paytm

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Name: - Suryaprakash Tiwari
Roll No.:- 27
Course: - MFM
Subject: - Legal Aspects Of Business.
Project On:- “PAYTM”

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Q1. HOW PAYTM WORKS?
INTRODUCTION
ABOUT PAYTM:
Paytm means “Pay through Mobile”. It is one of the largest is one of the fastest growing
Indian e-commerce shopping websites launched in 2010. The name of the company who
launched the Paytm is One97 communication. Initially, it is focused on Mobile and DTH
recharging. The Company headquartered in Noida, India. It gradually provided
recharging and bill payment of various portals including electricity bills, gas bills as well
as telephone bills.
In 2014 Paytm has started the business same like as the facilities are getting from the
other E-Commerce company such as Flipkart, Amazon, and Snapdeal. Today, it is India's
most popular online destination for prepaid mobile & DTH recharges and shopping, and
its Android and iOS apps have been ranked among the most popular apps. In only 3 years
since the founding, the company created a user base of 25 million wallet users and 10
million app downloads.
SERVICE:
In 2014, the company launched Paytm Wallet, India's largest mobile payment service
platform with over 40 million wallets. The service became the preferred mode of payment
across leading consumer internet companies such as Uber, Bookmyshow, Makemytrip.

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FUNDING:
Paytm got a major boost in e-commerce when Indian industrialist RatanTata made a
personal investment in the firm in March 2015.In the same month, the company received
a $575 million investment from Chinese e-commerce company AlibabaGroup, after Ant
Financial Services Group, an Alibaba Group affiliate, took 25% stake in One97 as part
of a strategic agreement.
PARTNER:
Paytm works with all mobile operators in all states in India for prepaid mobile, DTH and
Data card recharges and postpaid mobile, landline and Data card bill payments. It's
partners with the multiple national banks, for a credit card, debit card, and net banking
payments. Paytm also works with various billers for utility bill payments.
ACHIEVEMENTS:
 2014 – Paytm is Gold Winner at the MMA Smarties in
the Mobile App category.
 2014 – Paytm is Silver Winner at the MMA
Smarties in the mCommerce category
 2014 – Paytm wins the Best Mobile Money product at
the 4th India Digital Awards.

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 2013 – Paytm wins Knowledge Faber Best Mobile
Wallet Program Award.
 2013 – Paytm wins a special mention in m Billionth
Awards in mCommerce/mBusiness category.
 2013 – Paytm is Gold Winner at the MMA
Smarties for E-Commerce.
 2012 – Paytm is recognized as the Most Innovative
Startup of the Year at the Entrepreneur India event
organized by Franchise India.

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TECHNICAL ARCHITECTURE OF PAYTM:
A high-level architecture for electronic commerce.
There are three components to this architecture: the Internet, a firewall, and your
organization. The Internet is where you will interact electronically with your customers,
your firewall will provide you with reasonable protection against people who wish you
harm, and your organization’s systems will process the business transactions generated
on the WWW by your customers.

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WORKING AND TECHNOLOGIES OF PAYTM
SUPPLY CHAIN MANAGEMENT OF PAYTM:
It is the management of the flow of goods and services to the customer. Supply chain
management has been defined as the "design, planning, execution, control, and
monitoring of supply chain activities with the objective of creating net value, building a
competitive infrastructure, leveraging worldwide logistics, synchronizing supply with
demand and measuring performance globally.
Benchmarking Web Server Hardware and Software:
A benchmark test considers several factors such as:
 The computer hardware
 The Web server software
 Network connection: A Web server on a T3 connection can deliver Web pages to
clients much faster than it could on a T1 connection.
 Throughput: It is the number of HTTP requests that a particular hardware and
software combination can process in a unit of time.
 Response Time: It is the amount of time that a server requires to process one
request.
 Type of Web page: A server that delivers mostly static Web pages will perform
better than the same server that delivers dynamic Web pages. A dynamic page is
a Web page whose content is shaped by a program in response to a user request

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(such as a database query), versus a static page, which is just a plain HTML
page.
Web Server Software Feature Sets
All Web server software provides some basic features which can be classified as:
 Core capabilities
 Site management
 Application Construction, and
 Electronic commerce
 CORE CAPABILITIES:
 IP-Sharing or Virtual Server
 Logical file
 Security
 FTP
 Site Analysis
 Searching
 SITE MANAGEMENT:
 A Web server provides tools to manage multiple Web sites, file security, virtual
file, and log file analysis.
 Administration of a Web server can be performed by a remote computer in the
network.

