Retail news. Semester 1 of 2014 table of contents

Switching on mobile wallets in South Africa retailing

By: Howard Moodycliffe | 3 Dec 2013 14:08

The biggest obstacle to making a mobile phone a wallet has always been the sheer complexity of electronic transactions. However, new technology is bringing this dream closer to reality.

Currently, every time one presents a credit card at a till, one initiates an intricate dance between the retailer, one's bank, the retailer's bank and a financial switch. It only takes milliseconds, but the system behind that deceptively simply action is the carefully tended product of decades of development.

Introducing new actors into the dance is hard but not impossible.

Much of the behind-the-scenes infrastructure needed to make mobile transactions a reality is already in place. The final, hardest hurdle is the point of sale itself. Any retailer, who wants to accept mobile payments including mobile vouchers and coupons, has to physically enable those transactions on every single one of the tens or hundreds or thousands of till points across the country and then train the operators in how to use.

This is an expensive exercise but it is one that retailers are willing to undertake - if they can be assured that it will pay off. However, if the return on their investment depends on the success of any one application or mobile payment system, it's dead in the water. No matter how brilliant that one app or system might be, it will never capture 100% of the market and there will always be another one along next week that could suddenly overtake all the others in popularity.

Customers who get told, "Sorry, we only accept mobile payments from X wallet or Y bank," will complain loudly or take their money elsewhere - not the outcome any retailer wants.

This is why the take-off of mobile transacting has been delayed for so long and is also why it is now finally gaining traction.

Key is open platform layer

The key has been to reduce the risk to retailers by removing the need for them to make an exclusive, all-or-nothing commitment. By installing a platform layer that any app, system or mobile payment services provider can plug into, retailers such as Shoprite Checkers and Pick n Pay are making in-store mobile transacting a success.

How an open platform like this works is easiest to understand with the analogy of mobile phone app stores. Apple completely changed the world of mobile phones with its first App Store in 2008. For the first time, phone owners had access to a wide variety of apps that could make their phone do just about anything and were easy to install. On the other side of the equation, it was the first time app developers - whether established companies or 15-year-olds coding in their bedrooms - were easily able to reach millions of potential customers. The result was an explosion of creative innovation that is showing no signs of stopping. Since the first day the App Store opened with few hundred apps, it's grown to more than 900,000 apps have been downloaded a collective 50 billion times. Apple has paid out $10 billion to developers.

The mobile transaction platform, currently being pioneered by South African retailers, works on the same basis. For banks, mobile app developers and payment service providers it provides a single interface through which they can reach any retailer and its customers. For the retailers, it means they can enable any mobile transaction method at the till quickly and easily through a single integration, helping them to respond flexibly to new opportunities and changing customer demand.

The results are impressive. At Shoprite's Hungry Lion fast food franchise, for example, customers have already redeemed well over a million mobile coupons for discounts, free extras or purchase upsizes; at Pick n Pay, MTN Mobile Money transactions are growing phenomenally by the day. To date, the platform has processed transactions worth over one and a half billion rand.

What happens next? That's limited only by our imaginations.

Nokia: a lesson in how high-tech flyers can fall fast. 11 Nov 2013

HELSINKI, FINLAND: In just five years Nokia fell from dominating the mobile phone industry to abandoning the handset business, a swift fall from grace with lessons for market leaders.

The story of Nokia, now at the toughest stage of the restructuring cycle, is a particularly salutary business case about the fast-moving, high-risk, high-reward, tech sector for hip consumer goods.

The rapid decline, which is ending with the €5.44bn (US$7.5bn) sale of the mobile phone division to Microsoft, owed much to Nokia growing too big, too fast and its management getting drunk on their own success, analysts say.

Looking back after years of Apple iPhone dominance, some may have difficulty in recalling that Nokia, in its heyday in 2007 took more than 50% of the world market for early smartphones.

"They had become arrogant at Nokia and as a result they were too slow to react to changes in the world around them," Petri Rouvinen, a researcher at the economic think tank ETLA, told AFP.

The technology of the iPhone upended the mobile handset business. It also highlighted the critical importance in any business, but particularly in the high-tech sector, of getting the timing right.

Not only did the iPhone, with its touch screen, become a hot fashion item worldwide, but also the operating system with paid-for applications invented a new revenue stream for Apple.

Dominance lost

When Google's Android took off in 2009, it became clear that handset manufacturers had lost dominance to the operating systems which generated revenue from applications sold to users.

Commenting on the business lessons, Rouvinen said: "Since 2007 it's no longer possible to consider telecommunications, consumer electronics and computers as separate sectors. Now there's just one industry and it's digital."

That is where Apple had an all-important lead: it brought the right hardware and software together at just the right time.

"If Apple had shut down its heavily loss-making PC business in 2000, it would never have been able to launch iPod, iTunes, iPad etc," said Tero Kuittinen at Alekstra consultancy.

Nokia's management was aware that a digital revolution was underway but in a recent book its former chief executive Jorma Ollila said the company peaked too soon - investing heavily in smart phone technology before operators were ready to offer services.

Analysts said another lesson is to have the appropriate expertise on the board. They said that Nokia had suffered from a culture of sycophancy towards Ollila - at the helm for 14 years until 2006.

Experts can give you the edge

"During times of transition, the board must have real industry experts, not random executives," said Kuittinen. He held that Ollila had been surrounded by "sycophants who had no competence to address software challenges."

Nokia kept developing its Symbian operating system but was slow to introduce touchscreen capability.

In 2010 it made a partnership with Intel to develop a different operating system, but abandoned this after a year and turned to Microsoft's new mobile Windows platform.

Nokia is just one example of the high stakes in high-tech consumer goods.

Telecommunications equipment manufacturers Ericsson and Motorola suffered a similar fate and sold their handset businesses after being overtaken by innovation.

Canadian firm BlackBerry is the latest example of a market leader fallen by the wayside.

Sony, which picked up Ericsson's handset business, has also had difficulty making money out of mobile despite its consumer electronics pedigree.

Tough choices

Companies sometimes need to make tough, radical choices to refocus their business.

Analysts say that the response adopted by Nokia is to develop the profitable mobile network equipment segment with Nokia Solutions and Networks (NSN).

"Now Nokia can concentrate on its other business - NSN," said Rautanen, adding to speculation about what the company might do with the €5.44bn from Microsoft.

Credit rating agency Moody's said recently that Nokia had emerged a winner from the sale, gaining much needed revenue and off-loading a loss-making business.

But the agency added that it will not be easy to reposition the company as a credible actor in an industry with very short product life-spans and rapid changes.

Nokia was already a business case of how to engineer corporate transformation.

The company started as a wood pulp mill, then bought a rubber business making boots and tyres. A cable business led to Nokia venturing into electronics and then telecommunications.

When mobile telecommunications boomed in the early 1990s, Nokia sold the other business to focus on handsets and networks.

Rouvinen said the conditions which led to the downfall of Nokia and others are not likely to change soon.

"The fact that so much happened in only five years does not mean that the next five years will see the same turmoil," he said.

"But I predict that the turmoil will continue at the same or even at accelerated speed."