By Lisa Ciangiulli, Optism Team, Jun 1, 2012
For years, brick and mortar stores in the US competed with each other on price, selection and service. The advent of online shopping has effectively taken away price and selection, so physical stores increasingly need to compete on service. Mobile has the potential to level the playing field for stores looking to deliver the best service to consumers.
Let’s examine trends and examples of each of these shopping elements and see what is in store for stores as they compete against online-only retailers.
The Internet has had a tremendous impact on prices. Using your mobile phone to instantaneously get pricing information on most products has forced US retailers like Wal-Mart, Target and Sears to keep their prices in line with their online and off-line competitors.
For these retailers, the biggest online competitor is Amazon and according a William Blair & Co. study, Amazon is 9% cheaper than Wal-Mart when sales tax is not factored into the price of the product but shipping is. Retailers complain about “showrooming”, the opportunity for shoppers to examine products in the stores but purchase them elsewhere. To make it easier (and some would say unethical), Amazon introduced their PriceCheck mobile app which enables consumers to go to a brick-and-mortar retailer and use the app to scan a product’s barcode to check the Amazon price for the product. If the price is lower at Amazon, the product is placed in the app’s virtual shopping cart.
Big box retailers are fighting back against their online-only competitors with a variety of strategies. Sears is offering in-store Wi-Fi to encourage shoppers to price check to see that the prices at Sears are competitive. Virtually every major retailer is now offering mobile coupons, including Target, which is developing instant coupons directed at specific customers once they are already in the store.
Amazon has the largest online selection with an estimated 10 million unique products while the average Wal-Mart or Target physical store has about 100,000 unique products and 100,000 square feet of space. Retailers are trying to compete with Amazon with a number of strategies on product selection.
- Target is pushing suppliers to offer products that are not available online while simultaneously increasing its online offering through its Target.com website.
- Wal-Mart pushed the concept of “endless aisle” to its store, to encourage its sales people to recommend to shoppers to use their phones to check wal-mart.com if they can’t find the product in store. Wal-Mart credits all online sales to the closest physical store so physical stores can still meet sales goals.
Retailers could look to Apple as example of offering a smaller and highly recommended selection of products, since the number of choices can be overwhelming at times. The average Apple store has a handful of products and only 8,000 square feet of space.
Physical stores should be able to compete on a number of elements of service. According to digital think tank L2; Sephora, Nordstrom, Macy’s and NET-A-Porter are the most “mobile-competent” brands, measured across a number of variables including their mobile marketing approach and innovation.
Here are examples of how retailers are and should be using mobile to compete on service:
- Apps – Retailers are using their apps to record shoppers’ preferences and location. Apple is now allowing customers in-store to use their mobile app to alert a salesperson that they need assistance or to allow the consumer to ring up their order right on their phone.
- Delivery – Best Buy and Sears offer the convenience of online shopping with the option of in-store pickup. Sears says the product you order online will be ready for you in five minutes at the store – guaranteed, or you get a $5 store coupon. Connecting a consumer’s online ordering account with the stores’ mobile app could make the experience completely seamless without hassle of a paper receipt.
- Rewards – As we wrote about last month, retailers are offering rewards for non-purchasing activities. Retailers like Target, Macy’s and Best Buy have partnered with incentive company, ShopKick to offer rewards for shopping activities, like demoing a product, visiting a store or recommending a product.
- SMS and QR Codes – Macy’s is focused on offering a “360 degree” shopping experience, connecting shoppers to its products through innovate mobile programs to merge the off-line and online experience. The Macy’s Backstage Pass program, for example, brings the retailer’s celebrity designers and fashion icons like Martha Stewart and Tommy Hilfiger into every store location nationwide via QR codes and SMS, providing fashion tips and recommendations.
- SoLoMo - Paul Cousineau, vice president of mobile products at Wal-Mart says about the intersection of Social, Local and Mobile, “It’s about accelerating your multichannel strategy,” he said. “Consumers don’t engage with channels, they engage with the brand and you have to think about how to make that experience as seamless as possible.” Wal-Mart using social recommendations and local proximity to deliver customized offers.
While Amazon (and other online-only retailers) may continue to win on price and selection, at least for the short-term, retailers with physical stores are aggressively fighting back to provide better service using mobile to provide an enhanced shopping experience. As shoppers become more comfortable with mobile technology and smartphone adoption in the US moves from 50% to 75%, retailers will have the opportunity to provide a more sophisticated and complete shopping experience through mobile.