N 43 O
ANTENNAE TREND REPORT
RETAIL REVOLUTION
2|3
RETAIL REVOLUTION The entire world is now a store – one in which we can make instant purchases regardless of time or place. The world of shopping is undergoing a sweeping transformation driven by the demand for immersive experiences, new technologies, and new services. Whilst virtual stores are growing in popularity, physical stores remain as vital as ever, providing an environment in which the retailer can promote their brand and offer an unparalleled experience.
No.43 ANTENNAE
4|5
CONTENTS
14
FOCUS 08 Pop-up store takeover Rise of the pop-up store could revolutionize high street retail
18
FEATURES 14 Self-serving Fast, easy and convenient retail experience 20 Flagships Focusing on creating an immersive brand experience
20
28 Shopping mall in your pocket Brands embrace mobile devices as the future of retail 32 Moving retail online Major investment in online retail could signal a move towards virtual retail 36 A cashless society Cash is no longer king
36
SPOTLIGHTS 18 Urban Station 24 Levi’s
No.43 ANTENNAE
Retailers and brands have to create new and innovative shopping destinations that engage the consumer, driving them to explore what there is to offer.
6|7
No.43 ANTENNAE
Pop-up store takeover Rise of the pop-up store could revolutionize high street retail
Over the last couple of years, American and European cities have seen a growing trend to utilize public spaces better. This has manifested itself in the development of the guerilla gardening movement, as well as a rise in temporary ‘pop-up’ shops, cafes, restaurants and cinemas. Although previously seen as a retail approach that only small, independent companies would take, we are now seeing big consumer brands running small pop-up stores in major cities. Due to the recent economic crisis, a number of retail businesses shut down in Western economies, leaving behind a large amount of vacant shop space. These empty retail spaces were utilized to great effect last Christmas by both small, independent retailers and big brands, who took the properties on as short term leases just for the holiday period. The surprise factor of a shop ‘popping-up’ in the high street found considerable traction among consumers, with small, independent retailers providing an alternative, unique offering for Christmas in both their products and retail experience. However, big brands also felt the need to take the same approach, opening up 8|9
a variety of pop-up stores in major cities. In the US, pop-up retail has considerable traction with big brands. Toys R Us will be opening 600 new pop-up stores and hiring at least 10,000 people for the holiday season this year. This follows last years success of the 90 stores it opened, and also the need to maximize sales during the holiday season, the period where the company makes a bulk of its sales. By putting many of these popup stores in malls, the brand becomes more accessible to consumers and can also leverage itself as the place to find the years best toys. In the UK, music retailer HMV opened up 10 temporary stores across the country. They were joined by upmarket department store retailer Harvey Nichols, who set up a pop-up food and wine store in Manchester’s largest shopping mall. This met a need for the retailers to expand their presence in the high street, and showcase their particular expertise and products to consumer in an attempt to draw them into the main retail outlets.
Left: Gap uses pop-up stores for a variety of its web based brands
The surprise factor of a shop ‘popping-up’ in the high street found considerable traction among consumers, with small, independent retailers providing an alternative, unique offering for Christmas in both their products and retail experience
No.43 ANTENNAE
Right: Phaidon has opened pop-up stores in London and New York
However, the short-term leases attracted Phaidon, the book publisher, into opening up retail stores in Central London and SoHo, New York. Describing themselves as ‘reluctant retailers’, Phaidon moved into using small retail spaces because of the decline in the independent bookselling base and a lack of interest from chain bookshops in niche publications. We should expect brands that haven’t entered retail before, or that don’t have a physical retail presence, to start using pop-up stores as a way of reaching out directly to consumers. Another brand that has never had an independent retail experience is Pop-Tarts, yet they have recently opened up a pop-up store in Times Square, New York. The Pop-Tart ‘café’ features a 30-item menu, including ‘Pop-Tart Sushi’ and the ability to customize your own Pop-Tarts with a variety of fillings, frostings and sprinkles. The ‘café’ was prompted by social networking interest in the brand, with Pop-Tarts being one of the top 20 most popular pages on Facebook. Realizing that Pop-Tarts had a particularly
10 | 11
strong following among younger people, the brand looked for other ways to interact with its consumers and found a pop-up café to be the most culturally relevant, as well as having high visibility and low risk. It is important for brands to keep themselves fresh and relevant to consumers and this is especially true for food makers, who face tough competition for shelf space inside grocery stores. Brands that have only ever had a presence online have also started to use pop-up stores as a way of having a physical presence that is both flexible and low cost. Gap’s website based brand Piperlime has used pop-up stores as a bricks and mortar supplement to its online retail model. The brand generates hype by renting out space for as little as three days at a time, becoming a social event and enhancing the niche, contemporary equity of the brand. Gap has also installed a permanent, rotating popup store in New York next to its flagship retail store, where it promotes collaborations with designers and brands based on seasonal and
