Connections

Ingenuity

The Future in Store

NFC technology promises to improve the shopping experience for consumers and give retailers new insights.

High-tech shopping is moving beyond the Internet and into brick-and-mortar stores as near-field communication (NFC) tech­nology offers consumers a faster, easier and richer shopping experience. When connected to a retailer’s wireless network and IT infrastructure, NFC devices can recognize shoppers, direct them toward specific products based on their informa­tion and make checkouts as easy as walking out of the store’s front door. NFC can also help retailers by providing a steady flow of detailed, actionable data on consumer shopping preferences.

Definition

Near-field communication (NFC) provides short-range wireless connectivity technology that carries secure two-way interactions between electronic devices. Its most popular implementations can be found on mobile devices in such applications as pay-by-mobile and ticketing systems.

RFID Shopping

NFC is an umbrella description covering several different technologies, including radio-frequency identification (RFID) systems. RFID uses chip-based tags to relay pricing, location and other data to a nearby reader, which then feeds the information into the retailer’s IT system. Shopping using RFID is a snap: Consumers bring tagged products to a checkout station where a reader automatically detects the items. Unlike today’s error-prone bar-code checkout systems, RFID technology doesn’t require merchandise to be moved past a reader by hand. Items are detected and rung up automatically by the reader and point-of-sale (POS) system while still inside a shopping cart or bag. The rest of the check­out process follows a familiar self-service transaction model: The shopper swipes a card, signs for the purchase and leaves.

A more sophisticated NFC shopping approach allows customers to place tagged merchandise inside a reader-equipped shopping cart. The cart, connected to the store’s wireless network, automatically detects items as they are dropped inside. When the consumer leaves the store, the system automatically bills the purchase amount to the customer’s credit card, debit card or checking account and emails a receipt to the shopper’s smartphone.

Telephone Wallets

While complete RFID retail systems are already operational in some stores—mostly in Europe—the technology has been slow to catch on because of the high cost of tags and fixed readers. But a new generation of low-cost smartphone chips could take NFC to a new level by eliminating the need for fixed readers and individually tagged products. Although smartphones featuring built-in NFC technology are just beginning to arrive on the market, the devices are already spurring predictions that they will create an entirely new way of shopping.

Not Just for Retail

Stores aren’t the only places that can take advantage of NFC. The technol­ogy can also be used to complete purchases at gas stations, on buses and trains, and in restaurants, hotels, theme parks and theaters.

  • A Swedish company is testing NFC smart­phones as hotel room keys.
  • A major resort chain is evaluating the technol­ogy’s ability to create instant ski lift passes for guests.
  • Public transportation systems can allow passengers to pay for their rides by waving an NFC smartphone as they board.
  • Financial organizations such as banks and credit card issuers can benefit from NFC smartphones, as password-protected smart­phones send data over encrypted wireless networks and can be much more secure than conventional credit and debit cards.

An NFC smartphone acts like a portable tag reader, allowing users to make fast purchases by holding the phone close to the products they want to buy. Users wave their phones in front of a nearby sensor, and the purchase is instantly charged to their credit card, debit card or checking account. Merchants and marketers can also use the technology to deliver useful informa­tion to consumers, such as detailed product descriptions, reviews and coupons, as well as store maps highlighting the locations of items read from a smartphone-stored shopping list. Obtaining this information is as easy as waving a smart-phone close to a sensor located within a product display or placed inside an adver-tising sign.

Abundant Data

While NFC promises to make real-world shopping more fun and convenient for shoppers, businesses will benefit from a fresh and steady stream of consumer information. By tying existing loyalty programs to NFC smartphones, retailers, wholesalers and ven­dors will be able to gather customer data for demographic analysis, evaluating sales and store trends, judging product preferences, and powering other analytical tasks.

The technology can also be used to detect missing or stolen products and to generate automatic security and stock replenishment alerts. NFC smartphones will also allow retailers to use customer-generated data to create precisely targeted marketing pro­grams based on gender, age, location and other criteria, as well as to instantly adjust prices and other purchase terms based on place, date, time and other factors.

Changes in Store

It’s too early to tell whether NFC shopping will replace credit and debit cards—and even cash—for most one-on-one transac­tions. But with millions of NFC-equipped smartphones set to reach consumers over the next few years and the technology’s advantages for shoppers and businesses, NFC looks destined to emerge as a major force in the coming decade.


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Datawatch Q4-2014