Retail Week’s new report on mobile payment examines why retailers are playing catch-up when it comes to enabling their customers to shop using their smartphones.

It’s hard to keep up with how quickly developments in the mobile space are moving.

Ofcom says the penetration of smartphones nearly doubled between February 2010 and August 2011 from 24% to 46%, and it’s now thought to have passed the 50% mark. Argos says 6% of its total revenue came from its mobile channel in its latest quarter, and IMRG estimates that 38% of smartphone owners have completed a purchase using their device.

But the area creating most confusion, and a degree of trepidation among retailers, is mobile payment. 

Retail Week has worked with Mobile Money Network – a business in which Charles Dunstone is an investor and Sir Stuart Rose is the non-executive chairman – to examine how prepared retailers are to adopt mobile payments given the opportunity.

Mobile Money Network managing director John Milliken comments: “Innovative mobile commerce offerings are already enabling retailers the world over to enhance the customer experience and drive significant new revenue streams.”

The perception study took in the views of 15 retailers, with off-the-record interviews conducted with a range of executives from grocers, fashion retailers, department stores and specialist retailers. We chose people within these organisations who were most likely to understand mobile payments including ecommerce, multichannel, marketing, IT, operations and commercial executives.

And they are frank that they have been slow to capitalise on mobile payment developments, as well as highlighting the hurdles they would like to see overcome in order for them to capitalise on the opportunities from changing consumer behaviour.

Spreading the word

The report sets out to answer two basic questions – do retailers think mobile payment is going to be important to their businesses, and what are they doing about it?

After defining four different types of mobile payment, we asked the retailers participating in our research to explain where they were on the path to adoption of each, how well they personally understand each and how well they think the rest of their company understands them.

The majority already have a live mobile-optimised website that customers can transact on. For the other three types of mobile payment – mobile wallets, mobile as payment verification and universal instant mobile checkout such as Simply Tap – at least some of the retailers are planning trials in the next six months. 

And while there was good understanding of the various payment types among the respondents, they admitted that this has yet to feed down to the rest of their organisations. There is recognition that this is going to be a problem if they want to quickly roll out mobile payments following their own trials or to react to theircompetitors’ developments.

One head of multichannel, who says there is little understanding of mobile payment in his wider business, explains why this quickly needs to be addressed: “I have just been talking to the store operations teams… about how big mobile payment is going to get, and how much transformation we will have to do to our store selling model in response to mobile payment suddenly taking off in the stores. And it was agreed we do have to start educating the rest of the staff.”

Chicken and egg

There are a variety of perceived barriers holding retailers back from jumping into adopting mobile payment types, particularly compared with how readily they have invested in mobile apps and mobile-optimised websites.

The report highlights how retailers associate mobile payments with customer convenience

The report highlights how retailers associate mobile payments with customer convenience

A lack of standards or a clear “winning solution” was repeatedly mentioned. Waiting for customer demand to present itself also came up; nearly half of the retailers interviewed said they had not yet begun to ask customers about mobile payments to assess demand.

But there is acknowledgement that customers won’t realise what they want until retailers give it to them. So it is only really the early adopters who will be able to test market demand.

Those who aren’t prepared to go first are, however, mindful of how quickly they may need to adopt mobile payments if the early adopters make a success of it. A retailer predicted that the adoption curve will look similar to that of click-and-collect services, with retailers rushing to launch once the results of the first few to make services live become known.

So while not all retailers are prepared to move at the same speed, they all broadly agree on the direction they should be moving in. Not one said they couldn’t see mobile payment being significant to the retail industry in the future.

A director of one fashion retailer says once he and his peers have got to grips with the convergence of their multiple sales channels, payment has got to be the next big development on the agenda. “At the moment when you buy on your mobile you have to get your credit card out,” he says, pointing out that there is clearly a place for developments to make this slicker and easier for customers.

What’s particularly interesting about this statement is that it tacitly acknowledges that retailers aren’t doing a good enough job on mobile payment yet. While people can make a purchase on their smartphone, many mobile sites have a fiddly manual process of keying in card details. Who knows how much more quickly online sales would be moving to mobile sales if this stage of the mobile customer journey was improved.

It’s this belief that there probably is pent up consumer demand for more convenient mobile payments that also explains why so many retailers want to be in a position to quickly follow the leaders in the field. Mobile sales may be relatively small, but no one wants to turn them away as they are growing so quickly when the overall market is not.

It has taken a decade for online sales to substantially cannibalise certain segments of the retail market, and make important inroads into other parts.

Everyone agrees that the time it will take mobile sales to do the same will be much accelerated.

And mobile payments go further than this too. As the multichannel director thinking about how to cascade information to his store staff says, mobile payments could also quickly have a profound effect on the store experience.

Milliken concludes that retailers must act now to avoid history repeating itself: “The retailers that waited for the online market to mature before investing in ecommerce lost out; customers didn’t wait for them. Successful retailers will embrace this opportunity to deliver a great experience whenever and wherever the customer wants to buy.”

The iPhone made browsing the web on a mobile device a no-brainer for the consumer. Retailers must now get to grips with how they make payment using such devices just as simple.