February 6, 2017

The new rules of attraction: 7 steps to tackling retail disruption

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Fredrik Bergström

Principal Consultant, Omnichannel Commerce, Tieto

Are fintech companies immune to change? Think again says Fredrik Bergström in a roundup of key talking points at the MCP Nordic conference.

Did you notice something a little different this morning while waiting in line for your usual Cinnamon Latte? Here’s my guess: instead of paying with a card, the 20-something student in front of you at Starbucks or Espresso House just scanned her smartphone and, within a second, was on her way with a coffee and a mini-muffin to go.

“Hey, that’s cool!” it made you think. “How does it work?”

Firstly, you should be aware that the young person in the line has probably been paying for her coffee this way for months. And yes, it may well make you feel hopelessly left behind. Secondly, there was more involved in the transaction than money, coffee and a muffin: she got a 10% discount and loyalty points.

Now, let me take a moment to explain what’s really going on.

Just recently I had the pleasure of both attending and co-hosting the Mobile Commerce and Payments conference in Stockholm, MCP Nordic, which brought together experts from the worlds of retail, financial technology (or fintech) and banking. No more than a year ago this event would not have focused on retail, but interestingly enough, this year it did, which is hugely significant.

Before I give you a recap of the two-day seminar and my talk, the most important message that impressed on me, other speakers and attendees, following the sharing of insights, was this:

Retail companies are disrupting financial services. They are launching independent payment models and apps that can enhance the experience and recapture customer data and profits.

And the trend is moving fast.

Retail vs. financial services: two worlds colliding

I was pleased to see a wide range of companies participating in the MCP Nordic conference including Mastercard, Visa, Nordea, Klarna, Qliro, Trustly and Tieto – with good discussions about how to better target customer needs.

The first day of the event focused on the payment providers and we got many useful insights from hugely successful ventures like Klarna and Swish. Having more or less conquered the online space, Klarna is launching a new feature for smoother payments in brick-and-mortar stores, which I’m curious to see.

Similarly, with a refreshed feature for companies launched in late January, I’m excited to see how Swish will impact small business transactions and digital payments in the year ahead. Can the app’s impressive following of 5.2 million users in Sweden grow even bigger?

So far, the new digital era has taught us that startups can do things more cheaply and efficiently than established companies. Nowhere is this more obvious right now than in the financial sector where banks are hampered by heavy regulations and costly structures. They simply can’t compete when it comes to being nimble and attractive when marketing to a new group of consumers – so they will have to play along and find new value positions. An obvious one is providing secure infrastructure for money transactions.

This brings me to Day 2 of the event and my keynote speech.

How Digital Natives prefer to pay

I began my talk at MCP Nordic by breaking down the current disruption in retail into four factors: New Customers, New Technology, New Gorillas and the New What.

With CEM as my specialty at Tieto, looking at how customer groups are changing is for me the key to understanding why a major shift is underway and what is likely to happen.

Retailers will today divide consumers into two demographic groups: Digital Natives – people born after the widespread adoption of digital technology circa 1994, and Digital Immigrants – which refers to everyone else born before the internet started to change our lives. The aforementioned Digital Natives generally show greater understanding and acceptance of technology and, more importantly, greatly value its speed and efficiency. Their attitude is: “If it makes things easier for me, then why not!”.

Combine this with the steady arrival of new technologies including wearables, VR, AI, robotics, on-demand manufacturing, advanced sensoring systems … and the world is their oyster.

This leads us to the viral checkout.

Digital Natives will in 2017 become the world’s largest spending population representing an estimated $200 billion of the retail economy. The question I asked was, how will both these consumer groups behave when it comes to payments? I believe that the research statistics I presented give us all food for thought.

For example, when it comes to mobile self-checkout, 57% of Digital Natives are positively inclined toward this payment service as opposed to 33% of Digital Immigrants. You may have also read about Amazon testing a supermarket in Seattle where customers simply walk in, grab their groceries and walk out.

Is it a robbery? No, it’s the digital revolution.

All the items are automatically registered by sensors and the bill is charged to the customers’ accounts in the Amazon smartphone app. No lines. No waiting. Easy.

One of the leading technologies enabling this type of payment system is RFID Checkout which, according to surveys by WD Partners, will attract 58% of Digital Natives and 39% of Digital Immigrants. And so it continues. Fingerprint scanning, retinal scanning, BOPIS (Buy Online, Pick Up in Store) drive-thru, beacon technologies… there is, overall, a 20% or higher difference in the trust and acceptance rates between these two groups.

The challenge: 7 responses to retail disruption

The point of joining forums like MCP Nordic is to not only examine industry trends together but to share ideas about how to address challenges. My humble contribution came under the final section of my presentation.

In a world where customers may no longer feel inclined to visit retailers’ physical stores, the opposite scenario must become a reality. Retailers need to be present wherever customers are.

With this in mind, I outlined seven steps retailers need to take in order to adapt:

  1. Create an experience surrounding your products: Through research, Sonos knew that most customers discovered their products at friends’ houses. Solution: design Sonos stores like an apartment.
  2. Add customisation to your offering: Expectations are on the rise. Consumers will expect an element of customisation in all forms of retail.
  3. Create an evolving in-store experience: Use new technologies in the physical retail space to enhance the customer experience. There are stores in the U.S that change their concept every three weeks by leveraging digital solutions.
  4. Collaborate across borders to enhance the experience: Rayban and Virgin Records is a case in point.
  5. Use your data: learn how to both collect and use customer data to your advantage.
  6. Act locally and think globally: there are no borders in the new digital economy.
  7. Do it NOW: the sooner you get on board with change, the greater chance you will have of appealing to tomorrow’s customer.


My advice is follow these steps, buckle up and prepare for change.

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