contributed by Janet Sherlock, Research Director, AMR Research Inc.
Recent research conducted by AMR Research indicates that 66.7 percent of retailers intend to employ some type of digital mobile initiative by the end of 2010. (See Figure A.)
This figure seems to indicate the industry is embracing the adoption of the mobility channel and mobile customer touch points. However, cell phone subscription adoption is predicted to reach 100 percent penetration in the United States by 2013, so perhaps the retail industry is still lagging in mobility initiatives. And retailers not developing a mobile strategy may be left in very non-competitive positions.
While it is clear that retailers will be investing in mobile technology initiatives, the following questions remain:
Retailers' Mobility Strategies
- What mobile strategies are retailers employing?
- What are consumers' expectations? Will they respond to the retailers' initiatives?
- What are the barriers keeping many retailers from developing mobile strategies?
- What does the future hold for mobile initiatives in the retail industry?
While talking on one's cell phone and exchanging text messages --the technical term is Short Message Service (SMS) -- remain the top uses of consumers' mobile devices, internet browsing is becoming more predominant. In addition, because Apple revolutionized the concept of adding targeted applications for mobile devices, cell phones are now considered personal computing devices and an extension of one's ability to communicate and solve immediate personal dilemmas.
Retailers need to capitalize on the psychological needs of consumers, attempt to solve their dilemmas, and enhance their shopping experiences with their respective brands.
There are many different types of mobility strategies retailers can employ. Many retailers are actively developing m-commerce (mobile commerce) strategies. M-Commerce specifically focuses on selling products via consumers' mobile devices without required interaction with other channels or means. However, recent AMR Research indicates that total sales penetration of the mobile channel will reach only .4 percent by the end of 2010.
Looking at: 1) the historical trend of e-commerce sales penetration in the retail enterprise; and 2) mobile adoption in other parts of the world, retailers should consider strategies for m-commerce for their organizations. Many companies that developed sound e-commerce strategies in the 1990s have benefited over the long term, given the adoption of online commerce, which AMR estimates now averages approximately 11 percent in the multi-channel enterprise environment.
Targeted Focus Key
In the immediate future, retailers can likely obtain their biggest "bang for their buck" investing in mobility initiatives that will focus on loyalty and targeted marketing. Of course, these initiatives should be permission- and preference-based in order to avoid alienating consumers. Targeted SMS, as well as Multimedia Message Service (MMS), loyalty programs, digital coupons, location-based messaging and marketing are means of leveraging mobility for customer intimacy.
See Figure B for specific types of mobility initiatives planned for deployment by 2011.
While SMS/MMS is the least "high tech" of most mobility solutions offered today, it can be effective when used in concert with targeted communications. Retailers that "push" untargeted marketing messages will likely find more consumers unsubscribing to messaging than those who utilize targeted messaging and offers.
Back-end campaign and loyalty systems are critical for generating effective targeted messages. These technologies are necessary for performing the following functions:
Digital Couponing Strong
- Offering a front-end component for capturing and storing customers' preferences;
- Conducting dynamic customer segmentation for creating highly focused messages or offers;
- Creating the means by which to transmit the messages or offers for execution, specifically to mobile devices; and
- Receiving multi-channel sales and activity data for measuring offer efficacy.
Digital couponing is an initiative rated very highly for potential deployment amongst retailers, with 64.1 percent of retailers intending to offer digital couponing as part of their array of mobile endeavors. Digital couponing via mobile device is akin to targeted messaging, as it allows a retailer to provide consumers targeted ads, offers, coupons, or messages, either by push or pull technology.
The added bonus surrounding digital couponing is that it typically incorporates manufacturers' coupons. This is beneficial not only to retailers who are predominantly resellers (e.g. grocery store chains, mass merchants, drug stores, electronics merchants, etc.), as electronic transmission to coupon clearing and settlement houses is also facilitated, but can also be very efficient for consumers who balk at cutting and managing paper coupons. Digital couponing heavily relies upon use of "back-end" consumer recognition via loyalty programs in order for coupons to be automatically applied to in-lane purchases, as technological communication between mobile devices and point-of-sale (POS) systems still remains virtually non-existent in today's retailing environment.
Unique Downloadable Applications a Good Option
In AMR's research, 38.5 percent of retailers anticipate creating unique downloadable mobile applications to support their brands. They are seeking more "community" and brand-building focus, and often considering free or inexpensive applications with whiz-bang effects to draw interest or buzz. Ideas range from gift-giving applications and recipe creation applications to workout guides and tools, etc. iPhone applications are probably most commonly known and used, but retailers also are creating applications for other devices, including Blackberries.
Transactional Messaging Highly Functional
Use of transactional messaging can be particularly effective for retailers using in-store pick-up functionality, or to let consumers know where or when products are available. Some 66.7 percent of retailers plan to communicate either in-store, online, or with mobile interaction notifications via mobile.
Consumers are interested in retailers' mobility functions only if they provide value, service, or make their lives easier. As such, retailers must be service-oriented vs. sales-oriented when developing mobile applications and functions. Companies' primary objectives should focus on facilitating interactions or delighting customers with use of mobility.
In a recent AMR survey of 300 consumers in the United States and the United Kingdom, consumers indicated the following mobile applications were of little importance to them and would not influence the purchase of additional goods from a retailer:
- Ability to pay for goods using a mobile device or cell phone
- Product information via scan or picture to provide additional product information
- In-store location-based messaging with promotional offers
- Shopping lists via cell phone or mobile device
The results of this survey might suggest retailers would be wasting time, money and resources investing in related mobile applications. However, consumers are most influenced by what they have seen or experienced. The introduction or existence of highly functional, high-quality mobile applications fulfilling these purposes has been exceptionally limited. After a few sizable retailers introduce effective programs, and adoption increases, and word virally spreads about noteworthy applications, consumers will likely take a different stance on the importance of such functions.
