SN EXTRA: Mastering Mobile

MICHAEL GARRY

As much as the Internet did 10 years ago — and maybe more so — the mobile phone is changing the way consumers shop. By 2015, shoppers globally are expected to purchase goods and services to the tune of about $120 billion via their mobile phones, according to the National Retail Federation, Washington.

Richard Mader

To help retailers grasp the exploding field of mobile retailing, the NRF, through its ARTS (Association for Retail Technology Standards) division, last year launched its Mobile Retail Initiative. The initiative, in turn, published a Mobile Blueprint, which is a comprehensive look at every aspect of mobile retailing, from apps, payment and standards to security, privacy and integration. Version 2 of the Mobile Blueprint, which is free to anyone at www.nrf-arts.org, was released last month at the NRF’s 100th Annual Conference & Expo.

Richard Mader, the executive director of ARTS and the chair of its Mobile Blueprint Committee, has led ARTS’ technology standards efforts and influenced the development of retail technology for nearly two decades. In this SN interview, he explains how mobile phones are being integrated into the retail space and what supermarket operators need to know about this fast-developing phenomenon.

SN: How important is it for retailers to offer a single, integrated shopper experience across the store, the Web and the mobile phone? How many retailers are actually doing that?

MADER: A year ago, everyone in retail was interested in mobile marketing and coupon applications. They were not as cognizant that mobile has a big need to have the right infrastructure and be integrated with existing applications. But now people are saying, “Tell us what we really need to do.”

When ecommerce came out, it ran away as a separate thing. Then people said we need to deal with multichannel retailing and so we have to integrate ecommerce. The same thing is happening with mobile. People rushed out with a few iPhone apps, but very few retailers have gone ahead and integrated the mobile channel. If mobile is not properly integrated, for example, you can’t take ecommerce images and put them on the phone.

We would say that less than 5% of retailers — some would say 1% — have fully integrated across channels, including mobile. IHL Consulting says that 3% or more expect in the next 12 months to integrate mobile right down to the self-checkout.

We tell people in the Mobile Blueprint to make a total enterprise plan for mobile — don’t say this is just another marketing thing. You better have your marketing, store operations, finance and IT people fully involved in developing the right mobile plan.

SN: What mobile applications will become most popular in the grocery channel?

MADER: Clearly, shopping lists have got to be No. 1. In the near future, you will be able to walk into the store with a list on the phone, it will guide you through the store, and you will click items off the list and apply coupons. A couple of food retailers have started doing some of this. Tesco’s Fresh & Easy Neighborhood Market has an app that allows you to create home delivery lists.

Some people have tried printing nutritional information on price labels. Can’t you see that as a big innovation where food-conscious consumers use their phone to scan a product in the store and get all that information? It could be information like where the product comes from and how many calories and fat it has. Look for people like Whole Foods — at the high end — to jump into that.

And there will be no reason you can’t check out and pay with the phone. We say in the Mobile Blueprint that the smartphone is the optimum self-checkout device. If a retailer can solve all of the security and integration issues, what could be better than having customers not only check themselves out, but do it on their own equipment? The retailer doesn’t have to buy a POS! And since self-checkout is so tied to the grocery sector, grocers should be a big player in this.

Scanning on a mobile phone is not as robust as a scanning gun at the moment, but it does work well enough. For example, I like AisleBuyer, which rolled out at some Magic Bean stores; after pre-registering, you scan a bar code with the phone’s camera, and make a payment in the store.

The phone camera is OK, but there’s a new scanning device that can be clipped to a mobile phone. Will the consumer pick it up? Maybe, but initially it will be used by the retailer. And the camera may get better; we’re seeing a move today to 2D bar codes, which makes it easier and faster for the camera to scan.

For the retailer, we had a company in our booth at the NRF Conference that has all the POS peripherals that attach to a smartphone — a scanner, a mag-stripe reader and a printer. You could take a smartphone and make it a fully functional POS system. And internally, retailers can use mobile phones in the approval process with text messages. And phones can be used for time-and-attendance; employees can sign in with their mobile phone and be assigned tasks.

SN: How close is mass retail in the U.S. to accepting mobile payment at retail?

MADER: If you go back 12 to 18 months ago, retailers said, “We don’t care about mobile payment, we want to know about marketing.” But in the last six months that’s changed.

