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The most successful retailers are providing a compelling mobile experience for tablet- and smartphone-based shopping.
The most successful retailers are providing a compelling mobile experience for tablet- and smartphone-based shopping.
• Cognizant ReportsRetail Mobility: Consumers in ControlThe new playing field for retailers is a mobile one, and the mostsuccessful retailers are overcoming challenges to provide a compellingmobile experience for tablet- and smartphone-based shopping. Executive Summary technology and the rapidly evolving landscape of The retail industry has embraced the ubiquity of third-parties and their related solutions. mobile devices across the consumer landscape. Studies of shopping behavior clearly indicate Mobility is one of the few areas where retail has increased reliance on mobile devices, especially led other industries. Most mobility investments by value-driven consumers for product research have been driven by the ever-increasing number and comparison. of consumers — existing and potential — armed with smart devices with access to high-speed Large retailers are responding by both acceler- Internet and the resulting demand for mobile ating and continuously fine-tuning their mobile shopping solutions. But mobility in retail has also commerce channel strategies. Retailers across been impacted by third-party applications and categories have had varying levels of success offerings such as RedLaser and Decide, which in harnessing mobility, but the trend is clear: provide intelligence to customers unavailable just Successful retailers are those that are succeeding a short time ago. with mobility. The interplay of the various actors in this The 2011 U.S. holiday shopping season witnessed environment affects the outcome for retailers an explosion in shopping conducted using mobile striving to build a successful mobile commerce devices such as smartphones and, increasingly, channel. Factors include their strategies around tablets. Various surveys revealed a sharp rise in app development and design; their understand- the number of mobile devices used to research ing of — and response to — consumers mobile and purchase products over the previous year, shopping behavior; the way they leverage lessons especially on key shopping days like Black Friday. learned from the first wave of e-commerce; and a This indicates a fundamental shift in how consum- desire to keep pace with the plethora of platforms ers have begun to approach the mobile shopping and applications proliferating today. proposition, one that is likely to be even more pro- nounced in the current holiday shopping season. Additionally, the growth of tablet usage has The new playing field comes with its own chal- created an even greater impetus for retailers lenges, the biggest being continuously changing to develop and execute a mobile strategy. cognizant reports | december 2012
Tablet owners shop more, have a higher conver- with superior tools, strengthened their purchasesion rate and ultimately spend more using their decisions and improved their overall shoppingtablets than do the owners of smartphones — due experience. According to a Google study, 77%primarily to the improved shopping experience. of tablet owners used their devices for shoppingTablet customers and applications should be the during the 2011 holiday season.2 A National Retailhighest priority for retailers today. Federation survey notes that 37.4% of consum- ers with tablet devices used them to conduct pre-Mobile strategies must address capabilities purchase research during the 2011 Black Fridaythrough both mobile browsers and applica- weekend, and 25.7% used them to buy products.3tions. While customers can be attracted throughthe browser, many retailers feel they can best Our research, conducted with over 2,000retain customers through capabilities only shoppers in 2012, confirms that mobile check-possible through a mobile app — thus the need out and payment are not yet embraced by thefor both. However, shoppers are growing more majority of consumers, but younger shoppers andaware of the demands that mobile applications high-income shoppers show the highest propen-place on their smartphones, and retailers need sity to take this approach. Thus, we believe it isto be careful of overloading capabilities and, a matter of “when” and not “if” retailers shouldsubsequently, data and battery usage. begin developing mobile checkout capabilities (see Figure 2, next page). (For more detail, exploreMobile Commerce Trends our Third Annual Shopper Experience Study,Mobile-led shopping is on the rise. Moreover, conducted with RIS News, “Enabling Retailmobile-empowered consumers are rewriting Without Boundaries.”)the rules of the retail game, compelling retail-ers to play along. Retail revenues generated by The Tablet Phenomenonthe mobile commerce channel are projected to According to research from the E-tailing Group,influence 17% to 21% of all