It's hard to calculate an actual return on investment for the new technology infiltrating retail stores today. Near Field Communication payments, Bluetooth beacons and even augmented reality can wow shoppers and if you're to believe the hype will drive a phenomenal amount of consumer spending.
All of these innovations are meant to counter the lure of online shopping, which is becoming more of a threat to brick-and-mortar retailers as e-commerce spreads to a growing number of Internet-connected devices.
"There's a lot of pressure from the e-commerce monsters," which include Amazon and eBay, said Chris Lybeer, NCR's vice president of marketing and mobile solutions in an interview at the National Retail Federation conference in New York City this week. "Retail will change more in the next 10 years than it has in the past 30," he said.
Smartphones really haven't been around that long. The iPhone debuted only in 2007, and the App Store didn't show up until a year later. Mobile technology is just starting to mature, and it's a good time for retailers to experiment with ways to incorporate mobile devices into the shopping experience.
Consumers used the Internet on personal mobile devices between 30% and 50% of the time they spent in-store, according to data collected from Wi-Fi and video cameras by Cisco, the global IT consultancy and networking equipment provider.
During NRF, Cisco released findings from a survey of 1,240 consumers in the U.S. and U.K. Respondents said they want personalized targeted offers but only if they are hyper-relevant. This is a major opportunity for retailers, but many are held back by the cost of deploying new technology.
According to Cisco, for a $20 billion retailer with 900 stores and earnings before interest and taxes of 7%, digitizing the store with Cisco technology would cost about $93 million the first year, including hardware costs. However, costs would decrease annually. The company estimates that one store could save $50,000 to $70,000 a year by connecting digital and mobile experiences to the physical store.
Cisco is rolling out a new analytics platform called sensor fusion, which brings retailers data such as how many consumers are on social media sites at what locations in the store. Plus Cisco can deliver its partner's technology as well, including weight-sensitive shelves that give merchants data about when products are leaving the shelves.
The digitization of the physical retail store will start with grocery, luxury and fashion, said Lisa Fretwell, managing director of retail and "Internet of Everything" at Cisco Consulting.
Scandit, which has offices in San Francisco and Zurich, is targeting the grocery vertical with a self-scanning mobile payment app. Consumers using a retailer's Scandit-powered app can scan product bar codes to create a digital shopping cart as peruse the aisles.
The company allows retailers to decide what payment methods they accept, but Heidi Elgaard, vice president of marketing at Scandit, said she sees a future where customers can pay through their mobile device with Apple Pay or other digital wallets. Afterwards, a sales associate at the door can check the receipt against the products as customers leave, similar to how warehouse stores operate, she said.
Scandit charges merchants a fee that varies based on the number of consumers using the app. Its professional-tier package supports 100 devices, starting at $199 per month or $1,999 per year. Merchants pay about $8 per device per year, said Elgaard.
Tech-savvy merchants, such as video game retailers, will also adopt new payment technology quicker.
Shelfbucks, a beacon promotion and smart-display platform provider, announced a partnership with GameStop this week.
The game retailer is piloting the technology in stores in Austin, Texas, with about eight beacons per location, said Leslie Friend, director of client services at Shelfbucks. Shelfbucks suggests retailers install a beacon every six to nine feet. GameStop has more than 6,000 stores worldwide.
As a software-as-a-service provider, Shelfbucks customers pay a monthly maintenance fee with pricing that varies by store size, number of stores and number of units, among other factors. Its fee includes the purchase of the beacons, the installation, customer support, marketing materials and Shelfbucks software. The company declined to disclose a specific range of prices.
Much of the hype around Bluetooth beacons has been about their ability to identify consumers as they enter a store and then push offers to them on a mobile device. But Shelfbucks takes a different approach. Consumers must wave their smartphone next to the Shelfbucks beacon to pull up a list of specials and discounts that relate to the product the beacon sits near.
"We're trying to bring an online experience into the physical retail space; online consumers don't click on every link so they shouldn't have to get every notification," said Friend.
