Coca-Cola recently announced that it is jumping into the red-hot Indian online retail arena by selling directly to consumers and small businesses, a first for a FMCG (CPG) company in India. While the Indian online retail story is still being written and Forrester is bullish about the long-term prospects for this channel, the immediate challenges need to be managed effectively.
Logistics and fulfillment are the largest challenges of them all in India, with more than half of all online retail sales being done using cash on delivery (COD). While COD is essential in a nascent eCommerce market, it can have a large negative impact on business margins. This is exacerbated in a nascent market where consumers are testing this new medium of ordering goods, as the return rates can be quite high. In India, reportedly, the return rates can vary from 5% to more than 25%, depending on the category, the demographics of the online buyers, and their online tenure (experience with the Internet).
2013 will be a pivotal year in consumer payments. It will be marked by an increase in digital disruption by nimble, tech savvy competitors. Payments incumbents will leverage their market power to battle disruptors. We see early evidence of this with MasterCard's new fee structure for “staged” digital wallet providers such as Google Wallet, PayPal and Square, which mask the merchant of record and other transaction details from others downstream in transaction flow. Finally, merchants and consumers will wield their tremendous influence in picking winners and losers as the array of alternative payment options become more abundant, more accessible and begin to deliver greater value to the commerce experience. In my new report out today, titled “Three Disruptive Payment Trends in 2013,” I explore three trends, driven by digital disruption, that will shape the future of consumer payments. I provide an analysis of what each trend means for competitors across the payments ecosystem and provide recommendations for responding to the impending disruption. Here are the key takeaways:
Today’s announced partnership between the West Coast innovators Square and Starbucks represents a significant milestone in the advancement of mobile payment and digital wallets. Here’s why:
New entrant scale. The Pay With Square digital wallet has suddenly catapulted from a respectable new entrant in mobile payments, driving adoption within the long-tail of retail, to soon being present in every Starbucks, and in NYC, that’s just about every other block. Starbucks, the leader of in-store mobile payments, says that 1 million people per week use its mobile payment app to pay in-store. Its existing mobile payment customers will now be Square’s customers, giving Square an immediate boost in the number of locations and consumers it reaches within the market.
Accelerated adoption. As with the Starbucks app, consumers have only to download the Pay With Square wallet and load their funding source in order to use it. But unlike the existing Starbucks app, the Square digital wallet works with other merchants. According to Square, merchant acceptance is very quick and no-to-low cost, and Square promotes its participating merchants to users of the wallet. I think this set of factors will motivate other merchants — both large and small — to use this as an opportunity to trial mobile payments in their stores. Today’s announcement is unclear about whether the initial implementation will have Starbucks embedded in the Pay With Square wallet, but at a minimum, this deal gives Square broader visibility and awareness and the opportunity to earn the confidence of new customers with its digital wallet, which will drive broader adoption overall.