The new mobile-driven ‘apps-and-mortar’ retail environment offers unparalleled opportunities for engaging customers and making sales. But it is not for the faint of heart. In the first of a two-part series, Brendan McNally reports.
Funny to think that only a couple years ago, when people talked about the future of e-commerce, they predicted how it all but spelled the end of bricks-and-mortar retail.
At the time, these predictions were easy to believe. After all, Internet shopping had gotten very big, very fast, and, with its lower prices and home delivery, and big-box retailers crashing left and right, online shopping clearly looked like the face of the future.
But, lo and behold, physical retail has survived. Even if one-time big-box icons like Sears and Kmart are still fighting for survival, Best Buy seems to have stabilized and has even begun crawling it way back into profitability.
What changed everything, of course, was the rise of mobile devices; smartphones and tablets. Just as home computers and the Internet freed consumers from having to shop in physical stores, mobile devices are now freeing consumers from their home computers and allowing them to shop wherever they happen to be, including, quite possibly, a physical store.
The power of showrooming
To put a negative spin on it, this phenomenon is known as ‘showrooming.’ It involves going into a physical store, examining merchandise inside, and then going online to find a lower-priced deal.
This has been the cause of much hand-wringing among bricks-and-mortar retailers, most notably Best Buy, which feared it couldn’t stand up to lower-priced online competitors.
But what the retailers are now starting to realize is that mobile-augmented shopping can actually offer new opportunities for reaching and engaging consumers. And these opportunities are only to get bigger.
Currently, more than 60% of Americans are using smartphones, and 70% of them will use them to make a purchase this year. (More than 30% of U.S. households have already completely gotten rid of their home computers and rely exclusively on smartphones and tablets for online connectivity.)
What’s more, e-commerce transactions are increasingly coming from mobile devices. For example, last year’s year’s Black Friday (Nov. 29), had its second billion-dollar year in a row, driven, in part, by mobile. Handsets and tablets accounted for more than a quarter of online traffic and more than 7% of sales.
(For Cyber Monday, Black Friday’s online counterpart, mobile’s growth was even more significant. Data from IBM’s Digital Analytics Benchmark showed almost a third of traffic was mobile, an increase of more than 50% on 2012.)
The savvy of today’s mobile-empowered shoppers
But mobile retail is not for the faint of heart. Today’s mobile device users are incredibly savvy shoppers. They honed their moves on the Internet and are now bringing them into physical stores.
For them, the retail experience begins well before they physically come inside a store. It might begin on a home computer, if they still have one, then move to a tablet and then a smartphone. In the process, they may also have taken input from friends on social media as well as from other retailers jumping in with offers and counter-offers of their own.
As a result, retailers who don’t start engaging these shoppers before they’re inside the store may very well lose the sale to someone that’s jumped in ahead of them.
While talking to executives and other people involved in mobile commerce for different major retailers in the United States, and hearing what they’ve done over the last two or three years to navigate this challenging new environment, a number of interesting patterns appears to emerging.
Even though the companies occupy very different niches, the lessons they’ve had to learn are, interestingly, largely the same.
Today’s retail experience begins long before the customer enters the store and often involves several different platforms. As result, retailers must provide customers with a seamless, multichannel approach to keep them engaged through the entire experience. Customers are going to practice showrooming regardless of what physical retailers try to do. But as long as retailers reasonably match competitors on price, customers will likely stick with whoever gives the best, most satisfying retail experience.
The more a retailer knows about its customers, the better. When it knows what they are buying or wanting to buy, what makes them happy or, even more importantly, what leaves them dissatisfied, the retailer will have an easier time gaining their loyalty and selling more.
(For more on mobile shopping, see Q&A: Poshmark on the power of social media and mobile to redefine shopping.)
When the mobile revolution began a few years ago, Walgreens was uniquely positioned to take advantage of it. They not only already had a broad online presence, they also had stores everywhere, enabling them to engage and serve their customers wherever and however they wished to be served.
