Keeping Up with the Mobile Consumer 2011 Benchmark Report Nikki Baird and Steve Rowen, Managing Partners September 2011
Executive Summary In RSR's collective years in the retail industry we have rarely seen a technology act as such a galvanizing force on the retail industry - and in a positive way - than consumer mobile. It is a seachange in how consumers engage with retailers, for the first time truly bringing together the physical and the virtual in ways that cross-channel efforts to-date have not. And it is relatively inexpensive to experiment with on the part of retailers. But so far, it is a Retail Winners' game (those respondents that outperform their peers in year-over-year sales growth).
Business Challenges Overall respondents report that they haven't yet figured out how to identify and accommodate different customer segments, that they have difficulty coordinating the mobile experience with other channels, and that the consumer technology landscape is evolving too quickly. While that makes for a very challenging environment for developing a mobile strategy, perception of ensuing challenges vary drastically by retailer performance and size. The largest retailers are more challenged by the difficulty of coordinating across channels, while Winners are more likely to focus on a more definable business need.
Opportunities Optimism about the channel is widespread. Overall, 51% of respondents say that their mobile sales will grow "significantly" in the next 3 years, and another 42% expect at least some growth, if not a "significant" amount. The top three opportunities have a natural focus on the customer: deeper customer engagement to drive loyalty, the opportunity to drive innovation through mobile offerings, and deeper customer engagement to drive sales. More than twice as many Winners as their peers report that they have been using consumer mobile and either are starting to get an idea of what to measure or already feel comfortable with the results that they're getting.
Organizational Inhibitors Resource challenges top the list of reasons why retailers haven’t seized more of the opportunities they see mobile solutions providing. In ascending order of difficulty, the top-three roadblocks are having the necessary resources to manage all of the available eCommerce and Mobile opportunities, overall budgetary constraints, and difficulty in quantifying Return on Investment. More problematic, however, are the number of retailers who are frozen in their tracks due to the rapid pace at which mobile technologies change. Sixty percent of retailers admit that a single executive, charged with ensuring the customer has a seamless experience across whichever channel – or technology – she chooses to engage is vital to becoming “unstuck.”
Technology Enablers Retailers are vaguely ambivalent as to what a strong mobile offering even looks like. While 79% know that a cut and paste version of a full eCommerce site is simply not a viable mobile strategy, the field is split nearly down the middle as to the value of a downloadable app. Though a vast majority of retailers ascribe value to retailer-provided wireless in stores, very few have yet to do anything about it. While technology adoption is still in very early days, twenty three percent of all retailers have budget set aside to ensure that the mobile developments they take on are repeatable across multiple platforms; 21% already have budgeted for mobile capabilities delivered via the cloud (or a Software as a Service model). All retailers recognize that mobile devices, their capabilities, and shoppers’ willingness to use them are very difficult to predict, but Winners understand that “the next big thing” in mobile devices – or platforms – may be just around the corner at any given time.
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BOOTstrap Recommendations mCommerce's learning curve will be much shorter, but it will also be more complex - a moving target on the process side, as consumers try to figure out how to best use mobile as part of the shopping process, and a moving target on the technology side, as leaps and bounds in technology constantly change what mobile phones are capable of doing. As a result, we offer the following baseline recommendations, explained in detail at the end of this report: Use consumers to help shape your strategy and make sure what you’ve done works, carefully consider/approach a Customer Experience Officer, rethink wireless, strategize across platforms, and most importantly, don’t be afraid to get in the mobile game.
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Table of Contents Executive Summary .......................................................................................................................... ii Business Challenges .................................................................................................................... ii Opportunities ................................................................................................................................. ii Organizational Inhibitors ............................................................................................................... ii Technology Enablers .................................................................................................................... ii BOOTstrap Recommendations .................................................................................................... iii Table of Contents ............................................................................................................................ iv Figures .............................................................................................................................................. v Research Overview ......................................................................................................................... 1 Why This Study Was Conducted ................................................................................................. 1 Early Mobile Efforts are a Winners' Game ................................................................................... 1 Methodology................................................................................................................................. 3 Defining Winners and Why They Win, and Why Laggards Fail ................................................... 3 Survey Respondent Characteristics ............................................................................................ 3 Business Challenges ....................................................................................................................... 6 The Consumer Made Us Do It ..................................................................................................... 6 Uncertainty Abounds .................................................................................................................... 7 What about the Impact on the Store? .......................................................................................... 8 Opportunities ................................................................................................................................. 10 Engagement, Innovation, and . . . Engagement ........................................................................ 10 We're Working On It ................................................................................................................... 10 Defining Consumer Mobile Capabilities ..................................................................................... 11 Phone-Friendly ....................................................................................................................... 12 Personalized ........................................................................................................................... 12 The Bottom of the List ................................................................................................................ 13 Winners vs. Peers: Day and Night ............................................................................................. 13 The Lowest-Hanging Fruit Gets Picked Quickly ........................................................................ 14 Organizational Inhibitors ................................................................................................................ 17 Mobile Has an Uphill Journey .................................................................................................... 17 The Way Forward ...................................................................................................................... 18 More Players Required .............................................................................................................. 19 Technology Enablers ..................................................................................................................... 20 To App, or Not to App ................................................................................................................ 20 Winners Keep Their Eye on the Ball .......................................................................................... 20 The Wireless Story Continues ................................................................................................... 22 Early Days .................................................................................................................................. 23 Too Soon to Lock In ................................................................................................................... 24 BOOTstrap Recommendations ..................................................................................................... 25 Don't Let Speed of Change Frighten You .................................................................................. 25 Use Consumers to Help Shape your Strategy ........................................................................... 25 Carefully Consider/Approach a Customer Experience Officer .................................................. 25 Rethink Wireless ........................................................................................................................ 26 Strategize Across Platform ........................................................................................................ 26 Appendix A: RSR’s Research Methodology .................................................................................... a Appendix B: About RSR Research .................................................................................................. b
