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Mobile disruption in retail
Agenda
1 Mobile overview 1
2 Global Trends 5
3 Mobile payment perspective 18
4 The integrated mobile 27
5 Retailers are having to change 31
Page
PwC
November 2013
Mobile overview
1
Mobile disruption in retail •
PwC
November 2013
Customers are of course doing things differently
2
Mobile disruption in retail •
Source: Apple, Google, Square, KPBC
Section 1 – Mobile overview
Consumers are doing things differently
10% of internet traffic is mobile (vs 1% in 2009)
We use the web (and
increasingly the mobile web) as integral part of our shopping
process to research, ask advice and search for better prices – we
also ask our friends as well as strangers
New Business models
Square (founded in 2009), processing payments worth $10
billion annually
These factors produce new
business models that did not exist 10 years ago, that disrupt
traditional businesses, from new ways of shopping through to new
payment systems
Smart phones really are rather smart
c. 1.5m applications for iPhone and Android
We use them for work, play, shopping, travel & banking
They know where we are, and
they are getting smarter
PwC
November 2013
Decade of change
0
20
40
60
80
100
120
% U
K A
cti
ve A
du
lt P
op
ula
tio
n
Traditional Consumer Transitionals Digital Natives
Up to 2010 Traditional consumer behaviour is the majority
2010–2018 Transitional behaviour is the
majority
2019 and beyond Digital native
behaviour dominates
Customers really are doing things differently
Mobile disruption in retail •
Section 1 – Mobile overview
3
Source: PwC UK
PwC
November 2013
4
Mobile disruption in retail •
Section 1 – Mobile overview
Customers are
connected
Consumers are ever more digitally connected and expect the same from businesses
Customers are
informed
Consumers are better informed than ever and trust the views of their peers
Customers have
choices
Customers expect more customisation of products and greater opportunity to do things for themselves
Customers value
experience
Customers value the quality of the user experience just the same as they value the product itself
Customers expect
more
Consumers compare experiences across industries and think “if I can do that on Amazon, why can’t I do this with you?”
This has also led to a change in customer expectations
PwC
November 2013
Global Trends
5
Mobile disruption in retail •
PwC
November 2013
There are a number of key growth trends in mobile
6
Mobile disruption in retail •
Section 2 – Global Trends
Smartphone penetration Mobile Advertising Growth Mobile Payment roll outs Use of Mobile Data/Analytics
Smartphone penetration is well over 50% in most mature markets with
Smartphones now shipping more than feature phones
The use of SMS, MMS, Coupons, vouchers, display
and in app advertising taking increased share of add spend
Mobile Payments platforms are continuing to roll out
from Banks, Retailers, Telecoms operators, and new
entrants
Mobile data being used increasingly to support business decisions and marketing – especially
through the utilisation of location based information
PwC
November 2013
Worldwide smartphone sales to end users, split by operating systems
7
Mobile disruption in retail •
Section 2 – Global Trends
72%
21%
70%
16%
29%
62%
49%
47%
55%
39%
Android
iOS
Blackberry
Windows
Other
United States China
Japan
EU 5
Australia Source: Kantar, Gartner
PwC
November 2013
Smartphone penetration is reaching critical mass, solving a key supply-side issue in m-commerce
8
Mobile disruption in retail •
Section 2 – Global Trends
By 2014, there will be 133m smartphone users
in the United States
0%
10%
20%
30%
40%
50%
60%
2009 2010 2011 2012 2013 2014
North America
Western Europe
Global
Asia Pacific Latin America
In Q2 2012, 56% of new phones shipped
in China were smartphones
Source: ComScore – 2012 Mobile future in focus, sina.com, eMarkerer
Smartphone penetration (per total mobile handsets)
Nordics will exceed 90% Smartphone penetration
by 2015
PwC
November 2013
9
Mobile disruption in retail •
Section 2 – Global Trends
Online
+4.0%
Mobile
+17.3%
The effect of mobile vs. online ads on ad awareness
201 144 88 75 67
2011 2012 2013 2015
2016
Global mobile analytics market ($ million), 2012-2016
109
2014
Source: PwC Entertainment and Media Outlook
Source: MillwardBrown
Source: Frost and Sullivan
5.1
8.3
12.2
15.9
19.7
23.5
2011 2012 2013 2014 2015 2016
Global mobile advertising market ($ billion), 2011-2016
The role of mobile is growing across a number of aspects
PwC
November 2013
Mobile is also set to transform the advertising market if inventory scale and consistency can be delivered
10
Mobile disruption in retail •
Section 2 – Global Trends
Internet now has a market share 18% compared to 11% in 2007
+15%
TV is still the dominant form of advertising with 38% share
+7% Outdoor advertising has remained stable at 6%-7% market share and is expected to remain that way
+5% Decline in newspaper advertising from 25% to 19% market share, expected to decline to 14% by 2016.
