A MONTHLY RECAP OF THE DEVELOPMENTS WITHIN THE OMNICHANNEL ECOSYSTEM 

FEBRUARY 2016

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PYMNTS’ VIEWPOINT The Millennial Touch

Everything millennials touch, or even think about touching, has the potential to essentially turn to gold – from technology to pop culture, and especially in the world of omnichannel shopping.

These digital natives come bearing an estimated $200 billion worth of purchasing power and the knowledge, tools, and skills to wield it appropriately. But how can merchants grab and keep the attention of a new generation of omnishoppers in order to fully capitalize on the millennial opportunity?

While the term millennial as well as the idea of reaching the growing number of 18 to 34 year olds in the market today is nothing new, what merchants may be missing out on is a true understanding of how the changing expectations of these consumers are shifting the retail landscape itself.

A recent white paper sponsored by Bronto, titled "Tracking the Mobile Millennial Shopper,” found that mobile is a critical factor in the millennial shopping experience. Nearly 36 percent of millennials leverage their mobile devices while shopping in-store, with more than one-third shopping on mobile devices at least once a month or more and 1 in 2 using their smartphones to shop outside of the store.

Smartphone-owning millennials are reportedly more loyal to brands that keep pace with the latest technologies, use app stores as a tool to help discover brands and value a brand’s use of technology as a more significant factor than the brand name itself.

As millennials continue to plug into mobile and social shopping experiences, essentially disrupting traditional shopping patterns, retailers are still struggling to capitalize on the changing behaviors.

“Millennials are savvy shoppers and many have come of age in a post-recession era; our research shows that this group routinely comparison shops on mobile to get the best value and shopping experience, but the market has not yet capitalized on those habits,” Rodney Mason, GVP of Marketing at Blackhawk Engagement Solutions, recently stated in reference to the path-to-purchase habits of this influential demographic.

At the end of the day, if merchants aren't capitalizing on the mobile opportunity being presented by millennials, they could risk being overlooked by the market’s fastest-growing segment of shoppers.

One significant way in which mobile can be utilized by merchants to bring millennials in-store – and keep them there – is through push notifications for location-based apps. Not only has the use of location-based services proven to be popular among this demographic, but millennials are also showing a high degree of engagement with the push notifications sent by brands and retailers to offer content on product offers in-store.

A study from location-based mobile platform Retale, which polled 500 millennials to gauge their actions and preferences related to using push notifications on location-based apps, found that nearly 84 percent act on these notifications.

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PYMNTS’ VIEWPOINT “Millennials are heavily reliant on their mobile devices, and push notifications are an ideal way to connect with them about the latest offerings from brands and retailers,” said Pat Dermody, President of Retale, noting that relevancy and being respectful of millennials’ time are both critical in order to increase engagement. Last year, beauty retailer Sephora’s efforts to revamp its omnichannel offerings, particularly through mobile, paid off and in turn created a way for it to stand out amongst other omnichannel merchants.

The retailer launched beacons, iPhone-based augmented reality and an Amazon Prime-style shipping service as part of a “digital experience” makeover of its U.S. stores, all aimed at developing new strategies and technologies for in-store and mobile shopping. Roughly 70 percent of Sephora’s customers carry iPhones, which was a contributing factor to the retailer rolling out Apple Pay acceptance both online and in-store.

While millennials are eager to use their mobile devices to find the best deals and suss out which retailers they want to shop with, the security of omnicommerce shopping remains a big priority for this generation. Despite a propensity for using new and advanced technology in their everyday lives, millennials have grown increasingly weary about their data and privacy.

The ever-growing threat of data breaches and identity theft is an issue that has impacted the way millennials view the businesses they interact with today, which is why building trust is vital to the overall customer experience millennials are seeking out.

One way in which millennials’ security concerns are impacting their shopping behavior can be seen through their efforts to safely shop online by using gift cards. According to Blackhawk Engagement Solutions’ “Millennials Disrupt Shopping” report, nearly 64 percent of millennials turn to gift cards rather than any other digital payment method, with 66 percent confirming they feel using gift cards will help to limit the risk of identity fraud.

But it’s important for merchants to not let the fear of fraud cost them more than actual fraud, which can easily happen when false declines enter the picture. The impact isn’t just a loss of that sale that time, but disgruntled consumers who never return.

“Online and off, there are $118 billion worth of legitimate transactions being declined. ECommerce and mobile commerce is $9 billion of that,” Andy Freedman, Chief Marketing Officer at Riskified, recently explained to Internet Retailer.

