The Accelerating Growth of Frictionless Commerce | A.T. Kearney

The Accelerating Growthof Frictionless Commerce

Consumer adoption of digital commerce and payments has become mainstream

The Accelerating Growth of Frictionless Commerce

Notes: Numbers may not add due to rounding. Digital purchases are defined as those conducted online on a desktop or laptop, using the Web browser of a mobile device, or within a mobile app. Question: “How often do you make digital purchases?” N=7,002

Source: A.T. Kearney Q4 2015 Banking and Payments Study

Frequency of conducting digital purchases% of banked consumers who selected each frequency

Using a desktopor laptop

Using amobile phone

Using a tablet

86%

57%

41%

Annually

Quarterly

Monthly

Weekly

Daily

8%

8%

60% atleastmonthly

38% atleastmonthly

24% atleastmonthly

7%

18%

11%

9%

32%

17%13%20% 12%8%8% 9%3%

Have alreadyused these typesof services

Have not usedany yet, but likely to use in the future

Have heard ofbut have notused any yet

Have not usedyet, and not likely to use inthe future

Nearly 60% of US consumers are aware of and likely to use innovative frictionless shopping services


Note: Question: What is your awareness of the examples provided?

Source: A.T. Kearney Frictionless Commerce Consumer Survey, February 2016, NPD Group, A.T. Kearney

What is your awareness of frictionless commerce?% of respondents

Entertain-ment(Netflix,Spotify,Verlocal,

Facebook)

Grocery(Amazon,

Google Express,FreshDirect)

Homemeals

(Blue Apron,Muchery,

Kitchensurfing)

Fashionand

apparel(Le Tote,

Trunk Club,Warby Parker)

Wellness(ClassPass,Lumo, Zeel,

Zocdoc)

Overall

31%

6%

36%

27%

12%8%

41%

39%

8%7%

29%

56%

11%9%

20%

61%

8%7%

25%

60%

17%7%

33%

43%

57%

Today, however, most digital purchases require consumers to enter transaction-specific information


Notes: Digital purchases are defined as those conducted online on a desktop or laptop, using the Web browser of a mobile device, or within a mobile app. Question: “How often do you make digital purchases? Which of the following do you consider your primary payment method (i.e., the one you most commonly use) for digital purchases (e.g., online desktop or laptop, on a mobile browser, on a mobile app)?” N=6,550


Primary payment method for digital purchases% who selected each primary method among banked consumers who conduct digital purchases

61%

21%

17%

Other

Enter payment information for each transaction

Access the payment information held on file at the retailer

Access the payment information held on fileat a third-party payment service provider(e.g., PayPal, Visa Checkout)�

1%

Innovative players are now moving to eliminate the “friction” fromcommerce, usingconsumer-provided datato automate the entireshopping process


These innovators have simplified and sped upthe payments process, removing steps such aspayment details and transaction authorization

Source: A.T. Kearney analysis

Illustrative movers and shakers across the consumer landscape

• Automated and near real-time fulfillment

• Personalized recommendations• Automated shopping lists and triggers

• Pre-authorization of purchase and/or payments• Little-to-no customer action

Consumerdata

ShopFu

lfillm

ent

Purchase


Frictionless purchases can then be automatically made on behalf of the consumer, with his or her advance consent, using real-time, integrated data from consumer preferences, past behaviors, sensors, and other sources


Looking ahead, consider how a smart refrigerator could automatically order groceries for homedelivery based on whichfood items are runninglow—and the consumernever even pushesa button


By 2026, frictionless commerce will likely reach 10 percent of all sales—and as high as 30 percentin some merchant categories


55%

15%

30%

$2.8

$2.6

$2.4$1.2

$1.0

$0.8

$0.6

$0.22014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

$0.4

Traditional retail

Frictionless commerce: Predictive algorithmsSensor-basedSubscription

Digital: Web and POS

Between now and 2026, frictionless commerce2 will grow annually by 24%3

1 Consumer spending is measured in constant 2014 dollar value. 2 Frictionless commerce category includes membership and subscription, sensor-based, and predictive algorithm commerce models.3 CAGR is calculated based on dollar value.

Sources: US Census data; A.T. Kearney analysis

Annual consumer spending forecast1

(US$ trillion)2026 spending(% of spending)


Consumer attitudes are sharply divided, however, onwhether sharing data required to conduct frictionless commerce provides benefits or is an invasion of privacy

Note: Question: “Which of the following statements best reflects your views regarding the use of consumer payment/purchase data by banks, retailers, or digital merchants (e.g., targeted recommendations, special o�ers, marketing promotions)?” N=7,002


Consumer perception of providers’ use of their payment or purchase data% who selected each option among banked consumers

13%

30%

30%

11%

17%

A benefit, but only if consumers are directlycompensated for the use of the information

A benefit if consumers benefit directly from the useof their information (e.g., special o�ers and discounts)

A necessary evil, with occasional benefits to consumers

A benefit because it improves retailers‘ knowledge of the customer and the context for future purchases(e.g., recommendations)

An invasion of privacy that should be prohibited

For banks, frictionlesscommerce is a threat—and an opportunity


Banks could become“commoditized” asfrictionless commerceeliminates consumerpayment type andbrand decisions


On the other hand, there areopportunities to add valueeverywhere: new mobilesales solutions; retailpartnerships; investmentsin mining customer data; and o�ering “privacy as a service”


Banks are in a strategically advantaged position interms of consumers’ trust in their ability to properlymanage consumer data


Notes: For each provider, excludes consumers who do not interact with that provider. Question: “Do you conduct any digital activity (e.g., sending emails, Internet browsing, social network activities, shopping activities) either online (with laptop or desktop computer) or on a mobile device (smartphone or tablet)?; In general, how concerned are you about the privacy of the information that is shared when you conduct digital activities (e.g., sending emails, Internet browsing, social network activities, shopping activities) either online or on a mobile device?; Consider the following types of providers you may share your personal information with when conducting digital activities (e.g., sending emails, Internet browsing, social network activities, shopping activities). Please tell us how comfortable you are with each of the following providers having access to your personal information.” N=7,898

Source: A.T. Kearney Digital Commerce Study 2015

Primarybank

Level of comfort with providers having access to personal information% who said they are extremely or very comfortable

42%

PayPal

34%

Visa

31%

Amazon

30%

AmericanExpress

30%

Master-Card

29%

Discover

28%

Apple

23%

Google

19%

Twitter

17%

Large/nationalretailer

17%

Facebook

14%

Five ways banks and payment providers canaddress the frictionless commerce trend


Participate in the deployment of frictionless commerce solutions to both guide the evolution and become hardwired into future solutions1.Pursue partnerships to provide and lever direct andindirect contextual shopping data2.Determine ways to use consumer and transaction data in moremeaningful ways for both consumers and merchants3.O�er di�erentiated value-added servicesto acquire merchants4.Pursue and develop “privacy as a service” to help consumers manage their personal data in the frictionless commerce world 5.

For more information aboutThe Accelerating Growth ofFrictionless Commerce,please visit:www.atkearney.com/frictionless-commerce


https://www.atkearney.com/america250/digital-future-of-retail-financial-services?utm_source=SlideShare&utm_medium=Social&utm_content=SlideShow1&utm_campaign=Frictionless_Commerce

Business

The Accelerating Growth of Frictionless Commerce | A.T. Kearney