The brick and mortar store has faced many threats including mail order catalogs, telephone marketing and, more recently, Internet retailers, but now, the biggest threat could also be its savior.
The mobile handset is making m-commerce—as in mobile commerce—a reality, and unlike e-commerce, it isn’t entirely about being tethered to a computer or about shopping online.
Because the phone can go to the store along with shoppers, the mobile phone as a tool for shopping actually has the potential to bridge traditional retail and digital retail in a way that couldn’t have been otherwise possible.
“Mobile has that one piece that connects traditional retail with digital,” says Michael Becker, North American Managing Director of the Mobile Marketing Association. He says that when it comes to mobile commerce, we need to step back and first think about its definition. “In the strictest sense, it is about the exchange of something of value with a mobile device.”
Comparing, Deciding, Buying
Becker suggests that the exchange is not necessarily limited to a product for money. Mobile commerce could also be about allowing the consumer to make a more informed decision while shopping. While web-based commerce has already allowed for consumers to compare prices, read reviews and make informed purchases at their computer and thus before heading to the store, the mobile component allows shoppers to do all this while in a retail environment.
“This is what we call the scan and scram shopper,” says Greg Gerard, Program Director for Retail Merchandise Strategies at IDC Retail Insights. “It is those who can find an item and compare by scanning and determine whether they’re seeing if for less money.”
Thus, they may even delay or forgo the purchase entirely, says Gerard, who notes that this shopping warrior class accounted for about 24 percent of last season holiday sales. And those numbers are only going to increase. According to recent IDC Retail Insight findings, these hyper-connected individuals will account for 28 percent or $127 billion of the $447 billion predicted that consumers will spend this holiday season.
Recent findings from Forrester Research confirm that consumers are looking to their handsets more and more while shopping, both with mobile websites and with retailer-specific shopping applications. According to the findings, six percent of U.S. consumers say they have used a mobile shopping app in the past three months.
"From a bricks and mortar perspective, the winners are those retailers that can create apps that drive users into the store and then engage them further."
Usage has risen as key retailers including Target, Best Buy, JCPenney, Apple and Barnes & Noble have launched dedicated mobile shopping apps. Additionally, during the last holiday season, 12 percent of U.S. adults also said that they plan to use their mobile phones to find or redeem coupon codes during their seasonal shopping.
These numbers will likely increase as smartphone adoption grows. While current numbers estimate that between 25 and 35 percent of adults have a smartphone, such as an iPhone, BlackBerry or Android device, this is also on the rise. And this trend is growing well beyond North America and Western Europe.
“Most people in the developed world will end up having smartphones over the next several years, and even those in the less developed world will have them sooner than many observers think,” says Scott Ellison, Vice President of Mobile & Consumer Connected Platforms at research firm IDC.
“That is the thing with mobile, it always happens much faster than you think. Prices are dropping fast, competition among device vendors is intense, and people with smartphones frankly do spend more than those without it. The mystery is where do people get the money to buy state of the art devices in this economic climate, even in some of the poorest countries in the world.”
Consumers and Retailers Benefit
The results of this adoption is that the biggest winners in all this could actually be the consumer.
“First and foremost, the primary winners are mobile users,” says Ellison. “Information that is of value, that saves you time, or that saves you money is a good thing—and apps are becoming primary ways to deliver those values. There are already stories circulating of retailers beginning to put their own private barcode stickers over manufacturer packaging barcodes in order to prevent mobile users from comparison shopping while in the retailers’ store.”
Ellison adds that it is a potential win-win, as it serves the retailer as well, at least those that do it right.
“From a bricks and mortar perspective, the winners are those retailers that can create apps that drive users into the store and then engage them even further. A great example is Puma and their in-store iPad app that allows you to create your own shoe while looking at swatches of materials in your hand. That transforms the online ordering experience at home to one that a shopper wants to go to the store to do, and of course once in the store the cross-selling opportunities abound.”
One question that remains is whether the smart money will be on the mobile websites or retail apps?
“It is going both ways,” says Gerard. “We will likely see many retailers putting a mobile component on the front of their sites, and this would work with most mobile browsers on the three big platforms.”
But Gerard says that the smart retailer may also hedge their bets.
“Web-based applications for retailers doing something attractive for a smartphone remains a chore for them.” But, says Gerard, “those that have done it have done a good job.”
He notes that watchmaker Fossil has kept the brand style and feeling intact as they bring the consumers experience to a smartphone. However, says Gerard mobile websites do have an advantage over apps.
“When you’re creating a front-end for a browser you just have to do it once, but creating an app that lives on the smartphone has to be done at least three times, one for each of the major platforms.”
Why Location-Based Techology is Crucial
What the apps do offer is something that brick and mortar stores also know, and that’s it about three things: location, location, location. In this case, it is also location-based.
“Location is absolutely a key element of mobile commerce, and there are numerous ways that the two are being integrated,” says David Diggs, vice president, wireless Internet development, CTIA-The Wireless Association.
“There are plenty of examples of location being coupled with social networking to locate friends. Some apps allow shoppers to hunt for nearby retailers that may have a better price or broader selection for a product they’re considering.”
Location could also play the role with the contextual experience says Becker, as this is increasingly true as consumers use their phones not just to make purchases, but in how to get to the brick and mortar locations.
“The mobile phone is a great device and becomes a remote control for local intent.”
According to Forrester, 26 percent of consumers have already shown an interest in using their mobile phones to get directions from their current locations to a store, and location-based services allow customers to find the nearest stores and obtain driving directions.
This has resulted in a near-experience for users that has garnered the buzz word “geofenced,” as in when a user comes within proximity of a retailer. The best practices say the experts would be for retail apps to remain permission based and let the consumer opt in for notifications and other information they may desire, but there are concerns this could result in potential spam.
“Information overload is definitely a risk,” says Ellison. “But the great thing about apps is that if you don't like 'em, you just delete 'em. The apps that succeed are the ones that provide continuous value over time, good customer experiences, and don't overwhelm you with extraneous information.”
The upside, or downside depending on your view, adds Becker is that this could result in even more personalized search and advertising, “Eric Schmidt of Google at Mobile World Congress noted that over time services will learn about consumers needs more than they know themselves.”
And isn’t knowing what the consumers want before they know it the ultimate dream of every retailer?
Watch CNBC's coverage of the 2011 CTIA Wireless convention on Tuesday, March 22 and Wednesday, March 23 from Orlando, Fla. Technology correspondent Jon Fortt will report live from the convention floor, Jim Cramer will host a special edition of "Mad Money" on Tuesday at 6pm ET, and Michelle Caruso-Cabrera will co-anchor "Power Lunch" from the event on Wednesday at 1pm ET.