How To Benefit from Changing Consumer Behaviors

1. Reshaping Retail with Mobility
How To Benefit from Changing Consumer Behaviors
Internet Business Solutions Group
November 2011
Lisa Fretwell, Jeff Loucks, Paul Schottmiller, Jon Stine, and Edward
Westenberg
For more information and to download the entire presentation please visit
http://www.cisco.com/web/about/ac79/docs/retail/Retail-Mobility_IBSG.pdf
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2. Today’s Agenda
1. Executive summary
2. Trends and challenges facing retailers
3. Today’s capabilities, tomorrow’s innovations
4. Opportunity and way forward
5. Conclusions
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3. 1 Executive Summary
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4. Executive Summary
 Mobile+location+context+social is creating exciting new experiences for
consumers and differentiation opportunities for retailers
 Combined with high-speed access, increased computing power, and next-
generation video, mobility will unleash a torrent of innovations
 Mobility is having the biggest impact in four areas: 1) mobile marketing,
2) shopper services, 3) mobile payments, and 4) mobile store operations
 By focusing on these areas, retailers increase net margins by as much as
10 percent
 Pre-shopping mobile search has become a key touchpoint. Through mobile
marketing and shopper services, retailers must begin to provide instant,
contextual, and relevant answers to consumers.
 To succeed with mobility, retailers should continuously assesses
opportunities and refresh their mobile experiences
 Mobility must be embedded in all retail functions and based on a content-
centric, device- and OS-agnostic architecture.
Source: Cisco IBSG, 2011
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5. Trends and Challenges
2 Facing Retailers
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6. For U.S. audiences
The Rise of Smart Devices
in the United States
Smartphones
becoming the
By 2015, of 58% majority
mobile users will have
smartphones…up from just
38% in 2011 People love Source:
Source: eMarketer, August 2011 the user Pew, 7/11
experience Source: Pew Research Center, July 2011
160,000 Android devices
Installed base (1000s of units)
140,000
dominate
120,000 Irreversible rise
100,000
of the tablet
BlackBerry (RIM)
80,000 MS Windows
60,000 Apple
Android
40,000
20,000
tablet sales to reach
0 27.7 million units by 2014
2010 2011 2012 2013 2014 Source: Parks Associates, June 2011
Source: Gartner, July 2011
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7. For European audiences
The Rise of Smart Devices
in the European Union
Smartphones
By 2014, 52% to 77% are mainstream
and growing
of mobile users will have
smartphones…up from
20-32% in 2011 People love
Source: Google, 2011 the user
experience Source: Pew Research Center, July 2011
200,000 Android now and
Installed base (1000s of units)
180,000 in the future
160,000
Irreversible rise
140,000
120,000 BlackBerry (RIM)
of the tablet
100,000 MS Windows
80,000 Apple
60,000 Android
40,000
20,000
tablet sales to reach
0 41.9 million units by 2014
2010 2011 2012 2013 2014
Source: Parks Associates, June 2011
Source: Gartner, July 2011
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8. Mobility Is Changing Shopping Behavior
The Influence of Mobility Cannot Be Measured by
Transaction Levels Alone
Impact on Impact on Shopping Behavior
Shopping Behavior Today Tomorrow (2014)
67%
Research on smartphone,  New device features and
buy in store capabilities will continue to
change behaviors
Research on smartphone,
23% visit store, buy online —Mobile health monitoring /
diagnosis will cause people to
Research on smartphone, make healthier shopping choices
16% visit store, purchase on
—Predictive analysis using mobile
smartphone
devices can determine
consumers’ shopping patterns
9% Visit store, purchase on
smartphone
Sources: Google and Ipsos OTX, April 2011 Source: The Wall Street Journal, April 2011
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9. Meeting Consumers’ High Expectations
Can Be Challenging
Some Retailers Making Basic Mistakes…
―Check availability No store hours,
at your local store‖ no commerce
Pictures not
showing
Hard-to-read,
static (can’t be Redirects to
resized) map unreadable
website
Apps that are just a catalog of products or that fail to use
smartphone functionality are unlikely to succeed
Sources: Cisco IBSG, 2011; Deloitte Content Strategy Forum, Colleen Jones, 2011
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10. Meeting Consumers’ High Expectations
Can Be Challenging
…But Some Getting It Right
Store hours
Personal
Preference
Transaction
visibility
Availability
Easy-to-use,
clear instructions Reminders
To drive customers into stores, mobile apps must deliver the
right content at the right time at the right place
Sources: Cisco IBSG, 2011; Deloitte Content Strategy Forum, Colleen Jones, 2011
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11. In Store Wi-Fi Increasingly More
Important
 2 of 3 smartphone owners use Wi-Fi hotspots outside home / office at least once a day
 72% of these users have bought local deals presented via their mobile phones
Why they switch to
What consumers want What retailers get
Wi-Fi in stores
 Always-on value /  High-speed, reliable access  More sales by providing
