Smartphones Ringing Up the Retail Experience


In the 1980s, mechanical cash registers, the century-old devices used to tally retail transactions, began to be increasingly replaced with electronic versions for selling goods and services.

Today, their electronic counterparts are increasingly being put out to pasture, relegated to retail retirement homes.

Smartphones are taking over the retail experience, allowing customers to buy goods and services in stores, and in many locations formerly unheard of as viable retail locations. In addition, cellular devices in recent years also are allowing customers to comparison shop by simply scanning a bar code with their devices.

“The iPhone has more power on it by orders of magnitude than the spacecraft that we sent to the moon,” said John Mayleben, senior vice president of technology and development for the Michigan Retailers Association. “Clearly, we have more power in our hands with smartphone and tablet devices than we have ever had before and that is trickling down into the point-of-sale experience.”

Apple is leading the way in the utilization of smartphones and tablets in the retail experience as all of their 412 worldwide stores located in 14 countries. These enable customers to cash themselves out on their iPhones through the company’s Easy Pay app. Similarly, Quick Response (QR) Codes which are now being placed on retail packages, kiosks, billboards and at bus stops, train stations and many other locations and media, enable consumers to make on the fly purchases and/or receive background information on products and services.

Mobile retail sales from smartphones and tablets
On a busy Monday at the Twelve Oaks Mall’s Apple Store, many customers throughout the day simply walked in and walked out without ever talking to a sales representative. That’s because they are using Apple’s Easy Pay app on their iPhone to pay for on-the-shelf products. The purchase process at an Apple Store is simple. After opening the Easy Pay app on their iPhone, customers simply scan the bar code and the product price is charged to their credit card they have attached to the app. It’s that simple, resulting in waiting in line becoming a thing of the past for many Apple customers.

“My dad does it all the time,” said Chris Van Howe, a sales rep at the Twelve Oaks store.

Apple’s sales representatives also have the ability to cash out customers on their iPhones using Intuit and Square hardware and software and at a number of iPads located throughout the store. At Twelve Oaks, only one traditional cash register remains for the infrequent cash purchase.

AT&T is also getting in on the act. The telecommunications company’s chairman, Randall Stephenson, has a vision which he hopes will see consumers reduce the items that they typically take from their homes when they depart for the day, from three -“ wallet, keys and smart phones -“ to one -“ just a smart phone. App’s like General Motor Corp.’s Remote Link Mobile App will be able to unlock and start all of the automaker’s 36 models equipped with OnStar in the 2014 model year, and the emergence of mobile point-of-sale technology are quickly making Stephenson’s vision a reality.

AT&T is beginning to eliminate sales counters and cash registers from its 2,300 U.S. stores. The telecommunications giant already has replaced all of its traditional registers with tablets and smartphones at its 10,000 square foot flagship location on Chicago’s Magnificent Mile with plans to do the same at 15 to 20 more locations by the end of the year and at additional locations in 2014.

Not only is AT&T opening up more retail space with their mobile point of sale devices, their system has become a living advertisement to generate sales to other retailers interested in incorporating similar systems on their sales floors.

“We are a wireless company first and foremost,” said Paul Roth, president of retail sales and service at AT&T. “The mobile point of sale system isn’t just a technology we put on a tablet, we’re actually experts in tablets, selling more than anybody in the United States. If you want to use a tablet in your business and you want to understand how to put a mobile point of sale system onto a tablet for your retail store, then AT&T is probably the best partner that you can pick.”

With mobile point of sales systems on the rise, Juniper Research, the British-based telecommunications research firm, estimates that mobile point of sales purchases will grow to $180 billion by 2017.

Minimizing traditional cash registers results in additional retail space being opened up for additional products on the sales floor, providing a financial boon for stores and chains moving to mobile point of sale technology. According to Ken Nisch, chairman of Southfield retail consulting firm JGA Inc., cash registers take up between 100 to 200 square feet of space.

“If retailers can get that space back for merchandise, and they’re earning $1,000 a square foot a year in sales, they stand to pick up $100,000-$200,000 in sales out of a space that was used for checkout before,” he said.