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Figures Figure 1: Retail Winners See Early Sales From Mobile .................................................................. 2 Figure 2: Winners Cite Mobile Presence More Often Than Peers .................................................. 2 Figure 3: Skating Towards the Consumer Mobile Puck .................................................................. 6 Figure 4: Uncertain End-Users, Business Process, and Technology ............................................. 7 Figure 5: Consumers Just Move Too Fast ...................................................................................... 8 Figure 6: Consumer Price-Check Ignorance ................................................................................... 9 Figure 7: A Whiff of Opportunity for Differentiation........................................................................ 10 Figure 8: A Race Up the Mobile Learning Curve........................................................................... 11 Figure 9: Top Mobile Opportunities Leverage the Phone or Personalization ............................... 12 Figure 10: Payment Types Near the Bottom of the Priority List .................................................... 13 Figure 11: Performance-Based Priorities: Purchasing vs. Promoting ........................................... 14 Figure 12: Fast Progress Against Capability Gaps ....................................................................... 15 Figure 13: Big Spending Plans on Mobile Capabilities.................................................................. 16 Figure 14: Stuck in the Mud ........................................................................................................... 17 Figure 15: Much Help Needed....................................................................................................... 18 Figure 16: Input in Demand ........................................................................................................... 19 Figure 17: Lots of Neutrality .......................................................................................................... 20 Figure 18: Device Sales Dictate Platform Importance................................................................... 21 Figure 19: Wireless Value Drastically Outweighs Adoption and Plans ......................................... 22 Figure 20: Follow the Budget and Plans ....................................................................................... 23 Figure 21: Winners Take the Long View ....................................................................................... 24
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Research Overview Why This Study Was Conducted Consumer mobile. Can you think of a hotter topic in retail right now? In RSR's collective years in the retail industry we have rarely seen a technology act as such a galvanizing force on the retail industry - and in a positive way. You could perhaps argue that eCommerce was such a force, but in many ways it was an isolated initial event - retailers established a separate team, often in a separate building, and tasked them with figuring out "this internet thing." Stores were relatively unaffected by the eCommerce business in the beginning - and stores to this day are where most of the action is, when measured by sales. You could argue that Y2K was a galvanizing force on the industry, but it was not a positive one. Yes, it caused retailers to upgrade their point of sale software and take a fresh look at some very old systems on their books. And yes, in some cases it led to an increase in capability that made some of eCommerce and cross-channel commerce possible today. But it wasn't customerfocused. It was something retailers had to do in order to keep their systems from blowing up when 1999 turned over to 2000. In fact, between Y2K, Sarbannes-Oxley and PCI, it's amazing that retailers were able to do anything innovative with the customer experience in the first decade of this century. That is why consumer mobile is so exciting for retail. It is a sea-change in how consumers engage with retailers - for the first time truly bringing together the physical and the virtual in ways that cross-channel efforts to-date have not. And it is relatively inexpensive to experiment with on the part of retailers. Anecdotally, CIO's have said that they can get into the consumer mobile space for the low-low starting price of $15-30,000 for an app. Even better, with all of their regulatory- or emergency-driven investments mostly behind them, retailers are ready and willing to spend some tech money on the customer experience - perfect timing for mobile. But that leads us to the question of this report. Within the retail enterprise is consumer mobile being pursued like eCommerce - a dedicated team, their own building and t-shirt, hundreds of thousands of dollars poured into it? Or is it more like initial social media efforts - the "intern" does it, or a Russian sub-contractor who whipped up a mobile app for pennies on the dollar? Or is it strategic - designed from the outset to be an integrated part of retail's cross-channel strategy? And what capabilities are retailers pursuing in their mobile efforts? Are they driving innovation, or are they responding - panic-mode - to a more informed and demanding mobile-engaged consumer?
Early Mobile Efforts are a Winners' Game There is no doubt that mobile is "hot" in retail right now. In our overall look at cross-channel commerce strategies this year, we found that mobile was by far the fastest-growing channel for 1 retailers. But it is also a Retail Winners' game (those respondents that outperform their peers in year-over-year sales growth). Over half of Retail Winners report that they are seeing sales from their mobile channel vs. 37% of their peers (Figure 1).
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Enabling Buy Anywhere/Get Anywhere: The Future of Cross Channel, RSR Research, July 2011 1
Figure 1: Retail Winners See Early Sales from Mobile What percent of your annual sales come from the mobile channel? More than 5%
Winners
Others
10%
3-5%
Less than 2%
17%
5% 5%
None
24%
Don’t know
41%
27%
7%
55%
9%
Source: RSR Research, September 2011
Optimism about the channel is not limited to Winners. Overall, 51% of respondents say that their mobile sales will grow "significantly" in the next 3 years, and another 42% expect at least some growth, if not a "significant" amount. However, it is Winners that have made the strongest moves into the mobile channel (Figure 2).
Figure 2: Winners Cite Mobile Presence More Often than Peers What Channels do you operate today? Winners
Others 83% 86%
Stores 38% 33%
Catalog
72% 81%
Online/eCommerce Dedicated mobile/mCommerce site
10%
31%
Mobile SMS campaigns
28%
Downloadable mobile app
28% 19%
38%
48% 48%
Social channels
Source: RSR Research, September 2011
Winners outnumber their peers nearly 3 to 1 in the number of respondents reporting that they currently operate a dedicated mobile site, and are also more likely to report having a
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downloadable mobile app. Their peers, on the other hand, are most likely to report their mobile presence is an SMS campaign, rather than something targeted to a smartphone.
Methodology RSR uses its own model, called the “BOOT,” to analyze Retail Industry issues. We build this model with our survey instruments. Appendix A contains a full explanation of the methodology. In our surveys, we continue to find differences in the thought processes, actions, and decisions made by retailers who outperform their competitors and the industry at large – Retail Winners. The BOOT model helps us better understand the behavioral and technological differences that drive sustainable sales improvements and successful execution of brand vision.
Defining Winners and Why They Win, and Why Laggards Fail Our definition of Retail Winners is straightforward. We judge retailers by year-over-year comparable store/channel sales improvements. Assuming industry average comparable store/ channel sales growth of six percent in 2010 compared to 2009, we define those with sales above this hurdle as “Winners,” those at this sales growth rate as “average,” and those below this sales growth rate as “laggards” or “also-rans.” It is consistent throughout much of RSR’s research findings that Winners don’t merely do the same things better, they tend to do different things. They think differently. They plan differently. They respond differently. Laggards also tend to think differently. They may have spectacular vision, but often fail on execution. They may forget the power and breadth of choices today’s customer has. They fail to re-invent themselves when it becomes obvious their existing business model is no longer working. They don’t change their business processes in an effective manner, and so they either eschew technology enablers, or don’t gain expected Return on Investment on those they DO buy. In good times, they skate by: in tough times these weaknesses come back to haunt them.