A study from the company found that millennials, like most consumers, take the decline of their legitimate purchases very seriously, with nearly 42 percent reporting they abandoned a retailer after being falsely declined.

In today’s omnichannel landscape, merchants must strike the balance between delivering what millennials want (when they want it) and ensuring those goods and services can be accessed and paid for in a secure fashion.

Happy reading!

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Although beacon adoption and the impact of the technology on merchant sales were initially forecasted to be quite significant, the “Retail Innovations: Beacons” insight report from L2 shows that current figures are falling short of initial expectations. While 85 percent of merchants were predicted to be using beacons by 2016, actual data from early 2015 found that only 11 percent of merchants were actually implementing beacons and geotargeting technology, with almost 51 percent reporting they had not even explored or had no opinion on using beacons. L2 researched the use of beacon technology at major retailers across various verticals, including Target, Macy’s, Sephora, Duane Reade, and Lord & Taylor in order to analyze performance and point out how brands should be approaching beacon usage. Key findings of their review and testing include:

• The top reasons retailers are choosing to implement beacons are to provide value to the customer’s shopping experience, promote customized loyalty and rewards offerings, and gain consumer insights.

• Retailers and vendors are partnering in order to leverage beacons in branded mobile apps. • Even successful rollouts of beacon applications still have shortcomings, including finding the best approach to

making offers robust, scalable and customized.

Source: Econsultancy: “Quarterly Intelligence Briefing: Digital Trends 2015,” January 2015.

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Mobile payments in 2015 grew to nearly $9 billion and there are outstanding forecasts that see this payment method reaching more than $210 billion by the end of the decade. However, a study from L2 that reviewed 61 big-box brands found that awareness of mobile payments is not fully realized as there is a lag in both usage and implementation among retailers and consumers due to technological constraints such as legacy POS systems or NFC-enabled terminals. With an increasingly fragmented market, retailers will have to accommodate and integrate with various mobile payment players in order to spur innovation and boost engagement.

The “Retail Innovations: Mobile Payments” insight report also highlights the low integration of loyalty programs and emerging payment options within mobile offerings, which has enabled larger retailers to launch their own closed solutions (such as Walmart Pay) without taking on significant opportunity costs. Other key findings include:

• Samsung Pay stands as the most highly accepted mobile payment solution, with all of the big-box brands analyzed officially accepting it. Other solutions have much lower adoption rates, i.e. CurrentC at 30 percent, Apple Pay at 23 percent and PayPal at just 7 percent. Out of the five mobile payment solutions reviewed, only two integrate loyalty programs into payments, while the majority enable adding loyalty cards to wallets.

• The top mobile commerce functionalities include: account sign-in from app (66 percent), commerce via app (44 percent) and access to loyalty account in app (38 percent).

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ADOPTION OF COMPETING STANDARDSDecember  2015,  N=61  Big-­‐Box  Retailers  

MOBILE APP COMMERCE FUNCTIONALITYDecember  2015,  N=61  Big-­‐Box  Retailers  

Source: L2: “Retail innovations: Mobile Payments,” January 2016.

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1: ENGAGE THE CUSTOMER Elo, a supplier of interactive touchscreen solutions, is bringing its self-service platform to Verifone payment devices. The integration will enable loyalty programs, along with EMV, NFC and mobile wallets, to reach into retail self-service and endless aisle environments, while aiming to simplify and reduce costs for new payment and loyalty methods in these spaces.

NCR announced a new partnership with Invenco, a global supplier of automation and transactional payment systems in the retail petroleum market, to bring its EMV-enabled touchscreens to the pump. Through the partnership, retailers who use the NCR Outdoor Payment Terminal will be able to engage with consumers at the pump to connect them to sales in the store, the ability to order food items, buying lotto tickets and the ability to interact with loyalty program rewards.

U.S. specialty beverage retailer BevMo! released a new digital platform powered by NCR eCommerce Click & Collect, which will provide members with the same loyalty club shopping experience whether they choose to purchase online or in-store. The NCR platform will also enable omnichannel features such as in-store pickup for transaction initiated online to provide a consistent experience across channels.

GOING SOCIAL

Retail chain Kmart launched a social media initiative called “Fit in the Fun” to help promote health and wellness products while also helping to engage its Shop Your Way loyalty program with consumers. The campaign includes its own dedicated website as well as the Twitter hashtag #FitintheFun, where the first 200 loyalty program members to upload their wellness photos or videos received a $25 gift card. The campaign is also reaching the in-store channel through the promotion of exclusive Blue Light Specials and health/wellness giveaways that are only available within the physical retail locations.