convenience access to information and
 Unique services and offers answering questions
 Satisfying in-store (subscriptions or coupons
experience for Wi-Fi users only)  Increased revenues from
consumers who spend more
 Connect with friends  Carriers moving away from time in the store
 Reassurance about making unlimited data plans
 Opportunity to offer shopper
the correct decision  Easy switching convenience (e.g., product
locator, click to buy)
Sources: JiWire, May 2011; Deloitte, 2011
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12. Mobility Trends and Challenges
Summary
Mobility changes behavior Retailers should…
 Convenient: Instant answers,  Embed mobile across all key
multitasking save time touchpoints to deliver a consistent
cross-channel experience
 Context: Relevant information
 Deliver in-store services that use
 Fun: Entertaining, challenging, context to help consumers find
engaging relevant answers and make better
decisions
 Understand how to offer those
services through 3G and Wi-Fi
Source: Cisco IBSG, 2011
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13. Today’s Capabilities,
3 Tomorrow’s Innovations
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14. Mobile Capabilties Creating Significant
Threats to Established Retail
Example: Mobile Shopper
3. Shopper compares
items (real-time pricing)
2. App displays
nearby stores
(real-time store
inventory)
1. Customer takes picture of 5. Customer picks up
desired product product using receipt
(mobile picture search) (mobile / store
integration)
4. Customer orders and pays
Source: Fast Company, 2011 (mobile payment)
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15. Cisco IBSG Sees Four Capability Areas
Where Mobility Has a Major Impact
Mobile Payments / Mobile Store
Mobile Marketing Shopper Services
Point of Sale Operations
 Connect with  Offer easy-to-use,  Streamline the  Mobilize store
customers where intuitive mobile checkout process functions and apps
they are services to:  Integrate with  Communication /
 Pre-purchase search –Encourage scanning, coupons / collaboration
support is crucial shoppers to make offers, mobile wallets,
and loyalty  Mobile POS
 Provide relevant purchases wherever
they are  Three methods:  Enable associates to
offers, content, and provide customer
services at the 1. Mobile POS
2. Web payments service where it’s
moment of need needed
3. In-store payments
(NFC)
Source: Cisco IBSG, 2011
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16. In Each Capability Area,
Mobility Offers Specific Benefits
Mobile Payments / Mobile Store
Mobile Marketing Shopper Services
Point of Sale Operations
 Permission-based  Increase loyalty  Increase staff  Improve task
response rates:  Capture more productivity management
2x higher lifetime value  Improve customer  Improve compliance
 Customer  Make it easier to service / interactions  Enhance
acquisition costs: shop (more)  Create up-selling / communication
10x lower cross-selling  Improve customer
 Offer redemption  Enable new location- service / experience
rates: ~40% based services
Source: Cisco IBSG, 2011
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17. Mobile Capabilties Create Significant
Threats to Established Retail
Example: Mobile Shopper Shopper
Services
Mobile
Marketing
Mobile
Payments
3. Shopper compares
items (real-time pricing)
Shopper
Services
2. App displays
nearby stores
(real-time store
inventory)
1. Customer takes picture
Mobile 5. Customer picks up
of desired product Store product using receipt
(mobile picture search) Operations (mobile / store
integration)
4. Customer orders and pays
Source: Fast Company, 2011 (mobile payment)
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18. Mobile Marketing: Search Is a Critical
Entry Point into the Shopping Cycle
More than 60% of Pre-purchase Searches Are Done on
Mobile Devices
QR codes Bar codes
Image search
Contextual search
Text search
Location-based Voice search
search NFC
Source: ROI Research and Microsoft, March 2011 Augmented reality
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19. Mobile Marketing Today: Advertising Is
Having an Impact, Couponing Is Leading
H&M using SMS and social media
for advertising and couponing
 Mobile coupon redemption is
10x higher than traditional
coupons
 By 2014, 300 million people
worldwide (1 in 10 mobile
subscribers) will use mobile
coupons, generating nearly
$6 billion in redemption value
 Mobile marketing is growing
at 84% CAGR, reaching $57
billion by 2014
Unlike other forms of advertising, 90% of
text messages get opened, and most are
responded to within five minutes
Sources: Social Media Pathways, 2011; Borrell Associates, 2010; Juniper Research, 2010; H&M, 2011
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20. Innovations in Mobile Marketing:
Trend Is “Social, Local, Mobile”
Airwalk: Social promotion designed for mobile only Thought Starters
 Invisible ―one-day-only‖ pop-up store for limited edition
Airwalk sneakers in two locations (NYC, LA)
Get permission
 Using GoldRun’s augmented reality and geolocation: Make offers relevant
download app + find store + find shoe + buy so customers share
 $5 million of earned media in press, online, and TV information about
themselves
Sephora: Personal and local transactional messaging
 Determined up-sell / cross-sell opportunities based