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 APPLICATION DEVELOPMENT:
Application development includes Web editors and extensions to produce Web pages –
either static or dynamic. These include HTML editors such as FrontPage for static
Web pages. For dynamic Web pages, there are protocols such as Common Gateway
Interface (CGI) and Application programming Interface (API) that are used by
programs such as Java and C++ to develop dynamic Web pages.
 ELECTRONIC COMMERCE:
Some Web servers provide advanced services that support online selling and buying
(such as shopping cart and catalog services). An electronic commerce software can
provide templates and other tools to quickly develop an e-commerce site. This might
include templates for product browsing, shopping carts, and credit card processing.
REVENUE MODEL OF PAYTM
Paytm earn their revenue through the marketplace model. They work on marketplace
model and they believe in the marketplace model for their revenue, they give to the
opportunity to vendors to sell or listed their products on paytm website, so the buyer
comes and buy the products. In this activity paytm charge commission from the seller so
this is some part how they generate their revenue. They do also some more activity to
generate their revenue.

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Paytm knows that Revenue model is the framework of revenue.it is a description How a
business generates income, profit, or an average earning in a business.and they fully
concentration their revenue model.
That's believed also purely marketing strategy, they get earnings from sponsored
advertisers, showing ads, they give coupons (from sponsors), so in order to gain some
popularity and to bare the competition, they are giving the cash back. So they attract more
visitors as well as get more sponsors, ultimately making them profitable. it's a most
profitable strategy of paytm.
Screen shot of paytm market place: they give the opportunity to sell their product on
paytm website.

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Registration Process For Merchants In Paytm Website:
Paytm provide a marketplace for merchants .this is a registration process for merchants
to register themselves in paytm website. They provide simple registration for merchants
to sign up for the site, the mandatory fill up shows red star(*) they must fill up by
merchants. The forming process is very simple you fill up are some necessary things like
name, email id, mobile number, city, business name, category(business), business
address. And all completion you press the submit button and after you can business in
the paytm website. this an activity of paytm to earn their revenue through the
merchants,

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After completion, this process paytm offers to merchants choose the
subscription plan this is the way paytm earn the revenue from the
merchants.through the subscription model. This is the part of subscription
model of paytm.

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Overview: How Merchants Sell Their Products Through Paytm Site:
This screenshot shows the seller name, product description that is filled by the seller,
product images, and the price of the product that all this filled are set by the seller.if the
buyer buys this product from the site so seller paid commission to paytm on every sell.
This is the activity the paytm earn revenue from the seller as a commission when seller
products are sold on this site. This is the best strategy for paytm to earn their revenue
part.

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The Subscription Charges From The Merchants:
This is the annual subscription plan they charge by paytm from their seller, they
divided their subscription charges into four categories:-
 Silver plan
 Gold plan
 Platinum plan
 Budget (zero setup plan)
This plan has owned their benefits, the highest plan is platinum plan give more
benefits to the seller to sell their product in site. In other hand silver plan give
fewer benefits as comparative to platinum or gold plan. This all the plan are
charged by the seller one time in the annually

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The paytm charge also additional charges through the seller like annual maintenance
charge (AMD) that is 2500 annually, and 12.38% charges if it's applicable. It’s a part of
paytm subscription model to generate their revenue. In this strategy paytm give the
more opportunity(plan) to its merchant and give the different benefits to the seller.
Top Merchants They Use Paytm Wallet:
This all are merchants with paytm wallet, these merchants are contribute revenue for
paytm to provide paytm wallet facility to the buyer. This is also the way the paytm earn
the revenue from the buyers. All this are big e-business site they are done huge
transaction daily. These merchants avail the facility paytm wallet which is provided by

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paytm. The famous merchants in the paytm are: dominos, jabong.com, book my show,
eBay, Uber, and haldiram.