No.43 ANTENNAE
Right: Pop-Tart Sushi at Pop-Tart World Far Right: Pop-Tart World opened in Times Square, New York
cultural events. This is an interesting use of the pop-up store format as a supplement to the main store, providing a retail space to give consumers a totally different experience and range of products to what they’d find in a standard store. We should also expect more pop-up stores to be used by big brands as a barometer for potential future success in certain locations. A pop-up store can generate an extensive amount of information on not only the profitability of a certain location, but also the consumer types that shop there, and their purchasing habits. If sales exceed expectations then a business should have enough information to not only decide to deploy a permanent store there, but also have enough information on what to stock there and what customer experience they should provide. This business model is particularly relevant in today’s tough economy, where risk is reduced and consumers are targeted with a more customized experience. What started out as a movement by small, independent retailers has now been adopted by some of the largest retail brands in the world. The availability of short term leases on retail properties provides brands with the
12 | 13
flexibility to provide a more unique, customized experience for their consumers at a minimal risk. Pop-ups serve not only as a way of reaching out to consumers in new ways, but also as a way of gaining consumer information about a location and testing it for profitability. We should expect brands to increasingly use pop-up stores as a key retail strategy, particularly during the holiday seasons. This could lead to a wholesale change in the way that our malls and high streets currently function, with a move towards flexibility and the short term. We could soon see our retail areas changing with the seasons, as brands seek to maximize profit and reduce risk by providing a smaller scale, more customized retail experience for consumers.
A pop-up store can generate an extensive amount of information on not only the profitability of a certain location, but also the consumer types that shop there, and their purchasing habits
No.43 ANTENNAE
Selfserving Fast, easy and convenient retail experiences
Retailers are ushering in a new world of self-service buy-and-pay applications, with consumers increasingly using selfcheckout stations at grocery stores, paying for travel through airport check-in kiosks, renting movies from self-service DVD rental kiosks, and motorists are refueling their vehicles at pay-at-pump gas stations. Restaurant diners can even order from touch-screens at fastfood chains and use hand-held, pay-attable devices at sit-down restaurants. This new mode of self-service kiosk commerce is being built on ground already broken by ATMs and vending machines, both of which are going through challenges and exciting developments in their own right. Well aware that helping consumers serve themselves is big business, manufacturers are working to develop applications to compete in this burgeoning market. Consumers increasingly desire a fast, easy and convenient retail experience, and it can help businesses increase revenue and build customer loyalty. A study by NCR found that 86% of Americans were more likely to do business with companies offering some sort of self-service. This appears to be especially true of young shoppers who are particularly comfortable with the technology, and as part of the internet generation demand instant gratification without feeling the need to handle the product prior to purchase. As consumers become increasingly more comfortable with this method, the
14 | 15
trend will only accelerate and consumers will increasingly buy a wider range of items at vending machines. In the UK Sainsbury’s is currently trialling a vending machine for NHS prescriptions, offering consumers a secure and convenient way to obtain medicine at a time that suits them, while in Pennsylvania USA, a wine vending machine is currently being trialed. Changing consumer preferences about shopping and the high cost of operating brick-and-mortar stores are inspiring premium brands to rethink how they sell their wares. As well as the traditional cheap items, more highend items are achieving sales success through vending. ZoomSystems offer consumers the chance to purchase high-end brands such as Apple, Sephora, and ProActiv, and can now be found at over 1,000 locations across the US and Japan. According to Gower Smith, the founder and CEO of ZoomSystems, “Zoom does for retail what ATMs did for banking. A ZoomShop costs less than an employee�. The revenue that can be achieved via a vending machine is also very impressive, while mall stores produce about $330 a square foot a year, a ZoomShop can generate
All: Mondrian South Beach Hotel vending machine www.mondrianmiami.com
$3,000 to $10,000 a square foot a year. In airports, where 70% of ZoomShops are situated, the numbers are even more striking – airport stores make about $1,000 a square foot while ZoomShops generate $10,000 to $40,000 a square foot. As an example one Apple iPod vending machine ZoomShop in Hartsfield-Jackson International Airport makes $55,000 a month (Atlanta Journal). In addition each ZoomShop incorporates an interactive touch screen so that the consumer can learn more about the products before purchasing. This not only allows the consumer to shop at their own pace without a shop assistant but it also presents accurate information, replicating the process that consumers have become accustomed to on the internet – not only are they comfortable with researching and buying products on their own by touching screens and pressing buttons; they often prefer it.
