The Green Sheet Online Edition
January 11, 2016 • Issue 16:01:01
Insider's report on payments:
Online, mobile gaining on brick and mortar
The Internet now rivals malls as U.S. consumers' preferred place for holiday shopping. I realized this while talking with my brother in the lead-up to Christmas. "I did all my shopping online, never once had to drive to a mall," he said in early December.
I was surprised because my brother is very hometown oriented. He's mayor of the town where he lives, and I often tease that he rarely ventures outside his ZIP code. He's friendly with local merchants; in fact, many are sponsors of youth basketball leagues he organizes. So what was the draw for him to shop online instead of at local stores or malls? Time. "I just didn't have the time to spend looking from store to store," he said. "This way I got to shop from the comfort of my living room at the same time I was watching a game."
Apparently, my brother wasn't alone. In the run up to the 2015 winter holiday season, the National Retail Federation reported that 121 million shoppers were expected to go online on Cyber Monday, the Monday following Black Friday. Nearly one in four (29.6 million or 24.4 percent) were planning to use mobile devices to shop, while the remainder expected to use PCs.
When I went shopping on Christmas Eve in the downtown area of a nearby city, I was shocked to find some stores had no shoppers at all. Looking around one shop I inquired about business. "We've had a pretty good season," the shopkeeper said. "We've had a lot more online orders this year. That helped."
It was a good holiday season, all in all, for retailers, with the NRF expecting the average consumer to spend nearly $806 on gifts, decorations, food and other holiday purchases. Most of that money was expected to be tendered as cash or with debit cards, at 38 percent and 31 percent, respectively, according to Bankrate Inc. Just 22 percent expected to put the bulk of their holiday purchases on credit cards, Bankrate said.
Meanwhile, a report in the Wall Street Journal revealed that retail sales at physical stores the weekend before Christmas were down between 6.7 percent and 10.4 percent from 2014 sales figures. It wasn't all bad news, however. MasterCard Worldwide reported that overall retail sales were up 7.9 percent for the 2015 holiday season, driven largely by 20 percent growth in online sales.
Mobile and online shopping converge
Of course, these days a lot of folks are accessing online shopping via mobile devices. "With so many consumers relying on their smartphone for everything from travel to email, the convenience of enhanced mobile shopping appeals to consumers and has changed who and where people shop," said Pam Goodfellow, Principal Analyst at Prosper Insights & Analytics.
A recent report from Aite Group LLC – Mobile Online Payments: Disruption and Opportunity – predicted that when combined with mobile shopping, the total annual volume of online purchases will reach nearly $6 trillion globally by 2020. Twenty-eight percent of that money will be spent using mobile devices to get online.
Experts agree the convenience of new payment alternatives, an explosion of mobile apps and websites, and the maturing of the millennial generation are key factors pushing global growth in online buying. "There has never been a convergence of technology, economics and demographics like this one," said Thad Peterson, Aite Senior Analyst for Retail Banking and Payments. Many things remain up in the air, Peterson added. "The only thing certain is that mobile online payments will change commerce for good," he said.
Millennials are the largest generation in the United States today, and they use smartphones more than any other generation. Their spending habits, like their social habits, have had a ripple effect on other generations and have set the tone for future market trends. Survey data and anecdotal evidence both point to strong attachments between millennials and their smartphones and tablets.
Zogby Analytics, for example, reported that 96 percent of millennials consider cameras crucial to their smartphones. Here are other compelling data points from that survey, which was conducted on behalf of Mitek Systems Inc., a San Diego firm that pioneered mobile photo imaging.
- 68 percent would rather snap a picture using their mobiles than to type information
- 40 percent would like more mobile capture (using a mobile camera instead of entering information manually) in banking
- 28 percent want to enroll for everything – financial accounts, loyalty programs, etc. – by taking photos of their driver's licenses
- 83 percent believe mobile capture will be part of all mobile transactions in five years
While mobile access has made significant gains in sales and payments, the consultancy Gartner Inc. suggested in a 2015 report that businesses are falling behind the curve in terms of customer service when it comes to the mobile channel. In fact, Gartner expects that by 2017, one-third of customer service interactions will still require the support of human intermediaries.
"Marketing may fill the sales funnel, and the sales department can close a deal, yet it is the overall impression of the enterprise generated by the quality of customer service that differentiates one enterprise from another," said Michael Maoz, Vice President and Distinguished Analyst at Gartner. "Translating this general and departmental customer engagement concept into operational components across the enterprise is transforming the definition of customer service from an isolated function into an enterprise objective delivered across all points where the customer 'touches' the business."
Maoz noted that businesses must understand when human engagement trumps online service. "Businesses need to focus on what key customer experiences would benefit from customer engagement with a human," he said.
Also, driven by the fast growth of mobile devices and companies' sense of urgency to deliver excellent customer experience as a competitive differentiator, video chat for customer interactions is rapidly gaining in popularity. Gartner sees this trend continuing as well. "Video chat provides customers with a richer sense of presence, personalized experience helped by coordination of communication and the support of emotional expression, and the real-time sharing of content," said Brian Manusama, Research Director at Gartner.
Patti Murphy is Senior Editor of The Green Sheet and President of ProScribes Inc. She is also the founder of InsideMicrofinance.com. Email her at email@example.com.
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