Why is Apple Pay such a Big Deal?

Apple Pay is Apple’s take on mobile payments. It works by storing credit card data and then charging consumers with a simple tap to NFC payment devices. Most important: it’s a huge game changer in payments.

apple-pay-cook
Tim Cook presents Apple Pay

With this product, Apple unveiled its grand vision of a simple, secure payment process. It can store multiple credit cards, it’s linked to the biggest card processors AND big banks such as JP Morgan & Chase or Citigroup. For now, not all Apple devices support Apple Pay but just give Apple a little time. The iPhone 6 and the iPhone 6 Plus come equipped with NFC technology. So will future products.

The big news: Apple is betting big on this product and you know what this means…

The retail industry hates it.

That’s right, even though Apple Pay registered 1 million credit cards in the first week and users love it, some retailers decided they know better.

Retail chains such as Walmart, Rite Aid, Target and many more chose to bet on a different technology, called MCX. The acronym stands for Merchant Customer Exchange and it is a network of retailers offering mobile checkout options through a product called CurrentC.

Seems a bit complicated? Well the short story is that even before Apple Pay was nothing but a rumor, some retailers thought – “hey, why let Apple have so much influence on our sales? Let’s build our very own mobile payment system!” (not an actual quote)

Pictured here: Not Apple Pay
Pictured here: Not Apple Pay

So the MCX people built CurrentC. And by built I mean they have been struggling for years to come up with something that says Mobile Payments. When Apple Pay was announced, they went on and announced their own product.

The product is sliiightlty different from Apple Pay: it works only in the MCX network and works with QR codes. Plus it stores consumer personal info and connects DIRECTLY to the consumer’s bank account. No way that storing consumer data in the cloud and accessing consumer bank accounts could ever go wrong. Just ask Target (among those in the MCX) and Home Depot.

As the public decided they are not going to wait for CurrentC to show up, retailers such as Walmart and Rite Aid went on and blocked the technology that made using Apple Pay possible.

Now why would they do that? Why is Apple Pay such a big thing and why are these retailers so afraid of it?

1. Apple Pay links online and offline shopping

Amazon vs Walmart - 17 years revenue comparison
Amazon vs Walmart – 17 years revenue comparison

Ever thought of buying online and picking up in store? Or searching for an item in a physical store and asking store associates if it is available at another store? If you have you’ve probably noticed that service is lousy when it comes to connecting channels. Omnichannel retail is still in its infancy. To make things work companies have to rewire their IT infrastructure and get ready for a future where it doesn’t matter if orders are placed online, offline, in the mobile app or on the phone.

And that’s hard.

Big retailers have a problem adapting to this new landscape where the consumer is at the center of every transaction and operation. Everything is moving faster and the giants are not really that agile. For example have a look at how much faster Amazon is growing when compared to Walmart.

A large part of this change has to do with payments. Consumers now have to pay one way in the Brick-and-Mortar store. Another way in the online shop. Mobile shopping has yet another payment process. It’s frustrating and the challenge to connect all payment systems is a really rewarding area.

The mobile payments market is estimated at $90 billion and expected to grow. That’s why Google, Apple, Amazon, PayPal and even AliBaba want a piece of it.

So far Apple has managed to connect online and offline channels best. Apple Pay’s ease of use, integrated payment in Safari through the Keychain and many others make it a reasonable bet for the future.

2. Mobile Payments are happening, whether you like it or not

29% of Millennials would be willing to bank with Apple.
29% of Millennials would be willing to bank with Apple. Source

Mobile Payments may seem like a no-go right now. After all PayPal is available for quite some time on the mobile and Google has already launched and failed once with its Google Wallet. What change the future holds as to make Mobile Payments such a big thing?

The answer is Millennials.

The up and coming generation is now just beginning to earn and spend their cash but soon they will be a driving force in the economy. Unlike elder consumers, they have no problem bridging the gap between sales channels and they definitely don’t have a problem paying with their smartphones. IF it’s easy and secure.

In a recent Accenture study millennials were found to be ready to accept mobile payments. They were, in fact, driving the adoption in mobile payments. Among those surveyed, 60% did NOT use their mobile phones to pay. Their main worries: privacy (45%) and security issues (57%). Apple Pay solves both.

3. Everyone expects a revolution

The player that revolutionized the music industry.
The player that revolutionized the music industry.