Newspaper Advertising +2%
Over last years, magazines and Directories have seen YoY revenue decline of c 5%
+3% Mobile internet advertising spending is due to grow 34% annually until 2016.
+34%
Source: PwC Entertainment & Media Outlook 2012-2016
TV Advertising Outdoor Advertising Outdoor Advertising
Magazine & Directory Advertising Internet Advertising Mobile Advertising
PwC
November 2013
The global mobile internet advertising market in 2016 will be worth
11
Mobile disruption in retail •
Section 2 – Global Trends
$24.5 Billion
Source: PwC Entertainment & Media Outlook 2012-2016
PwC
November 2013
Mobile Advertising revenue 2017
12
Mobile disruption in retail •
Section 2 – Global Trends
$8.7bn $0.2bn
$0.06bn
$14.1bn $4.1bn
$0.3bn
North America
Latin America
Middle East and Africa
Western Europe
Central and Eastern Europe
Asia Pacific
Source: PwC Entertainment and Media Outlook 2013
$27.4bn Worldwide
Total
PwC
November 2013
$2.6bn
$282m
$288m
$233m
$195m
$64m
$65m
$92m
$177m
UK
France
Spain
Italy
Germany
Finland
Denmark
Sweden
Russia
Source: PwC Entertainment and Media Outlook 2013
Top 10 European Markets
$82m Turkey
$73m Belgium
$4.4bn Overall
European Total
Mobile Advertising Revenue in Europe 2017
13
Mobile disruption in retail •
Section 2 – Global Trends
PwC
November 2013
Majority of growth in mobile advertising is expected to come from North America, Asia and Europe
Mobile advertising is seeing a continued growth across both search, Display and SMS /MMS.
• Growth in Asia & North America has been significant, with considerable growth in Europe. The total global revenue was $5.2bn
• According to eMarketer the Nordics will see a 70% growth in Mobile advertising in 2013
14
Mobile disruption in retail •
Section 2 – Global Trends
-
5
10
15
20
25
30
2011 2012 2013 2014 2015 2016
($ b
illi
on
s)
North America Asia Pacific EMEA
Global Trend (CAGR = 34%)
Source: PwC Entertainment & Media Outlook 2012-2016
Asia Pacific
North America
Europe
MEA / Latin America
Mobile Internet Advertising Forecast 2011 % of global Mobile internet advertising revenues
by region
PwC
November 2013
Mobile payments is now growing in a number of forms
15
Mobile disruption in retail •
Section 2 – Global Trends
70m
29.7m
102m
46.5m
10.4m
2.3m
5.7m
Mobile payment users by region, 2013
$49bn
$166bn
Value of global mobile merchandise payments, 2012-2017
Source: Gartner, PwC Analysis
PwC
November 2013
Digital advertising, and payment providers are aggressively perusing mobile ad and payments
16
Mobile disruption in retail •
Section 2 – Global Trends
2010
Apple introduces Passbook, stores
coupons and tickets
Launches Wallet which stores cards
and offers
Launches PayPal Here its own mobile
payment solution
Square launches its mobile
payments solution
Introduces iAd, a mobile advertising
platform for iOS
2011 2012 2013
Samsung launches its AdHub acting as an ad exchange
Acquires mobile advertising start-up MoPub for $350m
Google buys the mobile ad firm
AdMob
Announces 40% of ad revenue from mobile
Samsung Wallet launches as a rival
to Apple’s Passbook
eBay buys online payments firm
Braintree for $800m
iOS 7 without NFC but with
iBeacon
PwC
November 2013
The global mobile web analytics market in 2016 will be worth*
17
Mobile disruption in retail •
Section 2 – Global Trends
$201 Million
Source: Frost & Sullivan – Analysis of the Global Online Analytics Market
* Projections do not include mobile app analytics, spatial analytics, data warehousing and other mobile big data technologies
PwC
November 2013
Mobile payment perspective
18
Mobile disruption in retail •
PwC
November 2013
International NFC mobile payments developments Since 2008 there have been 0ver 200 mobile payment schemes across more than 50 countries
19
Mobile disruption in retail •
Section 3 – Mobile payment perspective
• PayPal and Google have been through extensive trials
• ISIS has been led by MNO working with Retail Banks, but still remains in trial
• MCX has been a announced as a retail led consortium
• Square, Apple, and Amazon are extending into mobile payments
• Brazil is by far the largest market with a number of recent entrants including, HP & Nokia, PayPal, and incumbent MNOs
• Telefonica has partnered with Mastercard to launch ‘wanda’ across a number of south American countries.