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REVENUE MODEL ADOPTED BY PAYTM:
They are some models they are adopted by the paytm to generate their revenue the
model are shown below:

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ADVERTISING REVENUE MODEL:
In this model paytm allow to merchants shows their advertisement on paytm websites
and charges some amount for this advertisement.this is the way the paytm used to
generate their revenue. This method for generate revenue is covered under the
advertising revenue model.
This model is more beneficial for paytm to generate their revenue.the charges are
charged by them they advertised their product on paytm site.
The yippee noodles show their advertisement on the paytm site and they paid some
money to paytm . this is a way paytm generate the revenue from the advertising revenue
model.

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It’s a screen shot shows how yippee noodles show their advertisement on paytm site
SUBSCRIPTION REVENUE MODEL:
Paytm also use the subscription model. They charge the subscription amount from the
seller annually and generate their revenue. they categorized their subscription into four
categories all are mention and discuss early in this project. They charge annually
maintenance charges also as a commission that is RS 2500. This whole process is coming
under the subscription model of paytm through them they generate their revenue. The
subscription model is most beneficial for paytm because all the seller who are register
themselves into paytm all are paid subscription charges to run their business in paytm

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site. Basically, the paytm adopt the paid circulation subscription revenue model to
generate the revenue in their business.this is the most beneficial model as comparative
to others model to generate the revenue.
TRANSACTION REVENUE MODEL:
paytm also charge their revenue through the buyer as well as seller transactions.
Through this model paytm charge some amount from buyer and seller when they
transact in the paytm site and avail the paytm facility. This screen shot shows that what
charges paytm charges when the buyer are transacted through the paytm wallet.
If you loading your money into the wallet, paytm charges nothing amount in this
transaction,
If you purchase any product at merchant site the paytm also charge nothing in this
transaction.

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If you transfer the money into one wallet to another person wallet, on this transaction
paytm also not charge any amount. but if you transfer the money from paytm wallet to
bank paytm charge 4% of the amount that you are transferring into the bank. this is the
transaction revenue model of paytm .
ADVANCE PAYMENT REVENUE MODEL:
In this model paytm received the interest on the payment of customer until they are not
transferring the money into seller account. When the paytm received amount from the
customer they are not instantly transferred on seller account. They hold the amount
and gain the interest on this amount. Through this process paytm generate their
revenue from the advance payment revenue model.
This model is very beneficial for paytm to generate the revenue this all process is also
called escrow account process.
COMMISSION REVENUE MODEL:
IN this model paytm charge commission from the seller for their listed product in
paytm websites. And they charge commission on every sale on the site of paytm from
the seller. This commission is totally based on the sale of the product if the buyer buys
the product from the paytm site so paytm charge the commission from the seller for
each sell in their website. Through this process paytm generate their revenue. The
commission based model are also beneficial for generating the revenue .the commission

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based model also trends in ever e-business site, paytm also adopt this revenue model to
generate their revenue.
They Are Some Other Activity The Paytm Earn The Revenue:
• Paytm escrow: through escrow account paytm received interest,when buyer
payment to their purchase that amount held by paytm until customer does not
confirm it.If the customer does not confirm in next 7 days paytm expect buyer
satisfied with the product and they transfer the money seller account.
• Paytm earn by advertising other products on websites.
• Patym charges annual subscription fees to the sellers who list their products on
website
• Introducing Paytm Wallet, a secure digital wallet where you can store money
and use it to make quick recharges, pay bills, do shopping on Paytm. You can
also send money to friends & pay for various services like Uber, MakeMyTrip,
BookMyShow & much more.

