|Issue:||Europe I 2014|
|Topic:||Mobile phones will revolutionise the high street|
Neil Garner founded Proxama in 2005 (then called Glue4 Technologies). The business focused on creating services that link people and brands using consumer technologies. In 2008, the company was rebranded as Proxama with a focus on the applications of mobile, smartcard and NFC technologies. Neil passionately believes in using emerging technologies to create valuable services for people.
Prior to founding Proxama, Neil ran a division of a niche consultancy, Consult Hyperion, where he led the systems implementation teams for a number of ground breaking products including Vodafone’s m-Pesa, MasterCard’s PayPass, Sky and Barclaycard’s SkyCard and American Express Blue card.
Growth of online retailing leaves the High Street struggling to survive. NFC based mobile apps can come to the rescue. NFC provides immediate consumer interaction, which is similar to traditional loyalty cards. While Bluetooth can alert consumers to offers in the vicinity, NFC helps to close the transaction. By tapping on a poster, consumers can take advantage of offers and redeem ‘coupons’ on the spot. NFC technology is now built onto advanced chips, and retailers’ reticence is overcome by the GSMA publishing standards and recommendations for use of NFC at the point-of-sale.
According to a 2013 Channel 4 Special Report, one in six shops across the UK lies empty as a result of the 183 brand casualties that have occurred since 2011. This remarkable change has seen high profile stores such as HMV, Blockbusters and Woolworths either close down completely, or significantly reduce in numbers. According to the Centre for Retail Research this rate will not slow down and estimate a further 60,000 shops will disappear in the next five years. There have been reports of m-commerce being the saviour of the high street as it helps to increase engagement and drive sales. With 75% of retailers running their own mobile optimised e-commerce sites or smartphone apps, it is becoming clear that they are attempting to use technology to save their physical stores. However, they are not doing enough; most of these sites are promotional services or store locators with few retailers offering transactional m-commerce.
The impact m-commerce will have on the high street has been overstated. Most retailers that have created an m-commerce site have done so by adapting their e-commerce sites to fit onto a mobile phone. M-commerce, in this sense, does not provide the physical world engagement the high street needs. NFC (Near Field Communication) technology, on the other hand, brings together the digital and physical worlds, providing a better use of mobile phones and revolutionising the high street. Not only does NFC offer customers a quicker, more convenient way to pay, it can also increase customer engagement and loyalty, offering retailers the opportunity to share offers directly with customer on their phones, making redemption easier.
Building customer engagement with NFC
Contactless payment cards have been rolled out in the past few years and created a common misconception that NFC can only be used for payments. However, the reality is that NFC can do so much more. If utilised correctly, the technology can help drive consumer engagement and increase loyalty, bringing customers back to the high street. In recent years, retailers have been looking for ways to convert interest into sales, and the mobile wallet with NFC can help them achieve this by closing the loop on loyalty and redemption. It allows consumers to scan special offers that they find in magazines and on posters and redeem them in-store, allowing brands to interact with potential buyers away from the checkout. Retailers can also use the technology to run in-store competitions, loyalty programmes and vouchers, increasing the interaction between customers and the high street.
For example, Orange launched its Quick Tap Treats (QTT), an NFC voucher and loyalty service which was delivered across EAT stores. The campaign enabled customers with Orange NFC-enabled phones to tap posters located in EAT stores and they were automatically entered into a ‘wheel of fortune’ spin to win a treat. This not only increased customer loyalty in EAT stores but three out of five consumers also purchased other additional items simultaneously when collecting their treats, highlighting the added value of NFC technology and how it can benefit retailers. Marketers and advertisers can also measure the success of these campaigns in real-time, giving them the opportunity to either rethink promotions or place more investment in campaigns, depending on their success.
Despite this, the majority of retailers are currently only aware of the use of NFC for payments and not about the engagement possibilities that it offers. This is preventing the technology from being utilised which is affecting the success of physical stores. A number of chains have introduced vouchers in recent years to help increase loyalty. These vary from the Nando’s Loyalty Stamp Card to the Sainsbury’s Nectar Card. Although both have been successful in increasing engagement, they place too much onus on the customer. Paper money-back vouchers can easily be misplaced or left at home and customers are not always aware of what deals are available and when. NFC technology offers a much more convenient way to store vouchers, as they are kept on an easily accessible, ‘virtual’ location on the phone, making redemptions much more straightforward. By improving customer experience, retailers can increase loyalty to their brand and help to ensure that repeated business is achieved.