• UK MNO JV has been cleared by the EU, and Piloted as Weve in Mid 2013
• Pilots are being run across most countries, mainly driven by MNOs, however some JVs have failed to reach agreement but this model is expected in many European countries during 2013/4
• Korea and Japan have taken the lead; mobile payments are widely used in these markets
• A consortium in Singapore consisting of banks, MNOs, mass transit and NFC technology launched earlier in 2012
• The middle East and North Africa have a range of operator or partnership based.
• South Africa is due to see the launch of mobile wallet services in 2013
North America
South America
Middle East & Africa
Asia Pacific
Europe
PwC
November 2013
We believe that there are 5 core operating models for m-payment market development
• MNOs • Banks/issuers • Associations • Other parties
• Retail banks/issuers
• Associations & network
• Alternative solution providers
• Retailers • Stand-alone
merchants
• Mobile Network Operators (MNOs)
Builds on existing network and deploys mobile payment applications or devices to customers, via bank partners
Collaboration among banks, mobile operators, existing payment networks and other stake-holders in the mobile value chain
Technology-based solution that leverages existing and complementary mobile assets to develop mobile payment capabilities
Merchants create independent, closed-loop payment applications that are interoperable with existing POS technology
Mobile operator acts independently to deploy mobile payment applications and value added services
20
Mobile disruption in retail •
Section 3 – Mobile payment perspective
Bank Networks Innovators Retailers Mobile Operators Collaborations
PwC
November 2013
Which opportunities are motivating players
Rev
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all
et p
ay
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t
Ambition
Key players believe marketing revenue will be of greater value than payment revenue...
Revenue from “marketing” to customers
via mobile wallets
• Protect their customers • Protect transaction revenues • Build new experiences
• Acquire share • Expand market • Marketing revenue
• Protect customers • Increase Customer offering • Marketing revenue
• Customer experience • Reduce payment costs • Marketing opportunity
21
Mobile disruption in retail •
Section 3 – Mobile payment perspective
Bank Networks
Innovators
Retailers
Mobile Operators
PwC
November 2013
NFC has become established as the
contactless standard, with both retailers and
payment systems rolling out extensive systems,
but yet to see mass adoption in most markets
The mechanism for payments is still emerging with NFC still being the most likely
22
Mobile disruption in retail •
Section 3 – Mobile payment perspective
Has been used by many as the ‘stop gap’ between
other payment mechanisms, very likely
to be replaced when other more efficient systems are adopted
Trialled by a number of organisations, but still
questions remain about feasibility and security
The new kid on the block using a range upto 50m, and likely to be part of IOS 7, apple seem to be
using these as an alternative to NFC
Near field
communications (NFC) Bar and QR Codes Facial Recognition Low Energy Bluetooth
PwC
November 2013
For Retailers to develop their own wallet platforms, it requires development of complex system
23
Mobile disruption in retail •
Section 3 – Mobile payment perspective
Illustrative map of stakeholders in the M-Commerce ecosystem
Mobile Advertising
Mobile Transactions
‘Smart’ data
Data analytics services
Coupon issuing service
Location services
Chip & handset
OEM
Payment network
Transit operator
Ticketing & event
manager
Acquiring bank
Payment processor
Mobile Network
Operator
Issuing bank
Trusted service
Manager
SIM & payment software
Application developer
Retailer
Operating system & device
Ad exchange
Supply side
platform
Ad network
Demand side
platform
Trading Desk
Advertiser / agency
Media Buyer
Publisher
Loyalty services
Data management
platform
PwC
November 2013
“I can store my favourite loyalty cards on my phone”
“I can send gifts straight to my friends mobile wallets” “I can get my receipts
on my phone”
“I can pay for goods up to £15 with a quick tap”
“I can browse relevant offers in my mobile wallet”
“I can choose which card I pay with, and coupons will be applied automatically”
“I just enter my PIN for payments over £15”
“I receive relevant offers when I am near my favourite stores” “It’s really quick to pay for
things”
Mobile is already being disruptive but we believe mobile payments will be transformational
24
Mobile disruption in retail •
Section 3 – Mobile payment perspective
PwC
November 2013
What benefits will digital wallets bring to retailers?
Brand Awareness
Product Search/
Compare
Product Selection Sale
Servicing
Repeat Purchase
The Customer Lifecycle
8% of adults buy through their phone in the UK, 21% intend to in the future
Access the growing market
Leverage MNO/financial institution customer segmentation insight
Data will drive product development, supply chain forecasting and individually targeted offerings
Mobile advertising enables reduced TV & display content
Electronic receipts, reduced checkout staff
Faster payment, shorter queues
Target specific customer segments
Marketing cost savings
Location-based advertising
GPS recognition of customer location
More efficient cross-sell
Relevant promotion/recommendation push to mobile at point of sale
Sale cost savings
Enhanced customer experience
Improved customer
insight
Reduced cash management requirement
Reduced cash handling in store resulting in cost savings and improved security
25
Mobile disruption in retail •
Section 3 – Mobile payment perspective
PwC
November 2013
StoreEfficiency
CashReplacement
ImprovedSecurity
TargetedMarketing,
Offers &Loyalty
ImprovedCustomer
Insight
Total Benefit
What justifies the move to digital wallets?