Seizing on the potential uptick in sales, a growing number of retailers are in the process of replacing cash registers with tablets and smartphones and implementing self checkout. JC Penny, Puma, Barney’s and Sephora represent a growing number of retailers that are replacing cash registers with smartphones and tablets, and other retailers, such as Nordstrom, which is planning to pilot wireless payments in its stores early next year, aren’t far behind.

RFID labels emerging as next frontier
The Radio Frequency Identification (RFID) label, in particular, is the latest technology emerging on the mobile point of sale and retail information technology front, which in addition to enabling customers to cash themselves out, can provide a wealth of additional information for consumers and added security that is unavailable on bar codes.

RFID labels use radio-frequency electromagnetic fields to transfer data. In addition to tracking inventory, the labels accommodate mobile point of sale purchases without an enabling app. They can transmit additional information such as product specifications, details, coupons and promotions. They also can activate an alarm if a customer attempts to steal an item. Plus, it can be scanned by multiple devices simultaneously, all features not available with traditional bar codes.

Radio Frequency Identification labels could replace bar codes.

Because of the superior capability over bar codes, the RFID industry is expected to surge to more than $20 billion by 2014, up from $6.37 billion in 2011, according to the research report, “Global RFID Market Forecast to 2014,” by market research solutions provider RNCOS E-Services.

According to Mark Roberti, editor at the RFID Journal, the leading source of news and in-depth information on RFID and its many business applications, electromagnetic technology could have a profound and secure impact on the retail purchasing experience. “You could see credit cards going away, and even potentially cash as your phone is secured with facial recognition software, a pin and other multiple levels of security before you pay with a credit card application on your mobile device. It would be much more secure than conventional credit cards, which are cloneable especially if they’re matched right.”

Although more superior capability exists with RFID labels versus bar codes, there are a handful of disadvantages. This includes their inability to be distributed electronically and additional cost to produce. Unlike Universal Product Codes (UPC), the twelve digit numbers which appear on bar codes which can be obtained for an annual fee well under $1,000 and printed in quantity by the retailer for pennies, each RFID label must be individually produced with prices ranging from as low as 9 cents to as high as $5 per label, depending on complexity. Due to these cost implications, Roberti expects higher priced items to be the first to include RFID labels until the cost to produce them comes down.

This hasn’t stopped two low-priced retailers from experimenting with RFID. Dairy Queen has partnered with VivoTech to provide its customers with RFID labels that transmit promotions and coupons for their loyalty and reward programs to their cellular devices. Another partnership, between 7-Eleven and MasterCard, is conducting a trial touch-free payment system in which select customers are issued a Nokia 3220 cell phone that can make wireless purchases through their MasterCard accounts at any of the retailers’ 50,000 worldwide locations.

7-Eleven is one of eight of the country’s top 20 retailers that are part of the Merchant Customer Exchange (MCX), a consortium of nearly 50 U.S. merchants focused on offering consumers a customer-focused, versatile and seamlessly integrated mobile-commerce platform.

MCX strengthened its leadership in July by naming as it’s CEO former Barclaycard U.S. Managing Director Dekkers L. Davidson, an executive with more than 25 years experience in the financial services and mobile industries.

“The strength of the customer experience, the breadth of acceptance, and the quality and security of technology the MCX solution will offer provides MCX with a historic opportunity to improve the shopping and paying experience for customers,” said Davidson at the time of his appointment. “I’m excited and honored to have the opportunity to lead this initiative for such a prestigious group of merchants. Great things are ahead.”

Quick Response Codes enabling on-the-fly purchases
Davidson’s organization will be developing strategies and systems for the expansion of technologies that enable mobile point of sale and information distribution with everything from bar codes to RFID labels and Quick Response Codes (QR), another technology that is emerging in the retail environment.

Quick Response (QR) Codes are two-dimensional bar codes that, like RFID labels, have greater storage capacity than bar codes with the additional benefit of being less costly to produce than the electromagnetic labels. Not only can QR Codes enable mobile point of sale purchases, they can transmit detailed product information by simply scanning them to a consumer’s smart phone.