Understand context
on individual purchases / transaction history SoLoMo captures
 Allowed Sephora to deliver personalized offers
new insights
based on user-specified attributes Curate the most
 Response rates have more than doubled
relevant local
knowledge
Nespresso: Mobile personal suggestions Market in real time
 Provided rapid ordering based on personal preferences Address customers’
 Used CRM database to deliver personalized offers to needs based on
customers’ mobile phones (Nespressso Club Members) where they are and
 More than 1 million people are using the app to order what they want now
new cups on their mobile devices
Sources: Tusk Agency, 2011; Mobile Marketer, 2009; PR Newswire, 2011
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21. Shopper Services Today: Mobility Is
Bridging Physical and Online Worlds
Tesco mobile shopper services Walmart adapting mobile to
shopping behaviors
 Mobile shopping across all platforms Optimized mobile site
with integrated loyalty card data
 When effectiveness
 Includes store finder, product matters
scanning, voice search for adding  For executing tasks
products to shopping carts
Native mobile app
 When efficiency
matters
 For customers on
the go (one-touch,
fast loading)
Source: MeasureWorks Mobile Convention, 2011
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22. Innovations in Shopper Services:
Making it Fun and Easy to Shop
Macy’s: Rich video content Thought Starters
 Lets designers explain the latest trends in HD mobile
video by scanning QR codes in the store
Be inspirational
 Bypasses store staff by allowing customers to make
purchases ―on the spot‖ Inspire customers at
home and on the go
Source: Business Wire, February 2011 Make real-time
recommendations
Highly accurate, location-based services (especially in stores)
 Tablet-equipped carts sync with consumers’
smartphones to offer position-relevant, real-time info Save time / money
 Uses shopping history to deliver targeted product Find things faster
recommendations / personalized marketing messages Help customers
 Pilot in progress make the best
Source: Springwise.com, September 2011 decisions faster
Never miss a moment Allow multitasking
 Sainsbury's is combining a shopping cart, iPad, and Enable customers /
streaming sports app shoppers to do what
 Allows customers to watch their favorite TV channels they want,
or sports while shopping anywhere, anytime
 Pilot in progress
Source: GigaOM, September 2011
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23. Mobile Payments Today: Bringing the
Online Payment Model to the Real World
Mobile POS Web payments In-store payments
 Mobile checkout throughout  Scan and pay for items with  Google teaming with Citi,
the store smartphones Visa, and MasterCard to
 Influence customers at the  ―The growing impact of make ―tap and pay‖
most critical part of the mobile technology on retail  Uses NFC to pay at more
decision-making process will soon make cash registers than 20,000 merchants,
 Reduce walkouts / increase obsolete.‖ including Macy’s, American
customer satisfaction by Glen Senk Eagle, Jamba Juice,
shortening checkout lines CEO, Urban Outfitters Bloomingdale’s, Guess,
Subway, Walgreens
 Capture information to boost
marketing
Sources: GeekWire, 2011; Retail Solutions Online, 2010; InformationWeek, 2011
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24. Innovations in Mobile Payments:
Delivering a New Shopping Experience
Google Wallet: More than payments Thought Starters
 "Google's interest here isn't in the payments, it's in
the data that underlies the complete chain of
commerce, including consideration, promotion,
Increase productivity
transaction details, coupons, and receipts." Streamline the
—Thomas Husson, Forrester Research checkout process
(faster / easier)
Personalized, local offers Enhance services
 Loyalty programs being built into the path of Utilize permission-
purchase based, two-way
 Location-based offers allow shoppers to see an interactions during
ad, download the personalized (NFC) coupon, transactions
and redeem it
 All on one device Use local resources
Differentiate by
Two-way interactions making local offers
 Retailers starting to use permission-based and deals
personal information to make relevant offers
at the point of purchase
 Creates a win-win situation for shoppers
and retailers
Sources: Cisco IBSG, 2011; Forrester Research, 2011; PayPal, 2011
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25. Mobile Store Operations Today:
Mobilizing Existing Applications for Staff
Mobilizing Communication / Customer Mobile POS
enterprise apps collaboration for service
all associates anywhere
Sonea Lowe’s JCPenney Urban Outfitters
 €10M annual benefit  Deploying 42,000  Integrating Apple  Serving customers at
from 6,000 iPhones to create a iPads to help the point of decision
employees seamless transition customers ―find  Goal: Make the store
executing more than between customers more in the store‖ experience as good
1 million operations and employees as the website
per day experience
Sources: Cisco IBSG 2011; Retail Systems Research, 2011; Shop.org Annual Summit, 2010
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26. Innovations in Mobile Store Operations:
Rethinking Processes and Functions
Next-generation, real-time BI dashboards Thought Starters
