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Will smartphone payment app help Target get turned around?
Coming off a tough holiday season, Target’s management continues to search for answers that will lead to a turnaround of the mass merchant’s business. Will a newly reported plan to introduce a smartphone payment option be part of the answer for the chain?
Michael McNamara, Target’s chief information and digital officer, told Recode the chain would introduce a mobile payment option in its stores later this year.
While short on specifics, it appears the retailer will introduce payments through an app of its own rather than opening up payments via third-party options. It is not clear if it the payment option will be embedded in the core Target mobile app, its Cartwheel discount and coupon app or both.
Mr. McNamara said Target planned to initially open the mobile payment option to the company’s REDcard credit and debit card holders. Members enjoy five percent off on purchases made in Target’s stores and online. They also receive free shipping on orders placed on target.com. Target accepts Apple Pay online, but not in its stores.
Target is following Walmart in developing its own mobile payment app. After introducing Walmart Pay last year, the chain claimed that internal surveys found 80 percent of users would recommend the app to others. It also found that 88 percent of purchases using the app came from repeat users.
One potential sticking point for Target is highlighted in an article on Mashable, which questions whether consumers need another mobile payment app option. Mobile payment apps are intended to make the purchasing process simpler, but consumers searching smartphones for the right app based on where they are shopping seems more complicated.
Target, led by chairman and chief executive officer Brian Cornell, continues to open smaller urban stores, emphasize “signature” categories and focus on supply chain and digital initiatives to drive a turnaround, but hoped-for results have yet to be realized. The chain’s comparable store sales fell 1.3 percent for the last two months of 2016.
- Target plans to introduce its own smartphone payment service in stores later this year – Recode
- Target launches mobile payment system — because you definitely needed another app – Mashable
- Target Reports November/December Sales and Updates Fourth Quarter 2016 Guidance – Target Corporation
- Walmart in no hurry to add other mobile payment options – RetailWire
- Will the Chase Pay option help Walmart increase mobile payments? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Will Target benefit from having its own mobile payment app? What do you see as the pros and cons of following this path?
Poll
BrainTrust
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Paula Rosenblum
Co-founder, RSR Research
It can’t hurt, but probably won’t help. Anything that reduces purchase friction is worth looking at, but another “me-too” payment app isn’t going to make much difference for Target. Are customers actually looking for more ways to pay? I doubt it. In fact, I question whether this is a good use of Target’s precious capital budget since the cost of developing the app and then maintaining it is considerable.
A mobile payment app will not solve Target’s woes. The company needs to focus on the basic building blocks of retail — inventory, in-stocks, well-trained personnel — in a way that reinforces a core brand message.
It won’t help at all. It is a table stake. Every retailer has an OBLIGATION to stay top of the latest in technology. Just don’t ever confuse a category obligation with a reason for preference.
The problem for Target is a brand issue. Their definition is diffuse and less clear than when they launched. When they decide EXACTLY where their brand fits, the preference issues will start to resolve themselves.
Brand is exclusive. That means it EXCLUDES some. Target is a generalist like Walmart. But Walmart means cheaper. Target means almost as cheap.
I am afraid that Mark and Max said it all. It won’t hurt but it won’t help — and consumers do not need another payment app. To date, Apple Pay is the fastest payment method I have used. Standardize on the mechanical things like payment, differentiate on merchandise, customer service, etc.
Mobile payments have been very slow to gain traction in the retail industry and Target would be taking a big risk expecting to succeed with this technology. Most mobile payment apps are inconvenient and don’t solve any real problems for shoppers.
The lone real success story is Starbucks’ mobile payment app, which benefits from the cult-like devotion of its customers and integration with mobile ordering. If Target follows through with its mobile payment app, it should cater to its most loyal shoppers with integrated ordering and promotions.
It didn’t make sense for retailers to develop their own payment apps three years ago and it doesn’t today. Target has retail-specific issues to deal with: merchandise mix, out-of-stocks, loss in foot traffic, solving its grocery problem …
Many of these things could be solved with technology. Why they would choose to do this instead is beyond me. I mean, I get that all the members of MCX are trying to get some kind of value on their original investment, but there are just better things to do. Write it off and move on.
