone app is becoming more important, as it allows them to do more when they are out shopping.  Venture Beat Article is here.

Mobile App Survey results

Mobile app usage in retail

Grocers’ digital dreams: Sainsbury’s launching VOD, Tesco ending MP3

Interesting how leading UK Supermarkets Tesco and Sainsbury’s are leveraging their online traffic to get into Video On Demand and go head to head with Netflix and the like.

Gigaom

The UK’s number-three supermarket is preparing to turn itself in to an online movie and TV rental service, as it vies with with leader Tesco on digital devices, just as they have in the aisles.

Sainsbury’s is contracting video tech firm Rovi to power video on demand and for download in a service due to launch later this year under its new Sainsbury’s Entertainment brand.

Rovi promised paidContent “a transactional-based model that supports the sale and rental of premium titles versus a subscription-based service”. The service will launch initially on web and Sainsbury’s says it wants to take it later to internet TVs, Blu-ray disc players, smartphones and game consoles.

Sainsbury’s movie and TV offering will go head-to-head with Blinkbox, which Tesco acquired a majority of last year. Expect to see each supermarket competing with Netflix, Amazon’s Lovefilm, BSkyB and other dedicated VOD brands on internet TVs next year.

Like Blinkbox, Sainsbury’s…

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Apple iPhone 5 mobile payment wild card

The new iPhone 5 with iOS 6 is due to be released in September.  Historically Apple has set the trends in Smart Phones which others have followed, but this time around the iPhone 5 will need to respond to the challenge laid down by the Android phones some of which already have Near Field Communications (NFC) payment capabilities.  Rumours are rife that Apple will integrate NFC with the new iOS 6 Passbook iWallet, giving Apple the ability to leverage markets such as mobile payments, ticketing, coupons, loyalty programs and secure access.

It is estimated that Apple has over 250 Million active registered iTunes accounts each with valid Credit Card details to allow for app purchases, which would give Apple a significant advantage in the mobile payments race making Apple the Wild Card in the mobile payments pack.

See the full article here.

PayPal in race with Square for Mobile Payments

PayPal is racing with Square and other tech companies to become the mobile payments service of choice as consumers increasingly use smart phones to make purchases in shops, restaurants and other retail outlets.  PayPal a subsidiary of eBay has a significant advantage with over Square with over 113 Million active registered accounts across 190 markets.

In May this year PayPal announced that they had made deals with 15 USA retailers including Home Depot, Toys R Us, JC Penney and Barnes & Noble to utilise the PayPal Here payment system.  PayPal has also signed agreements with Verifone, Ingenico and Equinox Payments to get PayPal’s payment technology onto their networks of payment terminals.  The full article can be found here.

This week news also emerged that McDonalds are currently testing PayPal Here in 30 McDonalds stores in France with the objective of cutting down the payment transaction time by using customer PayPal accounts.  if this is successful, it would open up a potential market for PayPal in 30,000 McDonalds stores globally.  See the full article here.

Starbucks Square’s deal shakes up Payment Industry

A couple of weeks ago Square Inc a two year old San Francisco start-up founded by Twitter co-founder Jack Dorsey, announced that they will be taking over the processing of all the payments for Starbucks 7,000 USA retail stores.  As part of the deal Starbucks will be investing $25 Million in Square and Starbucks CEO Howard Schultz will join the Square board. The Wall St Journal article on the announcement is here.

Starbucks acquired its stake as part of a $200 Million funding round that valued the company at $3.25 Billion (twice what it was valued a year ago).  If you have 17 minutes to spare the WSJ video interview of Schultz and Dorsey on the link above is worth watching.

Initially, the Pay with Square application will allow Starbucks customers to show their mobile phone and mention their name to complete the payment in a Starbucks store (by scanning a 2D barcode on the phone).  Later Geo Location functionality on the smart phone will be used to identify customers who have checked into the store and allow other associated smaller retailers in the area to promote special deals to the customer on their phones (even using Starbuck loyalty points).

Square was previously known for its white Square dongle that plugged into the audio socket of the iPhone and iPad to accept Credit Card payments that was used by numerous small businesses and taxi’s in the USA.  This was a significant departure for them and would increase their payment processing capacity significantly (before Starbucks it was already estimated at $6 Billion p.a. – Starbucks could more than double this).
Shortly after the announcement shares in traditional EFTPOS Payment processor Verifone, with a significant slice of the US and international payments market (estimated at $10 Billion p.a. in the USA alone), dropped more than 10% on the USA share market and prompted their CEO to quickly make a statement saying the deal was good for Verifone as they had been busy adapting to the burgeoning mobile payments market as well and had released a Square-like mobile service called Sail.  See the article here.

