8/01/12
With smartphones bringing price transparency into store aisles, retailers need to find ways to manage mobile in stores to their benefit—or else.
Allison Enright , Editor
The Internet and e-commerce have steadily dismantled, piece by piece, the foundations of modern-day store retailing. Stores still loom large—they accounted for nearly 93% of sales of products that could also be bought online during the first quarter of 2012—yet they are less essential to consumers' lives than they used to be as consumers increasingly turn to the web for what they need.
If a product can be boxed and shipped, an online retailer can get it to a consumers' doorstep virtually overnight, negating much of the immediacy benefit of stores. Web retailers collectively offer more product variety than any one physical retail store or mall ever could. And if a desired product is out of stock at one e-retailer, another, just a click or two away, is sure to have it. That means consumers can locate what they want in a minute or two versus an hour or two driving around town. Online retailers also often have the lowest price, as online stores typically have fewer operating expenses than store retailers.
The web's advantage in price and selection has increasingly turned bricks-and-mortar stores into showrooms, where consumers go to touch, feel, learn about and try on products before buying them online. That showrooming phenomenon has become significant as 48% of U.S. consumers now carry the Internet in their pocket or purse, in the form of a web-connected smartphones, according to consulting firm Deloitte LLC.
Showrooming—and what it means for the future of stores—is a hot topic among retailers, and for good reason. Consumers are using those smartphones in stores to get the best deal. Approximately 58% of smartphone owners say they've used them for store-related shopping activities, such as checking a retailer's web site for store location information or offers, and checking prices available elsewhere, according to Deloitte. 61% of these consumers say they're most likely to use their smartphones for shopping activities while they are shopping in a store.
With the mobile web bringing price transparency and product information to consumers at the point of purchase, there is unprecedented pressure on retail chains to give consumers a reason to buy in the store, rather than go elsewhere—whether that's to a store across the street or to the web.
"People have so much visibility on price, you have to give them a much better reason to show up and buy," says Candace Corlett, president of WSL Strategic Retail, a retail consultancy. "Retailers need to strategically think out how they are going to connect the store to shoppers."
That thinking is well underway. It's showing up in new programs aimed at driving consumers into stores for reasons other than making an immediate purchase—think Barnes & Noble's in-store book clubs and Nordstrom's shoe-tying workshops for kids—where picking up a book or a pair of shoes is the happy side effect of the store visit. Stores also are developing their own mobile tools that they hope will make their floor personnel more effective salespeople who can close deals at a higher rate and provide a level of service that keeps customers coming back. It's very early days, but there are some signs that retail chains that use the mobile web intelligently can, to a degree, slow the showrooming tide.
Doing it well
A prime example of a retailer trying to use mobile to boost store sales is Moosejaw Mountaineering, an outdoor clothing and gear retailer with nine stores, two of which opened in the last year, and a thriving e-commerce site. Two to three clerks per store carry web-enabled, credit-card scanner-equipped iPod Touch devices that act as ancillary sales tools and also as cash registers. "The handheld is so much better in enabling the sales associate to engage on the sales floor," says Eoin Comerford, CEO of Moosejaw. "That's where we want our associates to be, on the floor engaging with customers, not behind a register."
Moosejaw stores foster a sense of exploration and fun—it's not unusual for a clerk to draw customers into a ping-pong game or challenge them to a pull-up contest, Comerford says. 60% of transactions at the two newest stores, where clerks were trained to use the mobile devices from day one, are completed on the mobile devices.
When it gets down to selling, the devices can scan product bar codes to access more detailed product information available on Moosejaw.com and also check stock availability. A Moosejaw Mountaineering store can only stock about 4,000 to 5,000 product SKUs, but Moosejaw.com has about 80,000. Thus, if a customer wants a four-person tent but the store only has a two-person tent, the clerk uses the iPod Touch to place the order for the four-person tent, swipes the customer's credit card and Moosejaw.com ships the order to the customer for free. About 10% of total store sales today come from ship-to orders placed online from the store, up from 8% last year, Comerford says.
In the event that Moosejaw doesn't carry an item the customer wants, clerks use the iPod Touch to help the customer find the item at competitors' web sites. "The point is to serve the customer better, not serve you better," Comerford says. "Do this and they'll come back to you another time."
When a smartphone-toting customer shows a Moosejaw clerk he found a better price elsewhere, clerks are empowered to match it on the spot, but Comerford says most Moosejaw store customers don't use mobile that way in stores, in part, because they feel they're getting valuable information from Moosejaw clerks. And because employees have all the information they need at their fingertips they never have to abandon a customer on the floor, which means the interaction remains convivial and consumers rarely reach for their own phones to check prices.
The deeper interaction also means Moosejaw clerks naturally have more up-sell opportunities because consumers share more information. When a clerk learns a customer is shopping for a sleeping bag for his upcoming kayaking trip, he'll suggest a customer might want a bag designed to keep his stuff dry, and walk him to where those are in the store, for example. "In specialty retailing today, it starts with the staff in so many ways. You need people who know the product they are selling. If you don't, you are in trouble," Comerford says.
The problem with counting on store employees being real experts is retail turnover: a quarter of retail employees left their jobs in 2010, according to the U.S. Bureau of Labor Statistics. And the turnover rate is much higher for the part-time workers who make up a substantial portion of store employees—the turnover rate for part-time store workers was 67% in 2011, says consulting firm Hays Group.