Survey Respondent Characteristics RSR conducted an online survey from June-September 2011 and received answers from 83 qualified retail respondents. Respondent demographics are as follows: •
Job Title: Senior Management (e.g., CEO, CFO, COO, CIO) Vice President Director/Manager Internal Consultant Staff/Other
•
23% 13% 44% 15% 8%
2010 Revenue ($ Equivalent): Less than $50 million $51 million - $249 million $250 million - $499 million $500 million - $999 million $1Billion to $5 Billion
24% 16% 8% 12% 30%
3
Over $5 Billion
•
10%
Year-Over-Year Comparable Store Sales Growth Rates (assume average growth of 3%): Worse than average Average Better than average – single digit growth Better than average – double digit growth
•
12% 31% 40% 17%
Headquarters/Retail Presence: USA Canada Latin America UK Europe Middle East Africa Asia/Pacific
47% 4% 8% 6% 14% 0% 6% 16%
4
56% 36% 20% 20% 26% 6% 8% 26%
•
Primary Category: Apparel, Footwear and/or Soft home Consumer Electronics General Merchandise and Hard Goods Groceries Hardware and Construction Drugs Jewelry and Accessories Home Furnishings Music, Books and Entertainment Prepared Food Fuel (Petrol) Auto Parts Miscellaneous Services Other
5
18% 10% 14% 20% 2% 7% 2% 4% 4% 4% 0% 2% 0% 20%
Business Challenges The Consumer Made Us Do It According to survey respondents, the primary reason they are addressing a consumer mobile strategy is because they see that consumers are already there and using it as part of their shopping experience (Figure 3).
Figure 3: Skating Towards the Consumer Mobile Puck Top 3 Mobile Business Challenges Winners
Others
Consumers are using mobile as part of their shopping experience and we need to be there
81%
We're seeing significant online traffic from mobile sources and need to respond
92%
42%
29%
Mobile technology is moving too quickly; we can't keep up
38%
Store sales are getting cannibalized; mobile can help
38% 33%
48%
31% 24%
Our competitors don't have a mobile strategy Our competitors have a mobile strategy and we need to respond
23%
Mobile price comparison at the shelf is hurting our business
4%
33%
24% Source: RSR Research, September 2011
But while respondents clearly indicate that consumer need is overwhelmingly the biggest business challenge they face, there are some big differences in perception of the business challenges beyond that first clear one. Retail Winners are more likely to focus on a more definable business need - that they are seeing the traffic on their online site increasingly come from mobile devices. They are also slightly more inclined to feel that store sales are getting cannibalized, while simultaneously seeing an opportunity - that their competitors have not yet figured out their mobile strategy. Laggards and other peers, however, are six times as likely to say that mobile price comparison is hurting their business (more on that below), as well as ironically noting that their competitors have a mobile strategy and they need to respond. More troublesome is the overall challenge for both Winners and their peers in struggling with the fast pace and "wild west" feel of the consumer technology landscape - citing the speed of change in consumer mobile technology as a top-three business challenge. The largest retailers in our survey report something of a double-bind: fully 50% of retailers with revenue greater than $1 billion say that mobile technology is moving too fast to keep up, but 45%
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of these respondents also report that their competitors have a mobile strategy and they need to respond.
Uncertainty Abounds Uncertainty is not limited to the largest retailers. When it comes to identifying the top challenges to creating a differentiating mobile experience, overall respondents report that they haven't yet figured out how to identify and accommodate different customer segments, that they have difficulty coordinating the mobile experience with other channels, and again that the consumer technology landscape is evolving too quickly (Figure 4). In other words, "we don't know what consumers want, we can't get organized internally to deliver it, and by the time we do, consumers have moved on." That makes for a very challenging environment for developing a mobile strategy.
Figure 4: Uncertain End-Users, Business Process, and Technology Top 3 Challenges to Mobile Differentiation Winners
Others
Understanding and accommodating how different customer segments engage with us
64% 60%
Difficulty coordinating with other channels to create a seamless cross-channel experience
60% 60%
The consumer technology landscape evolves too quickly
44%
25%
Consumers privacy concerns over how we collect or use data
36%
15%
We don’t know what the customer perceives as valuable/differential
28% 30%
The transparency - competitors can see and copy innovations too easily
16%
Consumer expectations limit how quickly we can innovate
16% 20%
The technology is not advanced enough to create the kind of experience we'd like to offer
25%
12% 10%
We don't want to do what our competitors are doing
5%
12%
Source: RSR Research, September 2011
The largest retailers - those over $1 billion in revenue - are more challenged by the difficulty of coordinating across channels. This is understandable to some degree - these retailers have larger investments in a larger status quo - especially with the existing investment made in eCommerce channels. It's also much rarer for a CEO to put a stake in the ground and say "we must do this" at this level than at a retailer in the $250 million or less range - where the CEO is most likely the primary owner of the business as well. At the smaller retailers, $250 million in revenue or less, the pace of technology change is far more threatening, which is also understandable. They don't tend to have the cushion to experiment that larger retailers do, even when the going-in investment is tens of thousands of dollars. 7
These complex challenges carry through to our pulse on retailers' general philosophy and approach to a mobile strategy. Overall, respondents agree that the consumer has evolved so rapidly that retailers have little choice but to have a mobile presence (Figure 5).
Figure 5: Consumers Just Move Too Quickly Mobile Philosophy - Statement Agreement Strongly agree
Agree
Neutral
Disagree
The customer has evolved so rapidly that we are forced to have a mobile presence
35%
Mobile's impact/best uses are not yet fleshed out
We have completely different goals for mobile shoppers than eCommerce shoppers
43%
24%
9%
Strongly disagree
57%
37%
13% 6% 3%
9% 9% 1%
35%
16% 3%
Source: RSR Research, September 2011
They also pretty strongly agree that mobile's impact or best uses have not yet been fleshed out. However, we also found that retailers that are already selling via mCommerce (those that reported any sort of mobile sales) were much less likely to agree with this particular statement than peers. In other words, they are finding that they're already on the learning curve and gathering important information about how consumers want to use the mobile channel - and what retailers can do to best position themselves to meet those needs.
