by Sahir Anand

The technology impact of mobile retail in 2011

Jan 02, 2011
MobileSmall and Medium Business

Mobile retail is not a buzzword anymore but a formidable channel opportunity that cannot be ignored. According to data from Aberdeen’s November 2010, Roadmap from Multi-Channel to Cross-Channel benchmark report, 68 per cent of retailers are seeking new sales and service channels and opportunities to broaden their revenue pie. The consumer’s mobile phone has emerged as a “channel growth” opportunity that presents both customer engagement potential and incremental revenue options for retailers. Aberdeen surveyed 129 retailers between July and August 2010 to reveal that 38 per cent of respondents are currently at some stage of mobile retail technology or mobile channel adoption compared to 18 per cent at the end of 2008 (see New Age Multi-Channel Retail report). Another 50 per cent of respondents are looking to adopt this technology (15 per cent within the next one year and the rest considering planned adoption at some point in the future).

Mobileretailing or mobile channel initiatives are defined as processes and tools that enable brand / product marketing, search, order, and payment functions on the consumer’s mobile phone or similar devices at retail locations or otherwise (consumer’s home, office, or any other location).

Currently, there are three major elements of the mobile retail experience that are top-of-mind for retail CIOs. As expected, mobile web which features online channel sections and categories of products for information gathering, product demo, and feature comparisons is the top component of a mobile retail technology platform strategy for almost half (49 per cent) of retailers surveyed. The second highest preference for 43 per cent of retailers is mobile coupon targeting and delivery which can be tied into customer loyalty programs like that seen at Starbucks. In September 2009, U.S.-based department store chain JC Penney made a foray into mobile couponing with a pilot program at 16 stores. The target demographic was 25-to 44 year-olds, mostly female. The objective was to attract this audience towards the brand with mobile innovation.

The third most popular component of a mobile retail technology strategy is smart phone-platform specific mobile retail applications for iPhone, Windows, Andriod or Blackberry smart phone devices (37 per cent). These applications provide consumers with unique brand experiences with graphic interface enhancements and touch-screen features to browse, compare, and order products as well as gain reward points for future purchases and repeat store visits.

The advancement of consumer mobile technology and pervasiveness of smarter and commerce-ready mobile devices among customers are two of the top three pressures driving adoption and use of mobile retail or mobile channel initiatives. For instance, according to 37 per cent of retailers, smart phone or platform-specific mobile retail applications (i.e. iPhone, Windows, Andriod, Blackberry) is one of the top three elements of a current or planned mobile initiative. In the last two years, the gradual customer transition from feature phones to smart phone devices, and more clarity around mobile retail standards, has had an impact on the willingness of retailers to explore mobile as a channel of sales and service. The advancements in consumer mobility (61 per cent) and customer expectations for digital and personalised access to retail product information, price and feature comparisons, and offer consumption needs (49 per cent) are the driving forces behind the adoption of mobile retail.

Additionally, for almost a third (29 per cent) of retailers, the changing target audience demographics have also emerged as one of the foremost pressures. For instance, shopping choices have diversified in the last few years due to popularity and adoption of the following:

  • Digital shopping outside the store and within the four walls of a store
  • Proliferation of retail categories in non-traditional retail formats (i.e. drug stores and grocers selling general merchandise, office supplies, among other categories)
  • Growing purchase influence of a new generation of shoppers (i.e. Gen Y or millennial generation) who have grown-up in the mobile age and are accustomed to retrieving information on their mobile devices.

Where is the Mobile Retail ROI?

The larger mobile return of investment (ROI) question lingers on the minds of retailers. The encouraging sign is that improved customer targeting for higher response rates and a decrease in marketing costs are two specific performance areas where retailers have so far “received” an ROI. However, improved brand image (88 per cent) and customer satisfaction (81 per cent) are the top two benchmarks for mobile ROI success that retailers “expect” to receive in the coming months and years. This shows that overall service and sales satisfaction, customer-centricity, and brand value are highly correlated with mobile innovation and related investments. It is noteworthy that mobile marketing, messaging, and mobile web projects in retail did lead to some decline in marketing costs due to deeper customer targeting compared to traditional media targeting. However, 51 per cent of retailers “do not expect” ROI benefits from a marketing cost standpoint. The likely reason is that retailers cannot rely on market forces associated with marketing costs even as scalability and costs associated with mobile campaigns change overtime. As the mobile retail market continues to mature, retailers would much rather rely on brand value and customer satisfaction as significant areas of “expected” ROI benefit.

