Shopping by Phone Takes on New Meaning
By George Anderson
The year 2006 will mark the year that consumers began ordering items from retailers by cell phone, according to industry experts.
As an article in The New York Times points out, consumers are already spending billions of dollars downloading ring tones, games and wallpaper for their phones and many see shopping as the next logical step.
Phones are seen as an extension of the owner’s personality today and not simply a device to make calls.
Roger Entner, an analyst with Ovum, a technology consulting firm in London, said, “The more different pieces we add to these Swiss Army phones, the easier it is to get user acceptance for the next application. And especially around next Christmas, the convenience of shopping on a computer or a cellphone will beat the mall hands down.”
Amazon.com and eBay are two merchants that are preparing the way for consumers to let their fingers do the shopping on the small screens of cell phones.
eBay is introducing a new mobile phone shopping service this month to users of Verizon’s wireless service. For a $4 monthly subscription fee, users can browse eBay, make bids and receive updates on an auction’s progress.
The online auctioneer offers a free, stripped down version of the service to users of Cingular and Sprint.
“These kinds of services are still pretty new in the U.S.,” said Chris Donlay, a spokesperson for eBay, “so I think it’ll take a while to get some critical mass, but people are using our service, and they seem to like it.”
Patrick Byrne, chief executive officer of Overstock.com, believes that in the future consumers will begin to use cell phones to buy an increasing percentage of goods.
Mr. Byrne invested personal funds and lent engineers from his company to help another, mRocket, develop the technology to run his company’s Mobile O service.
“We do see the number of orders on Mobile O gradually picking up, but it’s still a tiny percentage of our business,” he said. “My hunch is that this is going to start really happening more in ’07.”
Moderator’s Comment: How will cell phones and the convergence of technologies in this delivery device affect retailing
in the future? –
George Anderson – Moderator
We have long professed that the retailer’s claim that RFID reduces “Out Of Stock” (OOS) is based on the perception that knowledge of an OOS will trigger remediation.
Our claim is that the same end-result can be achieved without an investment in RFID infrastructure in the retail store; it simply requires the use of the customer’s cell phone.
The cost of providing the customer the ability to do a store inventory query, send a message, make a price inquiry, resolve an empty shelf event, can be done with SMS at a cost of less than 1% of RFID.
Why? The use of cell phone technology in the store combined with SOA web services, can be used in limitless ways to enhance the customer experience.
Over 70% of retail shoppers today carry a cell phone, and 35% of cell phone users are capable and eager to use SMS.
That means with minimal signage and POS reward, the consumer becomes the extension of the retailer’s and CPG’s merchandising effort.
Imagine Coca Cola running a promotion for a 12 pack at Kroger’s stores in Cincinnati. When a store POP is empty of the promoted product, the consumer SMS the store. Kroger and the Coke bottler both receive the message and are able to aggregate the reports.
Subsequent report reviews allows both retailer and vendor to review the performance of the promotion and how it can be improved in the future.
What’s in it for the consumer? How about an employee bringing out Coke product before the customer leaves the store, or the customer receives a POS raincheck.
Yes?
I think of smartphones as mobile computers with Internet access. As they get more powerful and have faster Internet connections, they will take a chunk of market share that intersects with online retail, expanding the overall “online” segment but neither replacing it or being completely separate from it.
The overall trend that we are playing into is consumer choice and mobility. Smartphones fit very nicely into this paradigm. Consumers will expect to be able to purchase products and services whenever and wherever they want. If you’re at home, your always-on computer is probably the best experience. If you’re out and someone tells you about a product you absolutely must have–look it up and buy it right then and there on your smartphone. Or compare prices on a product you see in a store and choose how you want to purchase it–there in the store for instant gratification at a slight premium, or online via phone to save a few bucks or get the color you really wanted delivered in a few days.
The distinction between online shopping by cell/smartphone and online shopping by computer/wifi-connected laptop, to me, is one of form factor and interface.
There is a message here for retailers – it is time to sharpen up your act and entice people across your thresholds. Many people may “shop” just for the look, feel and experience but then purchase using other means after they have price compared. They may also prefer the convenience of having their purchases delivered rather than carrying them home. If retailers want to maintain, or increase, sales from their real premises, then it is incumbent on them to arrange stock attractively, have expert sales staff who would be more than worth their weight in gold and altogether make sure that customers see the benefit of making their purchases in a real place in real time.
