Some of the worlds top retailers in the US, UK, France and Germany, such as Walmart, The Home Depot, Tesco, Kingfisher, John Lewis Partnership, Carrefour, Auchan, Intermarché, Metro, Schwarz Unternehmens Treuhand, Rewe-Zentral, methodically examine consumer behaviour before and after a payment transaction. What consumers perceive in-store or online and how they treat information during their browsing, researching, decision making and purchasing at the point-of-sale or on the checkout page can be a fascinating topic. Even gender differences and the evolutionary hunter-gatherer behaviour are expressed in shopping malls around the world.
The act of making a payment transaction has not really changed much, involving the use of cash, cheques and cards. Cash still dominates face-to-face retailing and there are some paper cheques being accepted, but they are hardly used. Then there is the prevalent plastic payment card, which has been extremely successful in the last 50 years. However, Edgar, Dunn & Company (EDC), an independent global financial services and payments consultancy, believes the payments industry is currently standing at the crossroads of a substantial change in retailing and how consumers pay. The genesis of this change has been the use of the internet, the prevalence of e-commerce since the turn of the millennium and the rapid consumer adoption of smartphones.
In the next 5 to 10 years, EDC expects that changing consumer preferences and technological developments (e.g. mobile payments) accompanied by the emergence of a number of new retailer business models and sales channels will have a substantial impact on the retailer’s landscape. These changes in the way consumers pay for goods and services will be fast. Largely driven by technology, consumers respond positively to innovation and many retailers perceive this as a challenge to be up-to-date and respond to the expected change.
Multichannel or Omni-channel Firstly, terminology is imperative to this debate: do retailers operate a multiple channel strategy, an integrated multichannel or an omni-channel strategy? There is a substantial difference between retailers who operate a multiple channel strategy and those who have an integrated multichannel strategy:
• Multiple Channel Strategy is simply a channel mix where each channel operates independently of the others • Integrated Multichannel Strategy has genuine channel integration, which involves a synergistic combination of channel functions and services, in order to offer customers convenient cross-channel benefits. EDC believes that omni-channel is not dissimilar to an integrated multichannel retailer. True omni-channel retailers are probably 3 to 5 years in the future. Are there any retailers who claim to be a fully integrated multichannel today? This is where they can extend across social media, email, internet and mobile to add the entire customer experience, including things such as in-store displays, in store point-of-interaction (POI), self-service POS devices and kiosks plus other devices that have yet to be invented (or probably not). If a customer wants access to new channels, then a multiple channel strategy will likely serve the purpose. However, EDC has seen that consumers are increasingly receptive to the cross-channel benefits associated with an integrated multichannel strategy and so developing such a strategy is becoming important for retailers seeking competitive advantage. As far as the omni-channel is concerned, EDC does not think any retailer is there yet. Not even Apple.
In last year’s annual European retailer survey, EDC asked retailers how they would best describe their integrated multichannel retail strategy. The following statements were presented to survey respondents to indicate how they define their strategy:
• Developing primarily a marketing strategy • Bringing together both business processes and technology systems • Maximising revenue and loyalty • Consolidating purchasing data into a single customer database
59% of respondents indicated that an integrated multichannel retail strategy is comprised of all of the above elements. EDC shares this view with the retailers; a truly integrated multichannel retailing strategy should combine all of these ideas. The importance of developing such a strategy cannot be overstated and in order to truly take advantage of multichannel retailing, the retailer must decide which channel model to operate and develop an integrated multichannel strategy to fit the chosen channel model, providing definite cross-channel benefits for its customers.
A key goal of any retailer choosing to expand their business into multiple channels is improved sales performance and this was supported by how survey respondents defined their integrated multichannel retail strategy. 30% of respondents indicated that an integrated multichannel strategy was about maximising revenue and loyalty. There are a number of other benefits of using multiple channels in a more seamless and integrated way, these included:
• Access to a valuable subset of new customer segments (multichannel customers) • Access to improved and actionable customer information (across all channels) • Improved shopping experience, customer satisfaction and loyalty.
Optimising payments acceptance is not given the same level of importance as other potential benefits. EDC believes that this is because payments acceptance is a necessary part of any integrated multichannel retail strategy and not strictly a benefit. Payments acceptance is something that has the potential to differentiate the shopping experience and is something that should be controlled and owned by the retailer.
The proliferation of new sales channels has significantly modified customers expectations. Customers now demand convenience, simplicity and an effortless experience. Apple has ‘EasyPay’, a payment wallet using the iTunes account allowing customers to scan the barcodes of products in-store and pay without going to the checkout. Customers can also reserve products, arrange for home delivery, book a one-to-one training session or attend a workshop, all via their iPhone. It is this type of simplification of the payment process that retailers need to consider, so that it aims to make the payment experience frictionless.
The 2013 EDC retailer survey is planned to start in March and if you are a retailer and would be interested in participating, please do not hesitate to contact mark.beresford@edgardunn.com.
Part 2 of this contribution, focusing on frictionless payments, smartphone payments and social media will be published in March 2013.
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