What about the Impact on the Store? All of these challenges are well and good, but one of the main findings from our cross-channel strategy research was that retailers are increasingly concerned about cross-channel's impact on 2 the store. Mobile only exacerbates these challenges by exposing the inconsistencies between online and store, whether in pricing, product information, or even product availability. So how do retailers perceive how their mobile business challenges are impacting the store? To some degree, they see it as a non-issue, with 25% of respondents reporting that they haven't seen any mobile price comparison going on in their stores, and another 9% say that they completely ignore the impact of mobile price comparison at the shelf. However, these numbers have fallen significantly from our research of a scant eight months ago, when we focused specifically on the impact of price transparency on the retail enterprise. At that time, 43% of retailers said that they had yet to experience the joys of consumers using their 3 phones to check competitive prices on items at the shelf. 2
Enabling Buy Anywhere/Get Anywhere: The Future of Cross Channel, RSR Research, July 2011 3 Optimizing Price in a Transparent World, RSR Research, April 2011 8
st
While we delve more deeply into the topic in our recent store research, The 21 Century Store: The Search for Relevance, we did ask in this survey whether retailers were turning to employeefacing technology to respond to this more mobile-savvy consumer. We found that retailers, for the most part are still ignoring the topic (Figure 6).
Figure 6: Consumer Price-Check Ignorance What is the best policy for store employees to contend with mobile-informed consumers? Winners
Others 40%
Not yet an issue
32% 13%
Encourage employees to utilize their own devices in stores
9% 17% 18%
Provide mobile devices to store/department mangers
23% 27%
Provide mobile devices to all employees
Source: RSR Research, September 2011
However, an interesting trend is emerging - here, Winners slightly edge out their peers in reporting an interest in leveraging employee-owned devices to meet the information challenges that mobile-armed consumers are presenting in stores (13% vs. 9%, respectively). But the gap is just as apparent among retailers who have already achieved some kind of mobile sales - 13% of those retailers also report an interest in getting employees to use their own devices to compete with mobile-armed consumers, vs. 9% of those that have not yet achieved any mobile sales.
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Opportunities Engagement, Innovation, and . . . Engagement Retailers report their top three opportunities that a mobile strategy presents to the business, with a natural focus on the customer: deeper customer engagement to drive loyalty, the opportunity to drive innovation through mobile offerings, and deeper customer engagement to drive sales (Figure 7).
Figure 7: A Whiff of Opportunity for Differentiation Mobile Opportunities Very valuable
Somewhat valuable
Not valuable
Deeper customer engagement to build loyalty through mobile channels
73%
25%
2%
Identify innovative mobile use cases that no one else is doing yet
61%
27%
11%
Deeper customer engagement to drive sales through personalized offers
61%
27%
11%
Deeper insights into shopper behavior through mobile site or app insights
59%
34%
7%
Empower store employees through mobile site or app access in stores
41%
41%
18%
Mobile "save the sale" at the shelf
40%
42%
18%
Stop the decline in store sales
30%
36%
Mobile in-store concierge to alleviate some of the sales burden from store staff
27%
44%
Disrupt other retailers by providing a mobile experience that encourages the use of my‌
27%
Discourage the use of price comparison by offering another mobile option
16%
48% 41%
34% 29% 25% 43%
Source: RSR Research, September 2011
It's important to note that there is a certain amount of resignation when it comes to dealing with mobile price transparency - at the bottom of the list in terms of opportunities, only 16% of retailer respondents say that it is very valuable to them to try to use mobile to discourage the use of price comparison at the shelf.
We're Working On It In terms of maturity, clearly retailers are early on the consumer mobile maturity curve. This survey's respondents report that for the most part they are working to choose the right components to include in their strategy for consumer mobile (Figure 8).
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Figure 8: A Race Up the Mobile Learning Curve Consumer Mobile Strategy Winners
Others
We’ve been using it, are already targeting the right audience, and are happy with the results
5%
We’ve been using it, know what we are trying to achieve, but need to know how to measure
5%
12% 12%
We are working on selecting the right components to our mobile offering(s)
50% 43%
We would be willing to experiment if we could measure the impact we are having
15% 14%
We are willing to experiment even if we don’t yet know the outcome No plans
12% 19% 0% 14% Source: RSR Research, September 2011
However, more than twice as many Winners as their peers (24% vs. 10%) report that they have been using consumer mobile and either are starting to get an idea of what to measure or already feel comfortable with the results that they're getting. No Winners reported that they had no plans, vs. 14% of their peers. Consistent with the entry price tag to play in consumer mobile, the smallest retailers report being the most aggressive in their progress along the maturity curve - 36% of retailers with less than $50 million in revenue say they have been using it and are either seeing benefits now or are defining the right measures. However, they are also the biggest group to say they currently have no plans: 18% of these smallest retailers vs. 6% of overall respondents.
Defining Consumer Mobile Capabilities If the bulk of survey respondents are still working to identify which capabilities they want to include as part of their mobile strategy, then the next logical step is to take a look at the capabilities they report as being the most valuable. From a long list of possibilities, the top mobile channel capabilities that present the greatest opportunity for our retail survey respondents include search for merchandise, store locator, receive coupons/offers, and access product reviews (Figure 9).
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Figure 9: Top Mobile Opportunities Leverage the Phone or Personalization Mobile Channel Capabilities Very Important
Somewhat Important
Search for merchandise
Not Important 11% 6%
83%
Store locator
24%
76%
Receive coupons/offers
63%
Access product reviews
61%
31% 29%
0% 6%
10%
Check order status
55%
35%
10%
Access product ratings
54%
38%
8%
Redeem coupons/offers
53%
35%
12%
Source: RSR Research, September 2011
This list can be grouped into two general areas: those that leverage the innate capabilities of smart phones, and those that take advantage of the fact that a mobile phone tends to be a fairly personal device - one owner per device, in other words. Phone-Friendly Store locator, access product reviews and ratings are all capabilities that make the most of technologies that smart phones tend to come with these days - cameras for scanning, GPS for finding location, even click-to-call to contact a store directly. The retailer doesn't need to know anything about the customer in order to provide this information, but a customer with a smart phone will have a much easier time accessing richly detailed information than one with a basic "feature phone." Search for merchandise, while number one in terms of our respondents' opportunities, is a little more complex. While it may be possible to leverage smartphone capabilities to make product search faster - cameras for either barcode scanning or for image identification, for example - if the search involves any kind of browsing, retailers need to be very careful. RSR has done other research to evaluate mobile app capabilities and quickly found that browsing on a mobile phone requires a very well-thought-out approach to categorizing merchandise for browsing, with a deeper hierarchy (letting the user get closer to a limited set of results before presenting 4 bandwidth-heavy images), and with more summarized product detail pages that load quickly. Personalized In the other category, personalization, retailers value opportunities that let them reach individual consumers via their personal devices. Receive offers/coupons, check order status, and redeem coupons/offers all fall under this type of capability - either through a login on a mobile site or via a "registered" mobile app, shoppers can quickly access personalized information delivered right to them from the retailer. The only thing to keep in mind with these capabilities is to make sure that your company's priorities match up at least reasonably well with your customers. We have 4
Answering the Call: Emerging Best Practices in Consumer Mobile, RSR Research, October 2010 12
found in other areas of consumer research, for example, that consumers much more highly value being able to redeem offers via their personal mobile phones than being able to receive offers. Our survey respondents have the exact opposite priority.