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2: ENABLE THE CUSTOMER The “State of Retailing Online 2016” study from Forrester Research, Shop.org and Bizrate Insights found that an increasing importance has been placed on the use of smartphones by consumers, prompting paradigm shifts in mobile commerce. Despite the fact that smartphone and tablet devices remain a top driver for mobile sales and traffic for merchants, retailers tend to keep their overall investments in mobile at a moderate level.

The study also provided insights on the following points regarding mobile commerce in the retail landscape:

• Sales from smartphone devices grew 53 percent in 2015 from the previous year, accounting for 17 percent of surveyed retailers’ total online sales. Online sales garnered from tablets increased by 32 percent, representing 14 percent of total online sales.

• Nearly 30 percent of retailers surveyed invested less than $10,000 on smartphone platforms in 2015, while just 17 percent maintained budgets between $10,000 and $50,000. For tablets, those investments were even lower, with 37 percent of retailers saying they made no additional investments for their tablet platforms and offerings in 2015.

• Regardless of the low investments made in 2015, retailers expect to increase their mobile investments going forward. Roughly one-third of the study’s respondents intend to boost their investments in smartphone technologies by more than 20 percent during 2016.

ENABLING MOBILE PAYMENTS

Visa announced that new merchants, including Starbucks, Walgreens, the NFL shop, HSN, Match and Walmart, will soon add Visa Checkout as a payment method option during online checkout. Visa Checkout secures transactions with an online tokenized payment solution while aiming to reduce consumer checkout friction.

Visa’s latest data shows that more than 10 million consumer accounts and 600 financial institutions in 16 countries have signed up to use Visa Checkout since its launch 18 months ago. Enrolled Visa Checkout shoppers tend to be converted into buyers 86 percent of the time, while Visa Checkout merchants showed a 51 percent higher conversion rate in comparison to users who used merchants’ traditional online checkouts, a study from comScore showed.

What the data show is that shoppers are more likely to convert because Visa Checkout enables consumers to checkout without having to enter personal credentials such as payment information and address every time they checkout. The case is even stronger for mobile shopping.

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Source: comScore commissioned by Visa: “Visa Checkout Study,” based on data from the comScore research panel of 1 million U.S. PC/laptop users, April-October 2015.

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2: ENABLE THE CUSTOMER KRC Research and Verizon conducted a survey on U.S. adults to see how many smartphone owners are using mobile apps, and for what purpose. The study found that nearly 56 percent of respondents made in-app purchases in 2015, with 23 percent doing it for the first time last year. But the figures vary for different age groups, with 70 percent of millennials purchasing products within an app last year, but only 66 percent among Gen X and just 39 percent of Baby Boomers. Another notable finding is the huge increase of millennial purchases within an app, with an 85 percent increase between 2014 and 2015.

Other key findings of the report include:

• Other transactions made with mobile apps include: bank transactions (55 percent), making restaurant reservations (26 percent) and purchasing an airline flight (22 percent).

• Ordering a taxi or car ride on a mobile device was the category that showed the fastest growth, increasing 124 percent from 2014. 

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Source: KRC Research for Verizon, January 2016.

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Adyen, an Amsterdam-based payments company, is bringing its point-of-sale solution for merchants to the U.S. Adyen’s payments platform links eCommerce and POS terminals through a single dashboard and is already being used by major tech companies such as Facebook, Uber and Netflix. Its platform offers the ability to buy online and pick up in-store, enables in-store customers to make an online purchase when an item is out of stock at the physical store, and enables online shoppers to return items in-store.

Secure payment solutions provider FreedomPay has launched a new Pay-at-Table solution for paying bills at U.S. restaurants. The solution supports PCI-validated P2PE, EMV, and NFC enabling customers to make secure payments right at the table with their chip cards, mag-stripe cards or mobile wallets like Apple Pay, Samsung Pay and Android Pay.

Otto Group has partnered with PowaTag Technologies to improve its omnichannel payment and engagement capabilities by offering customers the ability to engage with the brand while shopping in-store, online or while on-the-go. Otto Group’s brands cover more than 400 brick-and-mortar stores worldwide, spanning 123 companies. Its mobile app enables customers to make quick payments by interfacing with features such as QR codes, beacons, audio signals and social media links.

Diebold, a firm best known for its work in ATMs, announced its new solution for checkout at merchant stores. It allows retail customers to essentially use their phones as a scanner as they travel through a retail location and then tap their phone at the self-checkout unit. Payment is made via preloaded card information in the consumer’s digital wallet within the retailer’s app or via cash slipped into the terminal. 

