PYMNTS’ 2016 Roundup: Retail Edition

There’s no doubt about it. This year has been big for retail — big on change, innovation and some surprises along the way. EMV changed the payments game in the U.S. Consumers flocked to online and mobile commerce, robots rose in food and consumer goods, and brick-and-mortar stayed relevant with retail experimentation — pop–ups, flash sales, store-in-store and showrooms.

But before we get wrapped up in all that 2017 will offer the world of payments, retail and technology, let’s take one more look back at some of the top retail stories, insights, interviews, trends and projections PYMNTS published throughout the past year.

A Retail Data Reporting Error Was Uncovered

2016 started off with a bang in the retail world when MPD and PYMNTS uncovered a few discrepancies in the retail data that many major retailers and reporting institutions were using to underestimate the impact of digital sales on brick-and-mortar sales.

“In 2016, I believe that physical retail may be facing its own ‘Kodak moment,’” wrote Karen Webster. “How many times have you heard retail experts assuage the concerns of physical retailers over the impact of online sales to their business by saying, ‘Don’t worry — 94 percent of retail sales still happen in a physical store’?”

As it turns out, the team at MPD found themselves swimming in a sea of ambiguity as it dove into the methodology that the Census was using to estimate online sales, documenting that as far back as 2010.The bottom line is that this team is pretty certain that anyone resting on their 94 percent laurels is probably in for anything but a relaxing year ahead.

Mastercard Offered Global Retail Trend Insights

In the beginning of the year, PYMNTS interviewed two Mastercard executives, Max Chion, executive vice president of global acceptance products, and Michael Cyr, executive vice president of U.S. market development, to get both a domestic and worldwide perspective on the current retail landscape.

“In a world where connectivity is a given, convenience will be table stakes,” remarked Chion.

Essential for retailers on that front, posited Mastercard, will be the integration of innovative technologies — such as the company’s own Groceries by Mastercard, a refrigerator-linked shopping app — that work in concert, saving customers time without sacrificing security.

Chion added that “interconnectivity and seamlessness will be the true differentiators” in this regard.

Data analyzed by Mastercard SpendingPulse showed that 2015 was a record year for retail spend on airlines and lodging. A major aspect of consumer vacations, according to the company, is shopping — for brands consumers know, as well as experiencing the discovery of new ones.

“This is happening within countries but also amplified across borders, particularly for categories like luxury,” said Chion. Mastercard attested that the increasing connectivity among once disparate regions of the world is a prime opportunity for retailers.

Cyr said that another of Mastercard’s survey findings is that close to 80 percent of consumer purchases are informed by a connected device. Third-party reviews posted online approached becoming as influential on shoppers’ decisions as recommendations from their family members and friends.

As a result, Mastercard predicted that in 2016, the savviest retailers would expand their digital presence through methods such as implementing buy buttons, facilitating P2P product education and describing products in more conversational language — i.e., less marketing jargon — on social commerce platforms.

Cyr and Chion highlighted that a unifying factor in all of the trends is customer experience. Retailers that focus on delivering the best experience possible, the pair concludes, will be the ones most likely to gain sales ahead of their competitors.

Unattended Retail Came Full Circle

In the February edition of the PYMNTS Unattended Retail Tracker, an interview with USA Technologies’ SVP of Marketing Maeve Duska and Senior Vice President of Sales and Business Development Mike Lawlor revealed how and why the unattended retail space is booming and what new revenue opportunities it enables.

“There was a time when market share for vending was shrinking because people were looking for a more customized experience in the store. But what’s happened with online shopping, mobile shopping, and smartphones is that retailers have come to learn that they can still deliver that customized experience to the consumer without having to have a person standing physically in front of them,” explained Duska.

Today’s consumers prefer to get what they want when they want it, and Duska noted that unattended retail enables this instant gratification — and then some. These newly modernized retail storefronts now offer 24/7 access to a variety of goods and services, just like consumers would get online — or in a physical retail store, when they were open, of course.