It seems to me that those who use the many features of their cell phones most — namely twenty-somethings, teens and even pre-teens — might be the ones least likely to actually shop by cell phone. Why? Because they are the ones who actually enjoy the shopping experience most! Those of us shopping for value and convenience, however we define it, are probably much more likely to use the computer as our “techie” alternative to in-store shopping. So maybe as the generations X and Y mature, and presumably lose some of their discretionary shopping time, they turn to cell phone shopping, but I don’t see it taking off much in the immediate future.
The old adage, location, location, location, is being turned on its ear! No longer is the location of the retail outlet the dominant perspective. Now retailer and suppliers need to think about location, location, location from the point of view of the consumer. Where is the consumer? Where does the consumer shop from? Where can the consumer be reached? The consumer is now a moving target and the most critical issue is how to reach and appeal to that moving target – a whole new location puzzle. Using cell phones are certainly going to be an important piece of that puzzle. The role they play today is not the role they will play 12 months from now. Companies that are investigating the location puzzle from the perspective of the consumer rather than the perspective of the retail outlet will be poised for success as solutions to the puzzle evolve.
Let’s not forget that Starbucks gets four bucks for a cup of coffee with milk in it because they offer an “experience.” Also, let’s keep in mind this “graying” consumer who is likely to want more customer service (the subject of an earlier story).
I’m not sure that a bunch of 60+ folks will be straining at their cell phones to buy stuff. Rather, I think the true growth is in customer service oriented offerings.
Of course, the new technology will impact business. I just don’t think it will be as huge an impact as some think.
Overstock invested around $300,000 in the cell technology so far. Considering their size, it’s a worthwhile experiment, as long as further investments aren’t much larger. It pays to explore any medium whose potential reach is so phenomenal. And it pays to be one of the early adopters, if the investment is kept reasonable, since once the novelty wears off, the sales effectiveness will decline. Every national retailer should be exploring this technology ASAP. Who does not want more impulse customers?
I am really mixed on this one….
I can understand the need to have information available at our finger tips as we browse the electronics store or furniture department, but I still can’t quite see making the purchase while walking around another retailer’s premises. Having never been through the screens, I can’t imagine how it would be easier to order through a cell phone than a computer. I guess the question is “does everyone have a computer”?
Maybe the way this will all shake out is that different market segments that have both a cell phone and computer will use the computer while those who don’t will use a cell phone. We shouldn’t forget that a large portion of the population does not even have a checking account. So just as people still conduct their shopping in cash, I believe it will be a very long time before cell phones become a significant shopping platform. It might be like the internet’s dependence on broadband, but in this case the form factor has to change. There needs to be a way to make more information available than can be viewed on the small screens.
Yes, this is a viable technology. However, getting the American public to use it is another story. Most of America still does not understand the majority of the functions available to them on their cell phones, let alone navigating and purchasing online. We also have split functionality concerns, security concerns and of course the ability of Americans to successfully navigate using a small screen. This is why text messaging and the sending of pictures has not taken off in the US like it has in Asia or Europe. To truly be successful, online purchasing using a cell phone needs to have a “killer app” type of device which makes it easy to navigate online, while still affording the user a small enough size for convenience and portability. The lack of this device has been the major stopping point in carrying this concept forward. We are stuck in the “chicken vs the egg” dilemma until we solve the hardware problem which this represents, and then address the conceptual issues with the average American usage.
THE 3RD SCREEN: The wireless device carried in our hip pockets (formerly known as a cell phone) is already becoming the “third screen” in line behind your TV and computer. You can watch TV programming (MobiTV), download iTunes, surf the internet, chat in real-time, check your email and calendar, instantly share files, get GPS directions – even thousands of miles at sea.
It doesn’t seem to be that much of a stretch to query, research, and order items and services from your favorite retailer. The challenge isn’t the adoption of the technology, its the question of how the retail business model will have to change to fit. Won’t work for everyone, but we will see heroes by the end of the decade.
Smart retailers and CPGs will start today by capturing (opt-in) wireless phone numbers of their customers and begin at least communicating with them about happenings at the store and CRM events. Think about it – most customers are only going to opt-in to a small number of retailers – will your store be one that is selected or left behind?