Remember the iPod, the iPhone and iTunes? They are just three of the most disrupting technologies from the past decade. And they were all introduced by Apple.

The scenario is always the same: a large market in need of change. Market leaders were stuck in exploiting existing technologies. Everyone from label records to Nokia and RIM learned a hard lesson. When Apple goes after a large market, it will revolutionize it.

Apple Pay is a revolution and the MCX retailers know it. Right now they are negotiating their place in the future of retail.

4. It’s not just about the payments, it’s about the consumer

APPLE-PAY-COMIC
Apple, Pay!

Omnichannel payments is all about the consumer. Everything happens around his or her habits. The retailer doesn’t get to dictate what the consumer wants, when it wants it and how the product should be bought.

If you look at Amazon you’ll find that it’s just a very very large store. But is it? In fact, Amazon is a marketplace. An instrument for the consumer to choose from lots and lots of products (240 million in Amazon US), sold by lots of merchants.

At the core you’ll find the consumer account. The preferences, the brand loyalty to Amazon, the saved shipping addresses and others. For each Amazon user, Amazon is a PERSONAL deal.

But for now, those products can only by accessed through Amazon’s infrastructure. The big thing that Apple Pay does is putting your personal account for millions of products and hundreds of merchants where it should be: in your pocket.

By doing this Apple will take out Amazon’s and the likes most precious asset and liberalize it: The personal account. Walmart and the likes have misinterpreted Apple’s message. Their product is not an enemy: it’s the best tool they have right now against Amazon.

5. It actually works

Consumers love the fact that Apple Pay feels easy to use and most important – secure. It works online, offline, on the iPhone and on the Apple Watch.

Unlike Apple Pay, previous products were introduced as standalone products, not as part of an ecosystem and seemingly without any clear strategy and vision for the future.

Google failed and now it’s trying again with a new Google Wallet.

PayPal has maybe missed its opportunity to become what Apple Pay will probably be. Internal company battles and unclear strategy made the company lose sight of how the market is shifting.

Amazon too launched Amazon Payments but its focus on online payments makes it a NOW product. It really isn’t future proof.

Apple Pay works great and it works great for a large audience. Apple has a huge user base and this user base trusts Apple. They use the company products and are willing to allow the company to store their credit cards. In turn, Apple has not let them down: Apple Pay just works.

Online Grocery Market is about explode. Uber wants in.

Top 5 groceries markets in the world. Source.
Top 5 groceries markets in the world. Source.

Quickly – think of one market you know is a sure bet for growth. If you guessed the groceries market, awesome! You’ve spotted the subtle hint in the title. The groceries market in the US is expected to reach $1.1 trillion in 2016. China, the largest groceries market, is expected to peak at almost $1.6 trillion in 2016. India, Brazil and Russia are growing at a fast pace and are expected to overtake Japan within the same threshold.

All in all – the US and BRIC states groceries market is expected to total $4.2 trillion within the next two years.

That’s a big market. Obviously, some of those groceries will be purchased online. For the online groceries market to take off, some disruption has to happen. Although not yet mainstream, we can see signs that consumers will be purchasing at least some of their groceries online.

Amazon is going Fresh

If there is one thing that online retailers need to get right in the groceries market – that is the logistics. From a consumer point of view, a reliable fulfillment and a guaranteed product freshness is a must. To do that, online and omnichannel retailers need to set new logistics policies to allow for a quick order delivery, without loss in product quality. Do we know a company that is really good at online retailing logistics? Of course we do:

Amazon Fresh
Amazon Fresh

Amazon is clearly the leader in online retailing so it was expected to move into this market. It did so 5 years ago. Its Amazon Fresh grocery service was first tested in Seattle. Now the company unleashed the grocery service in San Diego. Customers in Northern and Southern California can pick from 500.000 products, ranging from vegetables and milk to batteries and hair care products.

Jeff Bezos previously mentioned that in order to become a $200 billion company, Amazon has to learn to sell food and clothes. The obvious target was Walmart, a company with revenue north of $475 billion.

To do so, the company will continue to improve its service and increase the number of cities Amazon Fresh is available in. “We’ll continue our methodical approach – measuring and refining AmazonFresh – with the goal of bringing this incredible service to more cities over time” mentioned Bezos, addressing Amazon’s shareholders.

