The Eight Retail Stories That Shaped 2018

News travels fast in payments and commerce.

The world does not perhaps look terribly different, at first glance, than it did a year ago. Cars aren’t flying yet, and our frequent plaintive requests for a robot butler remain unanswered (here’s looking at you Santa). However, an awful lot is in fact different at the dusk of 2018 than it was at the dawn.

The year 2018 saw massive changes in where consumers shop, how they pay, and what goods and services they want in their carts. It was the year mobile payments and commerce solidified as a force, though not in the way — or in the venues — anyone was forecasting over the last couple of years. This was also a year that set the stage for many changes and advances, some of which would have been largely unimaginable even a year or two ago.

Before we can move on to the next act, though, there is the small matter of the final curtain call for the stories that shaped 2018 — and the commerce ecosystems we all live in.

The Facebook Follies

It has not been an easy year for Facebook.

Starting with the Cambridge Analytica scandal, which saw some 87 million Facebook users’ data end up in the hands of a political consulting group without their consent, CEO Marc Zuckerberg found himself on Capitol Hill. For two days, he underwent grilling at the hands of senators and representatives, and Facebook found itself in the midst of an extensive federal probe, evaluating its handling of user privacy.

By September of this year, Facebook was polling as America’s least trusted tech company — and consumers weren’t just complaining. They voted with their feet, with enough customers disabling their Facebook accounts to give investors and advertisers pause during the back end of the year. With user growth slowing, particularly in the high-value U.S., Canadian and European markets, Facebook said it will turn to expanding its service offerings in 2019 and beyond.

Yet, as 2018 was coming to a close, Facebook was hit with just a bit more bad news. According to a report in The New York Times, citing hundreds of pages of internal Facebook documents, Facebook reportedly enabled some of the world’s biggest tech companies to access the personal data of users. This was done so in a fashion that essentially amounted to exempting some businesses from the privacy rules its customers thought they were protected under. That news emerged around the same time as reports that Facebook could be facing a $1.6 billion EU fine for violations of the new GDPR regulations.

We imagine that for Facebook, its fondest hope for 2019 is a quiet, boring and uneventful year. Whether it’ll get one remains to be seen, particularly as it has caught the eye and interest of regulators all over the world.

However, on the upside, there is always the dating service to look forward to soon.

“I’m looking forward to rolling out dating across the world soon, too. These are services that generally benefit from having everyone you know connected on a single platform,” Zuckerberg told investors during Facebook’s last earnings call.

Tap-To-Pay Inches Into The U.S. Market

Outside the U.S., tap-to-pay cards play a big role in commerce. According to Visa, 40 percent of its own transactions done outside the United States are done through tap-and-pay means. In the U.S., the situation is quite different. Contactless cards are a comparative rarity — most issuers don’t offer them and so, not surprisingly, most consumers don’t often use them.

That may be on the verge of changing, though. In November, Chase, the largest card issuer in the U.S., announced it’s rolling out tap-to-pay functionality across its Chase Visa card portfolio. The rollout will be done in stages, spanning from the end of 2018 into 2019. As customers open new accounts, or as their cards are renewed, credit cards — then debit cards — will join the contactless pantheon in the latter half of 2019. As of the end of 2018, there are over 90 million Chase credit and debit cards wielded by customers across the United States.

Could it be the nudge contactless needs in the U.S.?

According to the PYMNTS/Visa “How We Will Pay“ report, 65 percent of consumers said they would be interested in adopting contactless payments because they are “faster,” while 60 percent said they’d do so for the convenience factor. A majority said they would like to use contactless at physical stores, and 84 percent said they see grocery shopping as the predominant use case, followed by pharmacies and quick-service restaurants (QSRs).

Merchants, by and large, are already technologically able to adopt contactless payments, according to Visa. Nearly all — 95 percent — new payment terminals come contactless-capable, half of all Visa’s face-to-face transactions in the U.S. take place at contactless-enabled merchants and 79 percent of QSRs have contactless-enabled terminals — as do 77 percent of pharmacies and 61 percent of grocery stores.

“We will soon start seeing the same contactless adoption trends emerging [in the U.S.] that we have seen in the rest of the world,” said Visa Vice President of Consumer Products and Head of Global Contactless Payments Daniel Sanford. “But there need to be cards in the market to drive adoption.”

The War To Win Grocery

Consumers can be counted on to buy food. In fact, 12.6 percent of what American consumers spend every year (about $7,203) is spent on procuring nourishment, according to the U.S. Census Bureau. More than 50 percent of that spending ($4,049) was on food bought at grocery stores to eat at home. That spend is typically done about 1.5 trips a week, mostly at brick-and-mortar stores. However, that is changing.

