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Mobile Commerce: The New Retail Therapy
Shopping trend empowers consumers and challenges business strategies
For the rest of the July 2011 issue of CRM magazine please click here
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Shopping sprees soon may have nothing to do with admiring mannequins adorned with the latest fashions through store windows. Instead, whipping out your smartphone without taking a step outside the comfort of your own home could be the future definition of retail therapy.

Mobile commerce is on a dramatically steep rise. Forrester Research estimates that 53 percent of mobile customers will most likely increase their mobile spending budgets in 2011, with only 4 percent reporting they will decrease them.

Another study, conducted by ATG, revealed that 48 percent of U.S. consumers are using their mobile devices to research and browse products and services, up from 37 percent in July 2010 and 27 percent in November 2009. In addition, 29 percent of consumers polled have made at least one purchase on a mobile device—more than double the number reported in November 2009.

“We are doing almost everything on a mobile device; that’s just the direction of the world,” observes Michael Fauscette, group vice president of software business solutions for IDC. “We are always connected. We have evolved into having the constant interactivity of the Internet, so it’s just natural that I want to take the next step and want to do some type of commerce, or I want some customer experience tied into the mobile device as well as other things.”

Forrester’s study also asserts that mobile marketing is at a “crossroads.” As a result, marketers will need to stop experimenting with an array of mobile marketing techniques and commit to “firm strategies.” With only 23 percent of marketers intending to spend more than $1 million in the mobile space this year, analysts warn about the potential dangers of ignoring the demand. Instead, understanding customers’ buying patterns and the benefits of mobile shopping are considered vital when developing a mobile marketing plan.

As smartphones become smarter, this always-on environment has bled into retail, begging the question: Will shopping dates one day resemble renting a VHS from Blockbuster?

Everyone’s Doing It
Suddenly, mobile devices are exactly that: devices. Gone are the days of just carrying cell phones; instead these tools now manage several aspects of people’s everyday lives.

“I can remember the phone I had in 2004, and there wasn’t a whole lot of shopping going on it,” jokes Andy Lloyd, general manager of e-commerce products at NetSuite. “It wasn’t a very good user experience, the network was slow, and the screen was monochromatic.”

However, because of breakthrough technology in mobile phones and their browser capabilities, Lloyd says, mobile commerce is “empowering” consumers, giving them a broader span of choices with which to make sound buying decisions. “Now, all of a sudden, the consumer is in charge,” he explains. “It’s something that retailers need to be cognizant of, and it shifts the balance to the consumer. So it’s up to the retailer to carry a quality product, a great shopping experience, and a good price, or consumers are going to go somewhere else.”

Indeed, consumers have gone elsewhere on several occasions. Fauscette explains that during the past Christmas shopping season, Best Buy lost business when people standing in its stores took mobile reads of barcodes and found items priced more cheaply on Amazon.com; some ordered while they were still on the retailer’s property. “That changes commerce significantly,” he says. “If I can’t even depend on the fact that somebody came into my store to think that I am going to sell that television or whatever, and they can shop me in real time against online and brick and mortar, then commerce has changed to a much more dynamic, connected environment.”

As a result, Lloyd believes that mobile commerce “absolutely” will have an impact on in-store sales, and retailers are taking notice. “We have talked to our customers who previously had a significant kiosk presence in their retail store, and they said they are basically reallocating that budget to mobile,” he says. “They are saying that they could offer just as rich of an experience on a mobile handheld device. And, instead of offering a situation where there is only one kiosk in a store, every consumer could be experiencing information about that product at that particular point in time.”

Retailer Adoption
When Crocs decided to invest in mobile, it was a risk the shoemaker was willing to take.

“We didn’t have a ton of demand in the mobile space, but knew it was time to invest in the campaign,” remembers Jay Custard, vice president of global commerce for Crocs. “We just needed to build this channel out not knowing all of the answers, and let the consumer guide us and let us know where they wanted us to enhance and where they wanted us to make changes.”

Planning began about 15 months ago, and the first fundamental, Custard says, was to build a site that provided the “brand and shopping experience that consumers expected.” He adds, “We needed to get the foundation in place so we spent a lot of time working on the infrastructure, product availability, and navigation, and we also focused on the conversion path.”

Crocs’ mobile site has been active for about a year, and Custard says results have exceeded expectations since its inception. “We went into this expecting that it would be a very small percentage of our e-commerce revenue,” he says. “What has surprised us most is that we have converted at a higher percentage than we had actually assumed going into this.” According to Custard, traffic to the mobile site is 30 to 40 percent higher than what Crocs had anticipated. “We are seeing an uptake in traffic, so we know that the consumer is becoming more aware of this and more likely to use this particular aspect of our e-commerce platform,” he says.

While Crocs’ biggest challenge was “making the case of pulling assets and putting them more in a research capacity,” Frederick’s of Hollywood hit a roadblock during implementation. Along with Crocs, the lingerie company used Demandware to develop its mobile campaign.

“We were the first Demandware customer to create a mobile version of our site that didn’t utilize a brand new domain name,” Frederick’s CEO Thomas Lynch explains. “This caused some initial challenges with our secure certificates and the way the site detected what kind of device the customer was using.”

