The seemingly unending growth in online shopping is doing more than closing physical stores. The point of sale in the stores that remain is changing, and along with it, payments providers, says Javelin Strategy & Research in its “2017-2021 Retail Point of Sale Payment Forecast.”
As consumers continue to increase their spending online rather than in stores, retailers and their payments providers will have to adapt more than they have already, says Michael Moeser, director of payments at Pleasanton, Calif.-based Javelin.
Chief among the findings is that the sales shift from physical stores to online ones will come at the expense of face-to-face transactions, the report says. E-commerce sales will grow from $518 billion in 2016 to $708 billion by 2021, while retail sales in physical stores will go from $4.46 trillion to $4.36 trillion. E-commerce sales made up 9.1% of all third-quarter 2017 U.S. retail sales, almost a full percentage point increase from 8.2% in the same quarter a year ago, says the Census Bureau of the Department of Commerce.
For payments companies, online retail growth does not signal a diminution of the importance of physical POS sales, Moeser says in an email to Digital Transactions News. “The important thing to remember is that many physical merchants also have a digital presence, however, many times there is a lack of coordination between the two,” Moeser says. “Oftentimes, the Web site by a ‘storefront’ merchant has a different acquirer, which can make it difficult when a consumer buys something online and brings it into a store for a return or exchange. Having the same acquirer can often help solve the payment side of this transaction.”
Acquirers will want to sell both in-store and digital card acceptance, despite the often different sizes of the two businesses, he says. “For example, a storefront may run 80% of the revenue and the Web site only 20%. So to have two different acquirers doesn’t make sense for the store or either acquirer. In this case, it behooves an acquirer to sell both services.”
The report cites other changes, such as a decline in paying with paper checks, growth opportunities for credit and debit cards, and a potential expansion of mobile payments and wallets.
Moeser predicts that mobile-wallet use, in particular, will “explode starting in 2018.” A big reason for that is that retailer-based mobile wallets, such as Walmart Pay, Kohl’s Pay, and Target Wallet, have something that multiretailer wallets have yet to achieve: retailer engagement.
“The value of a Walmart, CVS, or Target-type retailer wallet is that it holds a rewards card or program so you no longer need to carry a physical card or something on your key chain, coupons, receipts, payment cards, prescriptions or other standing orders, and more,” Moeser says. “Yes, having a CVS wallet is not going to help you at Target or Walmart, but it will help you if CVS is a place where you spend 25% to 50% of your retail dollars or it’s somewhere you go to get a prescription.”
Consumers will have only one or two retailer wallets for places they shop frequently or have important things they need to keep track of such as a prescription, he says.