Apple's Next Trick: Making the Retail POS Disappear | Street Fight

Apple’s Next Trick: Making the Retail POS Disappear

Apple’s Next Trick: Making the Retail POS Disappear

apple_logoMobile payments is yet another sector that has fallen into the grips of local. That’s not because of m-commerce (i.e. Amazon Mobile), but the area that’s come to be known as “proximity payments.” This refers to people buying items in physical stores — a much bigger opportunity given the scale of local offline retail.

Proximity payments are divided between receiving payments via mobile, like Square (even though it’s just a good old fashioned credit card swipe); and making retail payments. The latter is subdivided by location-aware apps (PayPal), POS barcode scans (Starbucks) and chicken & egg-throttled NFC.

Despite the nuance between these standards — which generalist media and and analysts tend to lump together as “mobile payments” – there’s one thing they do have in common: disrupting the retail point of sale (POS). But could the answer instead be to think a bit differently: tear down the POS altogether?

One company whose longtime persona has been all about thinking different could do just that: Apple. I’ve been speculating about the model for a few years, which recently took a step towards affirmation by Tim Cook’s earnings comments and some subsequent WSJ digging.

The idea is to enable shoppers to conduct roving transactions throughout retail stores by scanning items with their iPhones, paying on the spot via iTunes then going on their way. No checkout aisles, no gum-snapping shopgirl, no 15 items or less. That’s where the “tearing down the POS” part comes in.

In other words, it creates a world where the mobile device is the POS. It makes sense considering Apple owns the consumer touch point (375 million iPhones) and payment processing (600 million iTunes accounts). The plot thickens with iTouch (payment authentication) and iBeacon (in-store engagement).

Evidence can also be seen in Apple’s own stores: tossing out checkout aisles from the start in favor of roving transactions by store associates. It then provided shoppers the option to take the associate out of the transaction, freeing them to evolve from checkout clerk to more of a shopping consultant.

The next step is to bring that model to third party retailers. Picture it at IKEA: scan an item, pay with iTunes, grab it from the warehouse shelf and be on your way. Meanwhile, iTouch secures the whole thing and iBeacon leads you through the IKEA maze — maybe it even lets you pre-order some meatballs.

For big boxes in general, this model likewise has implications for store layouts. Average revenue per user (via basket size) could increase when you get rid of the bottleneck that is the checkout aisle. That creates an easier environment to buy more things as you wander the Targets of the world. Impulse buyers beware.

Of course, this is all easier said than done. There are security issues like anti-theft tags that would need to be rethought. And who will bag your groceries? The biggest barrier of all will be retail partnerships. But if there’s anyone who can partner with entrenched industries it’s in the process of upending, it’s Apple.

And what would Apple get out of all this? There are transaction fees, but Apple could forgo that as a loss leader towards larger goals. One driving force will be the same that stands behind most Apple moves: competitive features to sell more iThings — its core business where massive margins lie.

The other big gain for Apple is offline transaction data, where 93 percent of U.S. retail spending happens. That could fuel location-based mobile ads (iAd), and Apple’s continued string of “local” acquisitions. Then we could really see the iPhone take a swing at the $5 trillion U.S. retail market.

speaker_MichaelBolandMichael Boland is senior analyst at BIA/Kelsey, where he heads up the firm’s mobile local coverage. Previously, he was a tech journalist for Forbes, Red Herring, Business 2.0, and other outlets.