What Apple Pay and the iPhone 6 mean for Online Retailers

Among a bevy of announcements, Apple today announced Apple Pay: A new mobile payment service for retailers, both online and store-based. Apple Pay launches with an impressive roster of online retailers, purpose built apps, and "real life" merchants including Target, Whole Foods, McDonalds, Panera Bread, Nike, Starwood, Groupon, and Uber.

The new iPhone 6, available September 17, is going to be the first device embedding Apple Pay, allowing customers to pay with their phones online and in store. Payment will be done through the Touch ID interface - using one's finger. The new Apple Watch, available early next year, will also feature Apple Pay.

 In this post we dive into some of the background and strategies which may have contributed to Apple's decision to develop Apple Pay, as well as the implications for online retailers.

 Why Apple Pay? Why Now?

According to The Custora E-Commerce Pulse Mobile Report, Apple devices still dominate mobile e-commerce (= online shopping done on phones and tablets). In August 2014, over half (52.4%) of online shopping done on mobile phones was done on Apple iPhone devices. Almost a third (30.6%) was done on Samsung phones, and the rest - 17% - on other phones.

Tablet shopping presents an even rosier picture for Apple, with four out of five - 80.5% - of tablet e-commerce transactions done on iPads. Only 9.7% of tablet shopping is done on Samsung tablets, and the remainder is split between other tablet brands.

Apple's mobile e-commerce supremacy has been challenged...
While Apple still dominates mobile shopping, its supremacy continues to be challenged - most notably by Samsung and more recently, Amazon.

Over the last two years, Apple’s share of e-commerce orders done on phones went down from 75.1% in January 2012 to 52.4% as of August 2014. Samsung devices have more than quadrupled their share of orders over the same time period — growing from 6.9% in 2012 to 30.6% in 2014.

Share of orders made on Samsung tablets increased substantially in the past year and a half: From 1.9% in January 2012 to 9.7% as of August 2014. Amazon has also quickly become a player, as purchases made on Kindle Fire tablets account for 3.1% of all tablet orders.

Apple Pay might slow down (or reverse) the trend of Apple's declining mobile e-commerce share.

What Apple Pay means for online retailers

1. Paying directly with one's phone offers convenience, speed, and security (stolen celebrity photos notwithstanding). The Apple Touch ID mechanism is a clever way to bypass Amazon's one-click patent (as a touch is, conveniently, not a click), and can make those terrible payment forms all but disappear from online retailers' sites.

2. Retailers now have more choices when it comes to accepting payments. Between Paypal, Amazon Payments, and Apple Pay, online retailers have a choice. Competition is good for retailers (and consumers), and might lead to decreased fees and improved profit margins for online retailers. Apple Pay's Touch ID paved the way to its lower ("Credit Card Present") processing fees; The savings could be passed on to merchants and/or to consumers.

3. Apple + Retailers = ? : Over time, Apple might offer exclusive deals and promotions with retailers, which will make Apple Pay even more attractive to consumers. Apple said today it is not keeping any transaction data in its own database - it all goes directly to the retailer. It will be interesting to see if that changes in the future.

So now what?

The story will unfold in the next few months as the iPhone 6 becomes available, and the US holiday shopping season kicks into high gear. The Custora E-Commerce Pulse will keep tracking this trend, and other e-commerce stats: Sign up to receive updates when we release new e-commerce updates and research reports.

This post is an update to the Custora E-Commerce Pulse Mobile Report. The full 12-page report includes an analysis of mobile commerce growth in the past 4 years, the marketing channels driving mobile transactions, cross-device shopping behavior, and more.

Download the full report here: 

About The Custora E-Commerce Pulse
The Custora E-Commerce Pulse tracks key US e-commerce statistics and allows any retailer to benchmark their data in real time. The Pulse is based on Custora’s analysis of over 70 million online shoppers and over $10 billion in e-commerce revenue across over 100 US-based online retailers. The Pulse also leverages external data points, such as the US Department of Commerce e-commerce growth figures, to extrapolate growth trends within the Custora data universe to arrive at predictions for the US industry at large.

Pulse research has been featured in The Wall Street Journal, USA Today, Inc., Bloomberg TV, McKinsey Insights, AdAge, eMarketer, and many other publications. Pulse data is part of the Bloomberg Professional® Platform.
Sign up to receive updates on e-commerce trends and new reports here.

About Custora
Custora provides a customer-centric marketing platform that helps e-commerce teams make customer acquisition and retention programs more profitable. Custora’s software uses advanced statistical models to identify distinct customer segments and predict how customers will behave in the future. This enables e-commerce companies to deliver more relevant and effective communications that promote long-term customer relationships. Custora is proud to work with some of the world’s leading e-commerce retailers, including Guess, Ann Taylor LOFT, Etsy, Backcountry, Bonobos, Crocs, Wine.com, and One Kings Lane. If you’re interested in learning more about Custora, request a demo here.

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