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Online shopping competition gets physical, students respond

Submitted by Alexis Williams on February 12, 2014 – 5:53 pmNo Comment

By Ryan Guinee

Illustration by Paige Mason

The difference between online shopping and brick-and-mortar shopping has long been the focal point of retail business study.

Between the financial success of online shopping giants such as Amazon ($74.45 billion in 2013 revenue) and brick-and-mortar dominators like Walmart ($469.16 billion in 2013 revenue), it’s hard to tell where the future of shopping is going. One thing is for sure: businesses are looking to extract the most value possible from consumers.

With over 90 percent of US shopping—68 percent at UALR—still happening in stores, it’s unsurprising to see online going offline in an effort to glean more from shoppers.

From paying for one’s boots and Starbucks latte to buying a book for a friend, the money transaction process is becoming easier thanks to our mobile phones.

“I like having everything digital. If I want to return something, I have a digital receipt—not gonna lose that,” said Brett Clark, junior in molecular biology. The Wall Street Journal reported at the end of January that the increasingly crowded channel for mobile payments has made room for one more member.

Amazon, Inc. is in the building phase of a new Kindle-based point-of-sale system for brick-and-mortar retailers that uses a built-in credit card reader. Amazon’s plans would ultimately lead to a mobile wallet interface similar to the ways consumers can purchase their coffee at Starbucks with their phone.

One company that beat them to the punch is Isis. Consumers add participating credit cards to an app on iPhone or Android and use their phones to pay for goods at participating retailers. It seems stores and restaurants surrounding campus that accept Isis are slim, with McDonald’s being the only popular choice. The biggest hurdle for companies that offer mobile payments is larger than getting retailers to commit. There’s still a resistance from the consumer perspective, and UALR students are no exception.

In a survey of 50 students, 54 percent said they would not use a mobile wallet provided by Amazon. Many cited the refusal to trust something like that on their phone. One student simply didn’t understand how it would work.

“I don’t know how they would link money to your [Amazon] account. I know it’s linked to your card. How does it get paid though? I would need to understand the flow,” Gregg Kollbaum said.  Kolbaum is a nontraditional student majoring in information science.

Others were quick to adapt to a hypothetical Amazon mobile wallet system regardless of details.

“It would be direct to your credit card anyway. It would be easier. People are paying with Square and PayPal anyway,” Gerome S. said.

Added to the mix is a product like Coin that allows the consumer to add any credit or debit card to an application. Your phone then syncs with a Coin card that, when swiped, charges the card with which you want to pay. With payments made so easy, some students worry about their personal spending habits.

“I would probably end up wasting all my money,” Lance Biggers said.

Biggers is a post-baccalaureate in his first year of the nursing program.

Now, the question for Amazon is why. Why enter into an increasingly flooded payment channel? Why offer what other companies, like Isis, Coin, or Square, do best? The Journal recognized the opportunity that Amazon has gained—not for additional revenue, but for coveted data on in-store shopping habits. Hoping to use the information to better serve its retail business customers, or to use the information itself for predicting purchases and recommending products to shoppers, Amazon believes it has plenty of reason why it should do this.

A December 2013 acquisition of San Francisco-based GoPago Inc. showed analysts and investors just how interested CEO Jeff Bezos is in mobile payments. According to MarketWatch.com, Wall Street was uninterested and distracted by the “par” earnings in 2013 Q4. This contributed to a sharp 15 percent decline in the late days of January and leading into February.

Amazon continues to offer convenience to customers. Services like drone shipping, streaming, and possibly mobile payments all point to making the lives of consumers convenient.

“Convenience is huge. Having [payments] on our phone is even more convenient,” Mac B. said.

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