Be
ne
fit
Va
lue
(£
)
Early return
Future Return
26
Mobile disruption in retail •
Section 3 – Mobile payment perspective
PwC
November 2013
The integrated mobile
27
Mobile disruption in retail •
PwC
November 2013
We think the opportunity is greatest for those who capitalise on the strengths of mobile
28
Mobile disruption in retail •
Combine data from transaction, response, redemption and purchase history with MNO data including permissions, location, call patterns, web logs and interests
Deploy content through channels including
MMS/SMS, App, Loyalty, Coupons,
Email and Display. With the use of location
data and history
Use a closed loop mechanism to measure outcomes, and react in real-time
Using analytics and optimisation to maximise possible inventory whilst
maintaining customer relevance, and channel usage
Section 4 – The integrated mobile
Advertising & Loyalty
Transactions and
Interactions
Big Data
PwC
November 2013
Far more than just an ‘app’
Mobile payments Mobile Sites
Apps
In Store Wifi
Location Based Ads
Physical triggers
Mobile coupons/loyalty
Mobile POS
29
Mobile disruption in retail •
Section 4 – The integrated mobile
PwC
November 2013
Most leading examples only pull a few mobile capabilities together
30
Mobile disruption in retail •
Section 4 – The integrated mobile
Coca cola choc
campaign Weve Meatpacker shoes Starbucks
Tesco F&F IKEA Dominos Pizza Burberry
Mobile Payment and
Loyalty
Location based
Marketing
Mobile Coupons &
Vouchering
Gamification
Content Triggers Store Experience
Augmented reality
Duel Screen
Advertising
PwC
November 2013
Retailers are having to change
31
Mobile disruption in retail •
PwC
There are four transformations within the retail environment
Utilising technology to place content in the
physical store
Retailers are using mobile technology to bring digital
content into the store environment via mobile
devices
The device becomes the mechanism for linking
customers online and in-store
Mobile is being used to build a stronger
relationship between online and offline
behaviour
Mobile point of sale will change the in store
experience
Mobile points of sale on tablets and smart phones are allowing retailers to
put sales people back out on the shop floor
Loyalty , rewards and marketing through the
device
Using contactless mobile redemption, multiple ‘mobile channels’ and
contextual data
18
Content in Store Mobile as the ‘trigger’
Transforming store and
staff
Transforming data,
Marketing and loyalty
PwC
November 2013
The old success stories and leaders may not be the leader over the next decade
33 Mobile disruption in retail •
Section 5 – Retailers are having to change
Customer Insight
Fr
om
Pu
sh
in
ter
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to
Pu
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r
pa
rti
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ati
on
s
Low Some Mostly Everything
1 2
3 1 Organisations with a limited insight of customers, or the ability to use knowledge will loose relevance, and fail to meet the needs and changing habits of customers (Jessops, HMV, Curry's)
Digital channels including mobile, will move many organisations into this space (currently occupied by Tesco), where Insight is used, but to drive decision making which is ultimately around price, margin, and profit
2
3 The future winners – those organisations that can use insight to help customers deliver outcomes based on value exchange
PwC
November 2013
With customers becoming visible through mobile, organisations are able to connect customers through both in store and online interactions, and are beginning to develop new customer strategies to meet with changing customer behaviour.
Retailers who have limited insight and customer capabilities are expanding the function, to be able to manage customer data and behaviour coming from a range of new digital channels.
Marketing & Loyalty is starting to change dramatically, and is becoming more complex. Particularly as a result of location and contextual marketing which required more complex orchestration than traditional marketing and loyalty.
Customer expectations are changing, and retailers are investing in their core systems in order to get the basics right, such as previous orders, stock availability and order tracking – all through multiple platforms
Mobile is not adding a channel, but breaking through them, which means that the core capabilities of retail business are shifting away from channels into what we call a “Total Retail” model, which is about aligning the operating model around the customers, and not around the channel
What are the big considerations
34 Mobile disruption in retail •
Section 5 – Retailers are having to change
Customers
Insight & Data
Marketing &
Loyalty
Experience
Capabilities
PwC
November 2013
Summary
35
Mobile disruption in retail •
Section 5 – Retailers are having to change
Being ‘Mobile’ is just part of being a retailer
Enhance not replicate Utilise the strengths of
mobile Channel strategies
need to change
Some retailers need to build capabilities to get mobile to work
To really work, it needs value exchange
There is some first mover advantage
It needs to add a new experience
Thank you.
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