The technology impact of mobile retail in 2011

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.

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