Such a simple thing. Consumers see a promo code or coupon online and visit that very same merchant to shop. Once there, they hit a big brick wall — no place at the physical point of sale to take advantage of those very same discounts and offers.
Oversight? Technical challenges?
A little of both, said Gregg Aamoth, CEO of POPcodes, whose ability to solve for that problem while working at Macy’s inspired him to do the same for the rest of retail. And how he is solving it was the topic of this week’s episode of The Matchmaker Is In series. Aamoth joined host Karen Webster to share how the payment terminal is helping to address the complexities that come with allowing consumers to use a promo code they receive online on the shopping they do at a brick-and-mortar location.
Here is an excerpt of the conversation.
KW: What inspired you to take on this problem?
GA: Prior to starting POPcodes, I spent about 10 years at Macy’s where I was VP of customer and marketing systems. At Macy’s, we invested a lot of money and time in understanding the customer journey and knowing that the customer frequently went from online browsing and searching for products to making purchases in the store.
When I left Macy’s, I moved to Canada, and I observed that the customer journey quite often ends at the point of purchase on a payment terminal — a device that is very simple, very secure and customer-facing.
As I thought about the challenge of engaging customers, bringing them online, bringing them through social and then having that consistent experience in the store, I saw the payment terminal as a device that could potentially be a huge connector — the key to creating a consistent, seamless shopping experience. That means seeing a promo code online and getting the same offer that she would have gotten online.
Our focus is to make it seamless so that the consumer, even if they don’t have that coupon or loyalty card with them, can still connect in through a secure device and retrieve what’s been offered to them, whether it was a promotion or the ability to use their loyalty points.
KW: It sounds like the critical path for you isn’t so much the consumer, because they are already interested in being able to get that same level of service and savings. The merchant acquiring side seems be the long pole in the tent for you as a matchmaker. How are you getting them on board and convinced that there is enough demand on the merchant side to do the integration?
GA: There’s a lot of standards in place already for merchants and advertisers who are creating promotions. In the online space, that promo code is there, and it’s pretty ubiquitous across every checkout screen, while, on the brick-and-mortar side, there’s mostly the ability to scan barcodes at the POS. But the key is to be able to do either, whether the consumer is in the online or in-store environment, and doing it in a way that doesn’t require a very complex integration.
If you’re trying to do that across hundreds or thousands of different merchants and their hundreds or thousands of different POS systems, it’s extremely complicated to do on a one-by-one basis. So, we worked from the payment terminal backwards. And there are a small number of manufacturers and a handful of processors that have the lion’s share of the market in serving the 9 million or so SMB merchant market. So, by working with that community and leveraging that common device — the payment terminal itself — we are able to rapidly deploy and expand to a lot of merchants at a very low cost. That’s really been the key for us and enabled us to deploy this functionality to over 16,000 merchants in less than 90 days.
KW: Did you know going into POPcodes that wrestling down the acquiring side of the business was something that you would have to do? How did you overcome the challenge?
GA: It’s kind of a classic pivot story. I’m very familiar with the challenges that retailers have and the value of measuring and optimizing promotions and tracking them. But when I saw how common the customer experience was on the payment terminal, I thought, “Let’s go do that.”
Then, I found out that the acquirers and the ISOs that control that payment terminal and distribute the software really didn’t have a model to support something like this at a large scale. So, we had to figure out what would be in it for them — what would make those acquirers and ISOs interested in deploying our software and creating that merchant marketplace?
To do that, we added a set of features to our core application that would allow merchant acquirers to better engage and support their merchant community. It started off with something as simple as ordering paper.
Every payment terminal has a roll of paper in it, and everybody needs to have paper to be able to complete a credit card transaction. Ordering those rolls of paper was the first value add that we created. We actually created a promo code that, instead of giving the discount, sent a message to the merchant service provider that the merchant needs paper for the terminal. That secure, ubiquitous device now became a tool for the merchant to be able to get what they needed from their service provider, the acquirer.
