Analyst Corner

iPhone 5 – Any Good For Retailers?

Categories: Uncategorized

After looking over the Apple iPhone announcement I found myself, well quite underwhelmed. Oh my analyst friends that are photography buffs were drooling over the new low-light camera. And certainly the availability of 4G LTE available worldwide is a huge drawing card for the hoards of iPhone 3s, 4, and 4s owners that have jealously watched their Android brethren race through the internet. But Apple now seems to be playing catch-up for the first time to Android, rather than leading the way. And nothing, other than the camera design seemed to be earth shattering.

But with all this excitement, a question for all of us that begs to be asked and answered is the following. Does this help or hurt retailers? The answer? Neither.

What was glaringly missing in today’s announcement was any mention of an NFC chip for payment. While I would agree this technology overall is still a tremendous work in progress, Apple had the opportunity to truly lead this category with 435 Million iTunes accounts now activated and with the potential to tie payment at retail to those accounts. What’s more, the penetration of NFC reading card stations at POS is now rather ubiquitous in multi-lane retail. We can argue all day if they really work reliably, but thats an argument for another day. No NFC for iPhone 5.

What also was missing was use of any biometrics for authentication. Certainly this goes hand in hand (pun intended) with the missing NFC chip, but the opportunity to lead was missed. This is not a big deal, but one of the things that always must be considered with the adoption of any payment technology in retail is whether or not it speeds the transaction process or slows it down. The consumer’s portion of payment is the slowest part of the transaction. Biometrics is the only way that I see of speeding that payment to a level similar to a swipe card while providing a more secure payment environment at the same time. Apple has the ability to push this industry single-handedly, but chose not to do so at this time.

What they did release was the Passbook application, which is really cool to be honest for those of us who travel a lot. I love the format and display. If you are not familiar, Passbook allows you to enter your loyalty cards and boarding passes for any retailer into the Passbook application. Instead of carrying the cards, they are always at your fingertips by presenting a bar code on the phone screen to the scanner. I can see my wife ditching the myriad of loyalty cards and other cards that are stuffing her wallet. There are only three problems with that when it comes to practical reality for retail.

First, about half of those cards are for restaurants and other locations that don’t currently use scanners. So they will need to purchase scanners pretty quickly if they want to have all those iPhone users bringing their loyalty cards or is it faster to look up by phone number anyway ;-)?

Second, every scanner that is installed will need to have the ability to read an optical barcode. This is not the same technology as simply using a line scanner. We roughly estimate less than half of scanners installed today can do that.

And finally, in most cases consumers will need to hand over their bright, shiny, cherished iPhone 5 to some cashier to present to the scanner whenever they go into an establishment that even has the scanner. That’s a lot of hand sanitizer and screen wipes if you ask me.

So it should be a good year for scanner sales and the company that makes those sanitary wipes, but for practical retail use the iPhone 5 seems to fall flat.

As for that camera? Well it will make showrooming easier or make it easier for customers to show off their Tebowing, Planking or Eastwooding in your aisles. Improved customer experience, right? Its all about the customer experience.