A week later news also came out that Wal-Mart, Target and 7-Eleven in the USA had joined together and were developing a “mobile payment network” to allow customers to pay with their smartphones.  The system, known as Merchant Customer Exchange, will be driven by the retailers themselves and would include a number of other retailers including Best Buy, Sears, CVS and Publix.  They are in discussions with banks and payment networks and were looking integrate their promotions into the payment processing application.  The Article is here.

With all the talk around mobile payments a number of the traditional (and some new) payments companies have joined together to form a Mobile Payments Committee as part of the Electronics Transactions Association, hoping to define the future of commercial mobile transactions.  The companies include Visa, MasterCard, Amex, all the USA mobile phone carriers, Google, ISIS and PayPal (significantly Apple and Square were not included).

August has been a big month for mobile payments, topped off as McDonalds has now just announced that they are trialling a new mobile payment system using PayPal Here in 30 locations in France.  PayPal has also struck deals with more than 15 large retailers in the USA including Home Depot and Office Depot to accept PayPal payments (see next post).

August New Retail Technology News

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Thanks for taking the time to read the second edition of the New Retail Technology Newsletter for August.

Thanks also to those of you who contacted me after the first edition, I really appreciated the great feedback and concern expressed over my unfortunate Achilles predicament. For those interested, my Achilles is progressing really well – I should be out of the Moon-Boot and (almost) back to normal in a week or so (still a fair bit of Physio to go though).

This edition will focus on what is currently happening in the Mobile Payments space that will have a huge impact on how products and services are going to be paid for in the future in the world of retail.  So it is worth taking note of some the key trends.  Firstly, Smart Phone adoption is skyrocketing around the world – in Australia the smart phone adoption rate is nearing 65% (and you can bet that is much higher in the demographics most retailers are focused on).  Secondly, retailers are gearing up for Contactless Payment – currently being driven by Visa payWave and MasterCard PayPass, a new generation EFTPOS payment terminals are being rolled out that have the option for Contactless Payment (tap and go).  Companies like 7 Eleven and bigger IGA supermarkets have had contactless terminals for some time and Coles has just completed rolling out 750 Supermarkets, while Australia Post is now rolling them out to over 4,000 outlets.  The move to Contactless payment is being driven by customer convenience and speeding up the payment process.  The Visa payWave ad captures this beautifully. See it by clicking here.

The feature this week will concentrate on some key events in Mobile Payments in the last couple of weeks.  Starbucks decision to use relatively new start-up Square to process all Credit Card payments across all 7,000 outlets in the USA has some significance as it is the first time a major retailer (Starbucks) has partnered with a new generation mobile payments organisation (Square) to process all of their payments.  This will replace Starbucks own internally developed mobile payment application and future functionality promised by Pay with Square is quite exciting (see next post).

The other major player in the Mobile Payments space is PayPal with their PayPal Here application – again PayPal are making some early, but significant inroads into retail that will also be very disruptive to the traditional payment services (Credit Card companies, Banks and Payment Networks).  As interesting and disruptive as Square and PayPal are to retail payments, the one that has the potential to be the most disruptive will be Apple who will be launching the iPhone 5 in September that is rumoured to have NFC (Near Field Communication – contactless payment) capability utilising the new iOS 6 feature Passbook which could also be used to facilitate customer loyalty schemes, discount coupons and event tickets.

In Australia the major banks are also starting to get in on the Mobile Payment action with CBA’s KachingANZ’s goMoney and Westpac’s PayWay.  There are also numerous mobile application developers around the world building apps that will process credit card payments eager to jump on the mobile payments bandwagon and get a cut of each payment transaction, all of which will have the effect of driving the cost of processing payment transactions down (good for both the merchants and for the consumers).  Some of the mobile payment names to watch are PayMate and iCCPay in Australia, GoPago in the USA and iZettle in Europe.

Ha, I’ve just pulled my copy Time out of the mailbox (still getting the print edition) and guess what is on the cover of this weeks edition?  The Wireless Issue – 10 ways your mobile phone is changing the world.  One of those 10 ways is mobile payments.

As Bob Dylan famously sang in 1964 “The order is rapidly fadin’/ And the first one now/ Will later be last/ For the times they are a-changin” is still very relevant for today.

Keep well,

Vaughn Clair
@jvclair