Teaching case - Wireless@KTH

Teaching case for the IMP Conference 2013, Atlanta, USA
THE MOBILE PAYMENT IN RETAIL
(The Teaching Case)
Tatjana Apanasevic and Jan Markendahl
Wireless@KTH, KTH Royal Institute of Technology
Stockholm, Sweden
[email protected], [email protected]
INTRODUCTION
Due to a high penetration of smartphones, the mobile payment is one of the most promising
development areas able to suggest a substantial value for both businesses and consumers.
Businesses can leverage benefits of a direct communication channel with consumers. In turn,
consumers can use not only mobile payment and management of multiple bank cards but and
additional services, such as loyalty and fidelity programs, coupons, event and public transport
ticketing, personalized offers, and so on.
In the current case an example of a quickly developing Swedish market of mobile payment
solutions is used. During 2010–2012, new solutions were introduced by Swedish banks and new
Swedish companies, such as Accumulate, iZettle, Klarna, Payair, PayEx, Seamless, and 4T
Sweden. The solutions were tested in a number of restaurants, retail and coffee shops.
However, a number of obstacles for the adoption of mobile payment solutions by merchants and
consumers can be identified. First of all, a ubiquitous infrastructure for these solutions is still
lacking in the retail stores. Secondly, a large number of mobile apps linked to different mobile
services and payments provided by different service providers create a high level of market
fragmentation. Finally, there is a need to manage multiple user accounts. So, consumers and
merchants have to deal with this multitude of mobile payment solutions. At the same time, there
is a high level of penetration of bank card based payment, which is perceived as a secure and
reliable solution.
The case is focused on leveraging potential opportunities provided by the mobile payment
applied in the retail sector. Indeed, retailers get a direct channel for communication with
consumers, which can be used for personalized offers, further improvement of services and
assortment, better understanding of consumer needs and preferences, dynamic consumer base
management, and so on.
The main retail chains in Sweden are ICA, Coop, and Axfood. These companies are interested in
attracting new consumer segments. To do that they suggest new offers, supply food and goods of
better quality, improve assortment, develop different consumer loyalty programs, run online
shopping and purchase delivery to consumers services, some of them already propose mobile
apps. So, there is an intense competition among the retailers.
When working with a case, students are divided in groups representing one of the corresponding
retail chains. Using the information provided about each of the retailers, students will need to (1)
determine the main market forces in the market and industry; (2) analyze how the competitive
actions of other market players can affect company’s strategy and market position; (3) find a
strategy to incorporate the mobile payment in the existing business model, decide which mobile
payment service provider to partner with, to develop a bundle of attractive mobile services
aligned to corporate strategy and core competences in order to reach a sustainable competitive
advantage in the nearest year (or years); (4) to discuss the future of mobile payments in retail
sector.
THE CASE
Main Actors in the Retail Sector
ICA, Coop, and AxFood are the dominant retailers in the Swedish everyday goods market. ICA
accounts for 50% of market, the market shares of Coop and AxFood are 21% and 15%
retrospectively. Other smaller retail chains (Lidl, Netto, Bergendahls, and Vi) together account
for 14% of the market. This is illustrated in Figure 1.
Figure 1.
Market shares of the main retail chains in Sweden in 2012 (Source: Delfi and Fri
Köpenskap, 2012). (figures can be moved to Appendix)
ICA AB, retailing corporate group
History: The company was established in 1938, based on a wholesale company Hakonbolaget
(AB Hakon Swenson), which was started in 1917 by Hakon Swenson1. In 1972, changes
implemented in company’s structure gave a start to ICA as it is known today2. ICA’s core
business is grocery. This is the largest Nordic retailer with branches located not only in Sweden,
but also in Norway, Latvia, Estonia, and Lithuania3. At the same time, ICA Gruppen owns ICA
Bank, ICA Real Estate, Forma Publishing Group, inkClub, and partly owns companies Cervera4,
Hemtex5, and Kjell&Company6, meaning operation in banking, real estate, publishing and
media, and non-food sectors representing goods for home, textile, and electronic goods7.
