Three contrarian m-commerce predictions for 2016
December 30, 2015 10:09 AM
In the coming year, we will continue to see rapid growth of mobile commerce. Here are three predictions that stand in contrast to the prevailing discussions around mobile payments, beacons, geo-targeting, Apple Passbook/Wallet, and native apps.
1. The tail will wag the dog. In-store digital strategies that drive online sales will succeed. Those that attempt to drive in-store sales will fail.
Consumer confidence has grown steadily since 2011 yet store foot traffic is declining, according to ShopperTrak. Shoppers are going online. This is a tectonic shift in the way consumers prefer to shop and buy. Mobile is at the epicenter of this transformation, disrupting the traditional divide between the physical and online worlds. Retailers are betting that the mobile devices can draw more foot traffic and in-store sales through geo-targeting, beacons, and other technologies. Those approaches are years away from mainstream adoption; Big bets in those areas will not meet expectations in 2016.
Savvy retailers are taking the opposite approach. They use their physical footprint as a vehicle to enhance the online (and increasingly mobile) shopping experience. Same-day shipping and curbside pickup are two salient examples of enhancing the convenience of online shopping with the instant gratification of receiving your purchase within the day.
The left column below lists a set of strategies in which online sales are the primary goal. Retailers that pursue them aggressively in 2016 will see strong ROI and demonstrable increases in customer satisfaction. The right column below lists the more traditional approach in which retailers attempt to augment the in-store experience and sales through technologies that shoppers are not ready for or interested in.
Takeaway: shoppers increasingly want to buy online; retailers can help make that experience even better through their physical stores.
How physical stores support online sales
Shoppers want their items immediately. Same-day shipping facilitates this with the convenience of online shopping. Same-day delivery offerings are still relatively rare, with only 15% of retailers worldwide providing the service, but it is rapidly expanding. Services such as Google Shopping Express, Amazon same-day, and Postmates are becoming popular in some major cities. Amazon Prime Now is pushing further, offering 2-hour delivery of 1000’s of items.
Curbside pickup is perhaps the clearest example of mobile blurring the online and offline worlds. Target and Kroger recently rolled out curbside pickup services. Sears recently expanded its in-vehicle curb services to include returns and exchanges. Expect this trend to accelerate in 2016.
Online reservations/purchases of services, such as trying on clothes at Sears, changing tires at Pep Boys, dog grooming at Petco Unleashed, or eye exams at Target allow retailers to bring the scale of online demand generation to in-store services.
Drop shops or guideshops
Bonobos’ and Indochino’s guideshops are stark examples of the tail wagging the dog. Shoppers get a great, high-touch experience in a store and become loyal customers who buy online for years. Customers don’t leave the stores with purchased items; they are shipped home through an online order.
Showrooming is mainstream—46% of people do it, according to a 2014 Harris Poll. Some retailers, like Target, are embracing showrooming to drive sales. But as a strategy for retailers with physical stores, it represents a challenge. Few online stores have the rich set of reviews and product comparisons that Amazon has and as a result, showrooming tends to hurt most retailers and benefit Amazon.
How digital supports physical store sales
Shoppers using their smartphones to look up store hours and locations is a mainstream activity, either via apps such as Google Maps or the retailer's mobile website. Few retailers have translated this mainstream activity into a richer experience once the shopper arrives at the store.
Although 29%of retailers have implemented beacons in their stores, according to recent reports, there is little shopper engagement through beacon-based offers and other in-store digital engagement strategies. The problem is two-fold: shoppers don’t have the retailer’s app installed and even for those few who do, there are no established patterns of consumer behavior around in-store digital engagement and offers. This will not tip in 2016.
Software vendors are selling a vision to retailers of collecting rich data about shopping behavior and new levels of in-store engagement. But shoppers are not there yet and may not get there for years.
Mobile payments (Apple Pay, Android Pay, etc.)
Mobile payments are slightly more convenient for shoppers than using a credit card. There’s nothing about this added convenience that will materially drive more in-store sales.
