June 1, 2016, 3:54 PM

Who needs an app?

Retail chains and e-retailers with lots of repeat customers get more mileage out of mobile apps than smaller, niche merchants.

Lead Photo

When Blue Apron Inc. launched in 2012, it knew selling on mobile would be an important part of its strategy, says Ilia Papas, Blue Apron’s chief technology officer and co-founder.

The web-only retailer of make-at-home meal kit subscriptions had its mobile-optimized site up by summer 2013, however, it didn’t debut a mobile app until July 2015. Papas says the e-retailer, which grew its sales 80% last year to an Internet Retailer-estimated $117.0 million, didn’t want to add the workload and technical expertise an app would require until it felt secure in the technology and staff managing its desktop and mobile sites.

Blue Apron got to work on the iOS app in early 2015. It developed the app in-house and with the help of mobile technology vendor Mobispoke, which has since been acquired by agency Kurt Salmon Digital. It took about five months to build the app and Blue Apron now has five people—a mobile product manager, three engineers and a designer—who work full-time maintaining and adding features to mobile, Papas says. He declines to say what Blue Apron paid to create the app.

Nearly a year after the app’s launch, approximately 30% of Blue Apron’s subscribers use the app on at least a monthly basis, Papas says. The e-retailer is seeing evidence that app users are more engaged with the brand and its product offerings than non-app users. For example, app users are more likely to watch cooking demonstration videos or browse other products, such as a handmade chef’s knife, that Blue Apron has for sale. These features are available on the Blue Apron site, but are not featured as prominently as they are in the app.

Blue Apron’s app experience echoes that of several other larger e-retailers that can likewise claim a lot of repeat customers. Consumers are more likely to download and use apps for businesses they frequently shop with. But the early app experiences of online retailers that don’t sell products that need regular replenishment or encourage repeat visits are less sure how apps apply to their businesses.

Online merchants’ app adoption rates show that many have not bought into apps. Looked at in aggregate, 257 e-retailers in the 2016 Internet Retailer Top 500 Guide have a mobile app. A year earlier, 228 Top 500 e-retailers had an app and, in 2014, 214 had an app. Within the Second 500, adoption has been much lower, with only 64 having apps today, a slight rise from 48 a year earlier.

Second 500 web-only retailer Brian Gavin Diamonds is one of those merchants, having launched its app—which it spent between $10,000 and $15,000 to build—in January 2013. The jewelry e-retailer says it will shutter that app soon, but it is planning to launch a new app before the holiday season. Danny Gavin, vice president and director of marketing, says the app has been downloaded 5,000-10,000 times.

That first app is non-transactional, but provides images of the retailer’s jewelry. Brian Gavin Diamonds has otherwise used the app to push coupons and offers to shoppers, Gavin says.

“The app didn’t necessarily provide anything different than the website,” Gavin says, adding that it is hard to say whether the app was a worthwhile investment. “Because it didn’t have an e-commerce factor, kind of like a standard app, it’s difficult to measure ROI,” he says.

Apps are great for larger retailers that sell products that everybody needs, like Amazon.com Inc. and Wal-Mart Stores Inc., Gavin says. Since not everyone is buying diamonds regularly, Gavin knows that his app will have to provide something new to shoppers that the mobile site doesn’t provide.

“The app will help them in a way the website hasn’t,” he says.

The majority of the e-retailer’s business is from engagement ring purchases, and so many of its shoppers are one-time customers. That means that even if they downloaded and used the app, it tended to be for a limited time until they made a buying decision. Gavin says the average app user accessed the app six to 10 times. The next app, Gavin says, will have e-commerce functionality and app-only features. Brian Gavin Diamonds is still in negotiations about the cost of the app, but Gavin imagines the app will cost less than $50,000, he says.

“We’re going to find a way where it integrates with the shopping process,” Gavin says. “Shoppers don’t have to have it, but we are creating a way that it would be a good idea to use the app.”

“Every retailer needs to weigh the trade-offs of how you build an app and what functionality the app may have,” says Julie Ask, principal analyst at Forrester Research Inc. “Apps are for the intersection of customers who access and shop with a retailer frequently, and those that are what we call shifted—who expect to get anything, anytime, anywhere on a mobile device.”

Not surprisingly, it is a retailer’s frequent shoppers who will download an app. 83% of smartphone-owning adults agree with the statement, “I download apps for the services I use most often,” according to a Forrester Research survey in Q4 2015 of 825 U.S. smartphone owners. 

Most often, those are apps operated by chain retailers, which enjoy brand recognition and can generate sales online and offline. Digital analytics firm SimilarWeb Ltd. ranked the 90 Android apps from the top 100 e-retailers by the percent of consumers who downloaded the app and how often those consumers open it, and, with the exception of Amazon and Etsy Inc., apps from large retail chains—including Wal-Mart, Target Corp., Home Depot Inc. Kohl’s Corp., Best Buy Co. Inc. and Lowe’s Co. Inc.—dominated the top of the list (see chart on page 124).

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