Retailers Digitizing Daily Operations: From Mobile Payments to E-Receipts
When asked last year to name one technology that we rely on today that would no longer be around in 10 years, Microsoft CEO Satya Nadella responded: “fountain pens.”
Some may question Mr. Nadella’s prediction of the imminent demise of pen and paper. Indeed, such prognostications date back more than 40 years to a 1975 Business Week article, in which analysts first coined the phrase “paperless office” and predicted that use of paper would begin to decline immediately and “by 1990 most record-handling will be electronic.” Yet our collective reliance on paper has hardly diminished. In fact, it’s higher than ever, which has led some to dub the thought of going completely paper-free a “pipe dream.” Others have pointed to scientific and even evolutionary reasons for why a drastic reduction in paper consumption is – at least in the near term – unrealistic.
But when it comes to the retail industry in particular, perhaps Mr. Nadella’s prediction has more credence. Consider the following ways that retailers are – or are planning on – digitizing traditional paper processes in their day-to-day operations, and the uniquely powerful incentives for implementing such changes:
- Electronic Receipts: Instead of printing out paper receipts, many retailers now give customers the option of having their receipt e-mailed to them. Apple was seen as revolutionary when they introduced this service over ten years ago. Big box stores like Wal-Mart and Home Depot have followed suit in recent years. But according to a recent study, still only 10% of retailers offer e-receipts. However, that percentage is expected to increase to 70% over the next three years. Digital receipts at the most basic level provide a cost savings to retailers. Each receipt costs about penny to print, which may not seem like much, until you take into consideration that in the United Kingdom, for instance, over 11 billion receipts are printed annually. It has been estimated that 9.6 million trees are cut down each year due to the demand for printed receipts in the United States alone. Transitioning to e-receipts therefore presents a major environmental benefit, an important factor for a customer base that is increasingly “sustainability-conscious.” But perhaps the strongest incentive for merchants to adopt e-receipts are the marketing opportunities they provide. As one study found, 83% of retailers who offer e-receipts identified the ability to collect customer e-mail addresses as the primary factor for implementing this technology. As that same study explained, e-receipts are “an innovative communications vehicle for retailers that offer limitless marketing possibilities, providing deeper insight into consumer shopping habits, which can lead to more targeted advertising mailers, promotions and emails.”
- Mobile Payment Applications: Mobile payment apps like Apple Pay and Android Pay continue to evolve at a rapid pace, allowing customers to replace their wallet with their smartphones when they go shopping. These technologies can make the point-of-sale processes more efficient and convenient, thereby improving the in-store experience for customers. They also have a cost savings component by reducing the credit card fees paid by merchants. But as we discussed in a recent post, perhaps the biggest incentive for retailers to replace traditional paper currency with mobile payment apps is the ability to track customer spending habits. Adoption of mobile payment technology – both by customers and retailers – has been slow. But many see 2016 as the year when use of these technologies will take off.
- “Beacon” Devices: The Wall Street Journal last year discussed how paper circulars and coupons were one of the lone holdouts in today’s increasingly digital world. But even retail’s reliance on paper coupons may be nearing an end thanks to a technology dubbed by some as the “beacon of hope” sand “savior” for brick-and-mortar stores. “Beacons” are small, battery-operated wireless devices that transmit messages and offers to nearby smartphones. When a customer walks by or into a store that has one of these devices installed, their phone might buzz with a welcome message or a targeted coupon. The hope among retailers is that these low-cost “beacons” will create a more personalized shopping experience and replace newspaper circulars as the most effective means of drawing customers back into their brick-and-mortar locations. Traditional retailers like Macy's only began installing these devices on a large scale during the 2014 holiday season, but by the end of 2015 “beacons” were seen in the industry as “on fire.” And shipping trends as well as widespread roll-out of “beacon” implementation strategies indicate that 2016 will be another big year for this burgeoning technology.
Each of the above technologies represents an example of how the retail sector is uniquely poised to reduce its use of and reliance on traditional paper processes due to the strong incentives for doing so, such as cost savings, improved in-store experience and enhanced opportunities for customer data collection and targeted marketing efforts.