store sales by 2016.1 tablet owners use their devices for shopping to a greater degree than smartphone owners.One reason: Consumer bargain-hunting is The survey found that 69% of tablet ownerssignificantly bolstered by smartphones and rated their recent shopping experiences viatablets. With economic uncertainly abounding, these devices superior to the smartphone, withshoppers who engaged in "digital deal-seeking" 39% reporting a significantly better experi-during the 2011 holiday season utilized their smart ence. The remaining 30% rated their shoppingdevices to research products, compare prices and experience as somewhat better vs. shopping withsecure the best discounts available (see Figure 1). their smartphones.4These near-ubiquitous devices equipped buyersShopper Use of Smartphones Leading into the 2011 Holiday Season Looked up product information 57% Compared prices 52% Searched for coupons 47% Scanned a barcode or QR code 43% Checked inventory availability 40% Redeemed a digital coupon 39% Used shopping app to earn points 30% Used mobile payment 24% 0% 10% 20% 30% 40% 50% 60%Source: Shoppersciences.com Holiday Shopping 2011 SurveyFigure 1 cognizant reports 2
Features that make the tablet more enjoyable for visitors are more likely to make a purchase andshopping include a larger screen and better user spend more per purchase than other visitorsfunctionality for browsing. A significant amount using other devices.5 Adobe also predicts that forof online shopping is done in the comfort of a the 2012 holiday season, tablets will spearheadliving room, and with their larger display and the online sales channel. Tablets will constituteimmersive features, tablets enhance the entire 13.5% of all online sales, followed by smartphonesshopping experience. Also, tablet owners tend (6.5%) and other devices such as e-readers (1%).to be gadget-buying early adopters — young,educated and affluent and, hence, traditionally The average order value (AOV) by tablet visitorsgreater spenders. was 16%, 56% higher than smartphones and laptop/PC purchases for the 2011 holiday seasonA Forrester/Bizrate survey clearly indicates that (see Figure 4, next page). The AOV of purchasestablet owners across all age groups use these made using tablets also remained significantlydevices for shopping and prefer tablets over smart- higher than smartphone and laptop/PC visitorsphones for shopping-related activities (see Figure on Black Friday and Cyber Monday.3, next page). The trend is more prominent amongthe younger Gen Y and Gen X consumers, as they Retailer strategies for the 2012 holiday seasonare early adopters of gadgets. In fact most Gen X, and beyond should focus on developing Web sitesGen Y and baby boomer consumers find shopping and apps optimized for the unique user experi-on a tablet at least as convenient as on a PC. ence offered by tablets. This may encourage these consumers to shop more than they do whenAdobe Digital Index analyzed the more than visiting sites optimized solely for smartphones16.2 billion online transactions of over 150 U.S. or traditional computers. Further, they shouldretailers in 2011. The research indicates that tablet develop promotions and incentives that appealHigh-Income Shoppers Show Highest Propensity to Use Mobile Checkout Electronics >$150K $75K - $149K $25K - $75K <$25K Apparel >$150K $75K - $149K $25K - $75K <$25KHealth & Beauty >$150K $75K - $149K $25K - $75K <$25K Grocery >$150K $75K - $149K $25K - $75K <$25K Household >$150K $75K - $149K $25K - $75K <$25K 0% 20% 40% 60% 80% 100% In-store Web site Mobile (using smartphone) Mobile (using tablet) Phone and othersSource: “Enabling Retail Without Boundaries,” Third Annual Cognizant Shopper Experience Study,conducted with RIS News, 2012Figure 2 cognizant reports 3
Consumers Prefer Shopping on Tablets 65% I use my iPad/tablet more 72% than my smartphone for 67% shopping-related activities 51% 60% It is as easy to visit and/or buy 62% from retail sites on my iPad/ 57% tablet as it is on my computer 42% 73% I would buy/have bought 70% from a retail Web site 64% using my iPad/tablet 48% Gen Y Gen X Boomers SeniorsSource: Forrester/Bizrate Insights, Q2 2011 Tablet Commerce Flash Online SurveyFigure 3more directly to tablet visitors and/or utilize the Apps vs. Mobile Browserstablet user experience. Dedicated mobile applications have been a cornerstone of retailers mobile strategies sinceConversion rates from tablets are also substan- the introduction of the iPhone in 2007. Ourtially higher than those from smartphones. research indicates that 26 of the top 30 retailersFor the 2011 holiday season, the conversion (by revenue) have a dedicated iPhone app, andrates from tablets were 1.8% higher than those 23 have optimized their Web sites for the iPhoneof smartphones. The rate further increased on browser. Our study also suggests, however, thatBlack Friday and Cyber Monday, when they were consumers, overall, do not show a preference for2.4% and 3.2% higher than smartphone visits