In 2014 retailers will focus on reshaping their businesses on products such as merchant-led mobile wallets, which help them engage with consumers throughout the shopping experience.
"It seems that collectively that larger merchants are becoming disenchanted with third-party mobile wallets for fear of relinquishing the control over the customer experience," says Jordan McKee, an analyst at the Yankee Group, during a Web seminar on Feb. 4.
McKee reviewed topics from the National Retail Federation conference and Mobile World Commerce event, which both took place in New York City in January.
Starbucks Coffee Co. has become the poster child for a successful merchant-led mobile wallet, with 6% of device users saying they've used the Starbucks app in the past month, says McKee. This month, the coffee company announced that nearly 10 million customers use the Starbucks mobile app to make payments totaling close to 5 million mobile payments a week. Starbucks has also shuffled its top executives to give CEO Howard Schultz more time to focus on mobile payments and other digital initiatives.
Merchants are interested in developing their own mobile wallets to create "a granular 360 degree picture of each customer and customer interaction," McKee says.
The Merchant Customer Exchange, a merchant-driven mobile payments initiative backed by Wal-Mart Stores Inc., Target Corp. and others, will likely launch in the next few months, he says. It has spent the past year and a half signing up a significant number of national brands.
And merchants are especially focused on creating a loyalty program to integrate into their mobile wallets, and for good reason, says Sheryl Kingstone, research director at the Yankee Group. According to surveys from the group, 48% of consumers wish more stores would offer mobile apps to collect and redeem loyalty points and 44% would recommend a store to family and friends if it had a mobile loyalty program with personalized rewards.
To streamline the customer interaction, merchants are focusing on several products, including the mobile point of sale terminal, data analytics and Bluetooth "beacons."
Beacons use Bluetooth Low Energy, a wireless technology that can detect when a customer enters a store by interacting with an app on that customer's phone. Merchants can use beacons to send offers and coupons to consumers and then receive payment information wirelessly.
PayPal launched its PayPal Beacon in September. The eBay subsidiary is testing the technology with several merchants in the U.S. and Australia with plans to expand into Canada, the U.K., France and Germany.
In the same week, developers who got an early look at Apple's newest operating system, said that it supports Apple's BLE-based iBeacon.
Shopkick has been working with BLE for more than a year with its ShopBeacon product and in November began deploying Apple's iBeacon at Macy's locations in Herald Square in New York and Union Square in San Francisco.
Beacons allow rich media content to be delivered directly to the consumer, says Kingstone. Utilizing push notifications with beacons is an important step in engaging the consumer, she says.
"If I heard the word beacon one more time at NRF I think my head would have exploded," says McKee.
The hype around beacons is reminiscent of the buzz around Near Field Communication technology when it was first adapted as a means to make wireless payments. But BLE has a better business opportunity than NFC because it has fewer hardware and business hurdles and the technology makes "payments virtually invisible," says McKee.
Mobile point of sale, which started out as a product targeted at micromerchants, is now getting picked up with large retailers as well. Mobile point of sale systems allow "employees to become more influential having a dynamic role in consumers decision-making process," McKee says.
And big data continues to be a driver of customer engagement, leading to more purchases, he says. This is why Google, a company that gets most its revenue from advertising, was attracted to the payments market. The payment industry has lately attracted many companies from other fields, including T-Mobile, Amazon.com, Starbucks and Brink's.
"We're at a really interesting point in time," McKee says. Two-thirds of consumers own a smartphone and more than two-thirds of people want to be connected to the Web at all times, he says. "From a business standpoint this is an unprecedented opportunity," he says.