And Visions of Smartphones Dance in their Heads (and in the Stores)…

The holiday season is upon us. I know, wasn’t it just July? That aside, ’tis the season of parties, gift buying and giving, holiday songs and TV and movie classics that put the meaning of the holiday season in the proper context.

And the holiday season wouldn’t be complete without at least one viewing of that modern-day staple, A Charlie Brown Christmas. One particular interchange between Charlie Brown and Lucy sort of sums up the real meaning of the season, and in particular, the impact of technology on holiday shopping.

Lucy: I know how you feel about all this Christmas business, getting depressed and all that. It happens to me every year. I never get what I really want. I always get a lot of stupid toys or a bicycle or clothes or something like that.

Charlie Brown: What is it you want?

Lucy: Real Estate  A smartphone.

Now, we all know, that as astute as Lucy is, had smartphones existed at the time of the original script development, that would have  surely been her answer, particularly given how the real estate market has tanked in the last decade and in light of the estimates of mobile retail trending to something like $12B by the year 2014 (according to Juniper Research) So, I’ll do my best to channel my inner Lucy to provide some insights into 5 key statistics from a recent JiWire study of 2k mobile users that point to why a smartphone would be on her list, and how those devices are changing disrupting the world of retail this year and into the future. For every one of these insights, there are at least 20 more that provide even more clues as to how and why IP-enabled devices are reinventing retail and adding value to the consumer and merchant experience.

1. 55% of users under 30 would rather give up their computers for six months than their smartphones.

The only thing surprising about this statistic is that it isn’t higher. Smartphones ARE computers – full stop – they are just smaller. For many in developing countries, smartphones are the only way that the internet can be accessed and for many, it is a PC replacement.  Apps also make doing stuff on the mobile phone more fun and easier too – there are more than 500k apps in the iPhone apps store alone, in spite of the fact that most people use only a handful of those that they may have downloaded. The table below shows just what people are doing via their smartphones in the US, Europe and Japan.

Visiting retail sites certainly registers, but is not top of the charts, just yet. For mobile and shopping to be the match made in heaven that we know it is and to move it up the charts, there are things on the back end that need to be better integrated into the merchant and consumer point of sale experience, like offer presentment, loyalty and making payment frictionless at the point of sale – whether the point of sale is in lane, in aisle or somewhere else. The former is manual and a hassle for everyone – but seems to be the standard for now, and the latter will evolve over the next few years with the jury still way far out on whether NFC will emerge as the standard for how mobile payments are transacted at the point of sale.

The jury has weighed in though (at least for now) on the apps versus browser debate when it comes to the mobile and shopping. It appears, at least for now, that browser wins hands down with 60% to 80% of shoppers preferring plain old browser for search versus specialized apps (apologies to all of you merchants who have spent oodles on apps). I don’t think that it is all that surprising since searching on the iPhone or Droids or the iPad is really as easy as doing it on the PC and with some exceptions, of course, many apps don’t provide enough value to either download or use consistently.

Table 1. Mobile Behavior in the United States, Europe (UK, Germany, France, Spain and Italy) and Japan. Oct – Dec 2012. (age 13+) Source IDC

2.  Price comparison shopping on mobile devices will more than double to 45%, up from 22% in 2010.

Does anyone remember how tedious price comparison used to be B.M. (before mobile)? It was inconvenient (had to be done before you left the house or office), required knowing exactly what you wanted to buy – make, model and serial number (which was not always easy to get or obvious where to get it) and time consuming (endless Google searches that resulted in stacks of printed out product sheets or hand written lists). God forbid if you got to the store and found something entirely different – there was no way to price check, unless you went back home and started the process all over again.

Smartphones have just changed all of that. It makes this sort of thing so much easier, convenient and reliable and in many ways can influence demand as much as it can drive sales (or thwart them). Now, if you are a merchant, this new mobile capability comes with a double edge. It is now possible, thanks to apps like PriceChecker and Milo, to scan a barcode or UPC code in one store and see who has the item at a lower price in another (including online). It’s also why BestBuy has said that it no longer wants UPC codes displayed on items in its store! But, does having this capability (e.g. pricing comparison) always have to result in a lost sale if you are a merchant? I think not, – there are many other factors that go into making a buying decision on a product. Price is certainly one, but so is proximity to the store, payment options available (e.g. store card/credit) and yes, the merchant relationship.

The one thing that I think we have all lost sight of in this crazy deal-frenzied world is the value of the consumer-merchant relationship which is driven in part by the impact of the economy and the consumer’s interest in getting more for their money, the thousands of deal sites that have sprung up as a result to capture that appetite, and frankly, loyalty and other incentive schemes that have done little to create a valued customer relationship. [The subject of a piece to come later in the month.]

Today, the net-net of all of this is that consumers seem more loyal to a deal, than to a merchant or even a brand. 2012 will be the year, I think, to not only reinvent the retail experience from a shopping perspective, but to do so from a relationship perspective as well. Price comparison capabilities must be a part of that formula.

