In the age of Amazon, First Data pushes merchant flexibility

Amazon and other e-commerce disruptors are turning long-held retail models upside down, but in doing so they create a lifeline for retailers who see them as an opportunity rather than a threat.

There really is no reason for retailers to defend their current point of sale setup when Amazon and its peers are demonstrating the flaws in that model. If anything, merchants can view projects like the Amazon Go checkout-free store as free demonstrations of what they could do with newer technology.

"Some savvy merchants will adapt accordingly, and we're training our sales force on that. This is what their pitch needs to be," said Glenn Fodor, First Data's senior vice president of strategic intelligence in an interview that followed a First Data webcast on payment industry trends on Wednesday.

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Mobile payments, new marketing and other staples of startups are applicable to traditional retail, Fodor said, while adding not all merchants may respond to that message. "That is the ultimate outcome…you will have the haves and have nots."

During First Data's presentation, which also touched on issues such as the increased collaboration among payment companies and the winding down of the EMV migration, Fodor noted stores are struggling, closing locations and suffering poor quarterly earnings. Amazon has grown to substantial size, accounting for 60% of e-commerce growth, and only 17% of U.S. households don't use Amazon, Fodor said.

"Retailers will have to experiment and grow sales in ways that may not be considered core," Fodor said during the event.

Amazon has wandered from its traditional core, experimenting with new delivery methods and retail environments. The Amazon Go store will spur other retailers to accelerate development of omnichannel strategies, Fodor said, predicting retailers will recast larger stores as distribution centers, where people shop and later have goods delivered. And the sheer size of Amazon, which is bigger than most of the largest brick-and-mortar retailers combined, pressures the traditional retail industry.

Retailers must additionally respond to connected commerce innovations, such as bots, which allow selling through social sites such as Facebook, Fodor said, adding connected devices such as in-car computers are also advancing. "These experiences are out there to be had now and will evolve quickly," Fodor said.

Merchants will play a key role in this as they reach consumers through these new channels, Fodor said, noting Alexa's introduction to CVS as an example of a personalized digital shopping experience (Alexa is the name of Amazon's digital assistant, typically accessed through its Echo and Fire consumer devices).

First Data is upgrading its technology to accommodate the expansion of digital commerce and how that will transform the retail environment. It has opened its Clover point of sale system to external developers and has partnered with Silicon Valley Bank to boost its visibility into the technology industry.

The rate of change in payments is accelerating and the space is becoming more complex, said Thad Peterson, a senior analyst at Aite Group, adding consumers are driving merchants to deliver seamless omni-channel experiences and the number of competitors in nearly every category is increasing.

"To maintain share and stay competitive, processors much offer capabilities that their customers need. It's not a differentiation play, it's a 'keeping up with the Joneses' play," Peterson said.

The added technology acceleration for processors comes from an increasingly fast moving e-commerce and mobile environment, coupled with the incredibly fast growth of some of the emerging payment companies such as Adyen, Stripe, Braintree and others, said Rick Oglesby, president of AZ Payments Group.

"Not only is e-commerce growth dramatically outpacing that of retail, but the companies that have got it right are growing at a pace that is dramatically faster than that of established processors," Oglesby said. "So the processors are seeing e-commerce as both a threat and an opportunity. Sitting on their laurels and doing what they have always done doesn't make much sense."