Retailers are ushering in a new world of self-service buy-and-pay applications
In March ZoomShops introduced their first vending machines at leading supermarket chains including Kroger. These ZoomShops bring Body Shop’s popular body care and bath products to convenient locations across the US, creating a new channel for the boutique brand. “More
No.43 ANTENNAE
The United States currently has
400,000 self-service kiosks (SelfService & Kiosk Association) Across Japan there are 5.4
million
vending machines – that is a vending machine for every 23 people (Self-Service & Kiosk Association) Over $60bn is spent in vending machines across the US each year (Ingenico)
Eight out of ten British shoppers are happy to swap their purchasing from more traditional ‘bricks and mortar’ retail outlets to vending machines (Ingenico)
Revenues for vending operators are expected to be $11.3 year (IBISWorld)
billion this
In the US the self-service economy is set to reach $1.2 (IBISWorld)
trillion in 2012
UK vending machines sold over
£4.3bn in products, of which $1.5bn was refreshments
This page: U*tique vending boutique www.utiqueshop.com Opposite: Hudson Hotel vending machine www.hudsonhotel.com
16 | 17
than ever, customers today want to access products on their own terms when and where they want to. For The Body Shop it is an opportunity to meet their expectations in an innovative way,” said Al Montalvo, Director of New Sales and Emerging Channels for The Body Shop. Not only are we witnessing premium brands utilize vending in mass locations, but also in boutique venues where consumers have traditionally preferred greater service. This month the Hudson Hotel in Manhattan, New York, introduced a new vending machine in their lobby that is available for guests around the clock. Their vending machine is stocked not just with travel necessities but with items that are both luxurious and a little quirky, and vary greatly in price from as little as $4 to as much as $10,000. Kim Walker, Senior Vice President and Creative Director for Morgans Hotel Group believes that “This incredible concept gives us the opportunity to enhance our guests’ travel needs by offering exciting luxury brands, everyday essentials and unexpected experiences to take advantage of during their stay.” The Semi-Automatic machine in New York follows the successful launch at their Mondrian South Beach Hotel, Miami. The machine here has been dispensing items priced between $10 and $1.2 million, including Bentleys to bathing suits. The Semi-Automatic with its sleek design became an instant success and has become a feature of the hotel where guests gather to explore the store.
The description for the $90,000 Bentley reads “‘When admirers ask where you bought your 2003 Bentley Arnage convertible, we dare you to say you bought it from a vending machine”
The description for the $90,000 Bentley reads “‘When admirers ask where you bought your 2003 Bentley Arnage convertible, we dare you to say you bought it from a vending machine”. Front Office Manager James A. Bryant III is quoted as saying “People just pass by it, and literally even if they weren’t thinking about buying something, they buy into the idea. They want to purchase something cool; it’s almost a story to tell - really an experience. I’ve seen people spend 20 to 30 minutes just looking at the different products, and just be amazed.” Another upmarket vending model is being installed across the US this year – U*tique, an interactive luxury store that dispenses high-end and niche labels that include Frédéric Fekkai and MD Skincare. Available in boutique hotel lobbies, upscale gym locker rooms, nightclub lounges, premium shopping malls and airports. Russell Greenberg, Director of RUX who were responsible for the overall design of the machine said “The words upscale, automated and retail are not typically found in the same sentence. We needed to invent an image and experience for U*tique that was so seductive, elegant, and streamlined that it would instantly transform people’s preconceived notions about what shopping could be. The magic and allure of U*tique is that it combines
the shockingly new and the reassuringly ordinary”. CEO of U*tique, Mara Segal describes the modern consumer as “savvy, information hungry, and time-strapped… e-commerce bridged the gap between products and information, automated retail will bridge the gap between information and instant gratification – it’s retail on demand”. While in the UK they’ve been slow off the mark to exploit the instant gratification offered by vending machines, some of London’s hotels are beginning to follow suit. As part of London Fashion Week the St Martins Lane Hotel hosted ‘The Love Machine’ stocked with Selfridge’s products including an Alexander Wang dress and Vivienne Westwood fragrance. These new machines are offering a new way for retailers and brands to interact with their consumers, having the ability to delight them in new ways, offering them greater information, and in return the automated machines learn about consumers’ shopping habits. As vending becomes more popular, sophisticated brands will have to develop new packaging and communications at the point of sale that can profit most from the new technology.
