WE ARE (ALMOST) BIONIC. NFC, the new way to pay for goods and services

photo: blog.visa.com

ABSTRACT

NFC is an easy-to-use, intuitive technology because all it requires is a simple gesture with your mobile phone.

It increases customer comfort, because it reduces queuing time and there is no need to carry coins or waste time checking change.

__________

Count the number of plastic cards in your wallet, including credit, debit and the so-called “loyalty” cards. Would you be willing to add another card to your wallet?

Now calculate: How many centimetres away is your mobile phone from your body? Surprised? We are indeed almost bionic.

The telephone has practically become a “natural” extension of our hand, our fingers.

It is not by chance that a mobile phone is reported missing to the police after 4 hours, while a lost passport is reported missing more than a day later.

And what’s more, the phone has none of the problems of space that a wallet does. It is highly likely that with the advent of NFC, Near Field Communication, you will end up replacing it.

What is NFC?

It is an RFID technology that permits two objects in close proximity (usually not more than 4 cm apart) to identify one another and establish communication and data exchange.

One of these objects is typically a mobile phone with an NFC chip. The other may be a device in a store cash register.

How does NFC work?

When the customer goes to pay, if it is a small amount (for example, less that €20) s/he waves the phone near the reader embedded in the cash register and payment is made. If the amount is larger, the customer has to introduce his/her code and choose the credit or debit card with which to make the payment. The system then detects if this person has a “loyalty card” with the retail chain and points are automatically added.

Advantages of NFC

This is a fairly “invisible” technology with no problems adapting to it because it is easy to use and intuitive, needing just a simple gesture. And this is done precisely with the mobile phone, which you always carry with you.

NFC increases customer comfort because it reduces queuing time, and there is no need to carry coins or waste time counting your change.

This is an extremely safe technology because not only does it incorporate encryption to prevent fraud, but you cannot be charged the same amount twice, not even when you swipe the reader twice with your phone.

Why the phone?

My mobile phone is the interface that connects me to my reality, to my world. It is the bridge to my things, to what interests me and what I do. It does not identify me more than a passport, even though I identify myself more with it (and with what it contains) than with a passport. What’s more, it always has real-time connection to the Internet and, therefore, to a server.

NFC can also be used to receive offers or requested information by waving the phone near a chip embedded in a poster at a bus stop, for example. It can also be used for public transport ticketing or as a tool for access control to premises.

Its future

Several research companies point out that this technology is likely to take off in 2014 or 2015. Frost & Sullivan anticipate that the number of NFC-enabled phone users will reach 53% in 2015.

But for this to happen, all the operators (banks, cards, telephone companies, retail chains, etc.) will have to participate actively for users and retail stores to fully appreciate its usefulness.

And things are moving. Visa has already been piloting mobile payments with iPhones in Turkey, Italy, Poland and the United Kingdom. In Spain, telephone operators, Telefónica (02), Vodafone UK and Everything Everywhere (Orange and T-Mobile) have embarked on a joint venture.

In the USA, Google Wallet is almost ready, working in alliance with Citi MasterCard. Google wants to know what information people are interested in. This can be gleaned far more from what people buy than from their web searches. This will enable Google to sell more effectively-directed advertising and also charge retail chains for providing their links.

In Sitges (Barcelona), a trial run was carried out from May to October 2010, with the collaboration of La Caixa, Telefónica, Visa, Samsung and the town council, with 1,500 customers and 500 shops. 90% used the mobile phone payment system and 60% of the transactions exceeded €20, requiring the use of their code. Customers rated their experience 8 out of 10. 90% said they will continue to use it.

Although collaboration is needed, it remains to be seen which companies will come out on top, and how the NFC “control of the waves” takes shape.

_______________

Lluis Martinez-Ribes

A BEAUTIFUL PATCHWORK. Understanding Carrefour Planet (El Pinar de las Rozas)

Imagen: Àngels Miralles (Creative Commons)

ABSTRACT

In launching Planet, Carrefour has introduced an innovation by “editing”, in other words creating, a new shop, through the bringing together of elements that others had already created. However, it has combined them very well, like a beautiful patchwork, which is bound to appeal to customers.

