28 Jan 2014
The mainstream media is hooked on “mobile payments” like Doritos to the Super Bowl… we all like to talk about it… Difference is Doritos have real consumers.. while “mobile payments” at the POS are a laughable over-buzzed ethereal dream. I continue to be amazed at how badly this is covered, from over blown projections by Javelin ($20 B by 2012), to reports of NFC’s wonderful future from the GSMA. For readers of my blog, this hype is nothing new..
What is Apple doing?
Creating a Commerce Platform that will enable 1000s of Retailers to rewire commerce. Apple is the ONLY COMPANY in the world where Retailers will CHANGE THEIR BUSINESS to create a unique APPLE EXPERIENCE . Why? Apple’s biggest asset is their ability to change consumer behavior.. It is the only company in the world that can move: Retailers AND Consumers AND Manufacturers. There is enormous TRUST in the Apple brand; they have earned this trust (with THE MOST AFFLUENT consumer base) by consistently delivering the best product experience (A very very big PERIOD). They have proven to be THE leader in digital goods, physical retail AND eCommerce. Payments may be a starting point.. but Apple’s patents, technology, products and applications are completely missed if you only look at them from a payment perspective
Sorry to sound pompous here guys, but I’m pretty decent in predicting Apple in Payments, and the role of the Handset in Physical retail. Take a look at the consistency of my previous blogs…
- Apple and NFC (No NFC in iPhone 4 or 5)
- Apple and NFC Part 2 (NFC in next version of iPhone.. and the likely combo chip)
- Apple Passbook
- Handset – Commerce Orchestration (Drivers behind Apple and Google’s Platform Strategies)
- Rewiring Retail Commerce
Apple is a tremendous company, with the best product design teams in the world. They care deeply about their brand and the consumer experience, particularly as it relates to the iPhone. Apple also knows physical retail VERY VERY well, with the most profitable stores per square foot in the world (over $5,600 per square foot). Let me restate this again, Apple is #1 or #2:
- Ability to Change Consumer Behavior (see blog)
- Handset Profitability
- Customer Demographic/Profitability
- Product Design
- Consumer Experience
- Sales of Digitial Goods (App store)
- Sales of Physical Goods online (Mac Store)
- Physical Retail Sales (Apple Retail Stores)
- other (Authentication, developer community, cloud, fraud, security, …)
NOT About Payments
Do you think Apple would risk any of this on something that they could not control or has proven to be a failure? OF COURSE NOT!!
Physical Retail is a complex business that is undergoing a complete restructuring (see Blog), we are talking about $2.4T in sales (does not included Auto, Gas, Fin Services) vs. eCommerce sales of $180B. Apple has been very well served in acting as a late follower, the key for Apple to add value in retail is their role in changing consumer behavior (See Blog).
It is to make the iPhone a platform for Physical Retail, to enable retailers and manufacturers to create 1000s of fantastic consumer experiences. Apple will do NOTHING it cannot control, it knows that Banks and MNOs will look to leverage its brand and gain a controlling foothold. Apple and Google are very consistent in the battle to control the consumer (authentication)… the ability to authenticate is critical to bringing together the virtual (cloud, social, pictures, music, payment, ID) and physical worlds ( Blog Who do you Trust, and Authentication Battle ).
I have to run and catch a plane, but as a quick example. What if you were in a shopping aisle and the products could talk to you? They could tell you their reputation, what your friends thought of them, what they tasted like, or how they could best be used? What if you allowed certain retailers to know you were in the store (a form of checkin) and the retailer could give you a special deal on a package of 2 or more things you were looking at, or offer to meet Amazon’s price if they could package a warrantee and same day installation. When you walk up to the POS, they know your name and ask if you would like to put the purchase on the same card you used last time?
The business case for Apple is not making 10-30bps in payments, it is about making 500bps in advertising and retailer services. It is about cementing iPhone’s role as a platform for both Consumer and Retailer… adding services, adding transactions, adding loyalty and creating a behavior chain with APPLE AT THE CORE.
Most of you know I deal with the institutional investor community. Today I had a funny quote.. “Tom we heard that Paypal is working to be part of the Apple product”. My answer “I’m sure they are… but they have absolutely NOTHING to give them”. Apple would be nuts to include Paypal here, Paypal has NO Physical presence, no merchant relationships, no consumer traction in off line, … Should Paypal let consumers choose to a Paypal “product”? Why? Perhaps linking their debit accounts.. but Paypal is not merchant friendly… it would be a VERY bad way to start a platform business.
As I said before as Payments move to the OS, Paypal does NOT have one.