1
ICA-avtalet 40 år. http://www.ica-historien.se/Handelserna/Strategival/ICA-avtalet-40-ar/
ICA-avtalet 40 år. http://www.ica-historien.se/Handelserna/Strategival/ICA-avtalet-40-ar/
ICA. Our organization. http://www.icagruppen.se/en/about-ica-gruppen/our-operations/
4
Cervera. http://www.cervera.se/
2
3
5
6
Hemtex. http://www.hemtex.com/
ICA. Kjell&Company. http://www.icagruppen.se/en/about-ica-gruppen/our-operations/ica-gruppens-portfolio-companies/kjell-and-company/
7
ICA. Our organization. http://www.icagruppen.se/en/about-ica-gruppen/our-operations/
Strategy: Company’s mission is “to be the leading retailer focused on food and meals”8. ICA’s
strategy is focused on a number of strategic themes: strengthening of “ICA’s brand position and
customer loyalty”9, extension of customer offering, improvement of sales channels,
simplification of business, engagement of employees, and improvement of corporate
responsibility. A big attention is paid to renovation of existing stores.
Number of shops: In Sweden ICA is represented by four chains: ICA Supermarket, Maxi ICA
Stormarknad, ICA Kvantum, and ICA Nära. The total number of stories in Sweden equals 1330.
Sales: ICA chains exhibit a wide assortment of goods at a good pricing. As a result, the total
sales are increasing each year. In 2012, the total sales in Sweden were SEK 98 237 million and
indicated 5,2% growth compared with 2011. The share of net sales of corresponding ICA’s
chains is presented in Table 1 and Figure 2.
Table 1.
ICA retail chains
ICA Supermarket
Maxi ICA Stormarknad
ICA Kvantum
ICA Nära
Total:
Figure 2.
8
9
ICA net sales in retail chains in Sweden (Source: ICA, 2012).
SEK million
30 919
28 735
23 577
15 041
98 272
Share of sales (%)
32
29
24
15
100%
Share of sales of different ICA’s retail chains (Source: ICA, 2012).
ICA. Mission, vision and values. http://www.icagruppen.se/en/about-ica-gruppen/mission-vision-and-values/
ICA. Strategies. Available at: http://www.icagruppen.se/en/about-ica-gruppen/strategies/
Consumer relationship and target markets: ICA tries to engage consumers in different ways, for
example: loyalty programs for loyalty card holders; a launch of new pilot stores with a wide
range of fresh food and prepared food at competitive price; ICA To Go pilot suggesting food “for
people on the go”10; online offering on customer portal on www.ica.se – the Swedish largest
recipe site; a development of smartphone app allowing to scan coupons with mobile phone and
download them to ICA’s card; online and mobile site for home delivery; “Grocery Bag” that can
be delivered home or picked up at one of 250 stores delivering the service; constant search for
new target groups like offering for students; and focus on food quality11.
Coop
History: Coop is a part of KF Group (Kooperativa Förbundet Group), a retailing group. The core
business of KF Group is retail supermarkets, however, the group owns a number of companies
operating in other sectors like marketing (Coop Marknad), media (KFMedia, Norstedts
publishing group, Pan Vision group, and Vi Magazine), banking (MedMera Bank), finance and
investment (KF Sparkassa and KF Invest), real estate (KF Fastigheter and Handels Bodarna), and
so on12. KF was founded in 1899, Konsum Stockholm opened its first supermarket in 194713.
Currently, Coop is represented by a number of retail chains, an online shop Coop Online, a chain
of goods for renovation Coop Bygg, and one of the largest supermarkets (Daglivs) with a wide
assortment where consumers can order and buy all what they want14.