The Bottom of the List The least important capabilities to our survey respondents (those that received the highest percent of respondents rating it "not important") include purchasing and redeeming gift cards, viewing the weekly ad, checking loyalty status, and the always-disruptive using barcodes to check price or availability (Figure 10).
Figure 10: Payment Types Near the Bottom of the Priority List Mobile Capabilities Rated "Not Important" Purchase gift cards
22%
View weekly ad
18%
Check loyalty status
16%
Use barcodes to check price or availability
16%
Register/redeem gift cards
16%
Source: RSR Research, September 2011
Given all of the recent movement in mobile payments, it's not surprising that retailers are putting relatively less importance on managing electronic forms of payment, including and most especially gift cards. However, again, it's going to be important for retailers to make sure that their priorities (or lack thereof) match up with consumer expectations. If retailers don't provide what consumers want or expect, someone else will - as the popularity of mobile apps like RedLaser have already proven when it comes to scanning barcodes. If shoppers are going to do it anyway, is the retailer better off fighting mobile price comparison, or enabling it - and tracking it, and giving themselves an opportunity to either head it off or at least have a competitive shot at winning the price-checking shopper's business?
Winners vs. Peers: Day and Night Looking at opportunities by retailer performance yields a stark difference between the priorities that Winning retailers assign to certain mobile capabilities vs. the priorities assigned by their peers. Winners seem to be laser-focused on opportunities that relate to selecting and purchasing products (Figure 11).
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Figure 11: Performance-Based Priorities: Purchasing vs. Promoting Mobile Capabilities That Winners Value More Winners
Others
Winners
86% 77%
Search for merchandise Access product reviews Access product ratings Buy merchandise Click to call
Mobile Capabilities That NonWinners Value More Others
70% 82%
Store locator Receive coupons/offers
67% 55%
Redeem coupons/offers
56% 48%
View weekly ad
52% 45%
Use barcodes to check price or availability
48% 36%
48% 81% 44% 59% 48% 55% 33% 45%
Source: RSR Research, September 2011
In fact, when you look at the list of capabilities that Winners valued more highly than their peers, you get a basic description of a path to purchase: search for merchandise, access product reviews and ratings, buy merchandise, and if there are any issues along the way, have easy access to click to call for help. Non-winners have a completely different list of capabilities that they gave higher priority to, and with the exception of the store locator at the top of the list, the rest of the capabilities are mostly about promoting to consumers: receive and redeem offers, view the weekly ad, price check using the barcode (which could be especially powerful when combined with the ability to send offers to a consumer's device). Consistent with our past research on cross-channel, we find that Winning retailers are focused more initially on what could be considered basic commerce functionality - the minimum needed today for a consumer to make a purchase decision. Each of these steps also have a different sort of value proposition when considered as part of a cross-channel purchase - you don't need a "buy" button on the phone to give in-store shoppers access to product reviews. But if the product doesn't happen to be on the shelf, having that buy button sure helps capture a sale that might otherwise have been lost.
The Lowest-Hanging Fruit Gets Picked Quickly Overall, retail respondents to this survey report that they are making good progress against the capabilities they most value. While the biggest gaps are big - search for merchandise and receive coupons/offers in particular - these gaps are still narrower than many cross-channel capabilities that RSR has evaluated in the past (Figure 12).
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Figure 12: Fast Progress Against Capability Gaps Mobile Capabilities - Value ("Very Important") vs. Current Use Value
Use 83%
Search for merchandise
35% 76%
Store locator
48% 63%
Receive coupons/offers
Access product reviews
Check order status
32% 61% 26% 55% 25% 54%
Access product ratings
31% 53%
Redeem coupons/offers
29% Source: RSR Research, September 2011
Store locator, especially when GPS-enabled, becomes almost a requirement to have available on mobile, but even more difficult capabilities show a surprising amount of progress. For example, check order status and redeem coupons/offers both require a lot of integration with other systems - including POS systems for redemption - and they each have at least a quarter of retail respondents reporting that they have those capabilities in place today. Contrast that with a little over half of retail respondents to RSR's cross-channel strategy survey, who report that they currently enable buy online/pick-up in store - and that’s something retailers have been chasing for 5 at least the last four years. It won't take four years for retailers to double some of the more complex mobile capabilities, either. According to survey respondents, it looks like mobile access to product reviews will be widely available by the end of 2012, with receiving coupons/offers and search for merchandise close on its heels (Figure 13).
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Enabling Buy Anywhere, Get Anywhere: The Future of Cross-Channel, RSR Research, July 2011. 15
Figure 13: Big Spending Plans on Mobile Capabilities Mobile Capabilities - Investment Plans Budgeted Project
Planned, Not Yet Budgeted
Access product reviews Receive coupons/offers
28%
15%
23%
19%
Buy merchandise
17%
Check loyalty status
17%
21%
Purchase gift cards
17%
21%
Click to call
17%
21%
Register/redeem gift cards
17%
28%
17% Source: RSR Research, September 2011
In some ways, the massive amount of intended progress reported by retailers is emblematic of mobile opportunity in retail today: because of retailers' experience in eCommerce, their appetite to take on some of the more complex capabilities available to mobile is larger than it has historically been for say, cross-channel or even eCommerce alone. When you couple that with a relatively low cost of entry and a cadre of vendors focused on making that entry even easier and cheaper, one key difference that we expect to see between mCommerce and eCommerce is that mCommerce's learning curve will be much shorter - and the ride that much faster.
