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January 15, 2013

Apple Could Disrupt Retail

By Gary Kim, Contributing Editor

The Internet transforms virtually all businesses it touches, as telecommunications companies, the music industry, book sellers, airlines, consumer goods retailers, travel agencies, publishers of newspapers and magazines already can attest.

For retailers, the growing issue now is how to contend with a more-pronounced degree of competition from online retailers as mobile and tablet applications and devices begin to displace PCs as the worrisome trends.

To be sure, PCs have to create a growing e-commerce business that represents a shift of direct sales from physical retail outlets to online retailers. By 2014, U.S. sales of perhaps $250 billion, representing perhaps eight percent of total U.S. retail sales, will occur using e-commerce channels, Forrester Research (News - Alert) estimates.

Here’s the important observation: historically, any important new innovation accelerates dramatically after reaching penetration of about 10 percent of a market, or 10 percent of people or households. 

Image via Shutterstock

That suggests an inflection point is coming relatively soon, in the e-commerce business. But there are new indications that something else is happening as well, namely the growing way mobile devices and smartphones are being used, both by consumers and by retailers.

Simply, people are using their smartphones before, during and after visits to retail locations, sometimes using price comparison tools or searches to buy elsewhere. But many retailers now are looking for ways to deploy in-store Wi-Fi as a way of interacting with consumers they assume will be using their mobiles while in stores and shopping.

The thinking is that in-store Wi-Fi can be used to personalize the shopping experience and also promote products while shoppers are inside the store.

But retailers also are looking at ways to use tablets themselves, as a replacement for traditional cash registers, and as a tool store personnel can use to improve customer service.

Given the current involvement by Google (News - Alert), Amazon, PayPal (eBay) and many others in various parts of the retailing business, retailers will have to develop ways of working with, or against, major and start-up suppliers of commerce systems. And one might argue that the most-dangerous potential contestant has not even moved yet.

“When it comes to mobile payments, Apple (News - Alert) has a very different – but potentially more “

“Second, the iPod touch and iPads are fast gaining traction as the next generation of cash registers, and a number of retailers are now starting to roll them out to their associates in-store instead of using the traditional cash register,” Schafer said. “This sets up Apple to potentially own both sides of millions of transactions.”

Many of the other contestants will play in different parts of the retail ecosystem. Amazon currently is primarily a rival retailer, though its tablet efforts also make it a potential player in new ways in place-based retailing. And that is before Amazon has made a clear move in the mobile phone business, which many suspect it ultimately will do.

So far, eBay has been active as a new type of retailer, but more notably owns PayPal (News - Alert), an emerging major player in transaction processing. Google of course is a mobile wallet (and therefore mobile payments) supplier.

But it is mobile commerce, more than “e-commerce,” which now seems to be at the forefront of retailer thinking, both as a major consumer behavior trend, as well as a tool retailers can use themselves.

Ubiquitous use of smartphones is one angle. The explosive growth of tablets is the other trend of note.

Global sales of tablets are expected to top 170 million to 180 million in 2013 with seven-inch models likely to enjoy higher growth momentum. Global tablet shipments were estimated at around 130 million units in 2012.

That means greater use of tablets, by consumers, in ways similar to use of smartphones, while shopping. But tablets also could help retailers change their own business processes in ways that help them provide a better shopping experience.

Edited by Brooke Neuman
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