a dedicated app across all stages of the purchas-(see Figure 5, next page). ing cycle. In some cases, they display a marked disinclination toward using a dedicated app overWith the number of tablet owners expected to a Web site optimized for mobile browsers, accord-skyrocket over the next few years, these shoppers ing to an Adobe survey (see Figure 6, next page).potentially constitute the most important marketsegment that successful retailers will factor into Consumers seem to prefer browsers overtheir mobile and merchandising strategy in the dedicated apps because of the convenienceyears ahead. of simply typing their queries directly into theTablets Claim Higher Average Order Value $91 Black Friday $119 $129 $100Cyber Monday $113 $123 $71 2011 Holiday $96 Season $111 $0 $20 $40 $60 $80 $100 $120 $140 (Average order value across devices) Smartphone Laptop/PC TabletSource: Adobe Digital Index Report, 2011Figure 4 cognizant reports 4
Tablet Conversion Rates Substantially Higher Than Smartphones 1.0% Black Friday 4.4% 3.4% 1.0%Cyber Monday 4.8% 4.2% 0.70% 2011 Holiday 3.2% Season 2.5% 0% 1% 2% 3% 4% 5% 6% Smartphone Laptop/PC TabletsSource: Adobe Digital Index Report, 2011Figure 5browser instead of having to first search for and achieved a higher percentage of sales throughthen download apps from an app store. Given that mobile devices than their competitors (seethe mobile browsing and search environments for Figure 8, page 7).most devices closely resemble the desktop expe-rience, it seems that desktop-based browsing RSR research also indicates that most retailersbehavior is being transferred to the mobile envi- are looking to leverage mobile devices to increaseronment. Finally, most consumers are unlikely to customer interaction and intimacy and also todownload and maintain a large number of apps. provide better tools to their associates. This objective was given higher priority than “save theRetailers’ Mobile Strategies sale,” indicating that retailers view mobility as aOur study of retailers’ mobile strategies reveals strategic capability (see Figure 9, page 7).significant variations in their pursuit of growthin the online and mobile channels. A major However, when retailers’ planned investments invariation is the extent of sales achieved the mobile channel are assessed, this strategicthrough e-commerce/mobile channels. Studies intent is less visible. Most retailers seem tofrom Retail Systems Research (RSR) indicates be playing catch-up and are still working tothat retail leaders (those that have grown faster develop baseline capabilities (see Figure 10,than the average industry growth rate of 8.85%8) page 8). Using our annual Shopper Survey asShoppers Prefer Browsers to Mobile Apps 67% 72%Mobile Web browser 68% 63% 33% 28% Mobile application 32% 38% Browsing and searching products Researching and reviewing products Registering/receiving online Purchasing and order tracking promotions and couponsSource: Adobe Mobile Consumer SurveyFigure 6 cognizant reports 5
a guide, most shoppers are giving retailers a regarding customer preferences, return onreasonable timeframe in which to integrate mobile investments and technological approach.capabilities throughout their organizations;however, younger and more affluent shoppers Large Retailers’ Strategieswill be most sensitive to these gaps. Thus, while During the first quarter of 2012, Cognizantretailers might be able to make it through the Business Consulting’s Retail Practice compared a2012 shopping season without true mobile number of U.S. retailers’ mobile capabilities acrossintegration, we don’t believe shoppers will grant several parameters. The intent was to study thethem the same latitude during 2013 and beyond. variations, if any, in their mobile capabilities and technical platforms, as well as to assess the rangeThe challenges of implementing a robust mobile of services implemented to capture the attentionstrategy are exacerbated by the sheer variety of the mobile-enabled consumer (see Figure 11,of technologies and platforms, the rapid pace page 8). Findings include:of growth of new technologies, and uncertainty Quick TakeTo App or Not to AppRetailers lagging behind in the race to offer mobility have either been hampered by resource andinfrastructure challenges, or are feeling overwhelmed by what they see as the scorching pace ofadoption and the leaders’ rapidly evolving capabilities. Also, many are unable to decide whether tointroduce an app or use the conventional e-commerce Web site for their offerings.According to a survey by Adobe, despite all the attention branded apps received in 2011, the connectedconsumer does not like shopping via branded smartphone or tablet apps. Instead, a significantmajority chose smartphone or tablet mobile browsers as their preferred platform.6 Even as investmentsrise, successful retailers will need to continuously evaluate how their apps integrate with the lifecyclesof targeted consumers.Another survey by RSR reveals that 33% of retailers remain “neutral” on mobile apps, and 20% do notbelieve apps will yield more engagement than a mobile site.7 Meanwhile, 47% think mobile apps willadd value to their brand offering, and 79% feel that just creating another version of a desktop-basede-commerce site is not a viable option (see Figure 7).Will an App Be Apt? A downloadable app 9% 38% 33% 19% 1% will yield more engagement than a mobile site 1% A cut-and-paste version 12% 51% 28% of a full e-commercesite is a viable mobile strategy 7% 0% 20% 40% 60% 80% 100% Strongly agree Agree Neutral Disagree Strongly disagreeSource: Retail Systems ResearchFigure 7 cognizant reports 6