The methodical approach Jeff Bezos is talking about might reach New York soon enough. Re/Code mentioned the company has already prepared an warehouse in the area, instructed suppliers to ship frozen products to it and is hiring workforce for the service.

In New York, Amazon will have to face competition from online groceries retailers such as FreshDirect or popular startup Instacart.

Online Groceries in Europe are growing fast

It’s not just the US, though. Online supermarket Ocado now covers 73% of UK’s population, more than any other supermarket chain. It’s plans are outrageously ambitious: take the world by storm through a global marketplace, similar to Amazon’s. Only for groceries.

Whatever it is they’re doing – it must be right because the company jumped from being evaluated at less than £300 million to a £2.3bn valuation in less than 13 months.

Uber rides into ecommerce, brings groceries

Uber's Groceries Order interface
Uber’s Groceries Order interface

You’ve probably heard a bit about Uber. It’s that company that’s turning the cab industry on its head, enraging french cab drivers and linking riders with drivers.

Now it’s testing a new service, called Corner Store, in Washington. Customers can order from a limited inventory right now, 100 products only, ranging from “drinks” to “feminine care” to “first aid”. Not in that particular order.

And it’s not just Uber. Just like with omnichannel payments, it seems all the big boys want in. Google carefully nurtures Shopping Express, Ebay promises 1-2 hours delivery from local shops with Ebay Now and Walmart has Walmart ToGo ready for orders.

Now if anyone can actually make online groceries profitable …

 

 

 

 

Amazon vs Walmart Comparison in one Essential Chart

Two companies have redefined retail in the past 50 years. One is a company founded by Sam Walton in 1962. Mr. Walton opened the first Walmart in Rogers, Arkansas. The other is an Internet company, founded by Jeff Bezos in his small garage in Bellevue, Washington. This second company is Amazon, the largest Internet Retailer.

Both companies went on to be huge successes but in terms of revenue, Walmart has the upper hand. With $469 billion in 2013 revenue and 10700 stores opened worldwide, Walmart beats by far Amazon’s $74 billion 2013 revenue. If you look at the raw data Amazon is no match for Walmart. But pull back just a bit and the picture is changes. By comparing the track records for the two companies an interesting insight becomes clear:

Amazon vs Walmart - 17 years revenue comparison
Amazon vs Walmart – 17 years revenue comparison

The chart above is a comparison in terms of historic revenue. On one hand you have Walmart – the biggest and most successful retailer in recorded history. Employer of 2.2 million people, crusher of markets and destroyer of mom and pop shops. On the other hand you have Amazon, the brave new world of online retail. Both redefined their markets and both are leaders in their respective fields.

But one is unlike the other. See – I couldn’t even put together figures from the first years in Walmart’s history. Walmart’s revenues starts 6 years after the first Walmart opened, in 1968. That’s when the company reached a figure ($12.6 million) comparable to Amazon’s first year with recorded revenue (1996 – $15.7 million). 17 year after the company launch, Amazon registered $74.4 billion in revenue, while Walmart registered “just” $6.4 billion.

Both the trend and evolution show one thing – Amazon is on its way to become the biggest retailer in the world, a type of retailer the world has never seen. This might probably be a good time to reconsider your stock choices.

Online Stores as Super Heroes: Top 5 Online Super Retailers

There are retailers and then there are super retailers. Here’s a list of some of the bravest and strongest online retailers and their super hero avatar.

Let’s start with number 5:

5. Batman

Secret Identity: Apple.com

batman-apple

The Batman Super Retailer is a mighty hero – strong, determined but first of all – rich. He uses gadgets to fight off the competition and just when you think he is going down  he manages to bring out a game changer out of his handy secret belt (once every year during the WWDC).

But oh my under its dark armor (designed in California, made in China) lies a hurtful secret: The Batman Super Retailer misses his dad, killed by cancer. He tries to cope with the loss by continuing in its tradition and trying to save the world from bad design. Sometimes unsuccessfully.

Biggest enemies:

The Redmond Joker and Mr. Android.

Weakness:

The Dark Knight is everybody’s target. Everyone talks about the “the iphone killer”, “the ipad killer”, “the Apple killer”. Why? Because “he’s the hero Gotham deserves, but not the one it needs right now… and so we’ll hunt him, because he can take it.”