The idea is simple. Retailers can draw more foot traffic by providing offers or other reminders to people who are nearby - and who opted-in to receive such offers. Starbucks did this through its app and Apple Passbook. While the vision is compelling, few people have retailers’ apps and fewer opt-in for these notifications. Consumers aren’t ready.
Another example is, Neiman Marcus, which used geofencing to enable salespeople to see when VIP customers were in a store, look at their purchase history and provide more personalized service. But, the reality is this technology is still too slow to catch on with consumers.
Store associate app and sales checkout
These apps are designed to enable enhanced engagement between customers and sales associates. They also allow sales associates to provide real-time product, inventory availability and location information to customers based on historical patterns and profile data. The key for retailers is developing these apps so they expand the customer experience, while making it easy to use for the sales associates. The only retailers that have successfully weaved this into their retail strategy have been Apple and Nordstrom.
2. The mobile web will continue to outpace mobile apps for m-commerce
Mobile apps represent a small fraction of the total mobile revenue for all but a handful of the biggest brands. Amazon has more app revenue than mobile web revenue. Walmart is getting close to parity. Most are not even close. Why? Benedict Evans summed it up most succinctly: “Do people want to put your icon on their home screen?” The answer for most brands is “no.”
Does this mean retailers shouldn’t create native mobile apps? Absolutely not. But the goals are different. Apps are for retailers’ most loyal customers by definition (who else will download your app?). So instead of a generic shopping app, consider a VIP program for your best customers, delivered through an app. This will not only drive more revenue from these customers, it will also make their experience better.
A recent Forrester Research report shows shoppers prefer to buy from mobile sites while on the go.
The reality is that shoppers show up to your mobile site, not your app. Your mobile site is intimately connected with all of your marketing activities including email, SEO/SEM [search engine optimization/search engine marketing], affiliates, etc. Your app, even if the shopper has it, is not.
But what about data that shows over 85% of mobile time is spent in apps? On the surface, this number would indicate that offering an app is an imperative. But if you dig deeper, it becomes clear that a few apps dominate our time: Facebook, YouTube, games, and music apps. In fact, 80% of our app time is spent in our top 3 apps.
The data is clear—apps are for fun, mobile web is for getting things done.
This is why mobile web represents the vast majority of mobile revenue for most retailers.
3. Mobile web checkout will be a big area of investment for retailers
Retailers are losing $18 billion annually due to shopping cart abandonment. Research shows over two out of three users who add items to their online shopping cart leave without making a purchase. The numbers are even worse on mobile where conversion rates are 70 percent lower than desktop.
2015 was a pivotal year for mobile shopping. With over 57% of online traffic and over 30% of revenue, mobile dominated this holiday season. It was a wake-up call for those brands that have not optimized their mobile experience—including the most critical part—the checkout journey.
The mobile checkout experience today is miserable. Baymard Institute, a leading e-commerce usability research firm, says, “for the past 3 years, we’ve audited numerous multi-million and billion-dollar sites and during every single site audit we’ve identified lingering technical errors, layout bugs, or flawed interactive features.”
Mobile checkout can be made significantly easier. Many brands will invest in radical improvements through payment options that accelerate checkout, and there are products focused on this problem including MoovCheckout.
With the rapid growth of mobile traffic and the incredible pain associated with buying on mobile today, the key pages that represent the mobile web checkout will soon be viewed as the most valuable pages on the web.
In summary, while in recent years there has been a lot of noise around some m-commerce technologies (e.g., mobile payments, beacons, geo-targeting, Apple Passbook/Wallet, and native apps), retailers would benefit from a simpler approach in 2016: increase your online revenue by 1), using your physical stores and 2), improving your mobile web experience. This approach is not only easier to execute, it will yield better results—and your customers will notice.
Moovweb provides mobile commerce technology to 41 of the Top 1000 online retailers in North America, according to Top500Guide.com.