Tag Archives: High Street

Contactless and mobile payments

On Sunday I popped into my local butcher (they haven’t all been put out of business by hypermarkets) and tried paying using my contactless debit card. At first, the guy behind the till didn’t want me to use contactless because he didn’t think his till could handle it, but I tried and he was amazed how fast the transaction was finished.

We work very closely with one of the big European payments companies, and had been discussing contactless with them last week, and so I told the sales assistant in the butcher that his transaction fees cost less using contactless than chip and PIN. He said that he’d tell his boss.

The timing was interesting because this morning I went to a presentation at Intellect, “Contactless payments: A retailer’s perspective” by Julian Niblett from Boots.

Here are some of the key points from the presentation, together with his view of the future, and I’ve added some of my comments as well.

  • Boots are the second biggest retailer in the UK with 2,600 stores
  • At the moment a third of transactions use a card
  • Only 30 stores have contactless – a joint investment with MasterCard
  • Less than 2% of card transactions are contactless 

In terms of the value proposition for the retailer, given a choice between rolling out more self-checkouts and contactless, the former will always win because contactless has far less value to the consumer.

That said, their analysis is that first time customers who try using contactless it will continue to reuse it.

Julian asked how many people in the room have used a contactless card. Around a third put up their hands, which is well above the national average. Julian pointed out that watching consumers use a self-checkout, many people still aren’t sure how to insert their card into a card reader properly let alone ‘educate’ them to use another physical method of payment.

One of the issues in Boots’ case is that there’s no business case to offer contactless. Cash is still the cheapest cost at 0.5p per transaction (many of the costs of cash are both subsidised by the banks, and many of the ‘costs of cash’ are fixed). 

Also, contactless transactions cost less for a retailer, but the retailers are wary of the payment companies who have usually increased costs once a new technology rollout hits tipping point. This happened with chip and PIN, and retailers expect the same to happen from contactless.

The near term future

·         Tfl will use contactless cards as an alternative to Oyster this year. This will help the wider public use contactless more often, and consumers are expected to start using them more often in retailers.

·         Visa are going to be helping Boots with a wider rollout across London due to the Olympics.

The longer term

One of the key issues at the moment is that there is no customer demand for contactless. However, retailers can see that there is a demand for using a mobile phone for payments.

We all have more and more cards in our wallets for payment and loyalty schemes. Both of these will move into a smartphone apps, with numerous retailers already leading the way, and PayPal and Google Checkout leading the way with their payment apps.

Julian discussed a great consumer experience all based on a mobile, with coupons, a store loyalty card, payment and electronic receipts, and probably no need for a till at the end of the shopping trip. However there are very few customers who want to shop this way at the moment.

It was a really interesting presentation, and if you’re in the banking or retailer value chain, you should probably get in contact with Julian as he was very open with his analysis and data points (some of which I can’t publish here).

My take on contactless payments is that it will move to mobile, but it will become more complicated for consumers. My debit and credit cards have never run out of battery before – what happens when you want to buy something but have no battery in your phone. In fact, my cards are designed to be much more rugged than my phone – not only do they not require any power at all, they’re also waterproof and shock proof. And therefore they will stick around for a long time.

Using Groupon and Quidco at Christmas

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With so much industry news reported about Groupon, I was asked recently asked for my views on the Internet shopping/ deal site.

Firstly, I have been using a favourite deals site, Quidco, for several years, and this year Mrs H and I have done most of our Holiday shopping using the site, and earned a very nice cashback amount from the site. Quidco has a simple model – it uses the affiliate bounty that is a standard model across the Internet, and gives most of the money back to the end consumer (me) after taking £5 for the year.

There are hundreds, maybe thousands of deals and voucher sites on the Internet. If you type in your favourite retailer followed by the word ‘voucher’ into Google, you’ll find an amazing number. Now click on them and chances are you’ll be presented with tens of expired vouchers. With voucher sites, it’s a case of quantity over quality.

Groupon has just turned three years old. It’s model is to offer a limited number of products and sell them to the first consumers who buy those products. After the ‘inventory’ has been sold, the offer is removed from the site. 

Deals discounts are usually in the 50-75% discount range. Its the retailer who offers the deals to Groupon, and Groupon takes a further commission in the product.

One of the issues that Groupon is facing is that not all retailers believe the deals are worth that level of discount. When Groupon started business three years ago, the aim was that buy generating a loss-leading sale, the consumer would like the service/ product so much that they would revisit the retailer later.

There are many flaws to Groupon’s business:

  1. It’s a highly competitive market that is very easy to imitate, as demonstrated above
  2. Retailers don’t really want to be part of Groupon’s world because the discounts are huge, and the commission to Groupon is a high part of the remaining amount (i.e. what the consumer will spend)

In November, Groupon turned three years old. It is now in 45 countries. It IPOd last month at $19 per share. A fortnight after floating the stock had halved in value, and is now back to $18.

