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ChaseDesign Retail Report #7: Contactless Transactions Gain Traction

Contactless Payment

You’ve probably heard that the future of retail is contactless. But prior to the pandemic, the adoption of contactless options was painfully slow—at least in the United States. According to Forbes, in 2018, only 3% of U.S. cards in use were contactless vs. 64% in the UK and 96% in South Korea. The National Retail Federation (NRF) shows that Deloitte had originally thought we wouldn’t see contactless trending for a few years, but now that hygiene practices have many rethinking cash, contactless payment usage has risen 150% (since March 2019).

Shoppers Opting for Contactless Payments

A global study by Mastercard shows that nearly 8 in 10 respondents now use contactless payments and 82% of respondents see contactless as a cleaner way to pay. And according to ZDNet, digital wallets, apps, and similar options are ideal areas of expansion, in part because people are afraid of handling cash and in part because these technologies simply make transactions more seamless.

Skipping Checkout Entirely

While completely cashierless stores like Amazon Go are still relatively new, scan-and-go mobile checkout apps are becoming more readily available. They were gaining popularity even before COVID-19, but now adoption is increasing and more stores are investing in this functionality. As we detailed in our pre-pandemic study, Winning Digital Transformation at Retail, apps like Sam’s Club’s Scan & Go are an easy way for shoppers to enjoy a fully contactless checkout experience. As one study participant said of Sam’s Club, “They have a really nice shop-and-checkout-while-you-buy application where you can scan the item and add it to your cart and just check out using your Apple Pay. So you don’t have to wait in line.” Apps like this one make shopping more convenient, and also safer, as customers can avoid both interacting with cashiers and waiting in line to check out.

Ordering Products to Go

For those who want contactless convenience, options like curbside pickup, BOPIS (buy online pick up in store), food delivery, and contactless lockers are providing popular alternatives. Curbside pickup is the most popular, surging 208% in April compared to the previous year. According to Gallup, curbside pickup is most popular with younger, higher income adults, but is gaining adoption across shoppers. Due to its popularity, Target is now adding fresh and frozen grocery options to its curbside pickup service. Plus, grocery delivery services like Instacart and Shipt are seeing unprecedented growth and are predicted to see a usage increase of 7.6% this year compared to 2019.

Newer Trends in the Contactless Space

In addition to the contactless options that are gaining momentum, some companies are exploring new and innovative ways to provide a touchless experience. Amazon is testing out how to use biometrics for retail checkout and exploring how to use Amazon Echo Buds to direct shoppers to find items at Whole Foods. Both of these projects were announced pre-pandemic, but these contactless technologies are potentially even more valuable now. And many companies, including Microsoft and RetailNext, are taking inspiration from the cashierless Amazon Go stores to bring “just walk out” technology to retailers across the U.S.

Making Contactless Count

With contactless payments gaining traction among consumers, there are many opportunities for retailers and their partners to take advantage of this fast-growing trend.

    • Shopping apps are opening up contactless payments for many retailers. For example, Walmart Pay allows touch-free checkout through the Walmart App, as does Sam’s Club’s Scan & Go, 7-Eleven’s Scan & Pay, and others.
    • Retailers have been hesitant to move forward in the past due to the potential for shrink, but now that controlled entries and exits are part of the COVID-19 normal, that will help prevent theft. To get a better sense of how it will perform in your store, start testing in a few stores the way Wegmans is doing now with the new Wegmans SCAN app.
    • With a strategic focus on growing share of click and collect dollars, brand marketers may want to tailor promotional programs to incentivize these kinds of purchases by shoppers, helping themselves and their retail partners.
    • Brands that are driven by impulse, like confections and cold beverages, may want to collaborate with their retail partners to examine new ways to build impulse items in the click and collect customer experience. Some imagination and testing can open new doors—and dollars.
    • Examine the customer experience for those picking up in store vs. their car. Are you maximizing added value and finding new ways to surprise and delight your customers? Use your imagination to make these experiences more than a simple transaction.

 

Retailers will want to optimize the customer experience for shoppers to ensure it’s consistent and positive. And brands that rely on impulse purchases will need to find new ways to build impulse back into this new model. Our team at ChaseDesign has been helping retailers and brands get more out of every shopping trip for over 60 years. Contact Peter Cloutier at pcloutier@chasedesign.net.