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SECURITY AWARENESS AND POLICIES:
A need for security awareness and training is required to implement computer
security in an organization. The main purpose behind security awareness is to
enhance security by improving awareness of the need to protect system resources,
developing skills, and knowledge so that computer users can perform their jobs
more securely and build knowledge needed to design, implement, or operate security
programs for organizations and systems. A security policy is a formal statement of
the rules for people who are given access to an organization’s technology and
information assets. The main purpose of security policy is to inform users, staff, and
managers of their obligatory requirements for protecting technology and
information assets. To retain the value and genuineness of the policy, it must include
these components: computer technology purchasing guidelines, privacy policy,
access policy, accountability policy, authentication policy, information technology
system and network maintenance policy and violations reporting policies.
Security Policy, Procedures, and Practices
 A Security Policy Is A Formal Statement Of The Rules:

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 a high-level description of the technical environment of the site, the legal
environment (governing laws), the authority of the policy.
 risk analysis identifying the site's assets, the threats existing against those
assets, and the costs of asset loss
 guidelines for reacting to a site compromise (e.g., whether to trace the
intruder or shutdown and rebuild the system).
 Security-Related Procedure:
 Procedures address such topics as connecting to the site's system from home or
while traveling, retrieving programs from the network, using encryption,
authentication for issuing accounts, configuration, and monitoring.
 Security Practices:
 Implement a one-time password system. Ensure that all accounts have a
password and these passwords are difficult to guess.
 Use strong cryptographic techniques to ensure the integrity of system software
on a regular basis.
 Keep the system's current with upgrades and patches.
 Audit systems and networks, and regularly check logs for detecting an intrusion.

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HOW TO MINIMIZE SECURITY THREATS:
 Making Your Business Less Of A Target - consider what needs
to be on public or shared systems and, where possible, remove
sensitive business information.
 Increasing The Perception Of Your Business As Secure -
ensure that all aspects of security appear to be installed and well
managed.
 Ensuring That Warning Signs- on your website are clearly
displayed to any user who attempts to access secure parts of it.
 Not Providing Any Publicly Available Information- regarding
the security systems or operating systems in use.
 Making Certain That Your Employees Are Well-trained- In
proper email and internet usage, eg not opening unfamiliar
attachments or clicking on suspicious links.

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TECHNIQUES USED FOR SECURITY:
 Server Security: Use firewalls and proxy servers.
 Message Privacy (or confidentiality): assures that the
communication between trading parties are not revealed to other,
therefore unauthorized party can not read or understand the
message.
 Message integrity assures that the communication between
trading parties are not alerted by an enemy.
 Authentication: The term “authentication” determines the user
of the computer is actually who he/she claims. The term
“authentication of the receiver”: allows the sender to be sure that

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the party he/she intend to get the message is the one who receives
it.
 Authorization: Ensures that the trading party has the authority of
transaction.

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ELECTRONIC PAYMENT SYSTEM

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 INTERNET BANKING:
Banking through bank official websites. User ID & Password is a must
with register mobile number for OTP.
 DEBIT/CREDIT CARDS:
Online transaction on PAYTM is secure with the highest levels of
transaction security currently available on the Internet. PAYTM uses
256-bit encryption technology to protect your card information while
securely transmitting it to the respective banks for payment
processing.
 E-VOUCHERS(eGV):
The e-Gift Vouchers (EGV) can be redeemed online against Sellers
listed on www.PAYTM.com only. EGVs can be redeemed by selecting
the payment mode as e-Gift Voucher.
 IMPS (Immediate Payment Service ):
IMPS is Immediate Payment Service that enables you to make
payment through your bank account via mobile.

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What is MMID?
MMID (mobile money identifier) is 7-digit number issued by a bank
to the customer for IMPS transactions.
What is OTP?
OTP is one-time password issued by a bank to the customer for
payment transaction through IMPS.
 What is ItzCash Cash Card?
ItzCash is now the leading cash card provider and a holistic payments
solution company.
Features of ItzGift Cash Card:
ItzCash cash cards have a good number of features that make them a
good option for cashless transactions. Some of them include:
 Secured transactions: Cash cards involve secure procedures that make
the transactions reliable and heavily secured. It is hard to make a
transaction without the card.
 Quick processing: Cash cards function similar to an ATM machine
that can transact money with a single swipe on the machine.

