Shopper Marketing

Mobile Commerce Brings the Online Offline

Move Beyond Bricks and Clicks, Smartphones Change Everything

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Retailers and manufacturers are pondering whether, in a world of augmented shopping via mobile devices, we will see a shift away from traditional e-commerce. To help answer this question, I spoke with a diverse and comprehensive list of retail executives, mobile entrepreneurs, and financiers, including those at a recent conference at Stanford University titled "Beyond Bricks & Clicks: Smart Phones & Smart Shopping." The evidence shows that mobile commerce is arming consumers with a personal shopping assistant and offering new forms of customer rewards, while also providing retailers and manufacturers with valuable digital advertising. As a result, mobile commerce is taking a growing share of online transactions and, more profoundly, enhancing brick-and-mortar retail by compelling consumers to return to stores and interact with them in new ways.

Experts predict that U.S. mobile shopping sales volume will reach $9 billion in 2011, compared with $2.4 billion in 2010 and $1.2 billion in 2009, with as many as 74 million U.S. consumers contributing, according to a 2011 InMobi study. But the real story is that mobile apps are making it convenient and fun to shop in stores. About half of U.S. consumers have used a smartphone to get product information while in a store, according to Briabe Media. Lightspeed Research found half of U.S. consumers also believe mobile makes the shopping experience more enjoyable. For a recent report, "How Mobile Technology is Transforming the Retail Shopping Environment," I interviewed countless decision makers across the retail landscape. As one executive—who heads multichannel marketing at a leading big box retailer—explained, "Mobile is still largely a shopping aid for the customer. It isn't necessarily a sales channel. We're really focused on mobile in support of sales in the store."

Most major retailers now have an app to help shoppers find their stores, and once there, to better find products, learn more about them, and increase basket size. For example, Best Buy has its own app and is exploring mobile purchasing in its stores so that customers do not have to go to a check-out line. Ben Hedrington, director-web strategy at Best Buy said, "I believe the future of online is offline. Our challenge, in today's age of information at your fingertips, is making the experience in the store compelling enough for people to buy here. We have the expertise, and time is the limiting factor for most people."

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Marrying the online experience with the tactile and visual in-store experience, combined with the ability to take the product home with you, is the key to utilizing the potential of mobile commerce. And it is during the course of this shopping experience that consumers are open to innovative forms of advertising and branding, which can lead to immediate sales conversion.

ShopSavvy is a leading price and feature comparison app that delivers ads from brands to promote the product consumers are researching. By providing the shopper with a valuable service, mobile creates new opportunities for advertisers to reach that shopper in the store and at the moment purchase decisions are made. Matt Weathers, VP-product at ShopSavvy, explained, "Advertising changes on mobile. For (CPG) manufacturers, there is an opportunity to provide the customer [who just scanned or looked up their product] with rich media to get him to buy your product." With apps like this, in-store mobile advertising is just taking off. But we are also witnessing innovative ways to get people in the store in the first place.

In-store conversion rates are much higher than conversion rates for online shopping by an average magnitude of about thirty to one. Despite this advantage, up to this point there has been no way to directly connect online advertising to physical foot traffic in stores in the way online advertisers are paid on a cost-per-click (CPC) basis. Mobile changes that -- it connects the online world with the physical one. Shopkick is an innovative app that rewards shoppers with redeemable points and deals simply by setting foot in featured stores. Aaron Emigh, Shopkick's co-founder and CTO explained that "the fastest growing category in retail is actually not e-commerce; it is offline retail that is influenced by online activities." Geo-location check-in services have allowed retailers to reward customers for entering stores, yet are criticized for being imprecise and have realized only modest success. The Shopkick app addresses the issue of precision by using the smartphone's microphone to pick up a signal transmitted within the store. This process better connects the advertising ability of the online to the sales conversion prowess of the offline. We may even see new corresponding metrics arise in the vein of CPC, such as clicks-per-store-visit.

It follows that consumer packaged goods (CPG) manufacturers have an endless world of new opportunities to target their consumers in the store with the right message. They can provide their retail partners with richer and more innovative product content, including product descriptions and videos, which retailers can use to promote products. CPG manufacturers can also tap into customer reviews to get feedback on their products and inform future launches. "Closing the feedback loop is very important for manufacturers -- knowing what people are saying about your products is incredibly valuable," said Bob Borchers, general partner at Opus Capital. And now CPG manufacturers can also go direct-to-customer with their own apps. For example, faced with declining hair care category performance, Procter & Gamble this summer launched My Beauty Adviser app, which helps users with the "overwhelming" task of shopping for beauty products by offering how-to's and beauty news. It features a shopping list and an option to scan product barcodes to bring up reviews and ingredients. Similarly, KraftFoods' iFood Assistant app provides recipes, helps create shopping lists, and displays ads, but it also interacts with and complements Kraft's Meal Planning Solution Center, an in-store kiosk.

A growing number of people are making purchases online with their mobile devices and retailers must take advantage of this new channel. However, their efforts should not distract them from the opportunity to harness the power of mobile to enhance brick-and-mortar retail. Mobile apps are creating new ways for people to shop smarter, bringing the online offline to transform the retail experience and entice people back to stores. As the adoption of tablet computers like the iPad increases, the line between e-commerce and m-commerce will blur even further. We are witnessing online commerce evolve to bridge the gap with brick-and-mortar retail, and stakeholders along all points of the value chain should be loath to miss out on the opportunities this new dynamic is creating.

Michael Lingenfelter is a senior consultant at Maia Strategy Group, where he leads CPG, Technology, Healthcare, and Energy engagements. Prior to joining Maia Strategy Group,was a consultant at Kaiser Associates where he supported the development of the firm's marketing department. Mr. Lingenfelter also worked to build the Strategy, Innovation & Management business unit of Corporate Executive Board. Mr. Lingenfelter holds a BA in International Relations (cum laude) with minors in Spanish and International Trade from Tufts University where he was a Gibson Scholar.
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