The BING KIMPO Show.: 07/01/2012

Credit card processing fees are such a common part of the consumer-merchant retail experience that we hardly give them any thought. So we tend to forget that it costs merchants money every time we pay with our credit cards, or that the extra cost is then passed along to us in the form of a higher price.

Starting today, LevelUp, a service from Cambridge-based SCVNGR that lets you make mobile payments via a QR code linked to your debit or credit card, is eliminating processing fees for its merchants, making it the first payments company to nix charges that cost merchants $50 billion each year. SCVNGR’s Chief Ninja Seth Priebatsch refers to the concept as “Interchange Zero,” and says it’s the next step toward building an ecosystem in which payment companies’ worth is measured only by how much value they can provide to their merchants beyond simply helping them make transactions.

“Right now, the competition is over who’s the most entrenched or who’s the cheapest,” Priebatsch tells Fast Company. “But eventually, who gets to move money will be about who can create the best value to add to the business, which isn’t a bad thing at all.”

The logic behind Interchange Zero is simple: Decades ago, processing fees were a necessary evil because they covered material costs to lay the physical lines that connected merchants to payment networks and develop anti-fraud technology. Then innovators in the mobile payments sector started to crop up, from PayPal to Square, and figured out how to lower processing costs even further. But the payment companies kept interchange rates between 1 and 3 percent, meaning they continued to profit without providing extra value to merchants. That’s where Interchange Zero comes in.

But eliminating transaction fees also happens to zap one of LevelUp’s major revenue sources, because it’s no longer charging merchants a flat 2% transaction fee on the $2 million it currently processes each month. So how can LevelUp conceivably expect to stay afloat? Priebatsch says the answer is LevelUp’s suite of merchant campaigns, including customer acquisition and loyalty programs. Now, when a merchant uses a LevelUp campaign--say a store offers $10 for every $100 you spend--LevelUp will make 35 cents for every dollar of credit redeemed through that campaign. That way, a large part of LevelUp’s revenue is its ability to help its merchants make more sales.

Priebatsch’s hope is that others in the mobile payments industry will follow suit, eventually making the idea of charging merchants to move money a thing of the past. Of course, if the idea of Interchange Zero does catch on, LevelUp will have to create more sophisticated campaigns to keep competitive. For example, Square recently added an in-app punchcard feature to its Pay With Square app; Starbucks just launched mobile payments on Android. Currently, 66% of LevelUp customers return within 30 days. That’s impressive, but "66 isn’t 100," Priebatsch says, which is why LevelUp is constantly devising new solutions for merchants that push the boundaries of a typical rewards program. Right now, they’re testing a campaign that offers special incentives to drive customers to stores when it’s raining, when sales tend to suffer.

LevelUp is also partnering with banks to create custom loyalty programs for certain cardholders. Sovereign Bank noticed its cardholders using LevelUp were active purchasers, but few in numbers. So last month, LevelUp ran a campaign that gave Sovereign cardholders $5 in free credit as an incentive to link their card. And it expects to have similar partnerships with about two to three dozen banks by the end of the year, Priebatsch says.

The question is how many businesses will be interested in adopting the setup LevelUp offers. It’s a natural fit for small businesses, which make up the majority of LevelUp's 3,000-strong merchant network, but you're not likely to start waving QR codes around at Walmart or Costco anytime soon. But Priebatsch says LevelUp is about to sign its first retailer with more than 500 stores, and they now serve more transactions at a given partner business than American Express in a 30-day period.

"Now we’re able to start approaching everyone but the top merchants in the country and have serious conversations with them," he says. "Of course, not all of them will say yes."
[Image: Flickr user WSDOT]

via fastcompany.com

Posted via email from BING KIMPO

Consumers are more versatile than ever, better informed and often acting less than loyal to brands. They want to buy at the best price and expect excellent service from retailers. Traditional mass marketing is losing impact in a world in which customers are confronted with thousands of advertising messages daily. Newly empowered customers have nearly unlimited access to information on products and prices through the Internet and mobile devices. And they use this information, even if they continue to shop in brick-and-mortar stores.
Retailers will continue to invest in technologies that allow them to reach their customers more individually and efficiently across all channels. These customer-facing technologies comprise online and mobile applications, as well as in-store solutions, such as kiosk systems, electronic shelf labels or digital merchandising equipment.
Retailers Will Invest in Digital Merchandising
Use of digital media for advertising and information purposes has become extremely popular in public spaces and customer areas, such as malls, restaurants, banks, petrol stations and retail stores. In some cases, digital media were installed simply to create a specific ambience in a store or a mall. The use of this technology is showing significant growth rates inside as well as outside of the retail space. In the world of retail, digital merchandising solutions so far mostly support promotions or new product introductions, provide more detailed product information, or help to create an atmosphere that engages customers and enhances the shopping experience.
Many retailers are still experimenting, trialling different options of implementation and business cases. The most common business model is based on selling advertising space and time to suppliers of consumer goods brands or other third parties, which allows the system to practically pay for itself.