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Organizational Inhibitors Mobile Has an Uphill Journey We aren’t surprised to see that resource challenges top the list of reasons why retailers haven’t seized more of the opportunities they see mobile solutions providing. In ascending order of difficulty, the top-three roadblocks are having the necessary resources to manage all of the available eCommerce and Mobile opportunities (a gating factor reported by retailers in virtually all of RSR’s eCommerce-specific research to date), overall budgetary constraints, and difficulty in quantifying Return on Investment. More problematic, however, are the number of retailers who are frozen in their tracks due to the rapid pace at which mobile technologies change (28%, Figure 14).
Figure 14: Stuck in the Mud Please identify the top three (3) organizational inhibitors standing in the way of taking advantage of these opportunities: 60%
ROI is hard to quantify Budgeting - there is little capital investment available
51%
We don't have enough eCommerce/Mobile resources to manage all the available opportunities Difficulty getting IT resources for eCommerce/Mobile projects Mobile technology changes too quickly for us to be able to make solid investments Stores don't understand the mobile, social, or crosschannel opportunities
19%
Stores are a higher technology investment priority
19%
40% 37% 28%
Our executive team doesn't understand the mobile opportunity We don’t know how to turn data gained from mobile channels into actionable business intelligence The marketing organization does not understand the digital strategies we need to support…
16% 16% 9% Source: RSR Research, September 2011
As we’ve already noted, this rate of change is not going to slow down; in fact, if a brief history of modern technology teaches us anything, it’s that the rate of change will only accelerate at breakneck speed. Consumer adoption is certainly not going to slow, and the technological capabilities of mobile devices and their users are guaranteed to “hockeystick” in an upward direction. For this reason, it is imperative that stores understand the mobile, social, and crosschannel opportunities of mobile technologies – currently, 19% of retailers cite this as an inhibitor to forward progress. What then, do retailers self-identify as some primary means to get past the notion that they can wait to implement mobile solutions until a time when the technology is no longer such a moving target?
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The Way Forward Much of the answer resides in a role that does not currently exist in most retail organizations: a chief customer experience officer. Sixty percent of retailers admit that a single executive, charged with ensuring the customer has a seamless experience across whichever channel – or technology – she chooses to engage is vital to becoming “unstuck” (Figure 15). However, the opportunities to get past roadblocks do not stop there.
Figure 15: Much Help Needed Please rate the value of the following in overcoming the organizational inhibitors you face to improving the mobile customer experience: An executive tasked with managing and improving the overall customer experience More coordination between selling channels and marketing Solutions that don't burden our IT department
60% 51% 47%
More experimentation
37%
Third parties to help guide us through a bewildering mobile landscape Investment in a streamlined technology platform or infrastructure
36% 33%
Case studies/success stories in my vertical
26%
More customer involvement in mobile development programs
24% Source: RSR Research, September 2011
More coordination between selling channels and the marketing department are fast becoming hot-button issues for retailers looking to embrace more – and better – mobile opportunities (51%, above). This trend has also emerged in our recent eCommerce, Omni-channel, Merchandising, and Store-based research over the past 12 months as an important step to overcome internal barriers. Further, Retail Winners are even more bullish on utilizing third parties to help guide them through the bewildering mobile landscape: 48% of Winners cite high value vs. only 21% of all other respondents in employing third party mobile expertise. Yet in a very interesting data point, while Winners look to third party experts more so than do their competitors, one place they are not looking to for guidance is from the customer, herself. Only 13% of Winners ascribe value to utilizing more customer involvement in mobile development programs; 27% of average and lagging performers look to glean insight from this type of increased customer involvement. Winners are clearly placing their bets, and the future of their mobile strategy, on expert information. As such, Winners perceive that the customer may be just as confused by a future of how they will utilize their personal mobile devices in the shopping experience as retailers are themselves right now.
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More Players Required Even though retailers want more coordination with the marketing department than they currently have, in aggregate, our respondents tell us that marketing, and the chief marketing officer in particular, are appropriately involved to-date in the strategic direction and management of mobile. The same cannot be said for the CIO, eCommerce Executives, and to a lesser degree, the CEO (Figure 16).
Figure 16: Input in Demand Who CURRENLTY particpates in the strategic direction and management of Mobile/Who SHOULD increase their participation? 26%
CIO
62% 51% 52%
Chief Marketing Officer 26%
eCommerce Executive
52% 34%
CEO
40% 38%
Store Operations Executive
37% 35%
Chief Merchandising Officer 26% 30%
CFO COO Supply Chain Executive
45%
20%
29%
17% 18% Source: RSR Research, September 2011
Further, when asked which departments can benefit the most from information gained via mobile solutions, 82% of survey respondents cite marketing, 68% say customer service, 52% cite storespecific sales, and 50% site online-specific sales. From this data, RSR can decisively suggest that every retail organization consider enacting a cross-functional team to map out its mobile strategy, comprised of IT, marketing, eCommerce, store operations, and financial line of business executives. In fact, when a chief customer experience officer has been established, that person becomes an important driver of the strategic conversation. However, absent that role (as is currently the case for most retailers), such a team is absolutely imperative. Let’s now examine the ways in which technology can help with forward progress.
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Technology Enablers To App, or Not to App So far, we’ve seen that retailers find no shortage of opportunities from mobile technologies. But due to copious resource and infrastructure challenges, as well a pervasive sense that the consumer’s adoption of mobility and its evolving capabilities is moving at a pace too quick to catch, many are still in wait-and-see mode. It should come as no surprise, then, that retailers are vaguely ambivalent as to what a strong mobile offering even looks like. While 79% know that a cut and paste version of a full eCommerce site is simply not a viable mobile strategy, the field is split nearly down the middle as to the value of a downloadable app. In fact, 33% of retailers are entirely “neutral” on their feelings about mobile apps, another 20% completely disagree that it will yield more engagement than a mobile site, and another 47% think it will hold value for their brand offering.
