Mobile Steadily Takes Over Retail Commerce

Transforming your business to mobile takes time, careful planning, meticulous execution and ongoing innovation.

February 07, 2018

By Aaron McLean, COO of Stuzo

NEW YORK CITY – For more than 40 years, the point-of-sale machine (POS) has dominated retail. However today, retail commerce is shifting to mobile. In 2015, a consumer paid for coffee by handing a credit card to a cashier at a Dunkin’ Donuts store. Today, a consumer can order on a smartphone before arriving at the store. Then walk in, grab his order and leave. What happened to the interaction between the cashier, the POS, and the consumer in that transaction?

The POS is now in the pocket of the consumer. Welcome to the future. And to the past. In China, Alipay and WeChat are king. WeChat is a mobile-first business that provides consumers with an iOS and Android app that allows them to pay just about any merchant with a mobile wallet, as well as gives merchants the ability to sell their goods and services, and push promotions to consumers through the mobile app. WeChat has become so ubiquitous in China that attempting to pay a restaurant tab or a dry cleaner with cash or a physical plastic credit card will earn you a puzzled look from the merchant.

To put this in perspective, 400 million people in China pay for everyday goods and services with their smartphones. That’s more than the population of the United States. In China, there is no need for certain retailers to purchase conventional POS systems. Transactions between consumers and merchants happen digitally, through mobile and the cloud. Physical currency and plastic credit cards have been relegated to museum exhibits.

Consumer Spending Drives Technology Adoption
Consumer spending is closely tied to the adoption of payment tender technologies by merchants. Surging demand from the consumer accelerates growth within existing merchant categories and creates new categories of merchants. If we look at consumer spending in the United States versus China, the case for why the POS scaled to dominate the US and why mobile scaled to dominate in China is compelling.

In the early 1970s, U.S. consumer spending started a steady upward climb. Compare this to China, where consumer spending was mainly flat until its inflection point, much later, in the mid-2000s.

In 1973, the electronic POS entered the American market. The POS was the best-available payment tender technology at the time when consumer spending spiked. In 2007, the iPhone entered the market and triggered the rapid proliferation and adoption of smartphones globally. Unlike the POS, by the end of the 2000s with China’s market experiencing explosive growth in consumer spending, mobile was the best-available payment tender technology in China. 

Disruption Ahead
As described in an article I wrote for TotalRetail on mobile shopping behavior last year, by the year 2020, nearly 60% of U.S. consumers will be making purchases on mobile. That’s roughly an 8% increase every single year.

Additionally, recent Business Insider Analyst Reports provided separate forecasts which support my projections, stating that, “Our new estimate finds that U.S. in-store mobile payment volume will reach $75 billion this year (2016). Between 2015-2020, we expect volume to rise by a compound annual growth rate (CAGR) of 80% to bring mobile payments volume to $503 billion by 2020. We forecast the number of in-store mobile payment users to rise at a 40% five-year CAGR to reach 150 million by the end of 2020. This represents 56% of the consumer population during that year.”

Get Ready Now
Wondering what your company can do to prepare? Here’s a quick list:

  • Start working on your mobile commerce products today.
  • Making an investment in mobile is non-trivial. Consider capital expenditure budget requirements and ongoing operational expenditure requirements. You’ll need both.
  • Plan for a steady, methodical transformation. Expect to crawl before you walk before you run. However, get ready to run, as consumers are not slowing down.
  • Adopting a new technology and consumer behavior is part IT and part operations. Work on a plan for how to operationalize new consumer mobile commerce experiences and business workflows.
  • Make sure you have your data. If you’ll need to change vendors, start building a data bridge today to centralize and own your data.
  • Evaluate your merchant services, payment processing, POS and other site system agreements to see if there are any impediments to integration with mobile or adding mobile payments.

During the upcoming NACS Convenience Summit Asia, mobile payments will be discussed during “The Future of Payments” roundtable. Join industry peers to find out what’s happening in the Asian convenience sector at the conference, scheduled for March 12-14 in Hong Kong. Register today!

Mobile Steadily Taking Over Retail Commerce from Stuzo on Vimeo.

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