The uptake of mobile payments, even when they’re easy, has been slow. Why add another?
I’ll join with Mark and Max too – they are focusing (as is usual for them, lately) on the wrong thing to try and fix. Go back to basic retailing.
It’s surprising that Target wouldn’t try a third-party app like Apple Pay first, before investing in its own mobile payment system. And given the lingering distrust from its data breach issues, is this even a smart move on Target’s part? Focus on getting the merchandise content first (including groceries) and let somebody else sweat the details of a mobile payment system.
Count me in with the others who have already said an app is not going to make a huge difference in the overall scope of business. It is questionable to me why Target would think it will. Target’s bigger issue is the way they are perceived by the consumer. Brand identity is more important than an app.
Seems like we are having a lot of “Will [fill in the blank] help Target get turned around” discussions. The answer is that anything Target does is just a lateral or negative move. In my opinion any success they have achieved has peaked and the company is in slow decline. They will be relevant for years to comes but will tread water at best.
I can only chime in with everyone else here. Individual payment apps are not likely to make much of a difference. Now if the app offers other consumer benefits and services like Starbucks does, such as allowing a customer to go to the head of the line and also pay, then it might have legs.
And that’s my 2 cents.
No, there is no benefit. None of these things Target is doing are the answer, they are reaching. We certainly don’t need another app to pay for stuff on phones. Is every store going to try to develop their own payment apps? It’s a waste of money. It’s nice to see them trying all sorts of things, but none of these are going to put them on top. No reason to keep wasting tons of money on developing software, sponsoring a soccer team, these things aren’t going to make a difference.
No idea who is making all these crazy expensive decisions, it wouldn’t be me. They need to have a strong online presence with good prices as well as keeping the stores clean and full of stock and having employees ready to check you out. We can’t be looking around for a cashier to take our money or waiting around for a sales person that doesn’t exist to help us get a game out of the locked up cabinets. They are doing it to themselves. People aren’t being catered to and that’s why they are not shopping there. Sorry, it’s the truth. I couldn’t get anyone to wait on me if I screamed and shouted. So I just go home and download the game on my Xbox. It’s that simple.
One exam today, easy day. Going out to play — have a good day.
The Payment Arms Race. This is another tactic in shopper data collection (aka loyalty). AND it offers some revenue that might otherwise go to a bank. For those with REDcards, this will simplify POS and aid in a speedier exit, as it has for Kohl’s or Walmart.
I don’t see a down side. Shoppers are already confused as to if they should swipe, chip or wave. I remain uncertain about Cartwheel’s role in the shopper’s pocketbook. Plus, soccer fans can use the card to enter NFC equipped arenas!
Or as we like to say, “retail ain’t for sissies.”
Target is a little late to the game and others have long claimed the first-mover advantages. I’m with the majority here that releasing a payment app will do little for the company, particularly in the short-term. However, a commitment to building value within an app via payment, discounts, eCommerce etc. will hold more value in the long run.
Every day, multiple times every day, on the street, on the train, at funerals, I’m stopped by total strangers telling me how their life won’t be complete until they can mobile pay everywhere…. Yeah right, it doesn’t happen and I don’t expect it to. Paying always has been and continues to be the least problematic part of shopping. Will Target — or anyone else — benefit from “fixing” what isn’t broken? No.
The key to success for the Target mobile payments will be how they deploy the app. I hope they integrate the mobile payment app with an existing Target app instead of creating another app that customers will have to add to their mobile devices. Consumers are reaching app fatigue and retailers are competing for precious space on consumers’ smartphone screens. The key to mobile app success is to provide real value so that customers are compelled to download and use the app.
Consumers don’t want more apps, they want apps that provide value. Starbucks has the right approach — combining loyalty rewards, ordering and payment benefits all on one mobile app. Mobile payments are the future for payments, but we need to make it easy for consumers. Following the leader or leap-frogging the leader is a smart strategy.
It won’t hurt as the next generation of shoppers will expect it. But it will not “turn them around.”
Once adoption grows, the next step will be to streamline the experience and make it more “frictionless” by removing the individual app per retailer issue.
There are aggregate loyalty companies now that consolidate your loyalty programs into one place. Same will happen for payment processing.