Figure 17: Lots of Neutrality Please indicate the degree to which you agree or disagree with the following statements: Strongly Agree
Agree
Neutral
A downloadable app will yield more engagement than a mobile site
Disagree
9%
A cut and paste version of a full eCommerce site 1%7% 12% is a viable mobile strategy
Strongly Disagree
38%
33%
51%
19% 1%
28%
Source: RSR Research, September 2011
It is RSR’s strong contention that only those brands who can thoroughly justify frequent (if not daily) interaction with a downloadable application consider it the backbone of their mobile strategy. Consider your brand’s place in the customer’s lifestyle: do your products and services evoke passion in the consumer? What value would she derive from opening – and engaging with – your brand’s application as part of her already-crowded list of daily activities? Only those who can guarantee value from such engagement will avoid being relegated to a back screen/folder – or worse yet – deleted entirely from the consumer’s personal device.
Winners Keep Their Eye on the Ball In aggregate, the platforms retailers identify as most important to tackle fall squarely in line with retail sales of mobile devices, as iPhone and Android-driven devices take top honors (92% and 87%, respectively, Figure 18). Because this is the first study of its kind, we do not have year-overyear data available for comparison, but based on the recent spike in Droid sales, we anticipate that Android will only continue to grow in importance for retailers. However, Retail Winners 20
disproportionately ascribe higher value to all of the platforms offered to them: 54% selected RIM (vs. 43% of all others), 32% chose Windows 7 platform (vs. 10% of all others), and 29% of Retail Winners (vs. 19% of all other retailers) said they still feel feature phones are important to support. In short, Winners are not backing away from any mobile platforms – wherever and however customers are using mobile phones, Winners feel it is important to be there. This also applies to tablets – 54% of Winners identify tablet platforms as important to support, vs. 38% of their underachieving competitors.
Figure 18: Device Sales Dictate Platform Importance Which mobile platforms are most important to tackle? iPhone
92%
Android
87%
RIM (Blackberry)
51%
Tablets
49%
Windows 7
25%
Feature Phones (SMS, very basic mobile web) HP Com
23% 6% Source: RSR Research, September 2011
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The Wireless Story Continues st
Earlier this year in our annual State-of-the-Store Report, The 21 Century Store: The Search for Relevance, retailers told us they see vast opportunity to interact with in-store customers in fascinating new ways via the consumer’s personal mobile device – both by driving customers to the store, and in communicating with them once inside. One missing link in this chain has been how retailers will engage with consumers via mobile devices - will they rely on cellular networks? Or provide their own public wireless network? Figure 19 confirms that retailers are rapidly moving away from anticipating that cellular carriers will shoulder most of the burden.
Figure 19: Wireless Value Drastically Outweighs Adoption and Plans Which of the following best describes your stance on retailer-provided Wi-Fi in stores? It adds some value
32%
It is a must
30%
It adds minimal value
16%
It's a PCI/data security risk
9%
We don’t have stores
7%
It adds no value at all
7%
Source: RSR Research, September 2011
However, just as in our Store Report this year, it is somewhat jarring to see that even though a vast majority of retailers ascribe value to retailer-provided wireless in stores, (78% of retailers in this case) very few have yet to do anything about it. In fact, in Figure 20, below, 56% tell us they have no plans whatsoever to fold in public WiFi to their stores. We did not mince our words earlier this year – from that report: Quite simply, as it pertains to wireless networking in the store, retailers just aren’t moving quickly enough… they are steadily warming to the fact that wireless devices are driving traffic to the store, but they have become red-hot for tapping those wireless devices’ potential once inside the store, itself. Even further still… they want to use social networking opportunities to engage with consumers while they are in-house. Yet… 30% still have no wireless network – of any kind – available in stores, and only 12% have wireless available for their customers. As anyone who has ever tried to access Facebook during peak hours on a cellular connection will tell you – this just doesn’t cut it. In order to interact with customers in any way via the consumer’s personal device, Wi-Fi is an absolute must.
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And as the widespread advent of 4G networks promise to increase the amount of content-rich data streaming to smartphones at any given moment, many telecommunications experts believe that the bandwith of cellular networks will soon become even more congested, causing cellular connectivity to become less reliable than the 3G networks of today. If this holds true, free Wi-Fi will become an even more compelling reason for customers to shop your stores."
Early Days Across the board, even when looking at the highest performers, retailers have not done much with mobile yet. However, based on the sheer volume of opportunities they’ve already identified in the Opportunities section of this report, coupled with the amount of budgeted and planned projects shown here in Figure 20, we expect that will not be the case when we conduct this research again in 12 months’ time.
Figure 20: Follow the Budget and Plans How long has your company been actively involved in the following technology-enabled processes in attempting to improve your Mobile presence? More than 1 year
Less than 1 year
Budgeted Project
An ecommerce site that can extend to mobile
10%
Planned, not Budgeted 36%
18%
Public WiFi in stores
8%
18%
13% 5%
A mobile-specific development provider
8%
21%
18%
Downloadable shopping app 5%
26%
Mobile-capable content management 5%
Mobile capabilities delivered via the cloud/SaaS 3%10% Downloadable branded apps (games, lookbooks, etc) 3% 16% Write once/deploy many mobile development platform 3% Mobile PCI certification An advertising agency with mobile experience
8%
23%
33% 33% 44%
23%
44% 47%
23%
15%
10%
21%
26%
18%
13%
33%
31%
18%
23%
15%
21%
18%
21%
23% 56%
5%
33%
Device/OS management and maintenance services (to 3% 15% keep up with changing devices)
No plans
23%
18% 21%
28% 49% 41%
Source: RSR Research, September 2011
Twenty three percent of all retailers have budget set aside to ensure that the mobile developments they take on are repeatable across multiple platforms. And while 21% already have budgeted for mobile capabilities delivered via the cloud (or a Software as a Service model), another 23% have plans for offerings that leverage such delivery models.
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Too Soon to Lock In Because retailers are so early in their adoption cycle of mobile solutions, it is important to examine those technologies which they perceive to hold the most value for them in the near future – particularly for those retailers whose sales are already outperforming the competition (Figure 21).