No.43 ANTENNAE
Urban Station www.urbanstation.com.ar In Buenos Aires a new coffee shop has opened that meets the growing trend for people to work remotely, which is estimated at between seventeen and twenty-six million people. The shop is filled with desks, conference rooms and electrical outlets, giving it the feeling of a trendy workspace more than a coffee shop. They rent the desk space, which includes food and drink in the cost of the hour. In addition, the large and airy store offers art and business magazines and books to read, comfortable armchairs for lounging and casual meetings, fully equipped meeting rooms, printers, fax and scanners, plus lockers for your possessions.
18 | 19
No.43 ANTENNAE
Flagships Focusing on creating an immersive brand experience
There is a growing desire for service that is intuitive and worthwhile, adding a level of discovery and education to the shopping experience. Retailers are increasingly giving consumers a reason to visit the store, enabling them to discover new products that they had not previously considered, and encouraging them to try them. Flagship stores are opening up across London’s West End, including Louis Vuitton, Chanel and Apple. For the last few years Apple have led the way in developing a branded retail experience and their new store in Covent Garden is their biggest ever store, becoming the ‘world’s flagship store’. The store includes a Start Up room where staff assist consumers to set up their purchases before they leave the store. Apple even hope that the store will become a destination for excursions, with a new Community room that can be used for classroom visits.
20 | 21
Takings are predicted to top £60 million per year, making it even more profitable than the Regent Street Store, which is currently Apple’s most successful store globally taking £2,000 per square foot – more than Harrod’s. Apple Stores deliver an holistic brand experience allowing consumers to have a deeper interaction with the brand, helping Apple to achieve the success it has today. More brands are trying to replicate Apple’s strategies and develop every store as a flagship store. In particular, Steve Jobs, as part of his role on the board, is attempting to repeat the success he has achieved with Apple by assisting the Walt Disney Company revamping 300 retail stores. The new store designs are intended to put the magic back in the retail experience. The goal of the new stores is to make children clamor to visit the stores and stay longer, bolstering sales as a result.
All: Apple’s new flagship store in London’s Covent Garden www.apple.com
No.43 ANTENNAE
The first of the new Disney Stores opened in June in California. Here, theaters allow children to watch film clips of their own selection that emits scents matching the footage, participate in karaoke contests or chat live with Disney Channel stars via satellite. Computer chips embedded in packaging activate hidden features around the store, for example walk by a ‘magic mirror’ while holding a princess tiara and Cinderella appears. Jim Fielding, president of Disney Store Worldwide wants to “make each visit customizable so that it is much more memorable. This is truly an immersive, one-of-a-kind retail experience for children and families that only Disney could deliver”. Paul Gainer, Vice President and General Manager of Disney Store North America adds “The magic and wonder of Disney is captured within the unique experiences that await families at the newly designed Disney Store. More than a store, we’ve created a destination that brings Disney stories to life”. Increasingly consumers are demanding better
22 | 23
service, and with more options of where and how they choose to spend their money, retailers and brands alike are having to respond by delivering unique experiences that attract consumers to visit their stores and spend time inside.
All: The new Disney Store in California www.disneystore.com
Increasingly consumers are demanding better service, and with more options of where and how they choose to spend their money, retailers and brands alike are having to respond by delivering unique experiences that attract consumers to visit their stores and spend time inside
No.43 ANTENNAE
Levi’s www.levistrauss.com Levi’s revenues are rising - growing 17%, (Reuters) - in no small part to their investment in their retail strategy. By opening high-end concept driven boutiques like the one on Regents Street in London are helping to elevate the brands fashion credentials. This store, which has been open since March, is dramatic and inspiring, engaging consumers as they are taken on a journey through the origins of denim and the brand’s evolution. This space offers their customers the ultimate brand experience, while providing expert knowledge, product offering and story telling. The store is designed to give consumers a tangible look into the craftsmanship that goes into the original and definitive jean, and instead of putting clothes in the window they have dedicated it to art. Armin Broger, President of Levi Strauss & Co. Europe, Middle East and North Africa is quoted as saying “On Regent Street, Levi’s has created a place where craftsmanship and authenticity deliver the most genuine experience of the brand anywhere in Europe.” Through such stores Levi’s are successfully maintaining a premium image whilst also offering more accessible alternatives in other high street outlets.
