In retail's innovation frenzy, the sharing economy finds fertile ground

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WeWork has gotten its share of bad news this year, but parts of its concept are filtering into small business retail, providing one clue of what the next wave of shopping and payments will look like.

The first Anchor Shop will soon open in Philadelphia. Anchor has nothing to do with WeWork, but parts of it will sound familiar. The store will offer shared resources such as inventory stocking and consultations for small retailers, who will pay a relatively small rent (about $600 per month and up) to obtain space to accommodate omnichannel and experiential commerce.

For merchants that will spend will spend the next few years figuring out how to counter Amazon’s dominance, the expansion of autonomous checkout and the decline of traditional retail, ideas that make it easier to respond to new shopping and payment habits will be in high demand.

“The ShopFulfill infrastructure enables speedy delivery and lower cost e-commerce fulfillment by moving product closer to the customer,” said Shlomo Chopp, CEO of ShopFulfill, the New York-based startup that operates the Anchor Stores. The stores will debut in the Philadelphia area and then expand nationally over the next year.

WeWork generated buzz by providing a way for small businesses to share office space in expensive cities like New York. The company ran into a snag in the past year over its sputtered IPO and regulatory issues. ShopFulfill believes the concept is beneficial for small retailers, by creating overhead flexibility.

To manage payments, ShopFulfill has partnered with Xenia Retail, which allows shoppers to assemble a cart either in-store or online. The shoppers can then perform self-checkout or share the cart with the “shared associates” in the Anchor Store.

This way the same pool of inventory is then used to service both online and store replenishment, Chopp said. “This is the underlying connection between online and store,” Chopp said.

The first Anchor Shop, which will host about 40 digital-first brands, will be in Philadelphia’s Fashion District, a redesigned version of the old Gallery Mall that sits on top of the Jefferson Station Commuter Hub.

The Fashion District is designed to accommodate digital commerce, combining entertainment and experiential retail to reach shoppers that have become accustomed to shopping and paying through mobile apps. In addition to traditional shopping mall staples, the Fashion District also has interactive stores and shared workspaces for artists.

The shared work spaces and experimental retail concepts provide an opportunity for micro-merchants, sharing apps and other small businesses. Payment companies and fintechs can also find opportunities.

Much like Slack and Square turned original business models around small business access into multinational operations that attracted billions in investment, there will be a race to replicate that success for other aspects of small business.

The next year will be dominated by firms battling to make it easier for merchants and consumers to engage online, offline and within shopping experiences that are personalized and entertaining more than transactional. Merchant acquirers will need to have workable plans to handle real-time payments, open technology development, artificial intelligence, autonomous checkout and wearables.

“Small business payments are sure to have a major impact on the industry in 2020 due to both the demand for the technology and the growing size of the market they serve,” said Derik Sutton, vice president of product and experience at Autobooks. “With the rise of the gig economy, the lines between consumer and small business banking continue to blur. Financial institutions will be under pressure to offer products that integrate receivables and financial management within their existing digital banking channels.”

AI and APIs

Fintechs will drive the changes in machine learning use cases, with faster payments getting a boost from the Federal Reserve.

Cross-channel retail experiences will require real-time payments, regardless of the retailer’s size. The planned FedNow service has caused considerable debate about the role of government, but the influence of a future government option for faster payments has corresponded with an uptick in adoption for other options, such as The Clearing House’s Real Time Payments rail.

As more startups provide payments technology to serve different retail and business needs, they will add more payment rails, according to Fran Duggan, CEO of Payrailz.

“Our current environment of payments technology, one that’s focused on stove-piped, single use rails, such as card payments, ACH, etc. will need to adapt,” Duggan said. “As consumers expectations continue to evolve due to other industries, such as ridesharing services, they demand experiences in which payments simply happen without concern for particular rails.”

AI can help inform this “do it for me” expectation among consumers, Duggan said.

"Current payment technology requires consumers to complete a step-by-step process for completing a transaction, but with AI, that technology can be used to simplify or even remove that friction entirely and do the transaction for the consumer," Duggan said.

The deeper incursion of fintechs into omnichannel commerce will accelerate open development. PSD2 regulation and other open banking initiatives have pushed merchant acquirers and other financial companies to improve their ability to communicate and share data with third parties.

But many businesses are still behind the curve in adopting the technology sharing capabilities necessary to quickly adjust to new payment innovation, according to Vijay Ramnathan, president of MineralTree.

“Businesses have clung to the tendency to operate in batch mode. Because many systems don't interoperate effectively, businesses in the coming year need to address these disparate operations,” Ramnathan said. “When moving processes and data to the cloud, these developments have allowed businesses to create ubiquitous access to insights and manage key processes efficiently.”

APIs have been crucial for this continuing evolution, particularly because they enables systems to communicate in near real-time, Ramnathan said

“APIs ensure critical insights are readily available, meaning businesses can make important decisions quickly,” Ramnathan said. “However, this connectivity is still in the early stages for middle market businesses, and will continue to be a significant area of growth for the industry in the coming years.”

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Retailers Point-of-sale Real-time payments Mobile payments Mobile wallets