 

3. Spiderman

Secret identity: Fab.com

spiderman-fab

You know that awkward kid that no one actually cared about back when he was into, what was that – photography? Oh, no, wait – it was social networking. It seems he is not so awkward anymore. Overnight he turned into this fabulous, tights wearing, home decorator that simply just loves to help you pick that lovely new carpet for your living room (yeah, he’s also gay).

His super powers are a. his spidey senses when it comes to picking beautiful products and selling them online, b. climbing on walls and giving you ideas on how to better redecorate, and last but certainly not least his unmatched ability to adapt fast to the market. By doing things like letting you design the furniture you want to buy.

The Spiderman Super Retailer has recently moved on from the recently mainstream Flash Sales market and into this new thing he’s doing right now, that doesn’t include Flash Sales and is aaaaalll about design. Also – you’ve probably never heard about it.

Biggest enemies

The Green Goblin living on One Kings Lane, and a distant cousin of Iron Man, the Doctor Octopus also known as  Gilt Home.

Weakness:

Spiderman the Super Retailer catches clients in a pretty expensive marketing web. It seems that its greatest weakness is the high customer acquisition cost.

 

3. Iron Man

Secret identity:  Gilt.com

ironman-gilt

Rich, famous, bright and ready to wear some of the best suits in town. The Iron Man Super Retailer was fathered by Kevin P. Ryan, that had a history of investments in some companies you have probably heard before: Business Insider, Mongo DB, Double Click. Although his corporate siblings are definitely bright, Gilt.com seems to be the prodigal son.

The Iron Man retailer is no match for any of his enemies when it comes to building the best technology, working and managing the smartest people and just being a genuine charismatic fashion and style icon.

Although not really into astrophysics the Iron Man Super Retailer manages to learn new things on the fly, adapt and … look … he does offline retail now.

Biggest enemies

The dreaded Miss RueLaLa – rich, smart and uber-sexy. She is backed up by her corporate hotshot husband, Mr. Ebay and has so far snatched a couple of victories from Mr. Gilt.

Weakness

Beautiful she-heroes like Miss RueLaLa or Maidmoiselle Ideeli.

 

2. The Hulk

Secret Identity: Walmart.com

walmart-hulk

When it comes to this Super Retailer – one thing’s for sure: you do not want to make him angry. When things go south this green retail monster will squash its competition with its low prices and national coverage. You are never too far from him and you won’t be able to hide when he gets all “Hulk, Smash!” on you.

What’s his super power? The Hulk Super Retailer has the upper hand when it comes to size, strength and endurance. The whole operation employs 1.6 million people, it’s bigger than Home Depot, K-Mart, Costco, Kroger, Target and Sears, combined and most americans (90%) live within 15 miles distance to a Walmart shop.

His online operations aren’t to shabby either: it made $4.9 billion in 2011 and that’s him not really trying. When exposed to the Big Poppa Walmart’s Green Dollar Radiation this Super Online Retailer has the potential to make its fellow competitors look like scrawny kids.

Biggest enemies. Biggest weakness:

The biggest enemy this hunk of overgrown retailer has is itself. Bigger is not always better. The Hulk is either a smashing machine or the smart researcher working at Walmart Labs. He is still trying to control its size and keep its balance while growing so fast. He is not yet there but he will be. From that moment on there will be only one Super Retailer that will, maybe, be able to face it:

 

1. Superman

Secret identity: Amazon.com

amazon-superman

This Super Retailer is actually in a class of its own. He is stronger and faster than anyone else online. He has a global reach and can fly and wirelessly deliver its products to anyone, anywhere. He grows faster than anyone else and has so far proven unbeatable.

He was born in a time when  people didn’t believe in its type of heroes. He struggled and after some slightly awkward teenage years (it took Amazon 9 years to turn a profit) it finally showed up at the graduation party, red cape flowing and all.

He is known for making a living of print but in time it diversified its product catalogue through a combination of digital content and marketplace products. After all – how could this Super Super Retailer finance its Fortress of Solitude other than by reporting a whooping $48 billion revenue in 2011.

Biggest enemies:

General Zod, a super enemy seemingly out of this world, seems to have set up shop with AliBaba.com and is now threatening Superman’s global reach. The Hulk (mentioned earlier) is not too happy with Superman’s hegemony either and is trying to catch up but is not yet strong enough to go head – to – head with the Man of Steel.

Weakness

No one has actually found the Kryptonite that is said to be the Amazon killer but rumor has it that its expanding marketplace and investment in digital sales might not be so healthy after all.