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  • Edgar, Dunn & Company 2012

    Ten trends in retailing in the next ten years and their impact

    on consumer payments

    A thought leadership paper from Edgar, Dunn & Company supported by ACI Worldwide

    December 2012

  • Ten trends in retailing in the next ten years

    Contents

    Confidential

    Page i

    Contents

    Introduction ............................................................................................................................ 1

    Ten Trends .............................................................................................................................. 2

    1 Simplification ................................................................................................................... 2 1.1 Payment transactions will be simplified at the point of interaction ................... 2 1.2 The impact of simplification .................................................................................. 2

    2 Alternative Payments ...................................................................................................... 3 2.1 The convergence of traditional and alternative payments ................................. 3 2.2 The impact of alternative payments ..................................................................... 3

    3 Social Commerce ............................................................................................................. 4 3.1 The road to genuine consumer engagement ....................................................... 4 3.2 The impact of social commerce ............................................................................ 4

    4 Location-Based Services .................................................................................................. 5 4.1 Are we there yet? ................................................................................................... 5 4.2 The impact of location-based services .................................................................. 5

    5 Multichannel .................................................................................................................... 6 5.1 A unified approach to customer service ............................................................... 6 5.2 The impact of multichannel ................................................................................... 6

    6 Merchant Diversification ................................................................................................. 7 6.1 The price of convenience....................................................................................... 7 6.2 The impact of merchant diversification ................................................................ 7

    7 Self Service ....................................................................................................................... 7 7.1 Helping customers help themselves ..................................................................... 7 7.2 The impact of self service ...................................................................................... 8

    8 Cashless Payments .......................................................................................................... 8 8.1 The death of cash? Probably not ........................................................................... 8 8.2 The impact of cashless payments ......................................................................... 8

    9 m-Commerce.................................................................................................................... 8 9.1 The Point of interaction will be mobile ................................................................. 8 9.2 The impact of m-commerce .................................................................................. 9

    10 Loyalty .............................................................................................................................. 9 10.1 Personalising the shopping experience ............................................................. 9 10.2 The impact of loyalty .......................................................................................... 10

    Conclusion ..............................................................................................................................11

    ACI response ......................................................................................................................... 12

    Glossary ................................................................................................................................. 13

    About the authors ................................................................................................................ 14

  • Ten trends in retailing in the next ten years

    Introduction

    Confidential

    Page 1

    Introduction

    Since the 1960s, traditional retail marketing theory has been based on the four 'pillars',

    or The Four Ps: Product, Price, Place and Promotion. However, taken in isolation,

    these pillars are a remnant of a different world one where the marketers and the

    retailers were king. In today's world, the consumer has come to the fore, and retail

    strategy must become a consumer-oriented model, rather than a retailer-oriented one.

    Edgar, Dunn & Company (EDC) believes that two new factors will move to the

    foreground of any successful retail strategy:

    Consumer preference the focus of retail strategy has shifted to satisfying

    consumer needs, and retail strategies should be built with the consumer at the

    centre: obtain a single customer view through aligning data across sales channels,

    optimise payments (both acceptance and process), and create a seamless shopping

    experience designed around consumers' preferences.

    Technology over the past few years, rapid consumer adoption of emerging

    technologies has facilitated changes in shopping behaviour. From mobile commerce

    and self service to social media, both retailers and consumers have had to adapt to

    the new ways in which they interact with each other.

    Working in concert, these two factors will drive emerging retail trends over the next ten

    years. Driven by consumer preferences, technology is facilitating significant changes in

    the retail landscape from enabling new sales channels, driving social interaction and

    giving access to new customer analytics, to providing consumers with entirely new

    ways to interact and ultimately, transact with a retailer.

    EDC has found that successful retailers place the consumer at the centre of their retail

    strategy in order to enhance the customer experience and provide greater speed and

    convenience of service. A content-rich customer experience has become the norm in

    online retailing; EDC expects that this will transcend into the physical retail

    environment, creating a future where m-commerce, e-commerce and in store shopping

    become a single integrated shopping experience.

    This paper presents ten trends that EDC believes will significantly impact the retail

    industry over the next ten years and their effects on consumer payments.

  • Ten trends in retailing in the next ten years

    Ten Trends

    Confidential

    Page 2

    Ten Trends

    1 Simplification

    1.1 Payment transactions will be simplified at the point of interaction

    Payment is often viewed as merely the concluding step in the purchasing process, i.e.

    the closure of the sale. The payment experience should be at the heart of an integrated

    retail strategy. Customer payment preferences have evolved and EDC sees potential for

    a major divergence between what a retailer does and what a customer wants from their

    payment experience.

    EDC's client experience demonstrates that in a complex, multichannel retail

    environment the customers perception of value is influenced by the perception of

    service quality. Customers do care about price, but at the same time there is a rich array

    of other considerations that they also take into account. Part of this is that retailers

    must better understand the customer's point of view on the payment process,

    recognise his/her pain points and identify areas of improvement.

    With a growing mix of payment methods to accept, no clear winner can be predicted in

    terms of universal adoption. Whether it is customer, mobile network operator, retailer

    or card network initiated, the key to success for a retailer will be to remain flexible in

    any future investments at the point of sale (POS). Retailers will want a simple and fast

    payment process, overhauling the underlying principles of the POS and transforming it

    into the point of interaction (POI)1.

    EDC has found that retailers are keen on using the POI to simplify the customer

    experience, as well as improving cost efficiency. Retailers are also being forced to

    mirror this simplification in their back-office operations (e.g. reconciliation and banking

    arrangements).

    1.2 The impact of simplification

    EDC believes the POI will represent a point of convergence for different forms of

    payment, such as smartphone initiated payments, electronic couponing, loyalty and

    contactless payments. In this environment, mobile POS devices will enable customers

    to finalise their purchase, irrespective of where they are in the store. Consumers expect

    a quick and easy checkout experience and want to avoid the traditional long lines in

    store and the complicated o

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