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For Retailers, a Merry Mobile X-Mas & an Appy New Year

Tuesday, 22 Dec 2009 | 1:39 PM ET

Retailers are celebrating their first real mobile marketing holiday this year with smartphone applications that they hope will help them ring in the New Year with a stronger mobile presence, but as this retail segment matures, apps might not be the best approach.

Photo by Oliver Quillia for CNBC.com

According to a Deloitte survey, one in five shoppers planned to use their mobile device to help navigate their holiday shopping this year, with four out of ten consumers between the ages of 18 to 29 years old planning to use their mobile device to shop.

“The mobile phone is a very effective way to find deals and retailers are harnessing the trend to make shopping more convenient this holiday,” said Ellen Basilico, a partner for Deloitte’s inner retail practice.

Although mobile marketing is not new among retailers, the explosion of smartphones sales over the last year has driven up the usage of the mobile Web among consumers looking to find stores, compare prices and share product information.

'The First iPhone Christmas'

According to Nielsen, smartphones will make up 50 percent of users’ cell phones in the US by mid-2011, or about 150 million people. And the vast majority, some 120 million of those users, will access the mobile Internet.

“Retailers see the amazing adoption of the mobile Web, and that their customers are using it, and apps as a great way of dipping their toe in the water,” said Scott Silverman, executive director of Shop.org, a division of the National Retail Federation.

A good chunk of those phones are iPhones. Apple said they sold 7.4 million iPhones in the fiscal fourth quarter ended Sept. 26 alone, up 7 percent from a year ago.

“The mobile retail revolution morphed incredibly rapidly over the last year,” Scott Ellison, a mobile consumer analyst for International Data Group, said. “In many ways, it’s the first real iPhone Christmas for retailers.”

From the high-end to the low-end, retailers are creating their own apps. Among them are: Armani Exchange,Chanel,Best Buy , Gap , Barnes & Noble, to discounters Wal-Mart Stores , Target , and even Walgreen’s.

Not surprisingly, online retailers also have a strong presence, with E-Bay and Amazon currently ranked in the top five free applications in the "Lifestyles" category of the App Store.

The retailers' apps allow consumers to browse, buy and bargain shop, but only within their store. Most retailer apps also provide a "store finder" option and access to promotions.

Consumer Nation Holiday Central Edition
Consumer Nation Holiday Central Edition

It’s little digital conveniences like these that consumers are using the most this holiday season, according to Deloitte’s research.

Of the 19 percent of holiday shoppers planning to use their mobile device for assistance this year, more than half said they would use it to find store locations while slightly less than 50 percent said would use their mobile device to research prices. Only about a quarter of consumers using their phone for holiday shopping actually plan to make a purchase from their phone.

A survey conducted by Shop.com also revealed that about 3.7 million people had planned to use their mobile phone for shopping on Cyber Monday, the Monday after the Thanksgiving that is often promoted with online shopping discounts.

The development of retail-driven apps that will help consumers better navigate their shopping will only increase in 2010, Ellison said.

But more retailer apps are not necessarily a good thing, said Gary Schwartz, CEO of the mobile marketing company Impact Mobile.

The App Overload

Apps are overhyped as an effective strategy in retail mobile marketing because smartphone users only use a few number of apps on a regular basis and it is unlikely that a retailer is going to be a part of this group, Schwartz said.

“If they (retailers) think they are going to be one of the chosen apps, they are in lala land,” he said. “If you want to be a successful app, you have to be that user's choice within three seconds, if you don’t have that stickiness, you are going to be left behind.”

With more than 100,000 apps available for download at the App Store, it’s not hard for an app to get lost in the crowd. Retailers’ apps are not immune to this.

Schwartz said consumers are unlikely to go to the App Store and search for specific retailers, let alone wait to download their app.

Shoppers stop to look at the newly decorated Christmas floor at KADEWE department store in Berlin, Germany.
Getty Images
Shoppers stop to look at the newly decorated Christmas floor at KADEWE department store in Berlin, Germany.

“Mobile is primarily about consumerability, it’s about ‘I want it now and I’m on the run,’ said Schwartz.

Instead of downloading an application, consumers are much more likely to open a browser and search for what is they are looking for, he said.

Although apps can be a great tool for retailers, it is unlikely that they will be most useful as a point of sale, Silverman said. Instead, the apps may help drive people to the store and provide product information.

“Apps are about connecting customers to retailers, it’s not yet about selling from the phone,” said Silverman. “I don’t know if the apps we are seeing right now will be the answer to mobile marketing, they don’t represent what mobile will be to retailers in the future.”

And retailers aren’t just competing with other retail apps, they are also competing with apps that point consumers to vendors that will sell what they want for less.

Applications like those from ShopSavvy and Pricegrabber.com, scan barcodes to compare prices online, and intensify the competition for retailers, said Scott Dunlap, CEO of NearbyNow.

“The smartphone shopper has one leg in the store and one leg online,” Dunlap said. “The retail industry is about to become even more hyper-competitive, there will be nothing but choices for consumers because all sides will be offering discounts.”

But Dunlap’s company, a local product search company that develops apps for retailers, is trying a new strategy that finds power in numbers.

An App for All

NearbyNow’s Gift Guide app provides users access to more than one retailer, offering consumers the chance to shop in more than one place.

NearbyNow, a local search company, worked with retailers like Macy’s , Lord & Taylor and Nordstrom’s and a number of different magazines to create a gift guide that would let consumers shop different stores with one application. The app also lets consumers locate the nearest retailer carrying their selected gift and put the product on hold.

The advantage of this approach is it becomes the one-stop shopping experience that the consumer desires, Dunlap said.

However, Silverman remains skeptical. NearbyNow is demonstrating a ‘powerful model’ that just might set a precedent for other retailers' app strategy, but the relationship between smartphones and retailers is likely to continue evolving, he said.

“It feels like to me like we are on the verge of breaking through, we haven’t quite gotten there yet, but it will be exciting to see what happens,” said Silverman.

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Questions? Comments? Email us at consumernation@cnbc.com

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