Opportunities in eCommerce for traditional retailers

The retailing landscape is changing rapidly, challenged by the new online retailing environment and the need to deliver competitive, convenient offerings to consumers who increasingly expect to be able to engage in the buying process in ways that suit their time-constrained lifestyle.

A New Way To Transact
There has been a transformation in the personal computing landscape over the past three years. Mobile devices now far exceed personal computers. The advent of the iPhone and subsequent smartphone competitors from other manufacturers has not only transformed the nature of the consumer infrastructure but consumers’ expectations of how they should engage with companies. Smartphones are on on track to supplant feature phones and consumer expectations have begun to reset. This dramatic shift offers businesses an unprecedented opportunity to engage more closely with their customers and to link their promotional activities directly to sales transactions.

Clear Consumer Demand
The remarkable enthusiasm of consumers for engaging with stores using their mobile phones is now unquestionable. In markets across the world consumers have demonstrated a keen desire to engage with suppliers who enable the twin benefits of convenience and simplicity through the mobile channel.

In Australia alone M-Payments are expected to total nearly $20B by 2015 and, according to the Yankee Group, in the USA they are expected to quadruple to US$ 1 Trillion over that period. In 2010 Amazon processed over $1B in orders placed via the mobile channel. In 2011 over $2.4B was loaded on the Starbucks Card mobile app. The consumer shift to the mobile channel is accelerating. Businesses need to efficiently address this opportunity as competitors begin to draw new customers and sales by increasing their mobile initiatives.

While these are challenging statistics for companies that are not contemplating the mobile channel, they do provide a strong opportunity for regular bricks and mortar stores to reach out to customers via mobile devices. When combined with targeted promotional activities they can provide real world stores with a compelling response to the challenge of online or virtual retailers.

Closing The Loop
Current mobile initiatives have tended to come through two distinct paths - payments, or branding and marketing. Each of these has been driven by parties with differing sources of expertise, each is a reflection of existing capabilities, but on their own neither is capable of delivering the full value potential that stores and customers would like to see. Mobile commerce will reach its potential when promotion and the buying transaction are integrated. Market research has demonstrated that promotional initiatives are positively received by consumers but the conversion rate diminishes with the level of difficulty and time delay in acting on the offer.
Ensuring that the promotional push and buying process are linked transparently increases the likelihood of any given offer converting into a sale and “closes the loop” on marketing, promotion and sales.

Drivers for M-Commerce
Usability is vital for adoption. Unlike the online world where the goal is to create a virtual experience that replicates or improves on the real world, a mobile transaction is typically conducted on a small screen device, with limited keyboard, on the move and often with time constraints.
To deliver on the key drivers requires a different approach. Replicating Internet services won’t necessarily meet those needs, since the characteristics of a mobile device - its size, where and how it is used and its potential for new ways of engagement - demand more.
The mobile device delivers an opportunity to provide a personal kiosk in the hand of any consumer, such that even when in-store the consumer can initiate and conclude the transaction from their own device. When coupled with other in-store systems, such as RFID tags, the opportunity to create a wholly mobile, unattended purchase transaction becomes a reality.

Integrated Mobile Solutions
Bringing together promotional and buying processes into an integrated mobile solution enables the delivery of additional capabilities beyond the proven sales benefits that come from “closing the loop”.
For instance, the capacity to handle remote micro-payments efficiently reduces the cost to engage in a much wider range of small transactions.
The refocussing of resources from order taking and payment handling to order fulfillment can deliver productivity gains and increased sales. It can break the queue constraint by allowing consumers to never have to join the physical queue.
The key to all these benefits is ensuring a seamless buying process that incorporates the ordering and payment steps. This delivers a rapid, familiar and secure transaction, which meets the requirements of consumers and stores.

Security Builds Trust
Addressing consumer concerns, in particular, regarding the security of the financial transaction is a key consideration in securing adoption. The mobile environment offers a particular opportunity to deliver a more secure transaction than the prevailing approaches used on the Internet. Well designed mobile systems can utilise two factor authentication, data distribution and other proprietary techniques to deliver highly secure transactions.

Marketing and Promotion
A mobile transacting solution complements strongly existing mobile promotional initiatives. There are a range of promotional solutions in the market whose effectiveness can be enhanced by such integration, including coupons, QR codes and video walls.
Retailers around the world are looking to integrate their marketing and transactional systems. McDonald’s have trialled the use of in-store kiosks that are integrated with display boards and order placement systems. These systems demonstrate the increased productivity and customer service which integrated technologies enable. Enabling each customer to have a virtual kiosk in their phone greatly extends this benefit without the capital costs of physical kiosks.
In Australia Domino’s Pizza has incorporated the mobile channel as an integral part of their marketing and ordering systems. By 2015 they expect to receive nearly 60% of their orders via a mobile device. Their CEO, Don Meij, has stated that if he were a new operator starting out in the business he would only use a mobile system and Facebook to drive his operation.
Mobile buying is the logical extension to promotions, whether these are delivered direct to the mobile, using QR codes on physical media or via coupons. The linking of the call to action to a facility to conduct the purchase immediately is a powerful mechanism for increasing response rates and sales volume. Market experience has shown that providing a way for a consumer to act on the impulse is crucial to the success of the promotion. The mobile device not only provides that, but its geo-location capabilities also enable the delivery of promotions at a point and time when they are more likely to be acted upon.

Making it Happen
The arrival of the smartphone and associated shift in consumer expectations and behaviour not only makes the mobile transacting channel a viable option, it makes it a necessary component for many business models.
The good news is that the consumer infrastructure is in place for retailers wishing to engage with customers in this way. For companies already active in promoting their businesses using coupons, video display boards and QR codes now is the time to take the net step in sales growth by linking those activities to an integrated mobile buying channel.

Author: Peter M. Hall