According to a survey of about 4,000 consumers that PYMNTS did in collaboration with in Vantiv, now Worldpay, consumers are getting more digital in their shopping habits. Some 55 percent said they use both online and offline channels to buy their groceries. Only 41 percent of consumers said the only way they shop for groceries now is by going to a physical store — and that was at the beginning of the year.

Roughly 3 percent of these consumers said they buy their groceries online and pick them up at the store, and 8 percent order their groceries online and have them shipped home.

Yet, as customers’ preferences are evolving toward digital, 2018 has seen the players get serious about winning at grocery, leveling up their digital delivery game. Amazon has expanded Prime home delivery from Whole Foods to over 60 U.S. cities, starting with offering curbside pickup of grocery items. Not to mention, it has formally made Prime the Whole Foods membership program and has spent the year pushing expanded discounts to Prime members.

To keep pace, Kroger has been pushing the Restock Kroger initiative: a series of investments in everything from beefing up the retailer’s private-label brands to being more price-competitive on individual grocery items, and even to investing more into its online order, pickup and delivery capabilities.

Also looking to keep pace in the grocery delivery game, Target paid around $550 million for same-day shipping firm Shipt, and has been rolling it out across the U.S. all year. CEO Brian Cornell noted that Target will continue to expand its “order online, pickup in-store” (or in parking lot) in 2019.

Grocery has been one of Walmart’s leading revenue drivers in 2018 — momentum it built from to expand its curbside pickup offering to over 2,000 stores by the end of the year, with plans to provide grocery delivery (through Instacart and other partners) to 40 percent of American households by the end of 2019. Going forward, the store is currently testing plans for a drive-up-only grocery store.

None of this is surprising, as Walmart has a big incentive to keep the grocery home fires burning — more than half of its sales are via the grocery aisle. According to the PYMNTS Walmart Whole Paycheck Index, its overall share of grocery has remained flat while Amazon’s has increased over the last several years, accelerating since its Whole Foods acquisition in 2017.

“It’s truly about being an omnichannel merchant — making it convenient for the consumer to buy things wherever they want to buy them, and to get them whenever and however they want them,” Karen Webster wrote of the looming war for grocery dominance. “The implications for grocers — and the ecosystem that supports them — seems clear.”

Alexa Goes From Echo To Everywhere

As of September 2018, Alexa was working through 20,000 devices, had sung Happy Birthday millions of times to consumers and told over 100 million jokes. A consumer wanting to interact with Alexa has over 50,000 skills to choose from, and those interactions will likely be happening in a wide variety of contexts — because, in 2018, Alex was… well, everywhere.

From a custom microwave to new and improved Echo buttons, to a line of smart houses that come built from the ground up with Alexa-controlled systems (think Wi-Fi, home security, doorbell and light), and an appointment with an Amazon Expert to customize the smart home experience and offer activation support, Alexa was on the go in 2018. That is, in ways both big and small, as voice continues to evolve from technological curiosity among early adopters to an increasingly central part of consumers’ commerce lives.

In August, Amazon launched an open source release of the Alexa Automotive Core SDK (Auto SDK), enabling automakers to integrate Alexa voice control into a car’s infotainment system. The Auto SDK brings Alexa to in-car dashboards for many common hands-free, voice-control tasks: playing music, providing turn-by-turn directions from native navigation systems, helping people find local businesses and making phone calls.

In addition, Auto SDK will be able to complete tasks that Alexa can do in a smart speaker, such as control smart home devices, check the weather and launch Alexa skills. The Auto SDK was the first official development kit Amazon made available to developers — though it is worth noting that Ford, Toyota, Mercedes-Benz, Hyundai and General Motors have already incorporated Alexa or some Alexa skills into their vehicles.

Alexa also reportedly made early steps into developing the platform for full healthcare. According to an internal document, a division called “health & wellness” is working through regulations and data privacy requirements laid out by the Health Insurance Portability and Accountability Act (HIPAA), with a focus on making Amazon’s Alexa voice assistant more useful in the healthcare arena.

If Amazon’s recently released Christmas sales figures are correct, Alexa is heading into 2019 looking strong. The best-selling Amazon devices during the holidays were the all-new Echo Dot, Fire TV Stick 4K with all-new Alexa Voice Remote and Echo.

Walmart Goes Big And Global

Walmart’s biggest global play this year was doubtlessly its $16 billion acquisition of Flipkart.

“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of eCommerce in the market,” said Walmart CEO Doug McMillon in a statement.

With the buy, Walmart secured its foothold in one of the world’s fastest-developing markets — and beat Amazon out on a purchase for which it has been hoping. However, while Flipkart was the biggest example of Walmart thinking global this year, it was far from the only one. Walmart also purchased Cornershop, which offers crowdsourced, on-demand delivery in Chile and Mexico. Through the service, consumers can order goods from pharmacies, supermarkets and specialty food retailers.