In the same consumer study, respondents indicated they possessed an average of 3.6 loyalty cards and found loyalty programs to be of great value to them, especially for saving money. Given these statistics, retailers should focus on mobile programs and applications that can differentiate or facilitate their loyalty programs with their customers. Consumers will likely adopt programs that augment their experiences related to loyalty or savings.
While consumers' current expectations for functions via mobile device may not be as great in the retail industry as other industries such as travel, or quick serve restaurants, the overall state of highly functional mobile applications remains in its infancy, but can be expected to continue to gain momentum in the years to come.
Barriers to Launching Mobile Initiatives
It shouldn't be a surprise that retailers' hot mobile initiative surrounds SMS/MMS, which requires the least mobile design. Nor should it be a surprise that consumers' expectations for more sophisticated mobile functions, features, and applications are low, considering they haven't seen any effective or rich examples of great mobile experiences by retailers.
Many of the delays and hesitations surround the technical underpinnings of mobility to make it truly effective in the retail industry. These include:
The number of device manufacturers and models in the market is staggering (telecom experts suggest more than 5,000 different models are available). The differences and nuances create challenges in the design and development of applications, mobile sites and features. Among some of the challenges are different browsers, operating systems, screen sizes and resolutions, amongst a myriad of configuration variations.
Some retailers have created three separate m-commerce web sites for their brands: iPhone, Blackberry and browser-based. As one would assume, this causes additional development resources and testing. Creating a single site that can render to any device or browser will likely lack functionality and have a user interface lacking design features.
Development of m-commerce sites and other advanced mobile functions can be inhibited by this barrier.
Storing personal information on consumers' mobile devices can be a risky proposition. While a retailer may not be incurring a multi-million record breach risk by creating applications that store personal data on consumer devices, it is putting its customers' personal data at risk on a device-by-device, customer-by-customer basis.
Retailers also take on additional Payment Card Industry (PCI) risk and certification when they take on m-commerce initiatives. Retailers must ensure that third party development houses are familiar with PCI requirements and can certify the retailers' m-commerce applications and processing.
Connectivity for Location-Based Features.
The "holy grail" of mobility should be communicating with the consumer at each "moment of truth" during any of the five stages of the consumer interaction or shopping spectrum. See Figure 1.
Most current mobile applications, messaging, functions and websites are location agnostic. Communicating via mobile device when a consumer is in a store or mall debating which product to purchase, considering purchase timing, or debating between different brands can highly influence the purchasing decision and timing.
But how a retailer can communicate with a consumer at a specific "moment of truth" or while the customer is in one of its stores remains challenging. There are a host of different connectivity options, and many are either not well adopted or they are expensive. Examples of communication connectivity options include: 802.11u, which is a standard that allows a cellular or mobile device to connect to a store's wireless Local Area Network (LAN); Near Field Communication (NFC); Bluetooth; and Global Positioning Systems (GPS).
Also, as mobility initiatives increase, it is highly probable that privacy and consumer advocacy groups or government entities may pursue legislation that may inhibit tracking consumer location or other access to consumer information related to mobile devices.
The Future of Mobility in the Retail Enterprise
While technical obstacles may exist and consumers are still hesitant to embrace many retailers' mobile initiatives, it is unquestionable that most advancement in the retail technology front will rely on mobility.
Within five to 10 years the following activities will likely be standard retail practices, leveraging mobility:
- Similarly to how retailers utilize web analytics applications to track where customers visited prior to coming to their website and track the activity and time spent on their websites, retailers will track in-store customer traffic via cell phone activity. They will be armed with patterns, linger times, total time to convert sales, etc.
- Retailers will communicate with customers while they are shopping. If a retailer knows the average shop-to-sales conversion time, a retailer can message a customer to ask if they found what they are looking for at the appropriate time.
- Customers can communicate to retailers for assistance. For example, they can request different sizes in a fitting room or to request assistance on the sales floor.
- Customers can be sent relevant offers or messages when standing in certain aisles or areas of grocery stores or big-box retail facilities.
- Consumers will complete sales transactions on their own devices when lines are long.
- Consumers will not need to provide phone numbers or loyalty numbers at the point of purchase. They will be identified by their cell phones. Nor will they likely need to pull out credit cards or cash for retailers they shop frequently.
Retailers will eventually realize great advantages by leveraging consumers' mobile devices:
- There will be real-time, relevant communication opportunity (vs. static nature of communication online at-home or in office).
- Over the longer term, leveraging consumers' devices will be less expensive than kiosk development, infrastructure, and managed services. It will also be less expensive than traditional traffic counting infrastructure.
- Store employee efficiency and customer service can be augmented or improved with increased customer self-service via mobile device.
While the mobile revolution and race has begun, retailers and consumers have not yet come close to experiencing the full force of transformation in the retail environment that will occur from mobility.
About Janet Sherlock
Janet Sherlock brings more than 20 years of IT leadership and operational experience to her role as Research Director, Retail, for AMR Research Inc. Her coverage areas include store and cross-channel operations in the retail enterprise.
Prior to joining AMR Research, Janet was VP and CIO at Calico Corners, where she developed and executed the company's e-commerce and information technology strategies and initiatives. Janet held senior leadership positions in various companies including Guess? Inc., where she was the VP of IT; ARCO am/pm stores; and Mobil Oil, where she was responsible for downstream retail systems for the U.S., Latin and South American markets.
In addition to her IT experience, Janet also has functional experience in store and franchise operations, merchandising and buying, web marketing and analytics and business process reengineering.
Janet has a B.S. in Business Logistics from Pennsylvania State University and an MBA from Marymount University.