3. 15% of shoppers will use their mobile device to make a purchase on their device while in a store.

Speaking of double edge, here’s a stat that will make a merchant’s heart skip a beat as well. Given that we are in very early days of the use of devices and apps that allow consumers to actually walk into a store, pick out a product and pay for that item in the store with their mobile, this statistic can only mean one thing:  da…da…dum … price checking in store via the mobile and purchasing online from somewhere other than that merchant. The implications of this are obvious but strategies to counter this capability are perhaps not so (see #1). One thing is for sure – removing bar or UPC codes is not the solution (sorry, Best Buy) since that will only alienate customers and won’t really stop them from doing the same thing, but another way, e.g. entering product SKUs into their browser since, ahem, smartphones make that pretty easy.

The more interesting implication of this consumer use of mobile is how it will change as the mobile payments applications mature and become more practical for merchants and consumers to adopt. This is where the excitement and the promise of mobile and other IP-enabled devices really lies. One thing for sure is that it will run the gamut of strategies that turn phones into payment form factors, or even more exciting, use the power of mobile/IP-enabled devices and the cloud to create new and disruptive retail POS experiences that turn the payments function into something of value to consumers and merchants.

Square is taking this to a whole new level. (Related: Square Adds Loyalty Featured) Once a customer has opted into its “geofencing” feature in the app, when that customer (and their phone) are within 100 meters of a Square merchant, walking into the store and saying your name at checkout means you are good to go with payment. At that point, the phone isn’t even need since once Square’s technology detects that a customer is near a merchant enabled store, the Merchant’s Square app will open a tab for the customer and show that customer’s account, name and photo. When the customer purchases an item, they say their name, and the cashier can verify the photo matches the customer and then completes the transaction. A digital receipt follows and loyalty cards are also appended to the customer profile, triggering offers, etc. as appropriate. Do you think that customer experience will be enough to persuade customers to frequent that store even if the price of the items they buy there are a little higher?

4. 44% of total searches for last minute gifts and store locator terms will be from mobile devices.

This stat can only mean good news for all those gift-buying procrastinators – recipients no longer have to be disappointed? And as a recipient that hates to be disappointed, the capabilities that mobile/IP-enabled devices provide is welcome news for sure. What’s implicit though in this stat is the mashup of product availability (which implies some sort of integration into inventory management systems that can reliably show availability) and store proximity which adds real value to merchants and consumers. This capability also drives demand and foot traffic to merchants that could mean incremental sales. B.M. the only way that consumers could access such information was by calling the store, where she was met with one of two options: interminable busy signals or interminable holds while busy sales associates went to the stockroom to check. This relatively straightforward capability made possible by IP-enabled devices calling to the cloud for information drives more sales, increases customer satisfaction and well, of course, reduces recipient disappointment. It appears that people are also willing to spend money when using the mobile phone to assist with the shopping experience – more good news for all of the gift recipients out there. A recent survey of 2,000 mobile users found that 68% of them were willing to spend up to $250 on a mobile purchase while nearly 20% said they’d go to $500. Men, on average,  spent more on purchases, paying $312 for the most expensive item bought on a mobile device, while women spent $222 for their most expensive purchase.

And since an estimated 60 million mobile users were planning to use their phones to shop during the Thanksgiving holiday weekend, one can only imagine how that number will spike the closer we get to Christmas (both number of users shopping and the cost of the items purchased).   

5. 65% of high-end device users report that they have used their device to find a business, and then made a purchase at that business in person

This is an interesting stat and less, I think, about the power of mobile to influence buying behavior, but rather to assist consumers in finding a place that have heard about, or a product they want to buy, and then more efficiently finding a business that has that product. It fulfills a need that they already have or have expressed they have, saves time, and allows this activity to happen completely untethered from a PC and most probably closer in proximity to when the need needs to be fulfilled. According to IDC, people, by and large, tend to search for more services-oriented establishments than stores: restaurants by a wide margin (often within a few hours of when they plan to eat), financial services, and beauty/personal services. Given that, it is not surprising that the percentage of sales in person is so high – people are looking for restaurant when they are hungry, a bank when they need to make a deposit or take money out, a manicure when their nails are in need.

Table 2. Percentage of searches that are via a mobile device

Source IDC

One more thing. Since I started out with an anecdote about Charlie Brown, I probably should end it with on,e too. Remember the little vignette about Charlie Brown’s sister who was writing her letter to Santa? That’s been updated too.

Sally: Dear Santa Claus, How have you been? Did you have a nice summer?
Sally: How is your wife? I have been extra good this year, so I have a long list of presents that I want.
Charlie Brown: Oh brother.
Sally: Please note the size and color of each item, and send as many as possible. If it seems too complicated, make it easy on yourself: just send money gift cards to J. Crew and Abercrombie.

Happy Cyber Monday!

Karen Webster is the CEO of Market Platform Dynamics (MPD), a consulting firm that helps companies find, implement and monetize innovation. She serves as an advisor and member of the board for a number of companies operating in the payment, technology and digital media industries. More info here.