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L2’s “Death of Pureplay Retail” report explores the advantages and disadvantages of both pureplay retail and omnichannel operating models and analyzes the impact disruptive retail models are having on industry players. According to the report, pureplay eCommerce retailers have higher advertising and shipping costs, while the ones who have also launched physical locations (called evolved pureplay retailers) have lowered customer acquisition costs and experienced more traffic in their online sites. The report also highlights the following:

• Click-and-collect services provide evolved retailers with a unique and inexpensive last mile option to close the fulfillment gap that pureplay retailers cannot attain. These convenient services, offered by nearly 32 percent of evolved retailers, allow customers to place orders online and pick up in-store when it best suits them, sometimes as soon as that same day. This functionality has been deployed by 60 percent of leading merchants in the omnichannel space.

• Shoppers continue to see brick-and-mortar stores as the most preferred channel for shopping. The main reasons are the ability to see and try merchandise (60 percent), the possibility of getting the product immediately (53 percent), and being more certain about the suitability of the product (33 percent).

• The eCommerce industry is trending toward consolidation. It is highly dominated by a handful of retail giants such as Amazon, Apple, Walmart, and Staples, which accounted for more than 40 percent of all U.S. eCommerce sales in 2014. Not taking Amazon into account, omnichannel retailers tend to dominate sales in the retail landscape, while pureplay retailers only represent a small portion of sales. These figures show that one of the hurdles to eCommerce profitability is scale.

Source: L2: “Death of Pureplay Retail,” January 2016.

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Source: Capgemini: “Digital Shopper Relevancy Report 2014,” September 2014.

Source: U.S. Commerce Dept: “Internet Retailer.”

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MANAGEMENT

eBay Enterprise released its Digital Commerce Index, which highlights the importance of physical stores in the omnichannel chain. The data show that eCommerce order volumes fulfilled by stores increased 72 percent during peak season, as well as that omnichannel commerce sales and fulfillment capacity increased significantly for situations where items are out of stock, sales need to be saved and/or tight delivery timelines need to be met. The Index also provides observations, including: ensuring an omnichannel fulfillment strategy keeps pace with eCommerce; the necessity for retailers to leverage ship-from-store to mitigate out-of-stock situations; and more than an industry standard for risk management is needed to thwart online fraud. Retailer Lucky Brand has started using NetSuite’s cloud-based platform OneWorld to better align its in-store and online operations. NetSuite solutions powers Lucky Brand with a single platform that enables inventory management, procure-to-pay, fixed assets, multi-currency and multi-tax compliance management, and data-driven digital marketing.

Starmount has launched its new Starmount Store Inventory application aimed at enabling seamless inventory management and providing retailers with the ability to achieve omnichannel excellence. The solution provides a way for associates to manage inventory with the same platform they use to engage with customers and process payments. Starmount’s latest application offers the ability to record receipts at multiple levels, improves shipment accuracy, provides cohesive in-store adjustments, in-store validation of stock count results, and facilitates price change processing. Mozu, a cloud commerce solution provider, launched its Mozu Marketplace, which features one-click integration to leading retail commerce technologies. The eCommerce platform is a one-stop shop where retailers can browse eCommerce apps and add-ons developed and used by more than 80 of the industry’s leading brands. While many apps on the Mozu Marketplace are aimed at helping brands streamline checkout processes and secure financial information from fraud and breaches, there are also dozens related to improving supply chain management — complete with integration for Dart, eBay, Shipwire and many more third-party platforms.

NCR has integrated merchandising and supply chain applications with NCR Retail ONE. NCR Retail ONE is a commerce hub that unites retail apps with an omnichannel platform. New application features include order fulfilment software for order online – pick up in-store, software that tracks movements of each SKU, demand forecasting to optimize replenishment, and an app that enables customers to browse products and create shopping lists. The Defense Commissary Agency (DeCA) will be the first U.S. retailer to create an omnicommerce experience using NCR’s store and sales channel software Retail ONE. Through the implementation of a commerce hub, NCR will help DeCA to build an ecosystem of apps and data that be used to support frictionless customer experiences.

Mobile point of sale solution provider Fiverun merged with software companies MarketLive and Shopatron to create a new omnichannel commerce solution provider called Kibo. The solutions offered will power retailers with in-store offerings such as POS, payment processing and store optimization; Web-based merchandising and webpage design; and order management. The company will also offer back end support and loyalty programs.