24 | 25
No.43 ANTENNAE
Modern technology allows us to purchase whenever and wherever we are, whilst assisting us in those decisions. Brands that use these technologies to support their retail models and products, are those that will have greater chance of success in the future.
26 | 27
No.43 ANTENNAE
Shopping mall in your pocket Brands embrace mobile devices as the future of retail
The prevalence of mobile devices, and the continuing increase in the abilities of our technologies, mean that we can now interact with products and places like never before. This has already infiltrated our lives in the form of social networking, where people can connect whenever and wherever they are thanks to their mobile devices, letting friends know where in town they’re having a drink, or rating the latest restaurant and sharing it with the community. With the increased use of mobile devices as portals to various aspects of our lifestyle, the potential for brands and retailers to generate sales through them is enormous. However, this also means that the need for brands and retailers to provide products and services that serve as stand alone experiences, is much greater. Creating an infrastructure to deal with the increased ability of consumers to access information about products has become vital. Mobile applications like Stripey Lines use barcode scanning and image recognition to enable users to access information quickly about a product – if a brand can provide sample reviews, helpful tips or further information for that 28 | 29
product then consumers are more likely to make a positive purchasing decision on that product. A recent retail program has used a combination of mobile device technology and RFID tags to enhance the consumer experience of purchasing in-store. A collaborative project between TOTeM (Tales of Things and Electronic Memory) and the charity Oxfam, has resulted in various donated objects and clothes being infused with personal stories, through RFID technology. Consumers can walk around the store accessing memories and stories that the previous owners have instilled within their old possessions, using their mobile devices as readers to access the information in text or audio format. This innovative approach could be applied by other retailers and brands to create a more immersive and informative experience, which could add value for the consumer. For example, through using RFID technology, a protein supplement brand could include information on how to use the product in conjunction with the right training regime, asking the consumer what results they want and helping suggest the right product for them. The technique could also encourage people to realize the sentimental value of products, appealing to their desire for authenticity.
Left: N-building by Qosmo and Terada Design
The ability for mobile devices to give consumers access to ‘background’ information has also become a highly innovative area of retail. The growing adoption of augmented reality among brands is a strong indication that they see this becoming a strong area of the mobile web, and that it will grow prevalent among consumers in the near future. Augmented reality has already been used in print advertising, and even in concert programs. The rock band Muse have utilized augmented reality in their concert programs, linking it with their website to give interactive tours of the stage and access to exclusive interviews with the band members. However, the ultimate use of augmented reality for retailers is in the ability for digital information to appear on top of the physical world, when it’s viewed through a mobile phone camera. The Layar app allows content partners to provide special paid content that users can access via their mobile devices. This can allow them to look at anything from product information to restaurant reviews, as well giving consumers a way to navigate new locations by brands and retailers. The future of augmented reality for retailers could be where users preview and purchase whatever they see, anywhere they see it.
