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 second of a two-part series, Brendan McNally reports.
With around 1,900 stores in the U.S. and Canada, Target is the nation’s second largest discount retailer, right behind Walmart, and it knows a lot about its customers, whom it calls “guests.”
They’re well-educated, earn about $64,000 a year per household, on average, many have children in school and in university. They have money, but not to throw around, which is why they shop at Target. Target has designed its stores especially for them; stylish with wide aisles and an easy-to-navigate layout.
Target also knows that, by now, most of its customers shop using smartphones, and it’s gone out of its way to embrace it. All its stores have been equipped with free Wi-Fi, and the strategy is to make digital shopping have the same look and feel as shopping inside their stores.
“Providing guests a seamless experience as they shop across and between channels is key,” says Eddie Baeb, a spokesman for Target. “Target is working to integrate our stores and digital platforms to provide differentiated products and services that enhance the Target experience for today’s digitally-connected guests.”
Target knows very well that its customers practice showrooming. Casey Carl, Target’s president for multi-channel and senior vice president for merchandising, puts it this way: “As my colleagues and I have said several times, ‘We love showrooming – when Target gets to book the sale.’”
Showrooming makes retail more competitive than ever
Target’s strategy for dealing with showrooming is to match prices of key top online retailers for up to a week after the purchase.
“On qualifying purchases, we essentially provide the difference back via whatever tender was used – cash, REDcard, credit card, etc.,” Baeb says. These include Amazon, Walmart, Best Buy, Toys“R”Us and Babies”R”Us.
Target will also match prices found in local competitor’s printed ads. “We recognize that showrooming is part of a revolution that’s making retail more competitive than ever,” Carl says. ”For retailers to survive and thrive in the future, we’ve got to up our game, play to our strengths and seize the upper hand by enhancing both our physical stores and digital channels.”
To show how much of a game changer mobile really is, Carl points to a recent Deloitte study showing that more than half of smartphone owners have used their devices at least once when they’ve shopped in a store.
More importantly, smartphone shoppers are 14% more likely to purchase in store – and that percentage more than doubles if a customer uses the retailer’s site or app while in the store. “That’s the power of mobile,” Carl says. “And that’s why, at Target, we believe our stores must offer exceptional experiences by inspiring discovery with exciting and differentiated products, content and services. … Fully embracing showrooming means seamlessly integrating the physical and digital worlds – from products to price matching to personalized offers – to exponentially improve the guest experience.”
“We took a big step at physical-digital integration last fall  when we made free Wi-Fi available in our stores,” he adds. “We took a giant leap this spring  when we launched Cartwheel, Target’s new digital savings program that we built with our partners at Facebook so guests can easily share with friends in social media.”
Of course, Target’s progress as a digital powerhouse came with its share of difficulties.
When it got into the e-commerce game in 2002 with the establishment of Target.com, it decided to outsource order fulfillment and some other guest services. Though the arrangement worked well for a number of years, Target eventually realized it was missing out on real-time data about its customers’ satisfaction.
In August 2011, it took web operations in-house. “We need to make sure we are in control of all aspects of our technology, and our guests shopping experience,” says Beth Jacobs, now former Target CIO.
Jacobs stepped down effective March 5 following a massive data security breach which affected as many as 40 million credit and debit card accounts and also resulted in hackers stealing personal information on as many as 70 million customers.
Design Within Reach
According to Mark Simmons, VP for marketing, e-commerce and social media for Design Within Reach (DWR), an upscale purveyor of authentic modern design furniture, “engagement and ROI begins when you understand who your customers are.”
DWR knows its customers are higher income, tech-savvy and that they come into the stores already with an appreciation and understanding of beautiful design. They are already familiar with iconic 20th century designers like Eero Saarinen, Charles and Ray Eames, Ludwig Mies van der Rohe and Jens Risom. They like furniture with clean lines and bold colors.
“Knowing what our customers like and using that knowledge to keep them engaged, has pushed up DWR’s Yelp score and kept tablet traffic and sales growing,” Simmons says.
Showrooming is not something DWR worries about because they sell unique designer furniture. And while the furniture it sells is not cheap, it works hard to keep it affordable.
To Simmons, showrooming is the mark of an empowered consumer and fighting it is “risky business.” “The empowered consumer has more options and more power than ever before,” he says. “If the retailers are not supporting what their best customers want, they’re not going to succeed. … Part of our job is to educate people about design. Forget price comparison and all that. They want a great experience. They want to learn. They want to understand. Whether it’s a mobile device or smartphone, iPad or Google Glass, we want them to be as educated as possible.”
He adds: “How do you create a great experience? How do you treat customers well and appreciate their time and the energy they’re going to put into it? And how do you make sure the customer’s service experience is consistent across all channels? Otherwise you’re going to confuse yourself and not focus on what the customer needs. In the last two years, we’ve invested very heavily in our back end and we are close to getting there.”
From people-counting to smartphone-based analytics
Leaving aside the stand-out examples of Walgreens, Target and Design Within Reach, the vast majority of the global retail analytics industry continues to gather its raw information mainly through people-counting cameras, which measure the flow of customers coming in and out of stores.
This industry is worth several hundred million dollars annually, and it is mostly based in the West since that is where the retail markets are most mature. But, according to a recent report from international market intelligence firm ABI Research, all this will change radically over the next five years as the detail industry transitions over to analytics based on smartphones.
The insights coming from this information will be infinitely deeper and more complex, and it will lead to much faster return on investment (ROI) for businesses using it. As a result, says the ABI Research study, the retail analytics industry is expected to increase tenfold between now and 2018.
“When you compare the new technologies and analytics to the people-counting cameras they’re using today, it’s a no-brainer,“ says ABI Research senior analyst Patrick Connolly, who wrote the study.
According to Connolly, “smartphones will completely revolutionize the existing analytics, CRM, digital signage, loyalty and POS markets, not to mention opening up a whole new medium for retailers to sell advertising to brands.”
“Major grocery stores generate as much as 20% of total revenue from standard in-store branded advertising today,” he says. “Imagine the potential of personalized in-aisle advertising!“
Connolly expects big brands like Starbucks, Walmart and Walgreens to lead the growth in the United States over the next three to four years. “The slightest movement in their revenue represents millions of dollars a year, so the ROI there is just a no-brainer,” he says. “But there’s going to be some very strong growth worldwide.”
(For the first part of the series, see Navigating the mobile retail revolution, part I.)
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.