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Zumiez, a lifestyle apparel and accessories retailer, has partnered with Starmount to implement its Customer Engagement Suite and POS solution. Zumiez aims to deliver a seamless omnichannel customer experience and improve operational performance. Starmount solutions provide shoppers with purchasing options such as reserve/buy online and pick up in-store, ship from any store to any location, and order online from the store. It also empowers in-store associates with access to product information, inventory visibility, and the ability to process transactions anywhere on the store floor.

CURBSIDE PICK UP

According to a recent study conducted by ACI Worldwide, the increase in eCommerce activity between Black Friday and Dec. 31 contributed to a correlative rise in fraud attempts, peaking on Christmas Eve. Compared to 2014, the 2015 holiday shopping season saw 8 percent more fraud attempts, while eCommerce sales increased by 21 percent. Buy online, pick up in-store is one of the delivery modes with the highest fraud attempts, and showed a 47 percent increase in fraud attempts, while next day and overnight delivery showed a 50 percent increase.

Through a representative sample of more than 1,000 holiday shoppers, the International Council of Shopping Centers (ICSC) concluded that shoppers are moving toward click-and-collect as its preferred omnichannel shopping method. Nearly 32 percent of holiday shoppers utilized click-and-collect fulfillment options this past season, with 69 percent of that segment making additional purchases in-store while picking up their original purchases.

As online sales continue to surge, omnichannel retailers are looking to self-service pick up solutions that are both cost-effective and secure, as well as convenient for customers. KIOSK Information Systems recently demonstrated its LockSpot solution, a retail locker platform that provides the hardware and software required for seamless implementation of site to store package lockers that enable customer self-service pickup.

CHECKOUT

Paris-based payments provider Ingenico Group announced the rollout of its new brand Ingenico ePayments, a new online and mobile commerce division aimed at enabling over 150 different payment methods in more than 170 countries. It also offers merchants advanced data analytics through its business intelligence tool, Elevate, as well as fraud management solutions and cross-border commerce assistance. 

Cayan has signed on to become a Demandware Technology Partner and will join the community of companies committed to powering eCommerce and in-store payments through the Demandware Commerce Cloud. Cayan’s cloud-based payments system platform, Genius, is designed to assist merchants and point-of-sale developers in adopting new payment technologies. 

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Demandware demonstrated its cloud commerce solution for multichannel integration at the NRF Big Show 2016. Its solutions include core digital commerce capabilities, new cloud-based POS and store operations, and predictive intelligence for personalized offerings.

Aila Technologies launched its iPad Pro-based new kiosks and mobile imagers to boost in-store services provided to customers. The devices can be used directly on the sales floor to provide quick access to product information, a price scanner, customer order station and payment acceptance.

A new partnership between Ingenico and Intel is bringing contactless payment acceptance technology to Panasonic devices, such as the recently launched mPOS solution Toughpad FZ-R1. The tablet is designed to help retailers meet changing omnichannel customer expectations while providing secure transaction capabilities. 

Brother Mobile Solutions and Retail Pro International presented their mPOS solution at the NRF 2016 Big Show, which consists of an associate-friendly mPOS software and mobile printers created to allow retailers to deliver a seamless transaction from virtually anywhere in the store.

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ABOUT

ABOUT PYMNTS

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This powerful B2B platform is the No. 1 site for the payments and broader commerce ecosystem by traffic and the premier source of information about “what’s next” in payments. C-suite and VP level executives turn to it daily for these insights, making the PYMNTS.com audience the most valuable in the industry. It provides an interactive platform for companies to demonstrate thought leadership, popularize products and, most importantly, capture the mindshare of global decision-makers. PYMNTS.com ... where the best minds and best content meet on the web to learn “what’s next” in payments and commerce.

ABOUT VANTIV

Vantiv, Inc. (NYSE: VNTV) is a leading payment processor differentiated by an integrated technology platform. Vantiv offers a comprehensive suite of traditional and innovative payment processing and technology solutions to merchants and financial institutions of all sizes, enabling them to address their payment processing needs through a single provider. The company builds strong relationships with our customers, helping them become more efficient, more secure and more successful. Vantiv is the second largest merchant acquirer and the largest PIN debit acquirer based on number of transactions in the U.S. The company's growth strategy includes expanding further into high-growth channels and verticals, including integrated payments, eCommerce, and merchant bank. Visit us at the new www.vantiv.com, or follow us on Twitter, Facebook, LinkedIn, Google+ and YouTube.

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