Web retailers aren't waiting
Adding to the pressure on stores is the aggressive way web retailers, particularly Amazon.com Inc., are promoting their own mobile apps that encourage consumers to use stores as showrooms. Amazon.com's mobile app is among the top five free shopping apps available in Apple Inc.'s App Store and Google Inc.'s Play store, which sells apps for Android-powered devices.
Half of the top 10 free shopping apps on Play include bar code scanning capabilities. Amazon built this scanning feature into another mobile app, aptly called Amazon Price Checker, last November, and caused an uproar among store retailers when it promoted the app for a limited time by offering a 5% discount on scanned items' prices. Presumably, consumers scanned items while standing in a retail store. 30% of smartphone owners who have downloaded apps say they've downloaded a shopping app that lets them compare prices or manage shopping lists, according to WSL Strategic Retail's How America Shops survey. Balanced against the entire U.S. population, that equates to 5% of all consumers.
Retail chains are fighting back in a variety of ways. Target Corp. made headlines in January when it sent a letter to its suppliers asking them to develop products only for sale at Target, products that then would not be available on the web. The letter, signed by Target president and CEO Gregg Steinhafel and executive vice president of merchandising Kathee Tesija, read in part: "What we aren't willing to do is let online-only retailers use our brick-and-mortar stores as a showroom for their products and undercut our prices."
But experts say that while selling differentiated products is one way to compensate for in-store comparison shoppers, what retailers really need to do is think long-term about the role their stores will play. "I don't think stores are moving quickly enough to find innovative ways to improve the store experience," says Ali Levy, a senior manager and retail strategist at Kurt Salmon, a management consultancy. "There are tools that stores can use to try and stop the bleeding, but what they need to do is invest in key areas that make sense."
While training store personnel is important, the transient nature of store workers limits its effectiveness, she says. This is where retailers can benefit by incorporating their own mobile resources in stores, such as quick response, or QR, codes on displays or shelf tags that, when scanned by a smartphone customer, link to product information, product reviews or videos on the retailer's own web site.
Kasey Lobaugh, multichannel retail practice leader at Deloitte, says retailers shouldn't think of the mobile web as an enemy, but as a sales enabler. Deloitte's recent analysis of the mobile web's influence found that smartphone shoppers are 14% more likely to convert in stores than consumers who don't use smartphones to help them shop. Store retailers get the first crack at closing the sale because the consumer is in a store making a purchasing decision. "That's where you need the right information and the right functionality," he says.
Deloitte estimates that mobile influences 5.1% of retail store sales today, a percentage it projects will grow to between 17.2% and 20.6% of store sales by 2016. (See chart on page 25 for more).
Rob Veres, general manager of bar code scanning and shopping app RedLaser, which is owned by eBay Inc. and has been downloaded more than 20 million times, believes mobile can drive higher in-store conversions because consumers who check prices on their phones then feel more comfortable making a purchase. "Doing a price check gives them the additional vote of confidence that they are getting a pretty good deal," he says.
Corlett of WSL Strategic Retail agrees, but says that if stores are going to remain relevant to consumers, retailers will have to do more to combat price-driven retailing. "Retailers need to embed reasons why consumers won't walk out because a product is $2 cheaper across the road," she says. For grocers, this might include carrying groceries to shoppers' cars or offering cooking classes; for a store that sells baby products, this could mean installing a car seat in the customer's car rather than letting her walk out with the box.
Mobile and marketing technologies play a role here, too. Retailers like American Eagle Outfitters, Toys 'R' Us and Macy's work with mobile shopping app shopkick, which grants points, or "kicks" in shopkick's nomenclature, when consumers using the app walk into a store, and more kicks as they respond to certain promotions or go to certain places in the store. Accumulated kicks can be redeemed for retailer gift cards or other goodies.
Macy's in July rolled out shopkick to all its 800-plus department stores. "We are continuing to bolster mobile efforts that enhance the shopping experience in our stores while creating an immediate and personal interaction with our customers," says Martine Reardon, Macy's chief marketing officer.
At American Eagle Outfitters consumers get more kicks if they visit the dressing room; the retailer knows a consumer who tries on a new pair of jeans is more likely to buy. American Eagle Outfitters and Toys 'R' Us also are using a new shopkick program that links consumers' payment card to shopkick. For example, when a shopkick user pays with that card at Toys 'R' Us, she gets more kicks, and if she spends more than the average customer, she gets extra bonus kicks, which drives greater basket sizes and provides Toys 'R' Us with more data into how mobile consumers shop its stores, says shopkick CEO Cyriac Roeding.
Retailers can use this kind of behavioral information to target consumers according to their interests, even very specific consumer groups. "Retailers used to bypass niche groups because they were too small, but now that it is so hard to increase sales, no group is too small," Corlett says. "The beauty of technology today is that you can reach out to everyone selectively."
With the mobile web bringing price transparency to the front lines of store retailing, and with web retailers likely to win on price alone, store retailers have to evolve and play to their strengths. That means incorporating mobile and web technology into the selling process and cementing themselves as go-to resources for the customers they serve. There's no guarantee it will work, but the alternative is to become showrooms that consumers may still visit, but where the cash register rarely rings.
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