 Full process control through alerts, triggers, and
real-time business intelligence (BI) Improve operations
with real-time data
Offer instant access
Video collaboration to data anywhere
 Fix issues on the spot using mobile video for (dashboards)
―show and share‖ collaboration
Video collaboration
Support collaboration
Full multichannel service at the edge for faster
 Mobile, Internet-like fulfillment in stores decision making and
 Adds the e-commerce ―long tail‖ to brick-and- better execution
mortar stores
 Dynamic reallocation of goods (home delivery) Execute
multichannel
Augmented reality Deliver true
 Increase in-store operational excellence and multichannel service
compliance verification for things like plan-o-grams and fulfillment using
mobile in stores
Source: Cisco IBSG, 2011
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27. Opportunities Across Mobility Areas Can
Increase Net Margin by 10 Percent
Typical Retailer with $20B of Revenue per Year
Shopper Mobile Mobile Store
Mobile Marketing
Services Payments Operations
2% lift 1% lift 1% reduction 0.5 % lift 1% reduction
($M / Percentage Increase)
$20M value $661M
$20M value $3M value
$6M value $6M value $61M
$6M value
$600M 10%
Net Margin
Current Mobile Mobile Increase Labor Cost Multichannel Labor Current
Advertising Couponing Basket Size Reduction Extended Cost Margin
Margin
Range Reduction +
Potential
Upside
Source: Cisco IBSG, 2011
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28. Opportunity and
4 Way Forward
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29. High Innovation Requires
Continuous Attention
6 1
Respond Assess your
and mobile
improve opportunity
5 2
Implement Determine
solution potential /
implications
4 3
Develop
Organize
technology
for success
architecture
Source: Cisco IBSG, 2011
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30. Your Mobile Strategy Should Reflect
Your Unique Brand Proposition
 Seek feedback: your customers  How does your brand fit
are in control 1 consumer needs?
6  What are your options for
 How do you participate in the Respond Assess your
conversation? and mobile delivering great support?
 How do you prioritize and
improve opportunity  What are your options for
improve your next upgrade? improving store operations?
 How do you embed  Which cross-dept.
mobility in all business 5 2 business capabilities
functions? Implement Determine are required?
 Have you enabled solution potential /
 How will you measure
multichannel implications
success?
experiences in stores?
 How do you prepare for continuous
improvement / responsiveness?
 Who owns the experience / 4 3  Which technology requirements
Develop are needed to deliver a great
content management? Organize
for success
technology
experience across touchpoints,
 How is mobility connected architecture
platforms, and devices?
to e-commerce?
Source: Cisco IBSG, 2011
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31. Cisco IBSG Partners with Customers
To Create Great Mobile Experiences…
Customer Journey
Location- Context- Visual
Check-in / based based Couponing / content Customer Payment /
recognition services services loyalty experience assistance POS
 Shopper  Search and  Recommend  Mobile offers  Access to  Customer  Consumer
Wi-Fi log-in, find actions /  Mobile mobile help and mobile
welcome,  In-store provide coupons content: feedback payment
recognition directions advice based – ratings  “Come and (web-based)
 Seamless from point A on past – reviews help me”  Retailer POS
handoff to point B history / – videos functionality
between 3G / requests – pricing
 Speak to an
Wi-Fi expert at
time of need
Source: Cisco IBSG, 2011
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32. …Using a Wireless Architecture for
Security, Reliability, and Performance
Wireless Architecture
Mobile
Services Mobile Shopper Mobile Mobile store
marketing services payments operations
Performance Policy management Infrastructure
Video Voice Data
Network Location Clean Air PCI HS 2.0 MSAP Switching
as the Routing
Platform Retail applications services
Wireless
Security
WAAS
Source: Cisco IBSG, 2011
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33. Key Takeaways and Recommendations
 Mobility is driving sales: create solutions / experiences that lead
shoppers to buy from you rather than your competitors
 Mobility will significantly impact retail in four areas:
1. Mobile marketing: social + local + mobile
2. Shopper services: make mobile shopping fun and easy
3. Mobile payments: delivering a new shopping experience
4. Mobile store operations: rethinking processes and functions
– These areas can increase net margins by up to 10%
 Recommendations:
— Define your unique, brand-relevant mobile proposition (do not copy)
— Develop solutions specifically for your customers' mobile moments
(fitness for purpose)
— Involve all relevant business functions (share the fun)
— Actively solicit feedback (listen and act immediately)
— Continuously rethink consumer processes / store operations using current /
emerging mobile capabilities (continuous innovation)
Source: Cisco IBSG, 2011
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34. For more information and to download the entire presentation:
http://www.cisco.com/web/about/ac79/docs/retail/Retail-Mobility_IBSG.pdf