2019 has truly been a year of global digital transformation for commerce and fintech. In commerce, major companies – think Amazon and Walmart – have found success in new business ventures, while other companies, like Toys ‘R Us, have managed to come back from the dead. Meanwhile, brands across retail and several other industries are testing out unique ways to engage with their customers.
On the fintech side, big tech companies could be both a threat and an asset to traditional banks as they move into banking. Customer demand for control over their data and reactions to industry failures highlight that fact, and just as in commerce, the customer experience is critical.
This information comes from a webinar hosted by Glenn Fodor, SVP of Data & Analytics at Fiserv, during which Fodor reviewed major developments in commerce and fintech in 2019 as players in both industries transform to stay competitive and connect to consumers.
Commerce Industry Trends
The commerce winners of 2019: Amazon and Walmart
Two major retailers, Amazon and Walmart, have implemented a breadth of new strategies to evolve their businesses this year. Unsurprisingly, Amazon continues to outpace overall U.S. market and commerce growth; a driving factor behind its success is the Prime delivery option, which has been used by over 100 million Amazon Prime members worldwide.
The once exclusively e-commerce giant has also begun to dabble in the world of physical retail with its casual store format technology. As of 2019, 20 Amazon Go store locations have been established or announced in the U.S., including locations in New York City, San Francisco, Chicago, and Seattle.
Amazon Go stores are Amazon-run convenience stores that offer customers a unique shopping experience. Customers use their Amazon Go app to enter the store, and then cameras and other cutting-edge technology track the shoppers as they pick up items, charging their purchase to the Amazon Go app when they leave.
In November, Bloomberg reported that Amazon is also eyeing supermarkets and pop-up stores compatible with Amazon Go technology as future ventures. In the Fiserv webinar, Fodor described this as “a brilliant value chain move that allows Amazon to continue diversifying away from online retail without having to build its own stores.”
Walmart, another large retailer disrupter, has spent much of the last few years acquiring digital native e-commerce brands, including Jet.com, Bonobos, ModCloth, and Bare Necessities, to bring several popular brands in-house that can’t be found on Amazon.
Overall, Walmart’s e-commerce business has seen massive high-level improvements, growing almost 40% in 2019. At the same time, Walmart has recently pivoted its e-commerce strategy, folding Jet.com into Walmart.com in June and selling ModCloth and laying off dozens of Bonobos workers in October.
Walmart is also using its existing physical footprint to build out a delivery service business. After a soft launch this summer, Walmart recently began expanding its “Delivery Unlimited” grocery delivery service to include 1,300 stores across the U.S. Fodor commented that “grocery is a perfect example of how Walmart is finding the right balance between e-commerce investments and levering its physical footprint.”
Ultimately, the two companies are finding success by essentially doing the opposite of one another. While Amazon is branching out into the world of physical retail, Walmart has honed in on acquiring popular e-commerce brands to supplement the physical footprint it already has.
Brand resurrection relies on meeting customer expectations
Some retailers have been unable to keep up with the changing trends and have failed entirely. Fodor pointed out that although every brand has a unique story, business failures typically can be attributed to a few primary reasons: outdated stores, debt burdens and financial constraints, and simply failing to meet consumer expectations.
A high-profile business failure was Toys ‘R Us. When Toys ‘R Us went out of business in 2018, consumers spanning generations mourned and shared their fond memories of shopping in its stores. However, companies like Toys ‘R Us – that have value, that still resonate with customers, that spark an emotional connection with consumers – are the ones that have managed to come back to life.
Now, Toys ‘R Us is coming back and has hopes of doing things right. The company recently reopened two stores, one in Texas and one in New Jersey, which barely resemble the stores consumers remember. The new store format is a much smaller, more interactive space and includes a treehouse for children to climb and play, a small events space, and boutiques for smaller toy brands.
It’s not just retailers like Toys ‘R Us that have switched their focus to interactive customer experiences. Brands across industries are finding new ways to connect with customers outside of traditional channels. Makers of the hazelnut-chocolate spread Nutella have plans to open a Nutella-themed pop-up hotel in 2020 that will feature hazelnut-décor, Nutella-themed cooking lessons and activities, and Nutella dishes served from Food Network celebrity chefs.
Meanwhile, KFC has released a limited edition seasonal fire log that smells like fried chicken when burned. When the logs were first unveiled in 2018, they sold out within hours.
Open banking accelerates
In recent years, open banking has been a rising priority for traditional banks, with Fodor noting that “it’s expected to be the number one priority for banking executives by 2025.” Overall, the concept of open banking encompasses the need for banks and credit unions to respond to consumer demands for simple and painless experiences either with their bank or a third party their bank has a relationship with.
Open banking, or any initiative by a bank to open its APIs to third parties, comes with benefits such as better functionality, new revenue streams, and an improved customer experience. Open banking can simplify things like applying for a mortgage, paying someone, getting paid, and seamlessly managing finances.
Big tech – friend or foe to banking?
While banks face a handful of obstacles, the biggest threat to traditional banking may be fintechs. Fintech and big tech companies are leveraging the API ecosystem to offer financial services to consumers, and deep pockets, vast customer bases, and great customer experiences give them an edge in the financial world. Surveys have shown that over 60% of Americans would bank with a tech company.
Fintechs aren’t simply a threat to banking, though – they also represent an opportunity. Given complex regulatory systems in place, tech companies moving towards banking may thrive most by partnering with traditional banks. Such a move could help big tech navigate the highly specialized regulatory landscape of banking while helping banks execute digital transformations.
Companies’ responses to their own errors ignites (or prevents) customer backlash
Just like the retail industry, a recurring theme in banking this year has been that customer experience matters. For example, multiple digital-only challenger banks have experienced similar technological glitches as larger banks and financial institutions, but customer backlash has been comparatively quiet.
According to Fodor, “you would think that these players would have faced harsher consequences than traditional banks because by design, they don’t have the same breadth of backup options and resources.” Fiserv believes that the muted backlash can be attributed to the simple fact that these challenger banks have handled the situations better, with transparent and clear action, quick acknowledgement of their responsibility to resolve it, and frequent customer updates that allow customers to feel in control.
Customer experience is an overlapping theme
While commerce and banking have different key players and emerging trends, one underlying theme became clear: customer experience is key for both industries. Commerce and fintech professionals alike are honing in on customer engagement to meet consumer expectations.
Those interested can access Fiserv’s 2019 Commerce and Fintech Year in Review webinar at: https://onlinexperiences.com/scripts/Server.nxp?LASCmd=AI:4;F:QS!10100&ShowUUID=B5431024-F6FD-4715-9BF6-8DDB0A0ED315&AffiliateData=WeeklyUpdate