Mobile Payment Scorecard
Apple did not create the mobile payment market when it launched Apple Pay in September 2014.
However, Apple Pay did effectively bring mobile payment to the forefront of retailers’ omnichannel commerce strategies. Consumers are slowly starting to follow, with Deloitte data showing in-store mobile payments have increased from 5% of total in-store payments 2014 to 18% in 2015.
Chain Store Age decided it would be a good time to take a quick look at what is happening with mobile payment providers in three key verticals: platform providers, retailers and financial institutions.
Platform Providers: Three’s Company
Apple Pay remains the preeminent mobile payment service, with Apple claiming it holds a 66% share of the total mobile payment market.
However, two other platform providers are targeting the mobile payment space. Google replaced its former Google Wallet app with Android Pay in September 2015. Although Apple Pay has a commanding early lead in market share, Gartner data indicates 85% of U.S. smartphones ran on Android in the third quarter of 2015, leaving Android Pay a lot of room to catch up.
In addition, Samsung entered the market in late September 2015 with the introduction of Samsung Pay for certain Android-based devices running on its Galaxy platform.
It is rare for any market to have three leaders. Apple Pay has essentially cornered the iOS market, leaving Google and Samsung to fight over the Android portion. Given the size and fractured nature of the Android market, this could be a time when three’s company, rather than a crowd.
Retailers: Big Names Go Solo
While Starbucks has been offering its own mobile payment application for some time, the recent entry of Walmart and likely entry of Target into the mobile payment provider space signals a major disruption.
The new Walmart service, called Walmart Pay, is likely to increase downloads and utilization of the retailer’s mobile app. With 22 million active app users, Walmart Pay has a huge built-in potential consumer base. A nationwide rollout of Walmart Pay is due this year.
By offering their own mobile payment solutions, retailers increase the share of mobile payments they keep. They also have a new avenue for targeted promotions and incentives.
This incurs costs of developing and supporting mobile payment infrastructure, but larger retailers can afford it. In addition, retailers with their own mobile payment offerings can reap “soft” benefits, such as increased app usage and loyalty membership, enhanced brand image, and more customer data to analyze.
However, there are a finite number of apps consumers are willing to download and use, so only large Tier I retailers will achieve the critical mass needed to support their own mobile payment offering.
CurrentC, the mobile payment application from retailer-backed consortium Merchant Commerce Exchange (MCX) that has not moved beyond pilot stage, may be doomed if major retailers launch their own mobile payment services.
Financial Institutions: A Safe Investment?
Major credit card providers such as MasterCard and Visa offer their own mobile payment apps, and numerous banks and financial institutions, including Capital One and J.P. Morgan Chase & Co., do or will as well. These players have the advantage of building in features like real-time transaction notifications and access to balance and transaction history.
However, applications such as Apple Pay already let consumers digitally store and use all their credit and debit cards, lessening the need for a financial institution to provide mobile payment services. Financial institutions can certainly offer mobile payment as a value-add for apps with broader financial management capabilities, but will not likely pose a major challenge to platform providers or large retailers in the mobile payment space.
MACY’S LEAVES NO ITEM BEHIND
Macy’s is supporting a new omnichannel order fulfillment program called “Pick to the Last Unit” (P2LU) with Tyco’s TrueVUE RFID inventory visibility platform.
Macy’s omnichannel strategy is to allow customers to shop anywhere, anytime and anyhow they choose. The retailer realized that brick-and-mortar stores could fulfill single-unit orders, essentially functioning as “warehouses” to utilize the full assortment of owned inventory. With item-level RFID, Macy’s has supported omnichannel operations and been able to reduce $1 billion of inventory from its stores.
Furthering that effort, Macy’s has launched its P2LU omnichannel fulfillment program. P2LU attempts to ensure that the last unit of an item in any store is made available for sale and easily located for order fulfillment.
Using RFID, Macy’s conducted a P2LU pilot project with women’s dresses, which delivered increased store fulfillment sales and reduced markdowns. The retailer is also reducing inventory costs by lowering interim inventory requirements by one-third.
A seamless customer experience begins with a complete, real-time view of enterprise product assortment. However, RFID technology is taking this concept of “inventory awareness” to previously unimagined levels.
“There is a big push toward retailers using RFID for continuous monitoring,” stated Justin Patton, director of the Auburn University RFID Lab. “Readers are permanently mounted in fixed locations in the store or distribution center. Associates don’t have to do a specific, executable task.”
Patton cited a number of well-known retailers, including Levi’s, American Apparel and U.K.-based hypermarket chain Marks & Spencer, which are experimenting with this type of blanket RFID coverage. Benefits can be delivered in several different areas.
“You can limit the required labor to execute inventory-related activities and save on the cost of RFID hardware,” Patton said. “Retailers are also using robots with built-in RFID readers to scan RFID-tagged items. You let it rip in the store at night and scan everything.”
In addition to reducing expenses associated with manpower and technology, continuous RFID monitoring also greatly increases the accuracy and timeliness of inventory counts.
“You can locate items within the store,” Patton said. “You can know exactly where an item is, and locate by specific components such as size and color. You couldn’t do that five years ago with handheld readers.”
In a pilot of continuous RFID monitoring using Intel technology at a store located at its San Francisco corporate headquarters, Levi’s has been leveraging real-time, highly specific inventory awareness to do things like notify associates of items that have been misplaced.
Patton said retailers can also leverage continuous RFID monitoring to obtain detailed item-level metrics, such as how often a specific product has been picked up or taken into the dressing room before being purchased. He also mentioned a pilot of Oak Labs RFID technology Polo Ralph Lauren is running in its Fifth Avenue New York store.
“Customers are shown pictures of products they bring into the dressing room on the mirror, and can select different sizes and colors,” Patton said. “An associate then brings the additional items to them. Customers are also shown the name and picture of the associate helping them. It uses technology to build a more personal customer relationship.”
According to Patton, the more RFID-tagged items that a retailer has in the store, the more it can leverage RFID to deliver a seamless and personalized customer experience. He is optimistic that the industry is recognizing this potential.
“There are more RFID projects with more retailers and vendors than ever before,” concluded Patton. “Before, you could only pick from a few prime examples. RFID in retail is here to stay.”