Target and Starbucks do allow you to pay with a mobile phone. So it’s coming — the big guys are playing with it. Isis is a new payment system being launched by Verizon Wireless, AT&T Mobility, T-Mobile USA, Barclaycard USA and Discover Financial Services, and it will be competition to VisaNet; they said it will be set up to use the NFC [near-field communication] chip in the phone, which is similar to the chip in the contactless card. There’s a lot of money behind Isis, and we know Visa and MasterCard are going to react to it. Apple said it will put NFC in the next version of the iPhone. Nokia said it will have NFC chips in select phones in 2011. PayPal is pushing it hard, not just online but now in the physical store. So now the manufacturers of handsets and the payment processors are saying they’re going to provide NFC in the device.

Retailers said if NFC is the way we’re going to take mobile phone payments, then we’ll have to put new readers in all of our checkouts. But that expense has been delaying implementation of mobile payment. People like Starbucks have instead gone to using a bar code as a payment indicator that the retailer scans, avoiding the need for an extra communication device, though you need an image scanner.

We do see payment coming — we see it on a big roll because there are so many alternatives out there. In the next 12 months we’re going to see a lot more payment hitting the store. The big issue is, do we go NFC and put in the readers? Contactless card readers would work and some retailers have invested in that. Contactless cards did well in transit systems in Washington, D.C., and Japan because when you’re in line there, speed is everything. Fast food did buy into contactless because they’re looking to be fast. But contactless cards are not as big a deal at retail checkouts vs. a mag-stripe card.

Retailers have said they’re facing a $10 billion implementation with chip-and-PIN. Potentially, payment with mobile phones could eliminate the need for chip-and-PIN because you can put a lot of the same characteristics in the chip in the phone. So maybe there’s some way for industries to work together and balance the expense of mobile payment, which will increase security and make it more convenient for the customer.

Mobile payment is going to be extremely convenient, and it’s going to present alternatives that will lower interchange fees. It will also add incremental sales — maybe not so much in grocery, but who knows?

SN: What standards apply to mobile in retail?

MADER: There are a ton of them. If you’re going to transmit credit card information across open space, the standard can’t be Bluetooth, which would allow a guy standing 10 feet away to pick it up. There have to be great restrictions, and the NFC Forum has standards for that. There are also groups that have worked on standardizing security within the NFC chips themselves; one is the GSM Association.

If you’re going to pay with mobile, you don’t want to be handed a paper receipt; you probably want a digital receipt in the phone. So ARTS is updating its digital receipt standard, which will be out in March. ARTS also wants to work with GS1 on standards for digital coupons so the coupons all look the same in form and format for payment and reconciliation.

ARTS is also working on a standard to help phone-app companies integrate with retailer’s back-office applications; we call that mobile integration. ARTS can help companies like AisleBuyer that are coming up with good mobile apps to get integrated quickly and lower expenses for themselves and for retailers. Look for the mobile integration standard in the third or fourth quarter of this year.

SN: What privacy issues will retailers have to address in the mobile space?

MADER: Privacy is huge. No. 1, the privacy of the mobile phone must be respected at the highest level possible and it must always be opt-in — always. So what the retailer needs to do right away is to establish a contract with the consumer and never break it. We all know our mobile phone is very personal to us. No. 2, make sure the mobile phone is very secure. There are ways to be secure. Some of the chips for payment encrypt right in the phone. Also, if you store all these cards in your phone, they need to be encrypted — that’s the mobile wallet. In the Mobile Blueprint, when we ask retailers to name their principal concerns with mobile, privacy and security come to the top of the list.

Reliability is also important. At the Jacob Javits Center in New York [site of the NRF Conference], most people with AT&T phones could not make a call. (Verizon phones to a degree could.) On Saturday and Sunday, I didn’t have a problem, but when all the people were there on Monday and Tuesday and the network began to fill up, I did have a problem. As the old Boscov’s CIO, I go to their stores occasionally and my cell phone doesn’t work well at all because of the old construction — there’s lots of steel. So retailers need to think about whether they properly updated their building to make sure they have a strong cell signal. AT&T told me they have people trained to review a venue and make adjustments so the signal works well. The carriers are aware of this — look for them to become a partner and take a leadership role to give retailers that reliability.