In China, Walmart has worked closely with Tencent. The two inked a deal with Tencent’s WeChat Pay to make it available for use in all of Walmart’s stores in the western region of China. The two firms announced plans later in the year to bring more WeChat “mini programs” into Walmart. One, for example, allows customers to scan and pay as they go, using Walmart’s digital app and their phone camera as a scanner. Walmart also capped off its global year with an eCommerce opening with Rakuten in Japan.

While Walmart is expanding in the physical world, its digital ambitions continue to grow as well. Walmart expects its digital growth will end 2018 at over 40 percent growth for the year. In addition, it has brought PayPal Cash into stores and expanded its grocery delivery footprint with Instacart. This year also saw Lord & Taylor’s online opening on Walmart’s website, and Walmart beginning to lean into the home decor segment with the purchase of Art.com.

“This announcement is just another example of how we’re establishing Walmart.com as a specialty retail destination for the home — giving customers the inspiration and confidence to make a beautiful home possible for everyone. I’m so excited to welcome Art.com as a part of that mission,” said Anthony Soohoo, SVP and group general manager for Walmart U.S. eCommerce.

Sears Signs Off After 125 Years

With years of slowing sales, disappearing foot traffic, deteriorating stores, sell-offs of brands and real estate, and a series of emergency infusions of cash to keep it afloat, it was not a great surprise when Sears announced that it was filing for bankruptcy.

After more than 12 decades in business, and decades of being America’s largest retailer (before being displaced by Walmart in 1991), it’s hard to imagine a world without Sears — particularly since it is survived by businesses it created, like Allstate insurance, Discover and Coldwell Banker real estate.

Sears’ ultimate fate post-bankruptcy, and whether it will perhaps continue on in a very diminished state, remains up in the air. Prior to the Chapter 11 financing, lenders were pushing for a full liquidation of the enterprise via Chapter 7 bankruptcy, though that did not happen. In addition, some of Sears suppliers, notably Whirlpool, have asked for their merchandise back and demanded that it “refrain from selling, disposing or using … for any purpose whatsoever” the merchandise it received after its bankruptcy filing.

However, efforts to save Sears are not quite exhausted as of yet. According to reports, ESL Investments, headed up by Sears Chairman Eddie Lampert, is looking to purchase 500 of the retailer’s stores with a $4.6 billion proposal. With the proposal, ESL Investments is looking to provide a $1.8 billion “credit bid,” the assumption of approximately $1.1 billion-worth of liabilities and an asset-based loan facility with $950 million in cash.

“ESL Investments continues to believe in Sears Holdings’ immense potential to evolve and operate profitably as a going concern with a new capitalization and organizational structure,” the firm wrote.

Sears is also reportedly considering offers from liquidators.

Digital And Omnichannel Dominate

“Go big, or go home:” an expression that everyone has heard at least 100 times in their life (and probably used moments before doing something loud and attention-getting). This year, though, offering a novel twist on the concept, consumers both went big and stayed home. Foot traffic in U.S. stores — as measured over Thanksgiving and Black Friday — was down year over year.

However, swipes and clicks of digital buy buttons were on full display.

According to the 1,100 or so people surveyed by PYMNTS the day after Black Friday, roughly 28 percent of people purchased items using both online and in-store methods. Furthermore, we found the higher the income, the higher the likelihood that folks would be truly omnichannel on Black Friday.

Those who embraced dual-mode shopping spent more than $600 — leagues above the $200-plus that had been spent by shoppers who opted for either online or in-store, but not both. Amazon was a favored shopping destination for 65 percent of those polled, and convenience dominated the reasons for online shopping, no matter who owned the site — cited as the top reason by 78 percent of shoppers. About 49 percent of online traffic on Black Friday was generated by smartphone.

The Black Friday results dovetail with the results of a September PYMNTS study of 4,900 consumers. In that study, we found that for 83 percent of consumers, stores are no longer places of discovery, but where they go to buy after using their smartphones to scout first. Only 16.5 percent of consumers in the U.S. now use the physical store exclusively to discover what they want to buy. A decade ago, that figure was nearly 100 percent. Only 79 percent of the weekday consumers we studied made a purchase in a physical store, including for food and groceries.

As 2018 draws to a close, the headline for consumers — particularly high-spending, affluent consumers — is convenience, and there is no one right channel. There is only the choice to make it as easy for consumers to move between and through channels as seamlessly as possible.

Those that provide those experiences keep their customers. Those that don’t … well, Sears is a 125-year-old cautionary tale about how quickly the mighty can fall in the face of resetting consumer preferences.

The year 2018 was a busy and wild ride for payments and commerce — as mobile and omnichannel came into their own, and retail players big and small raced to keep up with that seismic shift happening underneath them.

As for next year? What big stores will shape the headlines?

Well, we don’t know just yet, but we’ll keep you posted in real time as they unfold.