The Real Reason Retailers Hate Apple Pay

By Richard Owen | Small Business

So now, apparently, CVS is the pharmacy that is not “always open”, at least not when it comes to Apple Pay. Don’t be surprised if many merchants are having similar worries; nobody wants to find themselves making the worst strategic concession since some Trojan army captain enthused, “Enormous wooden horse? A gift? Don’t just stand there, boys, wheel it in!”

But have no doubt, this is really a fight about data – and for the survival of traditional retail. Taken in that context, CVS is right to be concerned.

For the longest time, people have been talking about the “disintermediation” of retailers. Amazon has been a major disrupter, and online commerce in general continues to make inroads and challenge Main Street (or “High Street” where I’m from) for their share of the retail spend. Employment in retail has been on its heels for the last 5 years, not just because of the recession but also due to a pre-sold customer requiring less help in the store. And it doesn’t help that retailers need to keep their costs down to compete with human-free selling machines. But the economics of online commerce have been as much about data as they have been about reduced selling costs; the online guys know their customers better and therefore know how to market to them and build them a customized experience.

You see, the old retail status quo was that nobody, not the retailer or the manufacturer, owned any quality customer data. People walked in the store, they bought, they left. Sure, we tried a whole series of schemes to get contact information; loyalty programs being the most popular and least clunky, but basically the retailer knew little about their customer and the manufacturer even less. Corporations that sold direct had a significant advantage, but when online retailers emerged they were able to run rings around their bricks-based brethren. But if that sounds dire, it’s potentially about to get a whole lot worse for traditional retailers.

To see why, it’s instructive to compare Apple and Samsung. Apple knows its customers like few others; partly because they sell so much product with a direct touch (online or in their own stores) but also because they draw customers into an ecosystem of products that they control (icloud, itunes etc). Their knowledge of the customer gives them considerable marketing advantage, not the least of which is the ability to generate lifetime economic views on their customers. Now they can price for long term customer profitability, not just the initial sales. Once the customer joins their ecosystem, Apple knows who they are, what they buy, and they control future selling opportunities.

Samsung enjoys no such advantages. Their Galaxy phone gives them the weakest hand when it comes to control of customer data. The wireless carrier arguably has the strongest (they own the subscription, which is really how you own the relationship) and the retailer has a bite at the data cherry, if they can make it work. It’s a lesson that many are learning the hard way – indirect distribution puts you in a fight for control with far better armed opponents.

Now welcome Apple Pay, to deliver what could be a knockout blow. If it succeeds, the possibility of owning customer information across all kinds of purchases is enormous; the Apple ecosystem would stretch across the entire retail economy.

The music industry created a monster when they supported the creation of iTunes and it looks like the credit card companies may dance with the devil on this new tune. Control the customer journey and you control your business, and its actionable insights derived from quality customer data that gives you that control. With that in mind, retailers like CVS are well advised to bar the door when Apple comes knocking with a big wooden horse in tow.

This article was syndicated from Business 2 Community: The Real Reason Retailers Hate Apple Pay

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