Retail Leaders Sell More Through Mobile DevicesLeaders* 10% 17% 24% 41% 7% Others 5% 5% 27% 55% 9% 0% 20% 40% 60% 80% 100% (Percent of annual sales from mobile devices) More Than 5% 3%-5% Less than 2% None Don’t know* Retail leaders are defined as those that have grown faster than the average industry growth rate of 8.85%.Source: Retail Systems ResearchFigure 8• Business capability: There was a fair degree • Implementation/release timing: Most retail- of similarity among retailers in similar ers have implemented major functionality in sub-segments, with some basic capabilities fairly large releases that typically occur only extending across all offerings. For example, once or twice a year. two luxury department stores offered basic • Product-related research and pricing is the deals and in-store events that are likely to be most popular service that retailers provide of interest to their customers. through their mobile site/app, followed by• Technical platform: The iPhone appeared store location services. to attract the heaviest concentration of • Check-out services are the least popular capabilities, although the pace of Android mobile service offered by retailers. The releases is increasing. complexity of integrating back-end supplyThe Mobile Opportunity 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 insight into shopper behavior through mobile site or app 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% 34% Mobile in-store concierge to alleviate sales burden from store staff 27% 44% 29% Disrupt other retailers by providing a mobile experience that encourages the use of my product 27% 48% 25% Discourage the use of price comparison by offering another mobile option 16% 41% 43% Very valuable Somewhat valuable Not valuableSource: Retail Systems Research SurveyFigure 9 cognizant reports 7
Mobile Capabilities: Investment Plans Register/redeem gift cards 17% 17% Click to call 17% 21% Purchase gift cards 17% 21% Check loyalty status 17% 21% Buy merchandise 17% 28% Receive coupons/offers 23% 19% Access product reviews 28% 15% 0% 10% 20% 30% 40% 50% Budgeted project Planned, not yet budgetedSource: Retail Systems ResearchFigure 10 chain and payment systems is a significant their ongoing business plans and technical release challenge in providing such services. strategies. RSR found the key inhibitors for mobile• Services aimed at improving the shopping commerce to be budget and ROI, closely followed experience — from store location services and by a lack of skilled mobile/ e-commerce resources product locators to couponing services — are (see Figures 12 and 13, next page). a key component of mobile app development strategies for the retailers studied. Most retailers agree that quantifying the returns• Coupons and discounted prices remain a from mobile commerce investments is difficult, significant driver for mobile shopping, and and a significant number (28%, as shown in hence, most of the retailers studied provide Figure 12) also state that the fast pace of coupons to attract customers. technology change makes it difficult to keep up. A key differentiator between retail leaders andChallenges Facing Retailers other players is that leaders recognize consumerDespite the progress so far, retailers still need trends before others and so are better equippedto devote a fair amount of resources to further to stay a step ahead of the technological curve.develop and integrate mobile capabilities into Because many retailers introduced price-match-Mobile Services Offered by the Top 12 RetailersResearch products and pricing 12 Geolocation services 11 Loyalty/coupons 9 Dedicated app 9 Check-out 8 0 2 4 6 8 10 12 14Source: Cognizant Business Consulting, 2012Figure 11 cognizant reports 8
