But the social network’s advertising revenue grew 18.4% during the quarter.
With smartphones bringing price transparency into store aisles, retailers need to find ways to manage mobile in stores to their benefit—or else.
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.