Strategy: In order to achieve sustainable advantage in a long term, company is going to address
ethical, environmental, social, and economic aspects related to different stakeholders: consumers,
shareholders, employees, suppliers, governmental institutions, and other interested groups (KF,
2012). The main focus of strategic improvements is to reaching sustainability in assortment,
stores, and suppliers. As a result, Coop is a market leader in the sales of ecological and
sustainable brands (KF, 2012).
Number of shops: Coop retail chains are represented by Coop Nära, Coop Extra, Coop Konsum,
and Coop Forum. The size of stores ranges from big supermarkets to smaller convenience stores.
The total number of Coop’s stores and supermarkets is about 700.
Sales: The total sales in Coop supermarkets and stores achieved SEK 48 600 million in 2012
(Delfi, and Fri Köpenskap, 2013). This result shows a 2,5% increase compared to 2011.
Consumer relationship and target markets: The main Coop’s strategy is to attract consumers by
extended assortment of ecological goods. Other ways to attract new consumers are loyalty
programs, offers, and discounts for loyalty card holders provided by Coop and its partners.
Offers are related to goods and services in home care, travel and ticketing, culture, fashion,
books, health, and other areas15. Consumer experience in the stores is improved by fast selfservice cash desks (introduced starting from 200316). There is an opportunity of online shopping,
10
ICA. Important events 2012. http://reports.ica.se/ar2012en/Start/ICAs+operations/Our+companies/ICA+Sweden/Important+events+2012
ICA. Important events 2012. http://reports.ica.se/ar2012en/Start/ICAs+operations/Our+companies/ICA+Sweden/Important+events+2012
12
Coop. KF. https://www.coop.se/Global/KF/PM%20KF%20och%20Coop/KF%20orgbild%20januari%202013-04-24.pdf
13
Coop. https://www.coop.se/Globala-sidor/OmKF/Kooperativ-samverkan/Var-historia1/110-ar-tillsammans/
14
Coop. https://www.coop.se/Butiker-varor--erbjudanden/Vara-butiker/
15
Coop. Partner offers. https://www.coop.se/Erbjudanden/
16
Coop. https://www.coop.se/Globala-sidor/OmKF/Kooperativ-samverkan/Var-historia1/110-ar-tillsammans/
11
provision of recipes and information about discounts on Coop Online website, consumer
personalized accounts on the online portal, “Matkasse” service (“A food bag” – filled with
different assortment of products) which can be bought online and picked up in the nearest Coop
store.
Axfood
History: Axfood was established in 2000 as a result of the merger and acquisition of several
retail chains17. Currently, Axfood owns following retail shop chains: Hemköp, Willys, a grocery
chain PrisXtra; convenience store wholesaler Axfood Närlivs; and centre of logistics Dagab18.
Strategy: The vision of the company accents innovative thinking and growth as means to become
“the best retail company in the Nordic region”19. The core of Axfood’s strategy is based on
“profitability, growth, customers, sustainable development, and employees and organization”20.
One of growth aspects is development of e-commerce and ready-meal offers. Company has a
strong focus on consumer needs21 and seeks to develop loyalty programs, improve shopping
experience, and customer offerings22. The main elements of the business model are: “strong
purchasing function, focus on private label products, efficient logistics and attractive grocery
stores”23.
Number of shops: As it was already mentioned, the main retail chains are Hemköp, Willys, and
PrisXtra. Hemköp chain has 179 stores in total, and 65 of them are owned by Axfood24, Willys
has 176 stores25, and PrisXtra has 5 stores in Stockholm26. The total number of stories is 24627.
Sales: The total Axfood sales in the retail chains were SEK 24 991 million in 2012, indicating
3,1% growth compared with 2011. The net sales of corresponding Axfood chains are presented
in Table 2 and Figure 3.
Table 2.
Axfood retail chains
Willys
Hemköp
PrisXtra
Total:
17
Axfood net sales in 2012 (Source: Axfood, 2012).
