How smartphones may blow up the way customers shop, pay and fall in love with your c-store brand
The cross-channel retailer that has best capitalized mobile to generate affinity and increase brand value is Seattle-based Starbucks, according to Patricia Hewitt, vice president and managing director of consulting services for Mercator Advisory Group, a Boston-based research firm. She authored a study examining the major credit cards and emerging mobile wallets and concluded that the threats to existing iconic brands is considerable.
Today, major credit cards dominate at retail locations, with their logos prominent on registers and store doors. But as mobile wallets aggregate payment brands, these icons become secondary to the larger wallet’s identity.
“The credit card may still fund the transaction, but the brand is subordinate,” Hewitt says. “That’s important because it begins to eat into the real estate at the point-of-sale. Customers are no longer looking for the [credit-card] logo.”
If the mobile-wallet brand succeeds in overtaking the credit card in the minds of consumers, then that emerging brand can use its resources “to incent customers to keep more money in [that mobile] wallet, because it’s the funding source,” she says.
“The mobile wallet … is then able to use more of their own capabilities or the capabilities of others to move money between accounts, becoming less dependent on the [credit card] networks.”
Merchants may commandeer some of that opportunity, she says, naming Starbucks as a main example. The coffee chain started by leveraging its popular loyalty card, enhancing it with a mobile-payment piece and executing for the customer a consistent, delightful experience, according to those following the retailer’s success. Hewitt applauds the astounding volume (more than 11%) of the mobile payments being made at Starbucks locations.
That said, retailers on the whole face an uphill battle in that, as Hewitt points out, customers trust financial institutions, banks and the credit-card companies to handle their money. But as online and mobile begin to merge, those loyalties will blur, paving the way for mobile wallets and potentially even merchants themselves. “Customers will see more of a direct value in a merchant-reward loyalty payment,” Hewitt says. “I’m not dependent on the [card] issuer reward, and it makes more sense to me to go directly to [a particular] store.”
To that point, the concept of brand affinity can extend not only to card logos and retail chains but also to individual products and product lines. Last fall, Northfield, Ill.-based Mondelez International went into the second phase of a program to pair nine of its most recognized brands, such as Oreo and Trident, with high-tech startups in the social media and mobile fields. In this second phase, the companies were to pitch venture capitalists for funding for their proposed projects.
Many in the industry believe it’s only a matter of time before product brands engineer social and mobile programs reaching directly to consumers, potentially bypassing the retailers altogether.
Much in the way major online retailer Amazon hurt brick-and-mortar appliance and electronics outlets—essentially turning them into “showrooms” for things that customers inspected on-site but then bought online—c-store retailers may be “tasting rooms” for consumers, which could lead to shoppers ordering products (and getting rewards) directly from the manufacturers, according to Anton Bakker, president of Outsite Networks, Norfolk, Va.
Historically a loyalty solution provider, Outsite has evolved to offer brand-specific apps that have product-location, social-media and loyalty capabilities. He says the landscape may change in as little as 18 months.