Organizational Obstacles for Mobile Commerce ROI is hard to quantify 60% Budgeting — there is little capital investment available 51% We dont have enough e-commerce/mobile resources to manage all the available opportunities 40% Difficulty getting IT resources for e-commerce/mobile projects 37% Mobile technology changes too quickly for us to be able to make solid investments 28% Stores dont understand the mobile, social or cross-channel opportunities 19% Stores are a higher technology investment priority 19% Our executive team doesnt understand the mobile opportunity 16% We don’t know how to turn data gained from mobile channels into actionable business intelligence 16% The marketing organization does not understand the digital strategies we need to support 9%Source: Retail Systems ResearchFigure 12ing policies late in 2012, they are looking to mobile • Leverage existing technology andto arm associates with capabilities to address intelligence where possible. Apply currentshoppers’ concerns at the point of purchase. investments, existing tools and technolo- gies and accumulated knowledge associatedThe Road Ahead with prior desktop delivery methodologies toWe believe successful retailers will concentrate on provide mobile-optimized experiences.the following key elements for a winning mobile- • Listen to what customers tell you and learndevice sales strategy: from their behavior. Continuously assess mobile shopping and usage behavior, satis-• Pay obsessive attention to both content faction levels and expectations by leveraging and design: Craft a user experience that goes the wealth of analytical data capture and beyond just a mobile app and Web site to a analysis tools. mobile-optimized Web experience.Mobile Business Challenges Mobile price comparison at the 24% shelf is hurting our business 4% Our competitors have a mobile 33% strategy and we need to respond 23% 24%Our competitors dont have a mobile strategy 31% Store sales are getting 33% cannibalized; mobile can help 38% Mobile technology is moving 48% too quickly; we cant keep up 38% Were seeing significant online traffic 29% from mobile sources and need to respond 42% Consumers are using mobile as part of their 81% shopping experience and we need to be there 92% Leaders OthersSource: Retail Systems ResearchFigure 13 cognizant reports 9
• Engage across a variety of consumer their strategies and related investments will be segments: Smartphone adoption will soon a key indicator of future business performance. be ubiquitous, and differences in user As previously discussed, most shoppers are engagement will narrow. Retailers must be giving retailers some latitude in how quickly they smart about ensuring that large consumer develop mobile capabilities, but building these segments are not under-served due to a capabilities takes time. Retailers cannot wait to narrow focus on one slice of the pie. Doing develop strategic capabilities that will impact this requires: such a large portion of their revenue. > Integrating their mobile capabilities as part of a multichannel/omni-channel business These strategic choices will determine whether organization, focused first and foremost on these revenues will come at the expense of the customer experience. existing channels or will open up a plethora of > Developing and executing a technical possibilities, such as deeper and more meaningful development strategy that brings new consumer engagement. Successful retailers are capabilities to market at a speed that meets treating (and will continue to treat) mobile retail consumer needs. as a strategic imperative and not merely as an adjunct to the existing e-commerce channel. TheWith mobile platform-influenced revenues mobile application strategy for retailers is thus aestimated to be about one-fifth of retail revenues C-suite issue and not merely a to-do item on theby 2016,9 the choices that retailers make in e-commerce divisions agenda.Footnotes Michelle Hernandez, “The Mobile Influence Factor,” Deloitte Digital, June 27, 2012, http://www.1 deloittedigital.com/blog/the-mobile-influence-factor.2 “Tablets and Smartphones Become Holiday Shopping Assistants,” eMarketer, Dec. 8, 2011, http://www. emarketer.com/Article.aspx?id=1008725&R=1008725.3 “Big Online Gains For Black Friday Weekend, with Help from Tablets,” eMarketer, Nov. 29, 2011, http://22.214.171.124/Article.aspx?R=1008710.4 Lauren Freedman, “The ‘Shopping’ Mindset of the Mobile Consumer,” E-tailing Group, March 2011, http://shopcoffeetable.com/wp-content/uploads/2011/05/e-Tailing-Whitepaper-March-2011.pdf.5 “The Impact of Tablet Visitors on Retail Websites,” Adobe Digital Marketing Insights, 2012, http://www. cmo.com/sites/default/files/Digital_Marketing_Insights_WP_FINAL.pdf.6 “Adobe 2012 Mobile Consumer Survey,” Adobe Systems, Inc., 2011, http://success.adobe.com/en/na/ programs/products/digitalmarketing/offers/1207_20860_mobile_consumer_whitepaper_generic. html?s_osc=701a0000000l9JeAAI&s_iid=70130000000l88xAAA.7 Nikki Baird and Steve Rowen, “Keeping Up with the Mobile Consumer: 2011 Benchmark Report,” Retail Systems Research, September 2011, http://iwoorx.com/ref/Keeping%20Up%20with%20the%20 Mobile%20Consumer.pdf.8 Value Line database, January 2012.9 “The Mobile Influence Factor,“ Deloitte Digital, 2012.References• Sucharita Mulpuru, “Mobile Commerce Forecast: 2011 To 2016,” Forrester Research, June 2011.• “Winning Over the Empowered Consumer,” IBM Institute for Business Value, 2012.• “Emerging Mobile Commerce Best Practices,” RIS-Cognizant Research, 2012.• “Harnessing Mobile Innovation,” RIS-Cognizant Research, 2012. cognizant reports 10