SEK million
19 407
5 082
502
24 991
Axfood. History. http://www.axfood.se/en/About-Axfood/History/
Axfood. History. http://www.axfood.se/en/About-Axfood/History/
19
Axfood. About Axfood. http://www.axfood.se/en/About-Axfood/
20
Axfood. Strategy. http://www.axfood.se/en/About-Axfood/Strategy/
21
Axfood. The Brand. http://www.axfood.se/en/About-Axfood/The-Brand/
22
Axfood. Strategy. http://www.axfood.se/en/About-Axfood/Strategy/
23
Axfood. About Axfood. http://www.axfood.se/en/About-Axfood/
24
Axfood. Hemköp. http://www.axfood.se/en/About-Axfood/Business/Hemkop/
25
Axfood. Willys. http://www.axfood.se/en/About-Axfood/Business/Willys/
26
Axfood. PrisXtra. http://www.axfood.se/en/About-Axfood/Business/PrisXtra/
27
Axfood. About Axfood. http://www.axfood.se/en/About-Axfood/
18
Share of sales (%)
78
20
2
100%
Figure 3.
Share of sales of different Axfood’s retail chains (Source: Axfood, 2012).
Consumer relationship and target markets: The three Axfood’s retail chains address different
market segments. So, Willys is targeting price-sensitive consumers, large households, and
families with children28. One of its successful offerings is “Sweden’s cheapest bag of groceries”.
Consumers targeted by Hemköp are active people of all ages, “seeking variation, a range of
choices and high quality at an attractive price” 29. The target segment of PrisXtra are food lovers.
In the stores they are attracted by a wide product assortment and “an inspiring shopping
experience”30. In addition, Axfood suggests a big range of private labels being a leader in the
market (e.g. Willys, Hemköp, Grant, Grant Ecological goods, Awade, and others)31. A big
attention is paid to the quality and safety of products, adoption of good environmental practices.
Different chains offer different loyalty programs for consumers. There are online shopping
services. A pilot project NetXtra offers online grocery shopping with opportunity of home
delivery, online shopping with pick-up in the store, or physical shopping in the store (Axfood,
2011).
28
Axfood. Willys. http://www.axfood.se/en/About-Axfood/Business/Willys/
Axfood. Hemköp. http://www.axfood.se/en/About-Axfood/Business/Hemkop/
30
Axfood. PrisXtra. http://www.axfood.se/en/About-Axfood/Business/PrisXtra/
31
Axfood. Private labels. http://www.axfood.se/en/About-Axfood/Private-labels/
29
Main Mobile Payment Service Providers
A number of mobile payment solutions were launched in the retail sector in Sweden. Their
overview is presented below.
SEQR provided by Seamless
Since spring 2012, SEQR, a mobile payment solution developed by Seamless, can be used for
payments in a number of different shops, e-shops, and restaurants (Seamless, 2012; Sellebråten,
2013). Moreover, the solution can be used free of charge and is not linked to any bank account or
card. So, there is no dependence on consumers’ affiliated banks. In order to perform the
payment, a QR-code should be scanned and payment approved with a personal PIN code. The
SEQR users have to register a credit account at a financial service company Collector (Seamless,
2012; Sellebråten, 2013). The financial company (Collector) handles all questions related to
payment transfers and issues monthly bills to the consumers. The retailers issue bills via the
mobile payment app (see Figure 4a).
Bart provided by Swedbank and Sparbankerna
Another mobile payment solution dedicated to retail purchases is Bart. This service was launched
by Swedbank and Sparbankerna (Swedbank, n.d.). Bart is directly related to consumer’s bank
account, acts as a bank card, and performs payment transactions via QR-codes (Swedbank, n.d.;
Sellebråten, 2013) (see Figure 4b). The consumers make payments using the separate payment
application directly connected to their bank accounts. Banks act as the mobile payment solution
providers. They have a direct relation with the consumers, manage their bank accounts, and
perform money transfers. Additionally, bills issued by merchants are saved in the electronic form
within the payment application.
a) SEQR
Figure 4.
b) Bart
Actors and relations for SEQR and Bart mobile payment solutions. The grey arrow
indicates “billing relationship”.
