mobile disruption in retail - pwc · mobile disruption in retail • section 2 – global trends...

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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


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



3

Source: PwC UK

PwC

November 2013

4



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


PwC

November 2013

There are a number of key growth trends in mobile

6


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



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



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



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



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



$24.5 Billion


PwC

November 2013

Mobile Advertising revenue 2017

12



$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



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



-

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%)


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



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



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



$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


PwC

November 2013

International NFC mobile payments developments Since 2008 there have been 0ver 200 mobile payment schemes across more than 50 countries

19


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



Bank Networks Innovators Retailers Mobile Operators Collaborations

PwC

November 2013

Which opportunities are motivating players

Rev

enu

e fr

om

pr

oc

es

sin

g t

he

mo

bil

e w

all

et p

ay

men

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



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



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

http://en.wikipedia.org/wiki/File:Googlelogo.png

PwC

November 2013

For Retailers to develop their own wallet platforms, it requires development of complex system

23



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



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



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



PwC

November 2013

The integrated mobile

27


PwC

November 2013

We think the opportunity is greatest for those who capitalise on the strengths of mobile

28


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



http://itunes.apple.com/gb/app/asos/id457876088/?mt=8

PwC

November 2013

Most leading examples only pull a few mobile capabilities together

30



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


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

ac

tio

ns

to

Pu

ll o

r

pa

rti

cip

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 •


Customers

Insight & Data

Marketing &

Loyalty

Experience

Capabilities

PwC

November 2013

Summary

35



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.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information

contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness

of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or

assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this

publication or for any decision based on it.

© 2013 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United

Kingdom) which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

mobile disruption in retail - pwc · mobile disruption in retail • section 2 – global trends...

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