The Retailer’s New Best Friend: The Cellphone

Written by Evan Schuman
November 19th, 2006

At one level, the concept of cellphone payment systems is ludicrously attractive. What if retailers could get consumers to pay for their own POS units, which they could carry with them to the stores? The customer would also key in much of the information, at far less than minimum-wage rates.

This POS unit would also serve as a very sophisticated loyalty/CRM device with the ability to store an avalanche of consumer data. It would be able to tell the merchant exactly where the customer is at all times?including proximity to rivals?and allow for a wide range of merchant-to-customer two-way communications. Best of all, many consumers would be quite happy being allowed to do it as they would also see quite a few convenience benefits from it.

In Japan, it?s quite commonplace for consumers to use a cellphone to making vending machine purchases or purchase train tickets. These approaches are being trialed at many of the nation?s largest retailers, including McDonalds, Subway, Regal Cinemas, Barnes & Noble and Bath & Body Works.

Much of the attraction of the cellphone?or sell phone, if you?re so inclined?is its versatility. Let?s start with simple payment. It can beam a signal to the POS and literally make purchases as any contactless credit card would. Or it can use its phone number as an identification code?for a limited period?which is what the Super88 grocery chain is trying. That second method involves tying the transaction to a traditional credit card on file somewhere.

The phones can also communicate using infrared or even their integrated camera. NeoMedia is a vendor selling what it calls an Interactive Point Of Sale, which allows a customer to approach a poster or a display and ?read? the barcoded message (using the phone?s camera), which then launches the phone?s browser and brings them a very specific page within an E-Commerce site. An alternative approach is from a vendor called Digimarc, where the phones allow customers to download reader software and then use their phones to scan digitally watermarked images on lots of items including drink coasters.

McDonalds? efforts involve letting customers place?and beam?their orders long before they?ve gotten to the counter. Subway is perhaps the most aggressive, using the phone literally to replace POS, loyalty and coupon/incentive functions.

At least one department store is working on using the phones to literally talk with customers while they are in or near their stores. Scenario: Customer 789 walks into the store and the customer?s cellphone is recognized by the store?s LAN. That customer?s history suggests a fondness for striped shirts with polka-dot sleeves. A text message is flashed with a temporary coupon for 40 percent off such shirts, but only for the next 40 minutes. The customer?and this is my favorite part?can text message back and actually negotiate. ?I have to meet someone in five minutes, but I can come back afterwards, say in two hours. But your rival down the road is already offering me 50 percent off. Match it and you?ve got yourself a deal. You?ve got five minutes to decide.? Remember that the person text-messaging?and potentially upgrading to voice, if the situation warrants?might be 5,000 miles away at some outsourced call center.

Perhaps my personal favorite cell-phone-integration example is happening in the dressing rooms of the huge Japanese department chain Mitsukoshi. They?ve taken the cellphone idea and taken it to the next level by upgrading it to a Voice-over-IP phone and matched it with RFID tags in clothing. (When it comes to retail technology creativity, Japan blows the U.S. away so very often.)

Half-dressed customers scan RFID-tagged jeans and then use an IP telephone to check inventory and call for more clothes to be brought in. Workers at the $8.5 billion retail Tokyo-based chain traditionally waited outside dressing rooms, listening for instructions to bring more clothes. In the new experimental system, the workers can stock shelves while waiting for their Voice-over-IP phone to ring and for the customer to ask for something. But those requests will most likely be quite specific. With most of Mitsukoshi?s clothing already RFID-tagged, customers can scan the clothing in to quickly check inventory displayed on the RFID-reader-equipped Cisco phone?s 3.38 x 4.5 in. touchscreen display.

Even BET Networks is getting on cellphone efforts, using the cellphones to partially replace TV remote controls and allow consumers to interact with the broadcaster?s shows?in realtime?by voting or making purchases of music, ringtones or videos.

Those are some of the reasons to seriously consider cellphone integration. What are the likely roadblocks? The same ones as always: standards and the fact that there are so many players involves, from cellphone manufacturers and cellular signal companies on the one side and the POS and retail software providers on the other.

But those are tactical issues. Cellphone payment integration simply makes far too much sense for it to be stopped. But being slow to respond will be a kindness for your rivals who, quite candidly, need all the help they can get.


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