__________

15 years ago, a Carrefour manager, who was taking part in a retail programme at ESADE, invited Professor Dawson and me to visit one of its hypermarkets. In the electrical household appliance section, I commented that their sales in this area could experience double-digit growth if they changed their selling methods.  The manager replied that whilst this was probably true, he could not change things, because discount self-service was in Carrefour’s DNA.

In 2010, Carrefour presented a new retail concept, which constituted one of the greatest transformations in the hypermarket format. In Europe, its clientele was distancing itself – both the number of customers and the frequency of their visits were dropping.  Supermarkets have improved a lot, and the main specialists (FNAC, Decathlon, Sephora, Ikea, etc.) are very experienced. A drastic change was called for. And that is just what they have achieved.

The tip of the iceberg

 

The most enjoyable, amazing, multifaceted shopping experience that has been achieved is only the tip of the iceberg in the re-branded, revamped retail business model that Lars Olofsson, Carrefour’s CEO, has described as having four aspects: delighting customers, enhancing internal efficiency, enriching the corporate culture and creating a chain brand focused on the idea of being positive.  These objectives are designed to ensure that Carrefour is both the customers’ and the shareholders’ preferred retail firm.

The paradigms have been broken

 

With this new retail concept, we need to forget the traditional hypermarket format (everything under the same roof and at very low prices).

The shop becomes something like a shopping centre; a highly coordinated group of shop-in-shops.  Each of these has been decorated, furnished and provided with a range of products and services all specifically designed to suit the type of purchases customers make there.  Most of these shop-in-shops are specialised (with a wide range to take into account a very diverse public). However, the baby goods section breaks another paradigm by introducing a segmented store-within-a-store (containing virtually everything this specific segment requires).

Carrefour breaks with tradition and uses the retail method best suited to each specialised selling area: self-service, vendor-assisted sales, personal behind-the-counter sales and even vending.

The most conventional area is in the “canned and dry foods” (shelf-stable goods) section with aisles of tall shelving, self-service retailing and a discount feel, albeit with less visual pollution than usual.

The shabby look does not sell (as much)

Some analysts say that Carrefour Planet is too attractive, and that this will have a negative impact on their low-cost image. Mr Olofsson stated clearly that: just because a store has low-cost and competitive pricing, it does not have to look like a garage. Inditex and many others have proven this to be true.  This risk of the false perception of it being a pricy store is reduced further, if customers visit it frequently.

The people at the very heart

 

At Carrefour Planet, family shopping trips are much more fun than before. But there are other individuals that Carrefour wants to look after – their own team, in other words the staff. Carrefour’s brand values also apply to them.  “We are committed, caring and positive”. A real declaration of principles that deserves to be followed.

Action speaks louder than words

 

In a scenario in which gross profit margins for the sector appear crazy (food gross profit margins are sometimes higher than non-food ones), the greatest improvements have been made in the non-food sector, in other words the one in which people shop less frequently.  Despite this, the best Planet stores, such as the one we studied, have seen their figures rise by 9.9% in terms of both customer numbers and sales.

More food for thought – in the only non-specialist, segmented (baby goods zone) shop-in-shop, the increase was 73%.

The analysts, who say that pilot shops are expensive, do not understand the role they play in R+D.  Later stores will operate on a tighter budget.

The results are promising and the concept is due to be rolled out in several counties, including Spain.  Carrefour’s shares will probably rise due to the company’s new shops short-term results and especially because the brand is being strengthened.

Innovate or edit

 

In launching Planet, Carrefour has not reinvented the hypermarket, a format that was in dire straits in Europe. It has simply done something different, and done it better.  It has introduced an innovation by “editing”, in other words creating, a new shop, through the bringing together of elements, or business parts, that others had already created. However, it has combined them very well, like a beautiful patchwork, which is bound to appeal to customers.

_______________

Lluis Martinez-Ribes