Groupon’s Q3 2011 revenue was an impressive $430m. It hasn’t achieved a financial year in profit, although Q1-Q3 2011 it has made $22m profit. 

In Q3 2011 it made $8m – an unimpressive 1.86% profit. Groupon has a market capitalisation of $12bn. It’s actually quite amusing to go to Google Finance and look at other NASDAQ companies that have a capitalisation less than Groupon, yet earn a good profit.

I don’t see how Groupon’s business is sustainable because of the flaws, and I think we’ll see a trend of ‘lower value’ retailers on the site, which will mean less visitors come to the site and destroying its business model.

In summary, if you’re looking for bargains this Christmas, take a look at Groupon for some ideas. If you are looking to simply have some cashback without any fuss, I highly recommend Quidco. And if you’re looking for an investment opportunity, you should look a little deeper.

Photo courtesy of 401K on Flickr

Early thoughts on Christmas and football

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This Sunday, that’s the 9th October, don’t go to Oxford Street because the road will be shut. It will be shut because the Christmas lights are going to be hung up. It feels strange that last week in London the temperature was over 30 degrees and next weekend Christmas lights are being hung up.

Fifteen years ago, even five years ago, the Western world was buying discs and tapes of films, music and computer games.

At least the retailers on Oxford Street could sell something because yes you can still buy a physical DVD or BluRay, but it’s now easier to download an ‘on demand’ movie via Sky, cable or BT Vision.

Music CDs? In our house we use Spotify (Premium – so that we can use the iPhone app in the car) to listen to music. I haven’t bought a music CD for years.

The one physical format that has stood the test of time is computer console games. Although you can download demos for the Wii, PS3 and XBox, most consumers still need to buy a physical disk for the latest releases. 

Perhaps the main reason for still needing a physical disk is the price point. A music ‘album’ (how much longer before no one understands what that word means?) costs under £10 on Amazon. Watching a film on BT Vision and Sky is under £5. Compare those costs to the latest football game, FIFA 12, which is £43 on the PS3 and Xbox. Perhaps buying a product for over forty quid is too much for a virtual object.

There’s also a school of thought that because most games are bought as presents, you need to be able to wrap and hand it over. I don’t necessarily agree with this because a console such as an Xbox has a much higher age group and the gift element doesn’t apply so much. And personally I’d welcome downloadable full games because my kids wouldn’t be able to scratch the disks without any possibility of exchanging the useless £45 circular plastic.

Back to FIFA 12 for a moment… at the time of writing this post:

·         Xbox and PS3 versions both cost £42.89

·         Wii version costs £32.99

·         PC version costs £27.51.

(All those prices are from Amazon).

Now hop over to the iTunes store to buy FIFA 12 on an iPad. It’s £5.99. Why such a huge price difference? I wonder if the iPad version cannibalises the other formats, or whether it helps market the other formats (i.e. iPad users try the iPad version and think it’s so good that they want it on their Xbox).

At least if you do visit Oxford Street this weekend, you can download FIFA 12 to play on your iOS device while the lights are being put up.

Photo courtesy of dark delicious on Flickr

 

Google’s new shops

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So Google have announced they will be opening retail stores, or at the very least, concessions inside IT shops.

I’ve talked about the concept of brand showrooms in the past, and Google are reconfirming this prediction.

Why are Chromebooks so expensive? The specs of a Chromebook doesn’t need to be particularly high, and the Operating System and software is available for free on Windows laptops.

Google are trying to compete with Apple on a mobile phone (iPhone v Android) and tablet (iPad v Android) level, where the competing products are becoming ever closer aligned as both sets of products mature. However on a laptop basis, the products are completely different.

Google are purely cloud focussed, with all applications HTML/ browser based and Apple users are still more than happy using downloadable native applications (think iWork/ Office and photo/ video editing applications). Even Google’s answer to photo editing, Picasa, is still a downloadable application – which raises the question of whether it will work on a Chromebook.

 

It’s interesting how the likes of successful Internet retailers such as Amazon and ASOS have steered away from physical outlets, and whether they are watching technology consumer brands such as Apple and now Google (not sure they have ever been classed as that before) to see how long before whether they shut down their super trendy stores in the near future.

Photo courtesy of ping ping on Flickr.

Digital Media pace accelerating

The pace of Digital Media is still accelerating in what has always been a fast moving industry.

