Retailers urged to embrace mobile potential

Retailers must embrace the potential of smartphones - or risk becoming shoppers' pawns.

Those shoppers who whip out their smartphone in Prada's flagship store in Milan will find they are met with short shrift by the immaculately dressed staff, who prohibit photography in-store. The luxury-fashion brand's attitude is symptomatic of the gulf that exists between many retailers and the revolution taking place on the high street.

Consumers that have traded up to iPhones or Android-powered devices in their droves have everything they need in their pocket to compare item prices, read reviews, and even get their friends' opinion about, say, a top they may be thinking of buying, by posting a photo of themselves wearing it on Facebook. What's more, all of this can happen on the shop floor. Loyalty, it could be argued, has never seemed like a more outdated concept.

Scott Seaborn, head of mobile technologies at Ogilvy Group UK, concedes that this is a problem. He reveals that the marketing director of one unnamed retailer had admitted to him that his company was losing 12% of its sales on the back of customers browsing in-store, using their phone to check the item's price and then ordering it online. If using a barcode-scanning app on a smartphone, it's a process that takes only a few seconds.

Nonetheless, retailers should not give up the fight, says Seaborn. 'There are things they can do,' he says. 'An obvious point is giving better service, and in the current era, that means offering a suite of solutions, such as an SMS channel, a mobile-web channel and a mobile-app channel, so customers can access reviews and make a more informed decision. The retailer could offer free wi-fi, too, to enable smartphone users to get online without incurring a bill, and promote the fact in-store. There is a leakage of sales at the moment, but there will be creative solutions that can play in that space.'

'Can iPhone help you?'

Department store Debenhams' approach has been to create an iPhone app, with versions for Nokia and Android-powered handsets to follow. 'The Debenhams iPhone app acts as a virtual shop assistant, allowing customers to scan product barcodes in-store, enabling them to see more product information, read customer reviews, view range items, add items to wish or gift lists, share items with friends via Facebook or email, or purchase items on their phone for home delivery,' explains Debenhams head of digital development Harriet Williams.

Other retailers have taken a similar line, but there is a debate as to what should come first: an app or a mobile-optimised website. The latter is a version of the normal site tailored to be viewed on mobile phones - 'full-fat' sites do not look good on a phone, even a smartphone.

While mobile websites give greater reach, being accessible on any phone with a browser, apps offer better functionality and features - although their downside is they are restricted to the parent platform, such as Android.

Williams explains that Debenhams launched an app first because that was where initial customer interest was highest. 'It enabled us to include rich features that are not currently available on a mobile site, including a barcode scanner, QR codes (graphic images that, when scanned with a code-reader app on a phone, take users to a mobile site or other content), GPS positioning and integrating a gift list with the user's phonebook,' she says. Williams adds that the company is also investigating mobile-site options, so that a Debenhams shopping facility will be available to all mobile users.

Marks & Spencer took the reverse route, focusing on developing a mobile site, which launched in May 2010. The retailer has, in fact, blazed something of a trail in mobile. In spring 2009, it briefed mobile agency Incentivated to create an opted-in CRM database that M&S could target with offers direct to customers' phones. By the end of 2010, the database was 700,000 strong: not bad for a retailer that did not accept credit cards until a few years ago.

'We wanted to reach all of our customers, regardless of their phone's operating system or device,' explains Sienne Veit, business development manager, new technologies, at M&S Direct. 'The mobile web is the perfect tool to do this. We also send text messages to more than 700,000 opted-in customers, and can now embed shortened links to specific web pages in these - launching a mobile web page direct from an SMS is a seamless journey.'

Veit adds that M&S has also used 2D barcodes (like QR codes), which take users to a specific mobile web page when scanned. It has employed HTML5 technology, too, which offers a richer, more app-like experience, with its Store Finder, which locates branches close to the customer by using their mobile phone's GPS capability.

The site has proved a hit with customers. In the four months after launch, it attracted 1.2m unique visitors, who between them placed 13,000 orders, the biggest being a £3280 transaction for two sofas.

Since then, the figures have rocketed, with the number of unique visitors exceeding 1m per day in December.

'Our customers have truly taken to using their mobiles to shop,' says Veit. 'From sofas to shoes, we have seen excellent month-on-month growth both in visits and orders across our entire product catalogue on offer on the mobile web.'

Neighbourhood catch

There is more to mobile marketing, of course, than sites and apps. Location-based services, for example, including location-based ads, could have a big part to play in driving customers into retail outlets.

Geocast serves up ads to users' phones based on their proximity to the advertiser's store. Someone looking at the mobile web on their phone could see an ad for M&S with a discount offer when they get within half a mile of an M&S outlet, for instance. Geocast advertisers can also choose to have their ads displayed when a consumer comes within a certain distance of a competing store. Vouchercloud, meanwhile, delivers money-off coupons for nearby shops and restaurants to users' mobile phones via an iPhone app.

While it's early days for location-based advertising, there have been some success stories. In Finland, a campaign for McDonald's targeted consumers via NAVTEQ's LocationPoint Advertising platform, delivering mobile ads to users of Nokia Ovi Maps when they were within a certain distance of McDonald's 82 restaurants in the country. The campaign promoted a McDonald's cheeseburger for EUR1, and delivered a 7% clickthrough rate. Of those who clicked through, 39% selected a click-to-navigate option, which offered drive-to or walk-to directions to the nearest restaurant.

There are still privacy and redemption issues relating to location-based services and coupons, however. Tim Dunn, director of customer strategy at Mobile Interactive Group, notes that coupons are suffering from the industry's failure to standardise on a redemption mechanic. 'Many brands don't want to engage in couponing because it cheapens the brand, and you just end up with people who only want a discount, which erodes both brand and profit,' he says.

While location-based services and mobile coupons may be relatively unproven, mobile as a retail channel is seemingly here to stay.

'Mass adoption of shopping apps will be driven by one of the two big names online - Facebook or Google,' says Chris Handford, research director at SPA Future Thinking. 'Retailers need to make sure they are competitively priced, and there needs to be a hook to make sure people buy from them, rather than online. Price matching will become more important, as will loyalty schemes, freebies and value-added services.

'Whatever the strategy, retailers will need to work with the market-leading shopping apps and adapt to how consumers use them. If not, they risk being excluded from many a smartphone user's consideration set.'

The smartphone revolution may pose challenges for retailers, but after initially ignoring the internet's potential as a sales channel a decade ago, the industry is unlikely to repeat the mistake.

- 24.9% of global handset shipments will be smartphones by 2014

- 1 in 5 of UK top 100 retailers has created a mobile-optimised version of its website

- 423m Projected number of smartphones that will be sold each year by 2013

- $24bn Global mobile advertising revenue forecast for 2015.

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