planning to up the spend in an effort to increase their visibility, social media will be a key channel for retailers to not only get their names out, but also try their hand at selling through social channels. 2016 WILL NOT BE THE YEAR OF APPLE PAY Consumers are glued to their smartphone screens in-store, but as of October 2015, only 16.5 percent of iPhone 6 users have ever tried Apple Pay. Even among those who have tried it, only about a third (35 percent) reach for their phone before their wallet every chance they get. Will 2016 be the year of Apple Pay? With consumers dragging their feet and only 34 percent of retailers planning to accept Apple Pay by the end of 2016, Apple needs to rethink its strategy. Credit cards offer the advantage of borrowing money for a big purchase, but became the new norm thanks to expertly crafted loyalty programs. The promise of points and miles leads hoards of consumers to instinctively reach for plastic for even smaller purchases on an everyday basis. In order for Apple Pay to make it big in 2016, they’ll need to start thinking more like credit card companies – what kind of loyalty programs will turn Apple Pay from convenience to natural habit? While credit cards and Apple Pay aren’t mutually exclusive, mobile payment providers will still need to think about the incentives that will drive widespread adoption. In 2016, they’ll put some money behind driving adoption in a number of ways, including strategic partnerships with big box and independent retailers alike that will offer discounts in exchange for paying a certain way, or rewards points for customers that choose to pay with Apple Pay. Android Pay has already enabled easy storage of retailers’ loyalty cards, and Google recently partnered with Coca-Cola to allow consumers to earn loyalty points directly through Android Pay vending machine purchases. As retailers develop their own loyalty programs, they’ll look to Apple Pay to follow those examples, offering seamless integration with loyalty programs or certain incentives.
2016 IS ALL ABOUT GETTING READY FOR THE GEN Z SHOPPER In just two and half years, the first wave of Gen Z – people born from the mid 1990s to early 2000s – will graduate college and get their first jobs. Armed with newfound independence and disposable income, their purchasing power is a force to be reckoned with; retailers who want to take advantage will need to start planning now. This generation grew up as digital natives, but the way they view the world and use technology is much different than the that of the generation before them. If retailers don’t already have an omnichannel strategy in place, they’re two steps behind: Gen Z has grown up in a world where the online and offline worlds exist as one, so they’ll expect nothing less from their shopping experience. They’ll expect brands to not only have a social media presence but also provide speedy customer service via social channels. It will no longer be enough to simply have a digital store: Gen Z consumers will prefer to shop brands they can access on any connected device at any time. When it comes to shopping in store, this may be the first generation that never knows a checkout line, as merchants equip their salespeople with iPads and embrace mobile point-of-sale. Understanding Gen Z habits and preferences, and knowing what motivates them, should be top of mind for retailers now. INDEPENDENT RETAILERS WILL PROMOTE LOYALTY THROUGH AMAZON-LIKE SUBSCRIPTION MODELS The world’s largest retailer relies heavily on its Amazon Prime memberships to keep customers coming back time and again. In 2015, we saw the rise of similar brand loyalty programs in the form of subscriptionbased models, like Instacart, Fabletics and Sephora, which have designed membership programs that promise discounts and perks in exchange for an up-front fee. In 2016, we can expect an expansion of upfront fee-based loyalty programs from even smaller retailers. The catch is that those merchants need to be sure the program is profitable – both
IF RETAILERS DON’T ALREADY HAVE AN OMNICHANNEL STRATEGY IN PLACE, THEY’RE TWO STEPS BEHIND.
in terms of bringing in revenue, and as a successful tool to build customer loyalty. Achieving that has been a challenge: data shows just a quarter of independent retailers currently have a loyalty program in place. However, that does not mean entrepreneurs fail to recognize the value of a strong loyalty program, with 30 percent more planning to implement one in 2016. In fact, almost a fifth of those surveyed expect their loyalty program to be one of their top two revenue generators. Providing free shipping is far from free for the retailer, and similar perks that come with the subscription model mean increased overhead cost. Smaller merchants will need to support those programs with sound business management software to ensure they prove to be smart decisions. As technology creates a new consumer experience, shoppers’ expectations for an everyday trip to the store are elevated. Whether via social networks, a wider array of payment options, or an increasingly robust loyalty offering, retailers need to keep pace to stay profitable. As Gen Z consumers flex their buying power retailers need to conceptualize and build toward what the store of 2030 will look like while simultaneously running the store of 2016.
Payment Quarterly | Q1 2016
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