Payair provided by Payair
One more mobile payment solution developed by Payair uses QR-codes for payment transfers.
The Payair application is linked to the user’s bank account or credit card. Currently, the solution
is used for payments at e-shops. The relations between the main actors are presented in Figure 5.
The payment service provider (i.e. Payair) handles the relation with the consumers. The mobile
payment applications are directly linked to the bank accounts of the users, so, a relation exists
between the service provider and the banks. The retailers (i.e. e-shops and restaurant chains)
issue bills via the mobile payment app.
Figure 5.
Actors and relations for Payair mobile payment solution. The grey arrow indicates
“billing relationship”.
WyWallet provided by 4T Sweden
WyWallet was launched by 4T Sweden, a join venture of the main Swedish mobile operators
Telia, Tele2, Telenor, and Three (Clark, 2012). The payment solution is based on Accumulate
mobile financial service platform (Clark, 2012). Another partner – PayEx – performs payment
transfers (Narayan, 2013). WyWallet app is linked to user’s bank credit cards, additionally, NFC
tags can be used (Sellebråten, 2013). WyWallet has future plans to provide mobile payments
dedicated to the retail.
Summing up, there is a number of mobile payment solutions, but a need of multiple account
management might be critical for service adoption by consumers. At the same time, the scale of
the service usage is limited to several retail or restaurant chains, or e-shops. This leads to a high
market fragmentation, and problem reaching a critical mass of consumers needed for mobile
payment to take off. Another important aspect is than the mobile payment service cannot be
provided without coupling to the bank cards. Taking in to account limited acceptance of mobile
payment solutions by retailers, traditional credit/debit cards seem to be a better solution. Indeed,
they can be used everywhere, provide centralized account control and management being safe
and convenient at the same time.
REFERENCES
WEB Sites
Axfood, 2012. Group overview 2012. [online] Available at:
<http://www.axfood.se/PageFiles/2425/Koncernoversikt_2012_eng.jpg> [Accessed 29 June
2013]
Axfood, 2011. New start for NetXtra. [online] Press release, 24 January, 2011. Available at: <
http://www.axfood.se/en/Press/Press-releases/New-start-for-NetXtra/> [Accessed 29 June
2013]
Clark, S. (2012). Swedish carrier launch mobile wallet service. NFCworld, [online] 29 June.
Available at <http://www.nfcworld.com/2012/06/29/316587/swedish-carriers-launch-mobilewallet-service/> [Accessed 23 March 2013]
Delfi, DLF and Fri Köpenskap, 2012. Dagligvarukartan 2012. [online] Available at:
<http://www.delfi.se/wp-content/uploads/Delfi_Dagligvarukartan_2012.pdf> [Accessed 28
June 2013]
Delfi, DLF and Fri Köpenskap, 2013. Dagligvarukartan 2013. [online] Available at:
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2013]
ICA, 2012. The ICA Group’s annual report and sustainability report. [online] Available at: <
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June 2013]
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June 2013]
Narayan, S. (2013). Mobile Payments – Comparison of Mobile Wallet Concepts. MSc Thesis
report, Royal Institute of Technology, Stockholm.
Seamless, 2012. Seamless launched easy transfer to all bank accounts in Sweden. [online] Press
release, 28 August, 2012. Available at:
<http://mb.cision.com/Main/3006/9297088/39604.pdf> [Accessed 23 March 2013]
Sellebråten M., 2013. Stort test: Mobila betalningar. (In Swedish) Mobil, [online] 21 March.
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[Accessed 27 March 2013]
Swedbank. (n.d.). Bart mobilbetalinig i butik. (In Swedish) [online] Available at:
<http://www.swedbank.se/privat/internet-och-telefontjanster/bart/index.htm> [Accessed 23
March 2013]
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APPENDIX A.
is about money transfer, a bank