NCR's Lybeer thinks this methodology could be more appealing for consumers who will likely want some kind of control over retailer's targeted marketing, such as the ability to turn on and off notifications.
Paydiant, a white-label payment technology vendor, has also started building out a beacon strategy. The company is deploying Bluetooth Low Energy (BLE) radio devices, which connect to the cloud and change the signal for each transaction. This dynamic signal mitigates spoofing.
The company sees beacons as especially promising for the drive thru, said Mark Budreski, vice president of national accounts at Paydiant. In this example the company's beacons, which cost between $10 and $20 for an order of 5,000 or more, will ping a customer's smartphone and automatically pull up the retailer's mobile app, he said. The customer can then pay by tapping an icon within the app.
This eliminates the need for the strange way McDonald's employees were handling Apple Pay mobile payments in the drive thru lanes by sticking the point of sale terminal out the window. Consumers also had to hold their phone out of the car window, creating a situation where they risk dropping their phone into the street as they pay.
Paydiant licenses its mobile payment technology to American Express, which used it within the Brooklyn Nets app. The vendor works with 60 to 70 clients, including Capital One, MCX, Harris Teeter and Subway.
In addition to the financial investment needed to add mobile technology to stores, there's also a time expense. Training will be critical; consumers aren't impressed when they know more than sales associates do.
Subway has been working with Paydiant for about six months, deploying the mobile payment system at its 27,000 U.S. locations and training employees on the technology, said Budreski.
But even with the costs, there's value in connecting mobile and online elements with in-store shopping. It can drive loyalty by better engaging customers and increasing sales and spending, Budreski said. Plus a retailer can push customers to a preferred payment method by implementing tender-specific couponing, he said.
The biggest factor that influences these strategies' costs is hardware deployment, especially hardware that needs a significant amount of horsepower such as augmented-reality systems, said Lybeer.
Augmented-reality (AR) products typically draw some computer-generated graphic over a real-life image captured through a camera. For example, Japanese apparel brand UniQlo partnered with U.K.-based Holition to develop the Magic Mirror, which allows consumers to stand in front of a mirror and manipulate the colors of the item they're wearing through a digital kiosk.
Whereas AR-equipped dressing rooms might be farther out, OneView Commerce's tablet app for dressing rooms might be easier to implement today. The app allows customers to request different sizes and colors from store associates, who are alerted on a mobile device they carry around with them.
The customer can then put items they want in the digital shopping cart, which connects to a checkout station so cashiers can pull up the total automatically when customers come up to pay.
The tablets can also be fitted with payment hardware to accept payments right in the dressing room, said Linda Palanza, chief operating officer at OneView Commerce. The company, which has five merchant customers, also has a mobile point of sale solution and consumer mobile app.
Lybeer gave Nordstrom's, Kroger, Safeway and Tesco Plc in the U.K. as examples of retailers finding digital strategies through experimentation.
Tesco is an "experiment factory," he said. Tesco powers payments through BuyaPowa, a company that combines online storefront development, e-commerce transaction processing and social media. And the grocery company's coffee chain, Harris and Hoole began accepting contactless mobile payments in June last year.
Nordstrom and a handful of other large merchants have begun adopting mobile point of sale solutions which were at one time targeted to micro-merchants. These large retailers are equipping sales associates with the card readers to accept sales anywhere in the store.
While the proliferation of mobile payments still has a long way to go, there's no doubt awareness and interest is rising. "Because of the big guys, Amazon and Google Wallet and Apple Pay [Paydiant] has doubled in size in the last year in terms of employees," said Jed Rice, senior vice president of business development at Paydiant.
In 2015, "very large retailers will run very large marketing campaigns to push mobile payment adoption," Rice said.
As nimble technology startups develop data-collecting devices to help retailers engage customers and drive more spend, payment incumbents are also pivoting to stay relevant.
Over the past 18 months to two years, WorldPay has focused on becoming a data hub so retailers can connect the physical, online and mobile channels, said Chas Gannon, who was brought to WorldPay through the company's acquisition of SecureNet.
"Merchants never looked to processors to create differentiation," Gannon said. "But why should all the disruption happen at the front end?"