How Digital Will Change Brick-and-Mortar In 2019

Give a deep and welcoming hello to the newest form of window shopping — a consumer behavior that will help to shape retail in 2019 and beyond, and a trend that stands as an increasing part of shopping, one that promises to impact brick-and-mortar merchants as they decide how to innovate.

As detailed in the recent PYMNTS Remote Payments Playbook, consumers are turning away from physical stores when it comes to product discovery. The research found there is about a 58 percent chance that a consumer knew what they were going to buy before they even walked into the store to make their most recent purchase. Window shopping these days is an activity increasingly being done from home, cars, at the store — all via smartphones, not through store glass.

In fact, more than one-third (35 percent) of consumers between the ages of 25 and 34 say they typically find new products by browsing on their smartphones. What’s more, 44 percent of consumers who bought goods from a mass merchant did so remotely, via their smartphones.

And that’s unlikely to change in 2019 or beyond, given the growing purchasing power of bridge millennials. At 30 to 40 years of age, they are younger than Gen X-ers but older than most millennials, tend to have finished their educations (and tend toward being affluent and well-educated), have settled into stable careers and are beginning to check off life milestone markers like marriages, families and home buying. And they are incredibly mobile-connected – particularly when it comes to making choices about purchases, according to PYMNTS research.

That’s not to say physical retail is dying. In fact, it is getting some new life from eCommerce operators. So-called online-only retailers — including Amazon — operate some 630 physical retail locations in the U.S., up 30 percent from 2017, according to figures from First Data and a recent year-end webinar conducted by Glenn Fodor, head of First Data insights.

That trend is certainly nothing new. Amazon, for instance, operates Amazon Go stores, and has had pop-ups — along with Whole Foods, of course — but it’s worth noting that, according to First Data (and PYMNTS and Adobe and others), the mix of offline and online retail will become even more prominent in the new year.

Cashierless Checkout

It’s almost retro, except for the scanning and payment and cashierless checkout technology that’s often involved in that mix. Speaking of cashierless checkout, that’s another building trend from 2018 that will carry over in a big way in 2019, Fodor said in the webinar, which served as an annual review and look ahead for payments and commerce from a First Data point of view. “We’ve seen startups and tech vendors making efforts here,” he added.

And the spread of cashierless checkout efforts comes amid advances in mobile payments and commerce, the use of QR codes and the rise of biometrics for consumer authentication and secure transactions. “All of these are being combined to create new and interesting experiences,” he said. And that will help stores — where, he pointed out, “the majority of shopping takes place.”

The First Data comments come amid significant shifts in the point of sale ecosystem —specifically, the move away from checkout tied to traditional merchant countertops. According to the recently released Retail Innovation Readiness Index from PYMNTS, most businesses — specifically, 56.4 percent — are willing to switch payments service providers if offered a better deal. As well, the Index — which goes into detail about how merchants are moving past the traditional concept of POS and toward value-added services and other cutting-edge features — found that 55.6 percent of businesses innovate to meet demand to use new payment methods, with 43.6 percent innovating to improve business analytics.

Mobile is changing not only checkout, but also retail in general, and will continue to do so in 2019. According to the PYMNTS Remote Payments Playbook, modern consumers take out their phones and start browsing whenever they have a spare moment, with two-thirds of the people who pay remotely via mobile doing so at home, 15 percent in their car (be careful) and 6 percent at work (watch out for the boss). That presents ample opportunity for mobile retail.

The Playbook also found that 73 percent of shoppers who paid remotely via smartphone first found the item they purchased online, and that 63.8 percent of shoppers who bought something via smartphone first discovered that item online.

Digital Banking

Mobile means more than retail, though, according to Fodor. The new year will bring more consumer moves to digital banking — and more partnerships between financial institutions and FinTech, he said. “FinTech and banks are becoming the best of friends,” he said. If so, that could potentially spark more development of real-time transactions and the construction of infrastructures to support speedier transactions and funds transfers, along with financial inclusion.

But don’t count on blockchain putting in significant work for payments — at least not for the time being. Sure, major players such as Walmart are indeed experimenting with blockchain technology for retail uses, but more is needed for blockchain-anchored payments, Fodor said. Specifically, the issue of speed needs to be addressed. “Until blockchain can get that sub-fractional speed (for transactions), it will be hard to use in payments,” he said during the webinar.

While blockchain may not make the biggest payments splash in 2019, P2P transactions will continue to gain users and payments volume, Fodor said. “It’s a huge trend being driven by Venmo and Zelle,” Fodor said. That’s not all that’s going on in that space, of course. In October, for instance, American Express and PayPal announced a partnership that will improve the P2P digital payments experience for U.S. American Express card members paying with PayPal and Venmo.

The holiday shopping season, off to a strong start, will provide many clues about the big trends that will hold far into 2019.