The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
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The proliferation of mobile devices and shopping apps has big implications for the ongoing shift of consumer spending from physical stores to the web." It used to be that when bricks-and-mortar retailers had people inside stores, they had a really good chance of converting them into a buyer," Lipsman says. "But now that consumers have smartphones, that is changing."
Web and store
Target Corp. attempted early this year to address that growing threat. The retail chain sent out a letter to suppliers explaining that it needed their help to fight the growing trend of consumers with smartphones and apps such as Amazon.com Inc.'s Price Check from using Target stores as e-commerce showrooms—that is, looking and touching products that the shoppers then might buy for lower prices online. 58% of smartphone owners who've checked prices for consumer electronics inside stores, in fact, have bought the products online, says consumer electronics shopping and review site Retrevo.com. Target wants to revise agreements it has with suppliers so it can offer products at lower prices, or sell items not readily available from e-retailers.
Such a move signals the intense pressure that even a large chain feels from online retailers and confident online shoppers, says Peter Fader, a marketing professor at the Wharton School of the University of Pennsylvania. He gives Target credit for at least considering how to address the tougher competition and consumers' easy access to information, but he was skeptical the effort would work. "The pendulum might be swinging too far the other way," he says.
Other retailers are fighting the trend by joining it. Executives at Patagonia Inc., for instance, were confused when they noticed that consumers used its iPhone app but didn't convert as much as expected, says Mark Shimahara, Internet marketing manager for the outdoor apparel manufacturer and retailer. That held true even after an updated version of the app featured product reviews and marketing messages based on the consumer's geographic location.
"But after talking with store managers," he says, "we realized that people were using the phone application to do their window shopping and would show up at our stores with the device in hand and product on their screens, saying, 'Do you have this in stock?' It's a great example of how we are entering the age of omnichannel marketing."
Staples Inc. faces a similar situation, though involving small-business owners, the office supply chain's core customers, says Brian Tilzer, vice president of e-commerce and business development. He says small businesses increasingly use Apple and Android smartphones and even tablets to research products, check inventory and otherwise prepare for what he calls the "in-store shopping experience."
The blurring of web and store shopping is just one new shopping trend. Another is a shift in how consumers search online.
Some 30% of consumers, nearly a third, are using Amazon.com to begin their search for items and for product research, according to Forrester Research Inc. vice president and e-business analyst Sucharita Mulpuru. That figure, based on a survey conducted in the third quarter of 2011, compares with 18% who began their product research on Amazon in the third quarter of 2009. By comparison, though 24% of shoppers began their research on Google in 2009, that fell to 13% in the 2011 survey.
Those figures show that e-retailers need to do an even better job of presenting their inventory on the Amazon Marketplace that is open to outside retailers, Mulpuru says.
It's increasingly clear to Rosen, the part-owner of SportsWorldChicago.com, that online shoppers, especially those using smartphones and tablets, are increasingly going to marketplaces such as those operated by Amazon and Rakuten Inc.'s Buy.com, instead of searching for products via Google. That's why in 2011 he began using technology from Zoovy Inc. to boost his visibility on such marketplaces. "I'll be continuing to use marketplace optimization techniques in an even bigger way this year," he says.
No matter where consumers start searching for products, an online shopping experience in 2012 is much more likely than ever before to involve a stop on a social network. 47% of consumers used social media or related sites as part of online shopping in 2011, up from 36% in 2010, according to The E-tailing Group Inc.
The report says that most consumers who Like a retailer or manufacturer on Facebook click the Like button in hopes of earning a deal or discount (63%), while others want to share experiences about that retailer (55%), take part in a poll (51%) or access store ads (48%).
RadioShack friends Facebook
It's the latter that inspired consumer electronics chain RadioShack Corp. last year to post its weekly digital circulars to its Facebook page. "The majority of electronics and wireless consumers consult friends, family and Google before they ever set foot inside RadioShack or click on RadioShack.com," says executive vice president and chief marketing officer Lee Applbaum. "Social networks afford us the opportunity to impact these moments."
Deals and advertising are only part of how social networks and shopping are converging in 2012. Forrester said in January that 27% of U.S. online consumers—again showing their confidence with the web—sought customer service and product information from online communities in 2011, up from 7% two years prior; the percentages were higher for younger consumers.
One reason that e-retailer AccessoryGeeks.com wants a robust presence on Facebook and Twitter, for instance—besides delivering coupons and drumming up interest in the company—is to get early warning of any issues that customers might have, and to respond to them before its reputation is harmed in the lightning-quick echo chamber that is often social media, says Julian Kwok, the retailer's strategic marketing analyst.
Even retailers that have not yet created mobile apps or mobile-optimized sites seem to know they can't ignore mobile devices for long; after all, in December, 28.5 million U.S. consumers viewed online retail content from those devices, up 87% from the prior year, comScore says. That seems certain to grow as more consumers buy computer-like smartphones. Among U.S. mobile subscribers, approximately 42% had smartphones in December. In July, for the first time, smartphones accounted for most mobile phone purchases, comScore says.