This week’s highlights (and it’s only Wednesday!):

  1. New Google styling across their apps (basically it’s all gone darker and neater – it now looks like it’s been designed as a suite of tools, rather than cobbled together by a developer who has a passing interest in web design). I suspect the new styling is all part of the preparation of the Google Chromebooks
  2. And while talking of Google, Google+ has been launched. And they’ve also launched What Do You Love – a mashup of different Google Searches. WDYL is nice, but it’s not immediately obvious how I’ll use it usefully
  3. Zynga has announced it will IPO for around $2 billion, valuing the company at $15 billion. Zynga produce a number of online games including the hugely popular Farmville. $15b is a huge amount of money, however Zynga’s revenue is already $850m and as a parent of young children, I can see the industry has got lots more potential
  4. GoDaddy.com, of Domain Name fame is just about to be sold for $2 billion. GoDaddy were also going to go the IPO route a couple of years ago on revenues of $800m but have preferred the route of private investment companies

In other news:

  1. The clocks are ticking for a number of high street retailers with Thornton’s, Carpetright, Jane Norman and TJ Hughes all either making some massive cutbacks or shutting down altogether. Carpetright are blaming the recession – that people don’t want to buy big ticket items at the moment, but that wouldn’t apply to Thornton’s or TJ Hughes and Jane Norman who are clothing retailers. I think it’s more to do with customer’s shopping habits because clothing website ASOS is growing at the same time that the others are shutting down tens of shops. 
  2. National Insurance cards are going to be phased out. From now on we’ll get a letter instead. What were the cards ever used for anyway? And why not replace the cards with emails or a mobile app? It’s about time the government hired a CIO from industry and let loose with a clear remit on improving ROI.

I’ve been asked by some other sites to write some blog posts – check out Technorati and Endava’s new posts, and I’ll let you know when Sitecore and CMSWatch both publish my articles too.

 

What businesses don’t compete with the Internet?

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Looking at my high street, a third of all shops are now empty. Whilst we’ve had a very severe recession, the Internet has destroyed my local electrical, book and music shops as well as countless others.

What businesses based in shops (so builders, electricians, etc.) do not compete with the Internet?

  • Hairdressers & barbers*
  • Food – restaurants, sandwich shops and coffee shops
  • Beauty – nails, tanning, etc.
  • Hotels
  • Gyms
  • Bakers
  • Car cleaners
  • Pubs
  • Nightclubs

*It was my barber who started this discussion!

Whilst these shops don’t have natural competitors on the Internet, they still rely on the Internet for mapping (i.e. a search for ‘pub’ on Google maps) and reviews (I urge all the owners of the shops above to keep checking review sites).

Any other suggestions?

Photo courtesy of Dave Patten on Flickr.

A nation full of shopkeepers?

Napoleon and Adam Smith described the UK as “a nation full of shopkeepers”. Walking down my local high street today couldn’t confirm anything further from the truth. My local high street goes something like this:

  • Coffee shop
  • Pharmacy
  • Bank
  • Coffee shop 
  • Bank
  • Bank
  • Hairdresser
  • Restaurant
  • East European Supermarket
  • Hairdresser
  • Bank
  • Sandwich Shop
  • Barber
  • Coffee shop
  • Restaurant
  • Restaurant
  • Nail shop (as in the decorative one, not a DIY shop) 
  • Restaurant
  • Coffee Shop
  • Stationers
  • Bank
  • Sandwich Shop
  • Barber 
  • Bicycle Shop
  • Restaurant

There used to be an electronic retailer, which is now the east European Supermarket. Virtually all the other shops have either become hairdressers/ barbers, or a coffee shop.

The confusing factor here are the banks. I can understand the barbers, hairdressers, coffee shops and sandwich shops/ restaurants – in all these cases, you can’t buy the equivalent from eBay/ Amazon/ the rest of the Internet.

It’s the banks that confuse me – why do we need all the major high street banks here? Can/ do they all depend so much on customers physically entering their premises? The answer is either yes – because of the cash that the local shops need to keep paying into their business accounts each day, or no – and over the coming years we’re going to see many more high street banks closing down branches, similar to the Post Offices that we’ve seen in the past few years.

In the future I think we will see the coffee shops close down quite rapidly. The high street can’t sustain a Starbucks/ Costa/ Nero on every corner (and a couple in between). The same happened in the 1950s with Lyons’ tea rooms, who had 250 shops in London at the time.

What will replace them? One idea (expanding on Richard Watson’s prediction) is to have ‘brand showrooms’, where a manufacturer, say Sony, needs to show off it’s latest products. Because we’ll all be using our phone to buy the latest 5D, nanotechnology television, we won’t see the other latest gadgets that Sony will be inventing. So we’ll go into a brand showroom to see these new releases. New brands that come along (say, a 21st century Dyson) will have to create these showrooms as well, or else people won’t be able to discover them.