This makes it the perfect time for unattended retail to flourish. Whether it’s “upscale” vending machines, commercial laundry, kiosks, parking, amusements or the micromarkets that enable consumers to dine cafeteria-style by buying a variety of fresh food and beverage options on the go, it appears that unattended retail is a category that is exploding. The retail automation market is forecasted to reach upwards of $275 billion by the year 2020, with the lucrative growth rate of the retail market and a focus on ease and convenience serving as driving factors behind the expected boost.

Whether it’s Best Buy or Apple, they’ve all recognized what Coke and Pepsi have for years, said Mike Lawlor.

“They’ve put their products at the fingertip of the consumer where they work, where they play, where they transit, and, if there’s a need for that immediate impulse consumption or purchase, they’ll do it,” Lawlor said. “The consumers who have been trained by online purchases are now doing those same types of transactions at an interactive vending machine or kiosk. When the experience is good and easy there as it is online, they’ll make the purchase in a heartbeat.”

EMV Rollouts Had Retailers Eyeing Alternative Payment Methods

As EMV slowly rolled out in the U.S., ACI Worldwide’s CEO Philip Heasly explained how the change might drive them to more seriously consider alternative payment methods that bypass traditional card networks.

They’re all trying to grapple with the upside-down economics associated with experiencing big increases in sales on a small base (eCommerce) and a small drop on a much larger base (in-store sales), he said. That has merchants grappling with a change in payments focus, Heasley added. In addition to the pressure on their bottom lines, networks “gave merchants [in the U.S. two years] to adapt, instead of the three years they gave everybody else around the world.”

The end result, Heasley remarked, is that the pressure to adopt EMV has “not created a lovefest” between the retailers and card networks.

“This will increase the appetite of the physical guys (retailers) to get into much more of an alternative payment scenario,” Heasley said.

As alternative payments abound (and retailers become payments agnostic), settlement will become a game changer, Heasley believes, forcing a shift in the roles and responsibilities of the players within the payments ecosystem. The end result will be that merchant acquirers will evolve into settlement processors for the merchants themselves, casting aside their traditional role of authentication, he said.

Thinking even longer-term and in the bigger picture, Heasley offered up a scenario: “What if we were to use all the great technology that exists from a mobility standpoint, from a digital standpoint? We see how great cameras are, how great GPS is, how great multifactor authentication is.… What if we use the technology so that as soon as a consumer enters the store, the merchant authenticates you through your phone and serves up the last card you used when you shopped there, ready for payment, and offers consumers an incentive to favor one method over another?”

But New Payment Tech Also Caused Worry In the Retail Space

The August edition of PYMNTS’ Developer Tracker featured an interview with founder and CPO for Vend Vaughan Rowsell, who said that many retailers fretted about the daunting task of meeting the high expectations of today’s customers by introducing new payment technology.

“Keeping operations siloed just doesn’t cut it anymore, but it can take some people time to come around to new technologies,” Rowsell said. He added that some merchants just can’t see the bigger picture of bringing various channels together or believe it will be too hard to accomplish.

The change to cloud-based technologies, which Rowsell said fuels the creation of a true omnichannel experience, can be a tough move, especially for SMBs.

“It can take time to build up your comfort levels and competency with online, mobile and in-store selling and how it all works together,” he said.

The best thing merchants can do is just get started, Rowsell said, adding that this can be as simple as taking a step to set up a new POS system and using a mobile payments provider. Once that’s done, it’s just a matter of linking to an online store and creating a strategy for communicating to customers in the same way across all those channels.

“It doesn’t have to be a big, scary change right away,” he pointed out.

As the POS and payments space continues to evolve, the ultimate goal, specifically for Vend, is to eliminate the need for the traditional cash register altogether.

“We’re already seeing many stores go straight to using [an] iPad to serve their customers — it takes up less space on the counter and means they can take a sale on the shop floor,” Rowsell said. “And because sales can be made from anywhere across any channel, location and size of the retail store will become less of a barrier. As the pace of change picks up, we’ll also see POS and payments systems becoming integrated with even newer technologies like augmented reality and 3-D printing to bring digital elements into the physical world. It’s a really exciting time to be in retail.”