Though Walgreens has been around since the 1920s, the company only reached the ranks of the largest drugstore chains in the United States during the last decade or so, when it acquired numerous other chains.
Today, it has more than 8,600 stores nationwide, which means that for 66% of Americans there is a Walgreens within three miles. It also owns five different e-commerce websites: Walgreens.com, drugstore.com, Beauty.com, SkinStore.com and VisionDirect.com.
In 2010, 10% of Walgreens prescriptions were being filled via mobile. Today, around 50% are. And Walgreens’ surveys have shown that engaged mobile customers spend the most money: In-store customers who use mobile for shopping spend four times as much as non-Internet customers who just walk in to buy something. And in-store customers who use a combination of home computer and mobile for shopping spend six times more than those who just walk in.
Customers go omnichannel
Little surprise that engaging these digital customers and providing them with a positive and seamless retail experience every time is one of Walgreens’ top priorities. This is where mobile is key. “These omnichannel customers don’t know the difference interacting with us,” says Tim McCauley, Walgreen’s senior director for mobile commerce. “Equating mobile with online is very important.”
He notes that of the 12 million weekly visits to Walgreens’ digital properties, more than 40% are coming in via mobile apps and mobile websites while roughly 10% happen on tablets. Therefore, he says, by focusing on building up mobile and tablet engagement, you definitely drive up retailers’ levels of overall digital engagement. “Invest in great mobile experiences, it will pay off,” he says.
To McCauley, the great challenge is what he calls “crafting the ultimate mobile in-store experience.” “It starts before they get to the store,” he says. “If you start in the store, they won’t get the full experience.”
In addition to its five e-commerce websites, Walgreens has developed ten apps and mobile websites. Among the most popular apps are two developed for pharmacy customers. Pill Reminder reminds users when to take their meds. Refill by Scan allows users to renew their prescription the moment it runs out simply by scanning the prescription’s barcode with a smartphone.
“Customers like Refill by Scan because it provides an instant reaction, and they feel very positive towards it,” McCauley says. “It’s real easy, real convenient, and they take that expectation into the store with them. Now they’re thinking, I’m already happy before I even get into the store. That’s how you start the retail experience outside the store, and then you continue it inside.”
Showrooming? No problem.
The idea of showrooming doesn’t bother Walgreens. “We want customers to have their phones out while shopping,” McCauley says. “We’re not the kind of store where you leave without buying something. We figure having your phone out increases the chance you’ll buy something additional.”
When it comes to developing apps, McCauley says the key is to concentrate engagement into single actions, such as starting out-of-store engagement via scanning (such as drug refills), by weekly ads or by automatically creating personalized shopping lists based on previous purchases. Then you finish it in the store through aisle mapping and product information coupons.
You can drive urgency by time-based offers and alerts. “Engaged customers have higher satisfaction and spend more,” McCauley says. “And the best way to engage customers is through a multichannel approach with mobile at its core. Make sure you know what your customers are doing. Watch all your metrics. You can’t measure too much. You must understand your customer’s pain points.”
Also, McCauley advises: “Read the reviews. Don’t forget the negative ones. They’re usually more important than the positive ones.”
McCauley recalls the difficulties Walgreens initially had making it possible for customers to order photo printing directly from their phones. “We were still just a 4 ½ star app at this point,” he says. “If we weren’t looking at the negative ones, we never would have solved the problems.”
Finally, after endless tweaking, the developer team got a review that read: “Ordering photos from my phone is now a breeze!” “We worked hard for that one!” McCauley says.
(Return in two weeks for part two of the series.)
Brendan McNally is a regular contributor to Open Mobile Media.
For all the latest mobile trends, check out Mobile Payments and VAS Europe on May 6-7 in London, The Open Mobile Summit on May 19-20 in London, Telematics Detroit 2014 on June 4-5 in Novi, Michigan, Wallet Wars USA on June 19-20 in New York and The Open Mobile Summit and Appcelerate in November in San Francisco.