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 Added discounts: Many brands tie up with cash card companies to
come up with exclusive limited offers on products. These apply to only
cash card users and no one else.
 Convenient and hassle free gift option: A corporate cash card can be
used as a gifting option for employees during gifting occasions. ItzGift
cards from ItzCash carry the flag for a cashless gift card.
 Mobile Friendly:
paytm service is also available in mobile so you can easily download and use this
application in your mobile anywhere. On another hand, we can say that it’s a mobile
friendly application. They are available in many stores:
 Safe And Secure Payment:
paytm uses many trusted software for their security purpose they used many
security application they provided the best security when any transaction are done,
they use 256 bit of encryption for their security purpose.

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This are the application/ software paytm use for their security purpose
 RBI Approved Digital Wallet:
Their digital wallet is approved by the reserve bank of India(RBI). So people are
trusted on their paytm wallet service. That means They follow all the rules and
regulation they are required to work e-wallet.
 They provide 45+ banks for net banking.(one of the largest Payment Gateways in
India.)
 You can also Rs 1 lakh plus money transfer (follow the KYC(know your customer )
rule and regulation) otherwise its RS 10000.

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 Seller Opportunity In Paytm:
SELLER OPPORTUNITY IN PAYTM
A consumer can also sell or do business with the help of paytm

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 Partner With Paytm:

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How to start an e-commerce business in India
The e-commerce industry is witnessing a tremendous growth in India backed
by increasing smartphone and internet penetration. With further increase in
internet service providers and the launch of 3G and 4G services, at affordable prices
– the e-commerce and m-commerce industries are set to record even higher growth.
In this article, we look at the procedure for starting a successful e-commerce
business in India.
Setting up an e-commerce business
Business conducted over the internet is called e-commerce. In recent years, m-
commerce or mobile commerce – business conducted through smartphones has
become very popular. Currently, there are two main modes to starting an e-
commerce business, a proprietary e-commerce website or joining an established
marketplace.
Creating a proprietary (own) e-commerce website
Creating a proprietary e-commerce website is one of the hardest methods of starting
an e-commerce business. Starting a proprietary e-commerce business requires a web
development team, online marketing team and a payment gateway for receiving
payments. Starting a proprietary e-commerce website is a long-term initiative and

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requires a good amount of investment in terms of money and effort to build up a
successful business.
Joining an established marketplace
Joining an established marketplace is an easy way to start an e-commerce business
or sell products/services online. Joining an e-commerce marketplace as a seller often
requires only a bank account and VAT registration, making the process easy and
simple. Further, on an e-commerce or m-commerce platform aspects such as
technology development, marketing, payment gateway, logistics, etc., are taken care
of by the marketplace platform, reducing the workload on the seller. In addition,
sellers can often join multiple marketplaces and sell their products, making it the
easiest way to start an online or e-commerce business.
Some of the popular e-commerce or m-commerce marketplaces are:
 Flipkart
 Amazon
 Snapdeal
 Shopclues

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Legal Formalities for Starting an Ecommerce Business
To start an e-commerce business, proprietary e-commerce website or become a
seller on a marketplace, the following registration is required:
Company or LLP Registration
While starting an e-commerce venture it good to have a company or LLP to have
limited liability protection and improve the ease of doing business. Having a
company or LLP would ensure that opening of bank accounts in the name of the
business or obtaining a VAT / Service tax registration are easy and fast.
Almost all marketplaces allow Proprietorships and Partnership firms to sell on their
website. However, there would be no limited liability protection in case of a
litigation. Hence, it is best to start selling with an LLP or Company.
In case the promoters wish to start a proprietary e-commerce website, then it is best
to start with a Company, as it is the only type of entity that can allow for angel
funding or equity funding – a must for successful e-commerce ventures.