Image copyright: Planet Retail Ltd.
Tesco shut down its network of 5,000 screens across 100 stores five years after launching it.
A Look at Tesco’s Failed Digital In-Store System
Tesco, one of the pioneers of in-store TV, began using screens in its stores in 2004. Five years later, Tesco shut down the network of 5,000 screens across 100 stores because the equipment was “outdated and energy inefficient.” But instead of another green initiative, this decision was more likely a general problem of the in-store advertisement market in Europe and the U.K. In truth, Tesco TV wasn’t living up to its expectations and always had a lack of advertisers. Even Tesco’s famous in-house consultancy and data analyser, Dunnhumby, which tried a turnaround with taking over responsibility for Tesco TV in August 2007, failed with a new concept.
The end of Tesco’s network changed the way the retail industry discussed digital in-store media. Other major European retailers were also complaining about not enough investments of brand manufacturers into digital in-store advertisement. For Tesco, advertising sales didn’t even cover the expenses of the network.
How Walmart Set Benchmarks With its Smart Network
In September 2008, U.S. retail behemoth Walmart presented a revised in-store media concept to agencies and marketers. The Walmart Smart Network was the result of two years and U.S. $10 million in research and development used to identify the optimal locations, applications and programming for reaching the millions of consumers who visit the retailer's stores each week. Walmart completed the chain-wide deployment in early 2010.
Walmart is the first retailer in the U.S. that has rolled out a next generation of in-store media that is supported by a flexible, open enterprise platform powered by Internet Protocol Television (IPTV) technology that allows the retailer to monitor and control more than 27,000 screens in more than 2,700 stores across the country.
One pillar of the Smart concept is the so-called Triple Play. In a first step, a welcome screen greets shoppers entering the store. Department screens, mounted only a few steps away from the products show content related to the category. Finally, smaller end-cap screens at each aisle provide customers with the final piece of information needed to make a buying decision.
Walmart's "Triple Play" comprises Welcome signage, category screen and display at gondola end.
All of the content on the Walmart Smart Network is customised and designed to deliver product information to consumers at the point of decision, when and where they need it. The network deploys response measurement and message optimisation technologies to enable delivery of the most relevant content to shoppers – by store, by screen, by day and by time-of-day.

Image copyright: Planet Retail Ltd.
Rewe Group commissioned T-Systems to deploy a digital merchandising network to 480 German supermarkets.
Europe Follows Suit
So far, European retailers have been less successful in deploying a similar business model. Some retailers may not be big enough to attract enough advertisements from the manufacturers. More importantly, FMCG manufacturers in Europe have been slow to recognize digital in-store media as a relevant marketing platform. This is changing, as powerful retailers began initiatives and started negotiating this topic with suppliers.
For obvious reasons, most retailers prefer a business model in which the digital signage platform is paid from advertising revenues. Nevertheless, some smaller independent retailers have been investing in this technology without securing income from third parties. They are looking to differentiate themselves from competitors using screens to enhance their own brand image and their customers’ shopping experience.

Image copyright: Planet Retail Ltd.
Digital merchandising screens enhance the shopping atmosphere at an Edeka store in Aachen, Germany.
In conclusion, a large number of trials and different types of implementations can be observed in the European market. In many cases, retailers are deploying a mixture of promotions, product information, image- or ambience-creating content, supplemented with news and weather forecasts or local information and advertising. Production and compilation of content is expensive and in most cases outsourced to specialised service providers. Some of these agencies have been developing specialised content related to local markets or specific segments. These offerings are also enabling small and independent retailers to participate in the trend.

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Joachim Pinhammer is Senior Retail Technology Analyst with PlanetRetail.
Copyright © Platt Retail Institute 2012 and reprinted with permission. All rights reserved. See the entire PRI Resource Library at www.plattretailinstitute.org/library.