Pokémon Go Boosted Retail In A Big Way

This summer, Pokémon Go brought augmented reality (AR) to the masses and topped all kinds of gaming charts and records. Revel CTO Chris Ciabarra talked to PYMNTS about the profound effect Pokémon Go had on retail and what AR could do for retail in the future.

“We are especially wired into trending because we make it easy for our retailers to plug in and see what is having an effect — and what exactly effect it is having,” Ciabarra said. “What we’re seeing online here is that 63 percent of our customers who have Pokestops increase weekly gross sales by 12 percent. If you want to put a number on that, it averages out to about $2,000 to weekly gross sales.”

This, Ciabarra noted, is a notable difference in the bottom line for small and medium-sized businesses on tight margins that requires essentially no investment, upgrade or marketing costs — just the willingness to participate in a virtual world that someone else maintains. More or less, Ciabarra said, it was easy for their merchants to essentially hit a switch that noted they were playing the game — so to speak — so that Revel could easily track what effect it had.

And that effect, as Ciabarra noted, has been profound. Even merchants who don’t have Pokestops are seeing an upswing. Eighty-two percent of merchants reporting nearby Pokestops are seeing an uptick in foot traffic — a 9 percent increase, to be exact. Measured by the customer, businesses that place Pokestop in front of their location see an increase of 253 customers per week and an increase in daily customers of 25.

Ciabarra also noted that apart from the uptick, which was notable, it was equally interesting that the increase was across the board — no matter what vertical the Pokestop was in proximity to.

“It works well for everybody. What we’ve noted is that when that Pokestop is in there, all the people are going to that stop because they really want to catch the Pokémon. So it works for retail, it works for restaurants — it really works everywhere. Augmented reality is where the future is going, and [retailers] need to adapt their stores to that technology.”

Service, Not Sales, Became The New Human Retail Touchpoint

By the last quarter of 2016, the digital age had so fundamentally changed the way consumers engaged with retail that Webster marked the shift as a move away from the need for salespeople.

“Back in the so-called good old days of retail, salespeople used to be the only source of information consumers could consult about a product before they made a purchase,” wrote Webster. “In a digital, mobile and always connected world, consumers have access to nearly perfect information about what they want to buy.”

“The notion of going to a store to see and interact with a salesperson to learn about a product and then visit another to compare brands and prices is a relic of the past. Salespeople have been replaced by product reviews, recommendations based on buying history and ‘editors’ who curate items and selections to guide browsers to buy based on trends and the things they’d like to sell — all before consumers set foot into a store to buy — if they even do.”

“When that more educated buyer walks into a store, they have a totally different expectation for how their ‘human interactions’ should go — with a bar that’s been set pretty high by their online shopping and buying experiences. An informed buyer now wants an efficient transaction: ‘I came to get that coffee maker, your site said that you carry that brand at this price, so please get it for me.’ The onus has shifted from the salesperson in sales mode to operational efficiency mode so that the consumer can get in and out of the store with what the coffee maker they walked in to buy.”

“Retail sales no longer have to rely on the superstar salesperson to move product. They can instead invest in tools and technologies that can be used by anyone walking the floor that provide real-time information about products, offers and even the people who walk through the door.

“Service in support of sales provides a great customer experience and the incentive for the consumer to buy. Putting those tools and technologies put in the hands of consumers only accelerates this shift.”

“Retailers today are facing the reality of this shift and confronting the reality that the asset that they once held most dear — the salesperson — may not offer the competitive advantage that it once did in a world in which decisions are made before a consumer ever steps foot inside the front door…. And the lessons that it holds for all of us as we contemplate our next moves amid these subtle yet powerful shifts in how consumers search, shop and buy.”

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Stay tuned in 2017 to find out what the next year will hold in retail, FinTech, business and payments. Happy New Year!