'M-retail: the new normal', The Times/Raconteur

Thursday, May 05, 2011

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Mobile Tipping Point: Buying things with your phone might still seem like a novelty to many people, but the sector is developing at massive speed. Very soon no retailer will be able to survive without mobile sales, writes James Silver

Two years ago, a New York-based start up called Sense Networks launched a trial product called CitySense. The free app - which is available on BlackBerry and in preview on iPhone - offers users a ‘live’ snapshot of San Francisco, featuring multi-coloured dots whizzing around a street plan of the city. Each dot represents a colour-coded ‘tribe’, such as ‘young and edgy’ or ‘barfly’, as they move through the city in real time, converging in activity hotspots.

The app is based on raw and anonymised data drawn from the movements of mobile and smart phone users, which comes from GPS, WiFi and mobile phone tower triangulation. The implications for marketers and retailers expanding into the field of m-commerce were - and still are - ground-breaking. “As people move through areas, we pick up the breadcrumbs,” said Sense Networks co-founder Greg Skibiski at the time. “Location data created all day long, just by having a phone in your pocket is probably the richest source of information in the world today.”

Skibiski wasn’t exaggerating. Real time location-based mobile retail has transformative potential for brands. As smart-phone penetration in the UK grows fast - and it’s predicted by Enders Analysis to reach 75% by 2015 on current trends - the most fleet-footed retailers are recalibrating their businesses accordingly. “Most retailers this year and early next year will go mobile, if they haven’t already,” said Mario Thomas, MD of digital and ecommerce agency Chapter Eight. “The ones that don’t, run a serious risk of losing customer share.”

Thomas points to a recent campaign for The Gift Experience, one of the UK’s busiest gift websites. Last year The Gift Experience noticed a sharp increase in visits to its website via mobile devices and commissioned Chapter Eight to build a mobile-optimised website, which launched just before Christmas. “They wanted a website that allowed customers to browse for products, because that’s what the traffic showed their mobile visitors were doing,” he said. The result has seen mobile visits shoot up by 58%, with a corresponding 123% increase in mobile transactions and a 160% uplift in revenues.

Latest research, conducted by Google and the British Retail Consortium (BRC), suggests mobile retail specifically is reaching a tipping point. In the first quarter of 2011, mobile search - in which consumers use their smart phones to check prices or browse comments and reviews - increased by 29% year on year, while mobile retail search traffic soared by 181%. “The star performer is mobile,” said Stephen Robertson, director general of the BRC. “A three fold increase shows customers are taking to smart phone and tablet shopping very rapidly.”

Mobile’s killer-app, as it were, is that it is the only device that is always within easy reach. We carry our handsets wherever we go. Unlike desktops or even laptops, we are highly unlikely to share them and their size makes them ideal for browsing or shopping on the move. “Google call your mobile ‘The ultimate shopping companion’,” said Phil Gualt, client services director of mobile marketing agency Sponge. “One of the things mobile does best is it gives you constant access to information wherever and whenever you are. An informed shopper is an empowered shopper, and that’s a great opportunity for retailers and brands.”

It’s an opportunity which high street retailers are starting to exploit. Just a year or two from now, outlets in a UK shopping mall will know what you want to buy - perhaps before you do. From the moment you push through the doors, your mobile device will check you in on opt-in geo-location services like Facebook Places and Foursquare. Based on your purchase history, offers will arrive on your screen - 20%-off coupons for your favourite brand name trainers, a free coffee at your regular chain and popcorn vouchers to be redeemed at the multiplex.

Then, while browsing in store, QR codes - a readable matrix barcode - or traditional barcodes on labels will take you to a web page which will offer deeper and richer information about the product you are considering buying. If your size or preferred colour of shirt is out of stock in that particular outlet, swiping your mobile across the QR or barcode could allow you to place an instant order for the shirt you do want, to be delivered to your home or picked up at a store nearby.

“Promotions like these still have the benefit of novelty,” said Gault. “But twelve to twenty-four months from now, they will become almost the norm.”

CASE STUDY - OCADO ON THE GO APP: Launched in summer 2009 as the first fully-transactional app on the iPhone and now also available on iPad and Android, Ocado On The Go accounts for more than 12% of the internet retail firm’s sales today. The apps download Ocado’s full catalogue of 21,000 products to a device, synching seamlessly with Oacdo.com.

“The whole idea is to allow you to shop anytime, anywhere,” says Lawrence Hene, Ocado’s head of grocery retail. “Internet allowed you to shop anytime. Now you can be on the Tube, out of internet range, but because your phone’s got the full catalogue on you can edit your shop underground, and as soon as you come back above ground it places your order.”

On The Go has voice search functionality which allows shoppers to find a product by talking to the app and Ocado, which had revenues of £515.7 million in 2010, was the first to launch a barcode scanner (initially on Android, now also on iPhone). “If you’re in your kitchen and you run out of cornflakes then you just scan the empty cereal box and it’ll automatically put it in your shopping basket,” says Hene. After Christmas, the firm saw “a big spike” in activity as customers unwrapped new devices, which is a trend he predicts will continue. “The 12% figure goes up every month, as more and more people get smart phones,” he says.

Mobile, By Numbers:

700 Million - the number of cell phone users in India (source - The Telecom Regulatory Authority of India)
47% - the percentage of 15-24 year old Italians who have a smart phone (Source - Nielsen)
$15.1 billion - projected worldwide mobile application store revenue in 2011 (source - Gartner report on mobile apps)
181% - first quarter (2011) year on year increase in mobile retail search traffic (source - Google and British Retail Consortium)
6.1 trillion - number of SMS or text messages sent world wide, in 2010 (source - International Telecommunications Union)
£280 million - UK paid for app download revenue for 2010 (source - Research2Guidance)

(The Times/Raconteur, e-retail supplement, May 5th 2011)

Posted by James Silver - On Thursday, May 05, 2011

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