The recently introduced mobile apps which are used by retailers to scan QR codes in order to redeem vouchers, still place the onus on the consumer to remember what deals they can redeem. Additionally, both retailers and consumers want the sales process to run seamlessly and having to locate specific apps on a mobile phone while at the till can cause delays. Tapping a phone on a NFC sign at a Point of Sale (POS) automatically launches individual apps, making the transaction as smooth as possible.
What is stopping retailers from embracing NFC technology?
The biggest stumbling block preventing the uptake of NFC technology is that a standard for loyalty redemption at POS is yet to be created. Without an industry standard put in place and commitment from the mobile phone companies that the system will work with all operators, retailers are hesitant to invest. Many retailers have already purchased contactless payment technology and are hesitant to spend more on other POS hardware like mobile-friendly QR-code scanners. Until this happens the full benefits of NFC cannot be realised.
However, the GSMA has already started to work closely with retailers and operators in the industry to create a common standard that everyone can adopt. The specification, which will begin to be rolled out to merchants in 2014, will make the sales process seamless. It will place generic software on SIM cards, making mobile phones loyalty-ready as well as defining what software retailers need to have on their existing contactless readers at tills. Retailers will not have to buy new technology and scanners, but could instead upgrade their existing POS with the additional software. By creating a simple, easy to apply standard, which will be borne out of discussions with retailers and operators, the GSMA can ensure that the industry is comfortable with introducing NFC technology. The GSMA will integrate this standard into mobile wallets such as those provided by WEVE, a joint venture between EE, Telefonica UK and Vodafone UK, allowing retailers to put vouchers, competitions and special offers in one, easily accessible place. It will also be possible for this NFC loyalty capability to be integrated into existing retailers’ apps, making the transition as smooth as possible to ensure that retailers can easily buy into NFC technology.
There is a view held by some that Apple’s decision to delay including NFC capabilities into its technology is a threat to the success of NFC and the impact it can have on the retail industry. Whilst Apple dominates the US smartphone market, in the UK and on a global scale, it is Android that consumers favour. According to analyst house IDC, Android holds 75% of the worldwide smartphone market, while Apple holds just 15%.With Samsung’s market share continuing to grow, there is now a genuine threat to Apple’s positioning. The majority of Android smartphones are already NFC enabled and, whilst Apple is popular with the early adopters and more affluent consumers, there is a broader base of mass market devices that do support NFC. Therefore, if Apple doesn’t become NFC compatible, it will be shutting the door to millions of potential customers and putting itself at risk.
It is worth noting that mobile chip manufacturers are starting to include NFC in the same chips that deliver GPS, 3G and 4G and therefore as the market moves ahead, Apple won’t be able to buy chips without NFC functionality in the future. This means that Apple will have to actively elect not to enable NFC on its devices, despite the chips having the capability. Therefore, the success of NFC technology and its impact on the retail industry will not be reliant on Apple’s adoption. It will certainly drive it forwards but it is not vital to the success of NFC.
Apple’s recent announcement about its Bluetooth iBeacon is seen as a competitor o NFC, when it is in fact complimentary. NFC is used for very close range secure ‘tap’ engagement while Bluetooth is used for close (personal) vicinity location based alerts, triggering a notification when a customer is near a store. Therefore, Bluetooth can help bring customers into a store, and once there, they can engage with the brand using NFC, further demonstrating how technology can help save the high street.
Embrace NFC, improve sales
With the number of high street customers and the subsequent number of stores falling, retailers need to embrace new technology to save their physical stores. Although some, such as Woolworths, have moved to an online only offering, a number of others wish to keep their high street stores alive and the mobile phone can help them do this. Most have attempted to create m-commerce sites in order to integrate their online, mobile and physical stores, but they need to be doing more. Technologies such as NFC help retailers go one step further, connecting their physical and digital stores, building new loyalty and engagement opportunities, thus helping to drive sales on the high street.