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Is mobile failing at driving in-store traffic?

January 27, 2014

Target's Cartwheel app

With light foot traffic dragging down retail sales over the holidays even as mobile commerce continues to grow, retailers are clearly struggling with effectively tapping mobile to bring customers into their stores.

For the past couple of years, retailers and mobile marketing services providers having been talking up mobile’s ability to enable hyperlocal, personalized engagements that can drive nearby customers into stores. However, with many retailers seeing few shoppers in their stores over the holidays, have they just not figured out the right formula yet for leveraging mobile to drive in-store traffic or is the convenience provided by mobile commerce trumping the need for real-world transactions?

“We don’t see mobile driving significant new trips to bricks-and-mortar stores” said Jason Goldberg, Chicago-based vice president of the commerce practice at Razorfish. “In many cases, retailers that are best-in-class at omnichannel experiences — showing in-store inventory online, offering buy online pickup in store or reserve online pickup in-store — are winning store visits that would otherwise have gone to a competitor.

“We’re also seeing retailers with great local SEO winning extra visits from competitors,” he said. “When a mobile search for ‘North Face jacket’ yields ‘in-stock nearby’ results for REI but not for Nordstrom, REI wins an extra visit.

“Digital retail, both on mobile and on desktop, are clearly winning visits from bricks-and-mortar stores, but disproportionately from stores in bad locations. Foot traffic in top-tier lifestyle malls and destination retail locations is up; but foot-traffic is down in regional indoor malls.”

Geofencing’s minimal impact
Much of the activity so far is still experimental when it comes to driving in-store traffic via mobile.

Some retailers hoped that basic geo-fenced promotions would drive extra visits to retail stores, but the results have not been there so far. The idea is to deliver an alert to a phone for an offer when shoppers are near a retailer.

“We’re seeing minimal opt-in adoption of those kinds of tactics and very little impact on foot traffic,” Mr. Goldberg said.

However, there are some successful use cases for using mobile to drive store traffic.

Walgreens’ mobile app

For example, Walgreens’ mobile app adds real value for customers by enabling them to quickly refill prescriptions. The app also provides in-store couponing.

Best Buy is driving in-store traffic by enabling customers to place an order from their phone and pick it up in store.

“As in any situation with modern branding, the retailer that can add real value to the consumer, in this case through mobile, will win their shopping dollars,” said Glenn Humble, director of marketing at Adroit Digital, New York.

“Best Buy knows that once the customer is in the door they’re likely to browse for additional items,” he said. “Once again, true value through convenience and avoiding shipping fees, especially on large items.”

Cartwheel delivers
Another example is Target’s Cartwheel app, which was designed to make it easy for mobile users to find, share and redeem offers by linking with Facebook.

“One of the best mobile promotions we’ve seen at retail for driving incremental foot traffic is Target’s Cartwheel App,” Razorfish’s Mr. Goldberg said.

“Using mobile to collect personalized promotions that then have to be redeemed in the store, has unquestionably driven extra store visits for Target,” he said. “Six months into the promotion, they have over two million registered users.”

Bluetooth Low Energy solutions such as Apple’s iBeacon and Qualcomm’s Gimbal show promise for helping retailers deliver contextually relevant mobile experiences to in-store shoppers and help drive sales.

Omnichannel shoppers
While retailers are still struggling with leveraging mobile to drive in-store traffic, the path to supporting online sales is much clearer.

A recent survey of smartphone-owning consumers by Adroit Digital found that 59 percent would prefer to purchase gifts online for the upcoming Valentine’s Day holiday, including using a smartphone or tablet, as opposed to purchasing from a bricks-and-mortar store.

However, just because consumers are shopping online from a mobile device does not mean that are not inside a physical store. This points to how mobile is facilitating in-store shopping even if it is not driving customers into stores.

The challenge for retailers is how to credit mobile-enabled online sales from inside a store.

“Mobile has an opportunity to help save the customer sale, but it will end up doing it by capturing sales in the digital channel that might otherwise have been lost in the store,” said Nikki Baird, Denver-based managing partner at RSR Research.

“Our research finds that when consumers are in the store, they’re most likely to pay at register,” she said. “But mobile doesn’t necessarily drive consumers to stores, it facilitates the shopping trip.

“But sometimes that may mean the sale will be recorded in the online space, even though it might technically have happened in a store.”

The challenge for many retailers is understanding the omnichannel shopper and figuring out how to leverage mobile to meet this shopper’s needs, whether that means providing a way to purchase gifts from a smartphone during their daily commute or facilitating an online purchase when a physical store is out of stock on an item.

Retailers are also struggling with creating marketing programs that reach the omnichannel shopper effectively across the multiple media channels where they are spending their time.

“Getting better at omnichannel mobile can definitely mitigate brick and mortar traffic problems, but it’s not a silver bullet,” Razorfish’s Mr. Goldberg said. “The real challenge for many retailers is that they are overstored in locations and formats that are no longer appealing to shoppers.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

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