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VAT Registration
A VAT registration is a must for becoming a seller on an e-commerce portal or
while starting a proprietary e-commerce website. VAT registration is required for
anyone selling goods or products in India and must be obtained from the State’s
Sales Tax Department. IndiaFilings can help you obtain VAT registration in India.
Bank Account
Once the Company or LLP is incorporated, a bank account can easily be opened in
the name of the business by contacting a Bank. In the case of Proprietorship firm,
VAT registration must first be obtained to open a bank account in the name of the
business. The opening of a bank account is essential to list on an e-commerce
marketplace or obtain payment gateway for a proprietary e-commerce website.
Payment Gateway
A payment gateway would be required for a proprietary e-commerce website to
process customer payments. Payment gateway providers allow for the website to
accept credit card, debit card, net banking, internet banking payments from
multiple banks and credit card companies. Therefore, one payment gateway is
sufficient to accept many forms of online payments. Once, a payment is received
from the customer, the payment is sent to the bank account of the business by the

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payment gateway provider in one or two business days. Read the article on “how to
get a payment gateway” to know more.
In the case of selling through online marketplaces, the marketplace would accept the
payment through their payment gateway and credit the money to the bank account
of the seller directly. Hence, a payment gateway is not required and only a bank
account is necessary.
Legal Documents
While selling online, it is important to protect the business and the promoters of the
business through the proper use of terms and conditions document and privacy
policy. In the case of a proprietary e-commerce website, the terms and conditions,
disclaimer and privacy policy would have to be drafted by the business based on the
nature of its activities and products sold online.
If the business sells through online marketplaces, then the legal document or sellers
agreement is provided by the marketplace and the seller must abide by the seller's
agreement. It is important for any business to read the sellers agreements before
agreeing to the agreement. You can create the following legal documents required
for an e-commerce website easily through IndiaFilings LiveEdit feature on iCFO
Platform:

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Geographical scope:
A company like paytm no need to setup any type of store at any place and we don’t need
to have any boundaries in business and this a best part.
Only we have to ensure that the securities of our system should be best. The company
like paytm will run on in people's hand means on mobile phones and on the computer so
it must be easy to understand and use. The application and web page should be
customer friendly, and to make it customer friendly it need an investment of good
amount.
If the application is good and it's easy to use then we can easily target to big cities in
India and metro cities and the most of the smartphone user is in these cities.
If the business structure will be good and people likes to use it more that their debit and
credit card than it will be a best to move forward and go to national and then
international level.
Where it could be suitable:
The business like E-commerce will be suitable to more in metro cities and developed
cities, means the company like paytm will never be best to start in village side.
Because the place where the people use to have cash with the their hand will never be a
good start a business in this type of place.
India will be a very big market in future and it will shift to e-commerce but still, it will
take some time to move all the population towards e-commerce and this is the only
reason to start a business in metro cities.
The one more things we can target more people in some time and at fixed place.

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Targeting villages mean we have to cover more area at the customer will be less and if
the move to metro cities than we have more customer at one place.
Following Steps Taken for Build Ecommerce Startup
1) Register a Business
2) Create a Website with ECommerce Platforms or Web Developers.
3) Drafting website legal terms and policy
4) legal contracts with vendors or suppliers
5) Get TradeMark/Brand Registration ( Opitonal )
5) Sell on MarketPlace like Flipkart, Snapdeal.

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How to registered company in India:

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Future of E-commerce services:
Consumer e-commerce today is largely driven by price and convenience: a good deal on
products that are delivered quickly. A smaller but growing number of consumers are
starting to want more from e-commerce, for example, wanting the ability to discover
unique goods they will not find in big-box retail chains. By 2026, these fundamental desires
will still exist, but consumer expectations of the e-commerce experience will have changed
drastically, along with the shopping experience. The desire for instant access and fast
turnaround, 24/7, will be the norm by 2026, driven in particular by millennials (born
approximately 1980–95) and also by Generation Z consumers (born approximately 1996–
2010). Generation Z is digital natives to the power of 10, with technology, use their second
nature. These generations are constantly connected and inhabit an online environment
where events happen in real time without them having to wait, and where social media
enables them to dictate terms. Key takeaways, However, by 2026, instant gratification will
have come to mean something more sophisticated than a quick fix. It will have evolved into
expectations of a seamless shopping experience across an increasing range of connected
devices, in which immediacy and convenience are paramount. Instant access and fast
turnaround will still be a key part of the equation, but other expectations will have come
to the fore: proactive customer service and support, and free or very low-cost delivery
anytime, anywhere. Consumers will expect goods advertised online to live up to the
promise in every way – with no disconnect between the “fit and feel” of what they see and
what they get. This places great pressure on retailers, and those that fail to meet
expectations will fall by the wayside. The desire for shopping experiences will intensify By
2026, many consumers will want retailers to provide an environment where shopping is an

