Mobile's Pressure on Traditional Retailing is Real

by George Peabody 0

As I talk with merchants, processors, and othersin the industry, I sense the perhaps wistful desire to limit thescope of mobility’s impact. “It’ll affect marketing but notpayments.” “Mobile is changing how we connect to our customers butnot having an impact on enterprise operations.” “Mobile’s givingour competitor fits but not us.”

Let’s be clear. Mobility changes everything -how we communicate asindividuals and how enterprises relate to their customers. This isthe rise of the Internet all over again. And then some.

There’s no dearth of news, never mind rumors, about NFC and a floodof speculation on how it will arrive, who it will affect, and howconsumers will use it. I’ve added a drop or two myself. We are allwaiting for the flood of NFC devices to hit. Next year, we’ll seewaves of repercussions ricocheting throughout the payments andretailing ecosystems.

But we don’t have to wait for NFC to observe the impact of mobiledevices on retailers. Weaponized consumers wielding smartphones andbarcode scanning price comparison tools are stalking merchantaisles and gathering instant pricing data from competitors.
One of the leading apps is Amazon’s own. Fire it up, scan theproduct code, and you instantly have the Amazon price, all of theproduct information, user recommendations and ratings, and theopportunity to make a One Click purchase if you can wait a few daysfor the product to arrive.

This new stream of clicks-at-bricks is putting real stress on thelong established physical goods retail model. While the retailingform factor has evolved over the years, from small shops on MainStreet, to malls in the suburbs, and big box stores at highwayintersections, the fundamental approach hasn’t changed. Theretailer has to acquire the land, the building, the staff, and theinventory and keep the whole thing operating and do that everywhereit wants to compete. It’s expensive and, in this networked age,inefficient.

Amazon has fewer than 100 locations, all massive warehousedistribution centers, allowing the firm to optimize delivery speed,shipping and inventory costs. Its only store fronts are thesoftware and servers needed by its online, mobile web, and apps.What it doesn’t stock, it outsources to thousands of sellers.

Now consumers are taking Amazon into the physical stores of itscompetitors. And winning business or driving down merchant marginswhen the consumer gets the Amazon price in store.

This is not good news. Amazon was mentioned as a major competitorto electronics specialist Best Buy which just turned in a dismalfourth quarter performance, a 16 percent drop. While the largestgeneral retailers -Wal-Mart Stores, Costco Wholesale -were alsomentioned, Amazon’s model has contributed to the pressure on whathas now been a very successful big box retailer.

(Of course, there are exceptions. Amazon’s tool does cut both ways.Shopping for a handheld vacuum cleaner two weeks ago, I foundKmart’s offer was a lot cheaper than the online giant’sprice.)

The efflorescence of mobile coupons, loyalty schemes, rewardspoints, and other incentives will bloom in the coming year. Many ofthe best will be augmented by NFC capabilities. Payments willfollow soon thereafter. As that happens, business models will haveto evolve in response.