We found that the merchant acquirers have the same problem in the marketplace that merchants have in reaching consumers — there’s a lot of churn, that churn is very costly, there’s a lot of competition and merchant experience and engagement are as important to those acquirers as consumer experience and engagement is to the merchant. Solving both sides of that marketplace problem with one solution was the ideal fit.
KW: You mentioned that you are focused on the smaller merchant to give them the same experience as the larger merchants have. Do many consumers who shop with smaller merchants get promo codes online from them?
GA: The small to medium-sized merchant is typically less than 100 employees and less than 10 locations. There’s about 9 million of those in North America, and they make up about 65 percent of total retail sales. They are absolutely struggling and behind when compared to the top 20 big-box retailers in terms of both their online and in-store experience, but that means that there’s a huge opportunity.
They’re also not participating as much as they could in the billions of dollars of trade promotions that manufacturers and CPGs create. The lost opportunity for them in participating in those promotions is significant, and it’s primarily because it’s a difficult process to collect the promotions, apply them and receive reimbursement for those promotions.
As a result, most of the businesses either don’t accept the promotions, which again creates some friction between the consumer and that merchant, or they don’t actually collect the money. They will give the discount, but they don’t go back to the manufacturer or the CPG to get the credit, and that’s another part that our solution allows to be tracked systemically. If I’m a big manufacturer or a CPG provider and I know that 65 percent of my product is sold in these SMBs, I can actually directly connect and engage with the consumer, offer them the promotion and know exactly, in real time, where that promotion was redeemed.
KW: Are you taking a particular vertical strategy or geographic strategy to your rollout? How are you approaching your go to market?
GA: It’s an interesting challenge, and as you look at the matchmaker models and success stories, the payment ecosystem brings some new twists to that. Our 16,000 merchant installs were spread pretty broadly across all of the Canadian provinces, as well as into a few states in the U.S.
Because we’re focused on helping those acquirers better service the merchants, we haven’t said we’re going to just focus in a certain geography or within a specific retail vertical. In subsequent months and into 2017 and 2018, we’ll be identifying different targets, but one that has cropped up just by circumstance is the quick service restaurant business. We have a midsize QSR client that has a lot of different POS environments and very little coordination between all of their different franchisees.
They are using our system so that their marketing agency can quickly create and define a promotion and then communicate it through social and digital channels. Now, when a customer comes into the store, the store associate knows that they can just direct them to enter the code and then honor whatever promotion is displayed. They don’t have to worry about whether the promotion is real or not; they know that it came out of the secure terminal and can deliver the promotion to the consumer.
KW: Foot traffic is just hard to come by these days. Are you seeing that the merchants who are deploying your solution are able to bring more people into their stores?
GA: There’s a couple of things happening in the omnichannel space that are pretty interesting.
Most of the big merchants see that roughly 30–35 percent of the consumers that make a purchase online chose to go to the store to pick up what they will buy. The buy online, pickup in-store model is 30 percent of the total incoming sales for big retailers, like Macy’s, Home Depot, Target, etc. They’re also seeing the cost of free shipping and paid returns, and again, they know that bringing that consumer into the store and allowing them to return the product in-store results in more sales. The balance between the convenience of the online shopping experience and the level of engagement and economic spend you get in store is a very delicate thing.
One of their challenges with the buy online, pickup in-store model is that, instead of sending consumers to shop the aisles, merchants are sending them to stand in line at customer care.
So, what if those merchants could allow those consumers to go to the shelf, pick up the product and generate a proof of their online purchase right at that point of sale? Instead of a promotion code, it’s a proof of purchase. With the right mix of incentives, merchants can use the product to drive traffic to the store and even give special pricing for online purchases picked up in-store. It could be an awesome way for merchants to both know their customer better and get the customer into the store to fill up their baskets.
We have a lot of those ideas and concepts to flush out still. As the marketplace matures and we start to build our install base, there’s all kinds of cross-promotion opportunities, multi-merchant promotion opportunities, among other things, that can be solved when the connection between the virtual world and the physical world is seamless, secure and ubiquitous.
The full interview can be found here.