Figure 21: Winners Take the Long View How do you perceive the value of the following technologies? (% 'Very Valuable') Winners
Others 77%
An ecommerce site that can extend to mobile Write once/deploy many mobile development platform
35%
88%
73% 64% 71%
Mobile-capable content management
45% 38% 41% 31% 36% 25% 36% 47% 27% 35% 27% 19% 18% 31%
Mobile PCI certification Device/OS management and maintenance services (to keep up with changing devices) A mobile-specific development provider Downloadable shopping app Mobile capabilities delivered via the cloud/SaaS Downloadable branded apps (games, lookbooks, etc) An advertising agency with mobile experience
Source: RSR Research, September 2011
Retail Winners are slightly less inclined to envision a future where the eCommerce site is simply extended out to the mobile channel (77% vs. 88% of all others). In a related notion, they look to outside advertising agencies with mobile experience less than do their competitors, as well (18% of Winners, 31% of all others). Instead, Winners are much more focused on the ability to write once and deploy across multiple mobile platforms than are average and underperformers (73% vs. 35%) – another clear indicator that the best performers take a broader view of what mobile really looks like as it relates to how consumers use mobility. While all retailers recognize that mobile devices, their capabilities, and shoppers’ willingness to use them are very difficult to predict, the best retailers understand that “the next big thing” in mobile devices – or platforms – may be just around the corner at any given time; these are not static times, and therefore any mobile offering must be built with an innate flexibility to accommodate whatever trends emerge – and quickly.
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BOOTstrap Recommendations Mobile commerce’s learning curve will be much shorter, but it will also be more complex. Mobile is a moving target on the process side, as consumers try to figure out how to best use mobile as part of the shopping process. But it is also a moving target on the technology side, as leaps and bounds in technology constantly change what mobile phones are capable of doing. The following are some baseline recommendations to optimize your mobile efforts.
Don't Let Speed of Change Frighten You Indeed, the retail uses of mobile technologies are still in their early days. Even so, it is safe to predict that uses of new mobile innovations will become deciding factors for some retailers’ ability to thrive, and an accelerant for others’ demise. While significant R&D is still required (much of it will occur on trial and error basis), the good news is that the playing ground is relatively level for retailers of all segments and sizes. Piloting new ideas which capitalize on mobile technologies comes at a much lower price tag than have more “traditional” lessons in eCommerce or store systems experimentation. The key is to at least be in the game.
Use Consumers to Help Shape your Strategy While it's true that consumers probably would not have given useful feedback for the idea of a Sony Walkman or iPod - or automobile, for that matter - there is still an important role for consumers in developing your mobile strategy. Even though consumers may not be able to tell you exactly what they want in a mobile offering, you should use them to validate that what you've done works. User Interfaces might be different, use-cases might be different, but it’s important to remember that mobile consumers are often operating in a different context than eCommerce consumers browsing from the comforts of home. Laggards currently pursue using the device as a promotional foothold into consumers' lives – this is a bad idea. While sorely tempting to try, it is something you can only achieve if you have their trust to begin with. The best way to win that trust is to be useful – which can be established by providing in-store access to product ratings and reviews, or enabling purchase at the shelf of an out-of-stock product.
Carefully Consider/Approach a Customer Experience Officer Absent this role in the modern day retail enterprise, retailers will continue to fall short on guaranteeing a seamless shopping experience across channels. We are very confident in this recommendation, based not only on survey responses from myriad current research reports, but also because RSR has recently undertaken several projects to evaluate top retailers’ cross channel offerings: we were thoroughly surprised (and in many cases, let down) by even topranked brands’ inconsistencies across such channels as stores, eCommerce, and mobile. The temptation is to "just throw it all into one organization" - headed by a Chief Customer Experience Officer. While this offers some benefits, it also comes with risks. Hence, for retailers who want to approach the idea of implementing a Chief Customer Experience officer, we suggest maintaining realistic expectations for what this person should own and manage, a move away from matrixed organizations, and ensuring that the candidate has enough credibility to wrangle both eCommerce and store operations.
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Rethink Wireless For those retailers who do operate stores, consumer-owned mobile devices provide endless new opportunities to engage with their customers inside the store’s walls. The caveat here is that to communicate effectively, particularly as richer mobile media emerge, retailers must have the wireless infrastructure to engage in the first place. Relying on cellular is not enough in concrete big-box stores and malls. The time is at hand for a hardened rethink of customer-facing and secure wireless networks in stores.
Strategize Across Platform Retail Winners have spoken: no mobile platform should be left behind. From its inception point, any mobile offering must be built with the flexibility to operate across multiple mobile platforms and devices in order to make best use of already-strained internal resources. Lastly, not all new endeavors will be successful. But consider this: the consumer already wants to use the device she has in her purse; even if a new tactic falls short, she’ll be eager to try it, and will likely reward you for trying. Certainly, if you don't provide something, someone else will disintermediating the retailer at their own shelf, in their own store.
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Appendix A: RSR’s Research Methodology The “BOOT” methodology is designed to reveal and prioritize the following: •
•
•
•
Business Challenges – Retailers of all shapes and sizes face significant external challenges. These issues provide a business context for the subject being discussed and drive decision-making across the enterprise. Opportunities – Every challenge brings with it a set of opportunities, or ways to change and overcome that challenge. The ways retailers turn business challenges into opportunities often define the difference between Winners and “also-rans.” Within the BOOT, we can also identify opportunities missed – and describe leading edge models we believe drive success. Organizational Inhibitors – Even as enterprises find opportunities to overcome their external challenges, they may find internal organizational inhibitors that keep them from executing on their vision. Opportunities can be found to overcome these inhibitors as well. Winning retailers understand their organizational inhibitors and find creative, effective ways to overcome them. Technology Enablers – If a company can overcome its organizational inhibitors it can use technology as an enabler to take advantage of the opportunities it identifies. Retail Winners are most adept at judiciously and effectively using these enablers, often far earlier than their peers.
A graphical depiction of the BOOT follows:
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Appendix B: About RSR Research
Retail Systems Research (“RSR”) is the only research company run by retailers for the retail industry. RSR provides insight into business and technology challenges facing the extended retail industry, providing thought leadership and advice on navigating these challenges for specific companies and the industry at large. We do this by: •
Identifying information that helps retailers and their trading partners to build more efficient and profitable businesses;
•
Identifying industry issues that solutions providers must address to be relevant in the extended retail industry;
•
Providing insight and analysis about a broad spectrum of issues and trends in the Extended Retail Industry.
Copyright© 2011 by Retail Systems Research LLC • All rights reserved. No part of the contents of this document may be reproduced or transmitted in any form or by any means without the permission of the publisher. Contact research@rsrresearch.com for more information.
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