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event experience in its own right. This will translate into interactive, highly engaging online
and real-world retail environments where augmented reality (AR) plays a key role. The
provision of distinct and tangible shopping experiences, online and real-world, will become
a key means to enhance and differentiate a brand’s value proposition. There are a number
of factors driving this trend. Many consumers today already treat shopping as a leisure
activity in its own right. Consumers are also increasingly drawn to a new generation of
lifestyle brands. Alongside this is the appetite for life-enhancing experiences in addition to
material things, evidenced by the strong growth in “adventure” holidays and “experience”
days. Another driver is the seemingly insatiable need for people to showcase their
participation in activities and experiences on social media. Retailers will increasingly align
not only their brands but also the shopping experience itself to this consumer desire for
encounters worth sharing. This can already be seen with the emerging trend of integrating
social media with in-store retail, with the aim of creating socially driven shopping
experiences. In 2015, Victoria’s Secret encouraged shoppers to take selfies in front of
displays and show them to sales assistants in return for a free gift – and hopefully, share
their selfies/experiences with friends. Key takeaways The provision of distinct and tangible
shopping experiences, online and real-world, will become a key means to enhance and
differentiate a brand’s value proposition. But retail brands must ensure that the experience
in question provides genuine delight and value; otherwise, there is a danger consumers
could view it as a stunt or gimmick. The pretzel-shaped shopping journey The traditional
notion of a universal, linear shopping journey that all consumers dutifully follow is already
disintegrating, and by 2026, the concept will be completely outdated. Due to the
proliferation of wearable devices and technology, smart TVs, connected cars and household
appliances, beacons, and other technologies, the consumer journey in 2026 will increasingly

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look like a pretzel that twists, turns and loops back on itself. Consumers can start and end
their shopping experiences on a mobile platform, in-store or online. It is a fluid movement
that by 2026 will be even harder for retailers to keep up with or predict because it will
include a growing number of devices and touchpoints. Key takeaways One of the key
conditions for success for retailers in 2026 will be their ability not only to keep track of
users across a growing number of devices and touchpoints but also to figure out how to
effectively measure which of those are most effective at driving sales. This will imply a
growing level of sophistication in how sales are attributed to the different marketing
touchpoints. The sharing economy is here to stay but with a mixed impact on retail The
trend for collaborative consumption that is emerging today, whereby technology is used to
facilitate the borrowing, sharing, lending, renting and swapping of goods and services, will
become more pronounced by 2026. The trend is being driven partly by economics and the
drive to save or make money, along with the diminishing desire to own digital content on
physical media, evidenced by the strong growth of streamed music and TV services. The
sharing economy is also being shaped by a mindset that is far more attuned to
environmental issues and the need to maximize existing resources. While collaborative
consumption will have a strong impact on hospitality, we expect its impact on retail to be
mixed. The popularity of the Airbnb model means that others will follow, and over time
this could have a negative impact on traditional hotel chains and package holidays. Retailers
of infrequently used or non-personal products could also feel a hit. For example, hardware
retail could be undermined by a secondary market for sharing or renting higher-value DIY
tools. Key takeaways Smart retailers will need to learn how to exploit the sharing economy
to their benefit, and there are several examples of retailers that have found innovative and
creative ways to do this. One example is the partnership between Marks & Spencer (M&S)