The future of augmented reality for retailers could be where users preview and purchase whatever they see, anywhere they see it
No.43 ANTENNAE
Augmented reality has also been used on the exteriors of buildings, such as the N-Building by Qosmo and Terada Design. The low-rise retail building is covered with QR codes, which can be then photographed using your phone. This in turn shows what retailers are inside the building, any sales and coupons that are currently valid, and even offers the ability to make a restaurant reservation. Layered on top of this information are the Tweets and comments of the people inside, due to the use of Twitter geotagging. What is most innovative and exciting about the project is that it doesn’t require a special application on your phone – all that is required is that the phone has QR capability. This makes the innovation less about the technology, and more about its application in everyday life - the ability for consumers to scan the skyline with their phone and read what shops are open, which have offers and where everyone is having a good time. Mobile devices are providing more than just portals for additional information. How we purchase things could be one of the biggest revolutions that these devices bring to consumers in the next five years. Using mobile devices as a way to purchase goods and services is expected to exceed $300bn by 2013 (Juniper research). Retailers are trying to tap into the familiarity that consumers already have with web shopping in
30 | 31
order to sway them over to paying for things via their mobiles. One of the key areas that will stimulate growth in using mobile devices for payment is ticketing, which could represent 40% of the market by 2013 (Juniper research). This will be driven by usage of mobile device payments on rail, air and bus networks, as well as with sport and entertainment venues and events. An example of growing use of mobile payments is subports.com, a New York-based mobile technology business that allows buyers, sellers and donors to use text messages in the transaction of products and services. Its main selling point is that its innovative retail model lowers the barriers of doing business between independently-owned shops, designers, artists and consumers. Subports also calls out the fact that its innovative format is a safe and highly sustainable alternative to the traditional creditcard swipe. Consumers order a product or service by texting its unique ‘subcode’ on their mobile to subport, which will send confirmation by text and email. We will continue to see more of these innovative businesses taking a greater share of the market from traditional retail models through using mobile technology. The total value of mobile payments (including mobile remittance and payments made via Near Field Communications) will exceed $587bn
Worldwide smartphones market is expected to reach 804.42
million units by 2015. (GIA)
Using mobile devices as a way to purchase goods and services is expected to exceed $300bn by 2013 (Juniper research)
Ticketing will represent 40% of the mobile payment market by 2013 (Juniper research)
by 2011, giving a clear indication that the future of retail will be moving more towards mobile devices sooner, rather than later.
Far Left: Subports uses a text based payment system
Mobile devices allow consumers to create, communicate and explore the world in ways that are constantly changing. The challenge for retailers will not only be keeping up with new technologies, but also utilizing them in ways that are easy for the consumer to understand and access. Using new technology is not enough – it has to work on the lower tier of consumers to be accepted and adopted by all the big brands. Mobile devices provide a portal for brands and retailers to layer on extra information and features that would be difficult and expensive to apply to their store interiors or products. We should expect our mobile phones to soon become as important in our retail experience, as they are for social networking.
Left: Stripey Lines App
www.subport.com
www.stripeylines.com
No.43 ANTENNAE
Moving retail online Major investment in online retail could signal a move towards virtual retail
Despite the fact that online retail has been a strong, and growing, presence in our lives for the last decade it still only accounts for around 10% of sales in the US and UK markets – so why is it not larger? We could soon see a change in this, as major retailers and brands start to roll out more innovative and ambitious online retail programs. Changes in consumer purchasing habits and decision-making will also play a part in moving retail sales to the online world, as will the growing usage of mobile technology in retail. The main attraction to online shopping is that it is totally flexible to the consumer, who can shop where and when they want, from the comfort of their own home. As consumers spend more time and money online, brands have begun to question whether it is worth having a physical store presence. For many consumers, a walk-in store is a physical expression of the brand and a vital component of more high-end, experiential products. It is often difficult to reproduce the luxurious aspects of brands in an online format, and so their stores and its customer service are one of the foundations to the success of the business. 32 | 33
Brands have also realized that 50% of consumers research products or services online, before going in store to make a purchase. With the understanding that online research drives sales in stores, brands and retailers have to look at how they present product information online. Some retailers are doing that by making their online presence more interactive, adding audio and video elements to their sites to give consumers a more immersive and customized experience. However, there is an alternative view to the ‘research-before-you-purchase’ process, in that customers will also purchase from online retailers after researching the product in store. This process is particularly prevalent in consumer electronics, where consumers may try the product in store, get advice, then go home and purchase the product online to be delivered to their door. It is important for brands to understand how consumers view their products, and where they purchase them, in order to correctly position their store presence as either a standard retail point or more as a showroom.