Frederick’s overcame those initial hiccups and launched its mobile site in April. “We are very excited to see how our customers interact with this different version of our Web site,” Lynch says. “We saw that our percentage of traffic coming from mobile has steadily grown over the last year. We knew that the shopping experience and the functionality was suboptimal for mobile visitors and that we needed to give our customers an easier-to-use interface than our traditional Web site.”

Larger retailers also are making significant investments in mobile. For example, Wal-Mart in April announced it was buying Kosmix, a social media company focused on e-commerce. According to Wal-Mart vice chairman Eduardo Castro-Wright, the company plans to expand its “capabilities in today’s rapidly growing social commerce environment.” In a statement shortly after the announcement, he said, “Social networking and mobile applications are increasingly becoming a part of our customers’ day-to-day lives globally, influencing how they think about shopping.”

Maximum Security
After news broke in April about the iPhone’s automatic tracking and storing of users’ location data, consumers understandably were concerned. Steve Jobs fired back (on his iPhone) and accused Motorola’s Droid of being guilty of the same thing, then added: “We don’t track anyone. The info circulating is completely false.”

Whether or not Jobs is telling the full story, privacy is a major concern for consumers. According to a recent TRUSTe survey of 1,000 consumers nationwide, the majority reported being apprehensive about advertising tracking. Seventy-four percent of smartphone users said they do not like tracking, while a whopping 85 percent wanted a choice to opt in or opt out of targeted mobile ads.

“What happens is that some consumers are not sharing as much information as they might otherwise, or they are not using sites that request personal information or accessing their accounts on the mobile device because they are concerned,” says Fran Maier, president of TRUSTe.

The study also reported that 98 percent of consumers are requesting easy access to controls over their personal information in a mobile application, while only 38 percent said they trust mobile apps with their privacy. “Consumers want some control,” Maier says. “If you give consumers choices, it doesn’t necessarily mean they are going to opt out. I think you are just going to enjoy increased trust.”

But Fauscette believes consumers are accepting a loss of privacy in a digital age. “Over time, you get used to more, and I think people are getting used to sharing more, and they are willing to accept that certain types of things that were private aren’t private anymore,” he says. “We also have certain expectations that have shifted because we just live our lives more online than we ever have.”

Facebook, Fauscette continues, is largely responsible for consumers’ shifts in attitude. “They go one step too far, so they go three steps forward and, to apologize, they go two steps backward. But they have already gone a step forward that you didn’t know about,” he says.

Because information is “highly encrypted,” mobile commerce may be safer than credit cards stored in your wallet. “The big misconception that needs to be spelled out is that you can’t just grab people’s credentials by brushing up against them with a reader,” says Yankee Group senior analyst Nick Holland. “It’s not broadcasting, for example, credit card details that are unencrypted. It is a two-way handshake to get ahold of this information. We are talking about virtual wallets here. If you lose your phone, you can have it remotely scrubbed; but if you lose your wallet, you don’t know where the cards are.”

Bill.com, an on-demand accounts payable application for digitizing bill paying, recently launched Bill.com Mobile, which lets users review, approve, and make payments on their mobile devices. According to Jeff Schultz, Bill.com’s vice president of sales and marketing, security is the company’s “primary concern.” All financial information is kept on Bill.com’s software-as-a-service platform, ensuring that bank account information is secure and encrypted.

“When we compare [Bill.com] to what most people do today, it’s far more secure and far more private,” Schultz says. “Most businesses today carry their check stock and their vendor records in filing cabinets, which are very easily stolen. Every single time they send out a check, it includes private information that also can be used to steal money from them, and we prevent all of that.”

On the other hand, usability is much higher on Crocs’ priority list than proving security, Custard says. “We have reached the point where we have the security symbols on our e-commerce site, and we really haven’t put a whole lot of effort into that in the mobile site,” he admits. “I don’t know if it is really security for our users. It is more just about the tedium of just typing it all in and not having the auto-populate that the browsers tend to offer up. We think that just by the navigation and look-and-feel of the site, they will bring that along with them.”

Forward Thinking
Considering the fast adoption and sale of smartphones, many analysts and other industry professionals agree that mobile commerce is here to stay and will continue to blossom. However, relying on the initial popularity is not enough for businesses wishing to take advantage of the capabilities of mobile devices.
Holland says, “Retailers need to understand that this is not just about new payment technology. Instead, it is a far broader value proposition for the consumer, which the retailer can capitalize on.”

Custard says viewing mobile as “one strategic arm of everything else” is key for marketers. “If you treat this thing in a silo, you’re missing the power of it,” he says. “It has to be completely integrated with all of the other things that you do. We view e-commerce in our retail organization as one channel that should be seamless for the consumer.”

Also important to the long-term success of mobile commerce is assuring consumers that their information is private, Maier adds. TRUSTe’s independent analysis of the top 340 free mobile applications revealed that only 25 percent include a link to a privacy survey. That is problematic because 51 percent of consumers said they look for a privacy policy on mobile applications.

“They have to start understanding that this matters and do what they can to address the privacy concerns,” she warns. “I think there is a good opportunity to be up front.” 


Associate/Web Editor Brittany Farb can be reached at bfarb@destinationCRM.com.


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