For more than five years, leading technology enterprises, mobile carriers, mobile platform providers, banks, trusted service managers, and mobile application providers undertook several mobile commerce innovation efforts and pilot programs. These efforts were targeted towards retail and other industries involving the use of mobile or smart phone-based marketing and payment applications by end-customers.

So far, successful full-scale roll-outs of these applications have been more widespread in Japan, South Korea, and Taiwan due to first-mover advantages, consumer engagement, and favorable market regulations. Meanwhile, companies in Europe and the Americas are continuing to make headway with more standards-based deployment strategies. While there are several success stories and actual deployments by retailers in Europe and the Americas, mobile retail growth requires better awareness around ‘readily-usable and mass market-ready’ standards that promote widespread adoption by consumers and enterprises alike. From a technology standpoint, the underlying architecture or backbone of such applications are supported by numerous technologies (i.e. SMS, quick-response (QR) code software, 2-D barcodes, near-field communications (NFC)), and other mobile-ready wireless network applications that enable location-based customer identification, targeted marketing, and quick mobile transaction techniques. Aberdeen data indicates that mobile retail technology will continue to see further advancements within the next two years within the following areas:

  • Customer loyalty functions
  • Graphic user interface enhancements
  • Other in-store sales, marketing, and merchandising integration areas

Smart phone applications that will further integrate with core retail functions such as before, during, and post-sales customer engagement areas Secure mobile form factor usage Point-of-service mobile payment improvements

As a retailer considering a foray into the mobile channel for marketing, real-time messaging, cross-channel customer interactions, or communications, following are the recommendations:

Complete a thorough customer and internal channel analysis before planning mobile implementation. For 49% of retailers, the top mobile-related business goal is to improve the customer experience. However, retailers must ensure that they know their core customer base before leaping into an advanced mobile solution. Retailers must determine whether their customers will use their mobile device or a mobile application for shopping or information gathering. Additionally, retailers must determine the complexity of their product offerings, and whether their customers would utilize mobile rewards, coupons, and other product information at the point-of-service within or outside the four walls of the store. Learn from the experience of online and call center channels. Currently, 22% of retailers indicate that mobile is integrated into their overall channel plans. A first step in gauging mobile channel interest would be to learn from the experiences of the online and call center environments, and measure the results before launching into the mobile world. As much as possible retailers should use the business workflow and customer-associate interaction within the call center, online, and stores. Streamline the process for allowing consumers to opt-in / opt-out of mobile marketing and messaging campaigns. While plenty of guidelines exist, opt-in practices have yet to be universally adopted as 82% of retailers currently do not measure opt-in / opt-out rates for mobile campaigns. From a company’s perspective, creating a process by which consumers provide explicit consent to receive brand communications on their mobile devices will give a company another set of metrics for determining success in reaching its target audience. Double opt-in processes are generally preferable. For mobile subscribers, the opt-out process should be as easy as responding to an SMS message with the word “stop.” Utilize location-based mobile marketing and messaging to drive targeted messages to customers. Like their key chains and their wallets, consumers take their mobile phones with them everywhere they go. Today, only 11% of companies leverage location-based services, according to survey respondents. Yet the ability to deliver consumer-initiated, context-sensitive marketing messages and offers via the mobile phone based on geographic location is powerful in terms of targeted retail loyalty and sales.

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About the author: Sahir Anand oversees and enables the overall research and analysis in the vertical industry segments including retail and hospitality, and retail banking related process management and technology value chain areas. Anand’s work is related to use and adoption of technologies and processes that aid optimization and efficiencies in the multi-channel business environment.