Will shoppers be enticed by new ways of paying?
- 31 January 2011
- From the section Business
Turning smartphones into payment devices, using Near Field Communication (NFC) chips containing personal data, is being touted as the next big thing by both retailers and phone manufacturers.
The promise to consumers is simple: faster and easier payments using only your phone, without the need to carry credit cards, loyalty cards, paper vouchers or cash.
The impact on retailers and financial services could also be big. Just imagine a world in which your salary is paid into your iTunes account, or retailers prefer payment by Android rather than American Express.
But regardless of the hype around NFC, the experience of one futuristic supermarket in Germany hints that consumers may need a lot more convincing before they change the way they shop.
No ordinary shop
The Future Store, near Dusseldorf, is the combined initiative of 90 different retail and technology companies, from Coca Cola to IBM, which share the aim of discovering lucrative links between technology and shopping habits.
"Our store was created as a 'living lab'", says Dr Gerd Wolfram, managing director of Metro Systems, part of the global supermarket chain that runs the Future Store.
"We test new shopping concepts with our staff and customers, and if they are good enough we bring them to our other stores."
Dr Wolfram is willing to give anything a go, from robotic shopping assistants, to fridges that know exactly how much food they hold and when it expires.
But, as he freely admits, his customers do not always lap it up.
His first big failure - a fingerprint payment system that no privacy-conscious Germans wanted to use - is particularly revealing in light of the current push towards mobile payments.
"The time wasn't right," he says.
"The technology worked, but people didn't accept it. If times change, then we will try it again."
The fingerprint scanning machine is now collecting dust in the checkout section.
Does the same fate await the NFC machine, which will start accepting mobile phone payments as early as next month?
Security, privacy and speed
Speaking to shoppers at the Future Store, it is clear that many just see it as their local supermarket, rather than as a laboratory, and they want to be in and out as quickly as possible.
Christiane Reckin, shopping with her two-year-old daughter Leona, is a typical customer.
She says she is aware of all the technology in the store, and Leona likes the robot assistant, but she admits she has not tried any of the hi-tech methods of checking out.
"Sorry, it's not for me," she says. "I still use the normal checkout, because for me its faster."
Clearly, if NFC is going to appeal to people such as Ms Reckin, then it will not only have to match credit cards and cash in terms of security and privacy, but also in terms of speed.
The Future Store already uses an iPhone app that is meant to speed up payment, but the app also reveals the pitfalls of bringing mobile phones into the shopping process.
Unlike other shopping list apps, Future Store's app lets you scan barcodes of items as you pick them off the shelves. When you finish shopping, the app generates a final bar code displayed on your phone, which you then scan at a self-service checkout.
The upside is that you spend less time in the noisiest and most stressful part of the supermarket - the tills.
But the problem lies with using your phone to scan bar codes, which demands both hands, and takes around 10 to 15 seconds even with an easy-to-hold item such as a bottle of wine.
Engineers working on the new NFC smartphone payment system should take note: 10 seconds of faffing around with a phone can seem like ages in a busy supermarket.
A fresh approach to fish
But the Future Store has its successes as well as failures. Metro claims that sales have soared 15% since it first started testing new technology there.
Even if customers have not latched on to new payment methods, they do at least seem to appreciate the supermarket's efforts to make things fun and convenient.
The fish counter is particularly popular, thanks to a localised air conditioning system, which injects subtle aromatic oils into shoppers' nostrils, and speakers that emit the gentle sounds of the seaside.
"I believe that customers notice these things subconsciously, and then they buy more from us," says Metro's fishmonger, Reinhard Sobert, who has no shortage of custom.
So perhaps there is money to be made from bringing better technology into shops, so long as it gives shoppers something they want?
"Over the last 10 years, consumers have taken back the power in terms of the shopping process," says Mim Burt, retail research director at Gartner.
"Supermarkets get bedazzled by new technologies, and get their heads turned by new devices. But what they really need to do is invest more in understanding what customers will want to use."