Left: Zara now has an online store for many of its European markets www.zara.com
Brands have also realized that 50% of consumers research products or services online, before going in store to make a purchase
No.43 ANTENNAE
Increasingly, retailers are looking to bring some aspects of the online world into their stores, particularly with social networking
As a further sign of the growth in online retail, there has been a rush by many major brands to secure online payment service providers. For example, Visa recently bought Cybersource, a California-based online payment and security outfit, for $1.3bn. Other payment service networks have, or will be, doing similar things in order to secure a future part of the online retail market. Retailers and big brands have increasingly moved into the online space to combat the likelihood of a global decline in high street spending. This has been especially true in Europe and America, where consumer confidence has waned due to fears of an economic slowdown. Despite this, online fashion sales have been resilient, prompting the Spanish clothing retailer Zara to open a new online store for France, Spain, Italy, Portugal and the UK. We should expect other clothing retailers across Europe and America to start reducing the number of physical stores they have and to increase their presence online. Online retail is not just restricted to purchasing, however. Increasingly, retailers are looking to bring some aspects of the online world into their stores, particularly with social networking. The rise of mobile devices as a key portal to social networks has prompted many retailers
34 | 35
to start to install technology in store that allows consumers to connect to each other. This gives consumers instant feedback and advice from some of their most trusted connections, as well as opening up the brand to a larger audience. Diesel has installed such a system in some of their stores in Spain, with a kiosk that allows you to take pictures as you try on outfits. These can then be posted directly online to sites like Facebook, where consumers can ask their network of friends for opinions on what style looks best. Youtube has also played a role in online retail, by providing a place for consumer’s to give reviews and tips on all sorts of brands and products. Although this is not necessarily a direct link to the online retail of that product / service, it does have an effect on consumer purchasing habits and choices. We can expect collaborations between retailers and online content providers in the near future, where online brands get a presence inside physical stores. In exchange for this, retailers gain a greater presence online, reaching out to a wider audience, as well as aligning themselves with an innovative brand. Although a major player in the industry, online retail has yet to fulfill its potential and gain a considerable share of the market from more traditional formats. We should expect brands
Left: Cosmetic brands like Benefit use YouTube to showcase their products in tutorials www.youtube.com/ benefitcosmetics
to look at what they sell, and explore consumer perceptions of whether they are products they feel more comfortable researching online and buying in store, or vice versa. Most importantly, we should start to see a variety of retail brands increasing their online presence and using various technologies to link the online world with the physical.
No.43 ANTENNAE
A cashless society Cash is no longer king
In the next few years we will witness a revolution in the way we pay for things, with cash rapidly going out of fashion. Mike Bownman, Head of Policy and Markets at the Payment Council said, “Although cash won’t disappear in our lifetime, the continuing payments revolution will make it an ever smaller part of our spending”. According to the Payments Council banknotes and coins will be used for fewer than half of all transactions in five years time. While overall spending has doubled since the turn of the century transactions with cash have only risen by 7%. The consumer card payments market has reached near full penetration in western European countries and is now standard in the wallets of many Europeans. However, in the US, this market has struggled to gain a foothold. But, smart cards may now be getting a second chance in the form of contactless technology.
Retailers, along with banks, are looking to make non-cash payments even easier and more attractive than using coins and notes. Consumers’ patience to queue in stores is becoming increasingly limited, in part due to 36 | 37
the instantaneousness of purchasing online. According to a survey by Barclays nearly twothirds of people have abandoned a queue in a store, as it was taking too long to get served. In addition two minutes is the longest many British consumers are prepared to queue, down from five minutes just six years ago. At the beginning of this year Orange partnered with Barclaycard to launch a contactless credit card. In theory these cards never need to leave the wallet, making them very convenient, and speeding up shopping. As part of this system, users can set themselves spending limits and for those who are also Orange mobile phone users, they will receive an SMS message when they are approaching their limit. The two main contactless cards are Visa’s PayWave and Mastercard’s PayPass, with Barclays the main bank signed up to them. Barclaycard already has one million customers
Left: Visa iPhone case that lets you pay without a credit card Below: The iPhone continue Visa’s development in making payment easier. In 2007 they released Micro Tag key fobs www.visaeurope.com
on its Onepulse card, and by the end of this year this will grow to four million, with a total of twelve million contactless cards in circulation, resulting in one in seven consumers in the UK having the ability to pay contactlessly. If the roll-out is a success, then it is hoped that contactless technology will move into mobile phones. Antony Jenkins, Chief Executive of Barclays’ global retail bank believes mobile phones are the future, and that people will be receiving, making and managing their payments on mobile phones in the near future. He even believes that consumers may soon be able to hover their mobile over the price label of an item in a shop, confirm their purchase and take it away without having to go to a checkout. Visa is currently trialling mobile payments around the world, exploring the services that work best. They are using the mobile to pay for transport in Germany, fast food in Guatemala, and to receive coupons and discounts in North America. No.42 ANTENNAE
