Apple and COMMERCE (not Payments and NFC)

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..HypeCycle

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 perspectiveiPhone-6-Fingerprint-Detection-And-Apple-Release-Date-Rumors

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…

Product First

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:

  1. Ability to Change Consumer Behavior (see blog)
  2. Handset Profitability
  3. Customer Demographic/Profitability
  4. Product Design
  5. Consumer Experience
  6. Sales of Digitial Goods (App store)
  7. Sales of Physical Goods online (Mac Store)
  8. Physical Retail Sales (Apple Retail Stores)
  9. 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).

Apple’s Strategy

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.

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5 thoughts on “Apple and COMMERCE (not Payments and NFC)

  1. It’s one of those rare occasions when I disagree with you, Tom.

    Apple knows nothing about advertising, from the 3rd party’s (i.e. retailer’s) perspective. The undisputed King and Queen and grandmother there is Google.

    Apple’s market share (as far as the consumer base) is concerned does not have the concentration to make a dent in the retail universe.

    Different retailers have different needs: WalMart, Starbucks, mom&pop shop etc have different modus operandi, business model, customer flow etc – those needs to be addressed differently (and Apple sucks when it comes to flexibility, with them it’s “my way or highway”).

    But they could spark a change… Which could start a fire… It’s not clear, though, who will be toast, and who will enjoy the sizzle and the stake.

  2. I agree with you about Apple and commerce, but do agree with Alexander that advertising is not the objective. Google wins there, but merchants trust Apple more than Google for that reason–Apple is not at all seems as a threat, while Google is.

    I am not sure Apple has got their mobile commerce business model wholly figured out yet, but they know by making their devices more useful for commerce it will pay off. Just as iTunes was did not make a ton of money from selling songs, but odd help selling a lot of devices and later, more profitably, apps.

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