Retail’s Innovation Race Pits Products vs. Services

Innovation takes many flavors and paths, and that’s especially true when it comes to merchants who sell retail products and companies that sell retail services. And payments plays a big role in all those efforts — even though many companies don’t yet to seem to realize how to get the most from transactions.

In an new PYMNTS interview, Karen Webster and Nicky Koopman, senior vice president of Content and Value Added Services at AEVI dig deep into findings from the PYMNTS and AEVI Retail Innovation Readiness Index. The research found a stark contrast among different types of companies — for instance, sellers of health and beauty products are very prepared to embrace innovation when compared to healthcare service providers.


“Services are operated so differently,” Koopman said when asked to explain such differences. “Service merchants are very much focused on their profession and giving great customer service — that’s difficult to do online.”

Innovation Role

But that doesn’t mean innovation is impossible for those service providers, of course. According to the PYMNTS/AEVI research, 44.8 percent of consumer services firms consider innovation crucial to their survival.

Innovation can come in various forms for service providers. To illustrate that point, Koopman said that because she travels so often, she sometimes neglects to make appointments with her hairdresser. Service providers who offer robust online booking tools to consumers can stay ahead in the innovation game. In general, she said, customer onboarding is a hot place for service providers to innovate. “Onboarding can mean online booking systems,” she told Webster.

Payments, of course, tend to have a big role in most innovation efforts at the retail level these days. But that doesn’t mean all retailers and service providers are doing a good job of keeping up with the payments game.

The PYMNTS/AEVI research provides evidence of that.

It found that 26 percent of consumer services merchants are “very” or “extremely” interested in smart POS systems — technology that can go beyond traditional transaction tasks and enable fuller customer experiences, which in turn can increase customer loyalty. Beyond that, 84.7 percent of small consumer services believe intuitive functionality is a key quality for smart POS systems.

All that said, the research found that no more than 15 percent of businesses actually use smart POS systems, though.

“This low adoption rate mostly has to do with awareness,” Koopman said.

Cash Role

Sometimes, however, the right POS system for a given business is not always focused on being the smartest. When it comes to merchants that sell food, or providers of such hospitality services as bed-and-breakfast experiences, about 45 percent of them said that they need POS systems that can accommodate cash.

“Cash is relevant to these sectors,” Koopman said. “Many merchants would love to switch to cash-less only.” After all, cash can be costly and time-consuming to process, and can open a company up to more risk of theft, among other negative factors. But customers still use cash, especially in certain retail and service situations.

“And cash is very important for tipping,” she said. “And for me, a customer sitting there, it’s very important to make sure the waiter received the money.”

All that said, the research found that 55.8 percent of accommodation and food merchants want smart POS systems that accept cashless payments.

Beyond the world of POS innovation, the research also found that 61.7 percent of merchants said customer loyalty was their top reason for innovating. Customer loyalty can be gained in many different ways. For sellers of retail products, personalization and customization can play key roles for innovation efforts, according to Koopman.

She used Nike’s shoe-customization feature as an example of that — and of how digital retail technology is setting the bar higher for consumer expectations of such services. “That’s the type of niche you will find with product-focused merchants,” she said.

Innovation can be costly and time-consuming. But no matter whether a business sells products or services, there is little to gain and much to lose from falling behind in the race to create new experiences and friction-free commerce for consumers.



Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border.

Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.