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and the charity Oxfam. For three years, M&S and Oxfam ran a program whereby consumers
could donate old M&S clothes to Oxfam charity shops and, in return, receive a discount
voucher against new M&S apparel. This type of program has since been copied by other
retailers, such as H&M and Ikea. Ikea allows customers to return their unwanted Ikea
furniture to participating stores, where it is resold or donated to charity. On a slightly
different but related note is an initiative from Hasbro, which is tapping into the growing
popularity of homemade crafts, sometimes referred to as the maker movement. Hasbro
has created a site called SuperFanArt.com that allows fans of My Little Pony to showcase
art and sell 3-D printed designs. Supporting the sharing economy can also become part of,
and reinforce retailers’ commitments to, wider sustainability and environmental issues,
which sends a positive message to consumers. Some retailers, such as Ikea, H&M, M&S and
the Kingfisher group, are members of the Circular Economy 100, which is driven by the Ellen
MacArthur Foundation. A circular economy is one where waste is minimized through
recycling, repairing, repurposing and even reinventing products and materials.
Retailers will have to be able to recognize rapidly changing trends and have the ability to
change with them. This includes adopting promising new technologies and embracing
partnership opportunities and organizational agility. Many retailers today approach
learning as an exercise in analyzing the past and making small, incremental changes. This
may no longer be enough to place retailers in a winning position going forward. Instead,
they should adopt a forward-looking stance on constant learning and selective testing of
fresh, innovative concepts for engaging and interacting with customers and partners.
Rethink segmentation Traditional approaches to customer segmentation already sit
uneasily with digital consumers and, by 2026, will no longer be appropriate. Consumers

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exhibit hybrid purchasing behavior today, and this will continue; for example, more affluent
consumers combine premium and value brands in their shopping mixes, while lower-
income consumers save up for select premium products as status symbols. Consumers will
increasingly move between segments, and this fluidity means that the boundaries between
segments will blur. Consumers are also drawn to the heightened relevance and utility that
more personalized services can afford (when executed well), and expectations here will
intensify. Old segmentation models based on socio-demographic parameters and past
search and purchase patterns alone will prove ineffective. Instead, retailers need to take a
far more sophisticated, creative approach to segmentation that is based on context rather
than old-school, prescriptive, one-size-fits-all models. Be mindful of the limits to
personalization It will be very clear by 2026 that while hugely beneficial, personalization
has its limits. There are serious cost implications in the production and supply of highly
personalized products and services. For many products, this will not be viable and will
instead translate into mass customization. Mass customization is becoming a familiar term
that describes the ability to offer more tailored, personalized products and services, but in
a way that such products and services can still be produced and delivered with cost-
efficiency and at scale (i.e., mass production). This is clearly a lot easier in principle than in
practice, but it has been implemented in several industries, notably in the apparel and
automotive sectors. At the same time, not all consumers will want a highly personalized
offer due to questions of agency and concerns over data privacy. Understanding the
customer journey will become critical to channel investment As channels become fully
integrated, understanding individual channel profitability becomes problematic, as the
value of a channel is not the transactions that go through it but the impact it has on
delivering sales, regardless of the channel the transaction is made in. Understanding the

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customer shopping journey becomes critical in understanding the role each channel has
and the level of investment that needs to be made in it. The value of stores is no longer
simply the worth of the goods sold in them but the impact they have in encouraging sales
online, showcasing the brand and developing top-of-mind awareness. Measuring these is
difficult and requires a deeper understanding of and engagement with customers. Create a
brand experience In an era in which consumers expect a seamless shopping experience as
a matter of course, retailers will have to seek other means to differentiate and stand out
from the crowd. In this context, building a brand experience will become more important
than ever before. A brand experience goes deeper than advertising alone and is a matter
of the overall quality of service provided. It is also about fostering a brand identity that has
a strong emotional bond and relationship of trust with consumers. This, in turn, means that
how advertising feels to a consumer will be as important as what is being sold. A key thrust
of retail advertising will be the story it tells about the retail brand, and the key factor in
making the story persuasive and personal will be a retailer’s conversational marketing
skills. The reality today is that most retailers do not have a brand experience of the kind
envisaged above, unlike many of the manufacturers whose products they sell.
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END OF REPORT
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