Right: Barclaycard OnePulse Oyster card is a combined credit card and London travel card meaning that commuters need never queue to pay again
Bottom right: Mastercard Zoompass www.zoompass.com
www.barclaycardonepulse.co.uk Below: Accessing accounts in the future may be done by biometrics
Although it will be several years before the new technology will be introduced globally, with more than 27 million point of sale locations in need of updating, an iPhone app already makes payment by phone possible. The Send Money app, developed by PayPal, which has already been downloaded by one million people, allows two owners of iPhones to ‘bump’ their phones together in order to make a connection and send money to each other. Additionally, this month Visa are releasing an iPhone case that makes the handset compatible with contactless consoles, whilst Mastercard have also introduced tags that stick to phones. These, however, are purely interim solutions, as from next year all of Nokia’s smartphones will incorporate NFC (Near Field Communication) chips, with many expecting the other large brands to follow. NFC is expected to become ubiquitous within the next five years, which will give new hope in determining the future of the mobile wallet. Yet the West is behind the rest of the world – in Africa, six million people are already paying for goods on their mobiles, and mobile payment is quite advanced in East Asia. The Japanese call it ‘osaifu keitai’ (cellphone wallet). In Japan NTT DoCoMo took control of the mobile-wallet market by buying a bank. If a mobile services
38 | 39
provider or handset manufacturer in the West was to partner with, or purchase, a credit card company, they could leverage their brand equity, and utilise their retail relationships. Many may see mobile phones as the payment system of the future, but the solution maybe even simpler. In schools across the world children are paying for their school lunches by just pressing their finger onto a recognition panel. With children being brought up paying for things without cash, or even cards, they are likely to demand similar systems throughout the retail chain. In the United Arab Emirates, Barclays have already introduced a new cash machine that enables people to use their fingerprints to withdraw money, and at RetailTech 2010 Coca-Cola presented a vending machine that employs a biometric system that scans your finger vein to see who you are, allowing consumers to ‘pay’ with their finger. In the next few years the way we pay for goods is going to change rapidly. It is essential that retailers, banks, and consumer brands find the best solutions that make the shopping process as enjoyable and easy as possible while ensuring that the system is secure and trusted by all. A new system may even offer consumers the ability to keep better track of their spending helping them manage their budgets.
In Europe currently six in ten transactions involves cash, but almost 80% of these are for less
than £10.
Approximately £1 in every £2.50 is spent on cards, and this is predicted to change to £2 in every (Visa Europe)
£3 by 2015.
More than 20,000 retailers now have incorporated contactless pay systems in store (Orange)
There are currently 5 million contactless cards in use (Visa)
In 1999 nine out of ten pints were bought with cash, today only four
out of ten are bought with cash
(The Guardian)
In the next few years we will witness a revolution in the way we pay for things, with cash rapidly going out of fashion.
In the EU ¤1.68 trillion was spent on cards in 2008 and has been growing at 12% a year for the last five years (European Central Bank)
In 2009 59% of the 37 billion transactions were done with cash – a sharp decline from the 73% in 2000 (Payments Council)
In the UK withdrawals from cash machines fell by £1.6bn compared with a year ago, a fall of 3.2% (Payments Council)
Last year 27% of US adults paid
bills online (Packaged Facts
their
68% of American adults have a debit / credit card in their wallet (Packaged Facts)
No.43 ANTENNAE
NewEdge is a dynamic innovation consultancy with a world-class team of strategists, trend forecasters, researchers and designers. We bring a fresh approach to growing business and brands through upstream and downstream innovation. Our Antennae Trends team are continually researching emerging design trends, ideas and creative thinking – from global product innovation through to changing consumer lifestyles. These trends indicate how markets are being shaped in the future, giving us the ability to anticipate how consumers are likely to respond to future solutions. If you would like to know more about our innovation consultancy, our trends research, or if you would like to comment on anything you have read in this issue, please email The Antennae team: antennae@new-edge.com
40 | 41
Customized. Bespoke. Your Antennae. The world is constantly changing, how will it impact your brand and business? For a tailored report specifically for your business email us at: antennae@new-edge-com Or call Richard on: +44 (0)208 439 8404
No.43 ANTENNAE
N 43 o
ANTENNAE TREND REPORT
London Richmond Brewery Stores 18 Petersham Road Richmond London TW10 6UW UK T +44 (0)20 8439 8400 Richland 1350 Spaulding Ave Richland WA 99352 USA T +1 (509) 737 9900 W www.new-edge.com E antennae@new-edge.com
Copyright Š 2010 NewEdge Consulting Limited The entire content of this document, both physically and intellectually, remains the property of NewEdge Consulting Limited. Please apply to us for written permission required to copy, or amend, in full or part. Opinions, conclusions, and other information contained within are not necessarily expressed by NewEdge Consulting Limited. 42 | 42