The codes were originally invented in 1994 by Denso-Wave, a subsidiary of Toyota, to track vehicle parts during the manufacturing process. Prior to their use in retail, QR codes began to be engraved on Japanese tombstones in 2008, supplying visitors with detailed information on the deceased and to and track the number of visitors. Three years later, the first commemorative coin containing a QR code was issued by the Royal Dutch Mint to provide background on its 100- year history.

Smartphones radically changed shopping habits, says John Mayleben of the Michigan Retailers Association.

QR codes are now appearing in increasing numbers on product packaging, a number of forms of media including billboards and magazine and TV advertising, along with previously unheard of locations such as bus stop, train and subway station kiosks, enabling consumers to make on the fly purchases, receive background information on products and services or simply to drive website traffic.

Peapod, the online grocery delivery service, drove traffic to their website earlier this year by placing kiosks with QR codes in East Coast subway and rail stations.

“It really put our mobile app on the map and the whole concept of being able to grocery shop anytime, anywhere,” said Peg Merzbacher, director of marketing at Peapod in Chicago. “It was a breakthrough marketing initiative that really communicated that very well. We had a lot of visitors to our website and saw good downloads. From a realistic shopping perspective, nobody in their right mind would actually ever really shop off those because there was only room for 50 items and we carry 11,000.

“The concept was really a breakthrough to see a realistic grocery shelf in strange places like a subway station in Washington, DC, or a commuter rail station in Long Island. People were like, ‘Whoa, I guess I really can shop for groceries while I am waiting for the train,'” Merzbacher said.

Wal-Mart has also been placing kiosks with QR codes at non-traditional locations to test consumer response for the opportunity to make instant purchases. Earlier this year, the nation’s leading retailer teamed up with Procter & Gamble, placing QR codes for the consumer goods company’s products on 50 bus shelters in Toronto. The codes enabled commuters to make instant purchases. The four-week test program was an encore to a similar marketing initiative Wal-Mart made with Mattel in Toronto during last year’s holiday season.

On the retail front, a number of on-the-shelf products at Apple’s worldwide stores combine bar and QR codes to provide customers with information and mobile purchase capability. One such product, the Philips Hue personal wireless lighting system, enables customers to learn more about the product by scanning the QR code with their smartphones, and purchase the product directly from their iPhone by scanning the bar code without ever speaking to a sales representative.

Target, another member of MCX, takes it one step further with an app that enables customers to scan a QR code into their smartphones from select items in their stores, purchase the product from the Target website and have it shipped anywhere for free. The Target approach combines the retail and online shopping experience together in what is known in the industry as omni-channel shopping.

The approach should pay huge sales dividends for the nation’s third leading retailer. Omni-channel shoppers spend significantly more than in-store-only shoppers, including a whopping 71 percent more during the holiday season according to Deloitte’s annual Christmas Shopping Survey.

“The smart retailers early on have adopted an omni-channel vision that says you can buy online and pick it up in-store or you can see it, feel it and touch it in the store, then go to a sales associate and they’ll ship it with gift wrapping,” said Joe Welter, a partner in Deloitte’s retail practice.

‘Smart’ comparison shopping
Amid all of the emerging technology is a not-so-new comparison shopping technique that has been practiced nearly as long as smartphones have been in consumers hands -“ showrooming — the practice of testing out a product at a retail outlet, scanning the bar code for competitive pricing information and, in many cases, returning home to make a purchase online for a lower price.

Many retailers have fought off showrooming by offering to match the lower price, or in the case of Target, providing free shipping if the purchase is made via a mobile device after scanning the QR code from the in-store item.

Regardless of how retailers adapt to consumers buying habits, it is clear that cash registers are quickly becoming a thing of the past, as smartphones are taking over the retail environment. Successful retailers will adapt with innovative practices that will keep customers visiting their stores while unsuccessful sellers may end up alongside cash registers in the increasingly crowded realm of retail retirement homes.