Slowly but Surely, Mobile evolves

Retailers are on the cusp of changing the shopper experience through mobile technology.

Within 12 months, pay-by-phone will be available in some grocery stores, experts say, while a growing number of retailers are investing in upgrades such as free Wi-Fi in their stores to allow shoppers to make the most of existing mobile applications and to address consumers' seemingly insatiable appetite for instant information.

"Within the course of the next 18 months, we're going to see a massive uptick in in-store mobile commerce with grocery retailers. There's going to be a lot more action," says Mike Grimes, senior vice president of mobile commerce at Catalina Marketing. The St. Petersburg, Fla.-based personalized digital media company developed Scan It!, a utility app for Stop & Shop Supermarket Co.

Retailers increasingly are offering apps to connect with consumers both inside the store and before they arrive. Many are offering apps that take prescription refill orders and notify consumers when they're ready, while others help with meal planning or recommend relevant products as shoppers browse store aisles.

"It's about creating that special relationship with shoppers," but it involves engaging consumers differently than marketers did 10 years ago, says Giovanni DeMeo, vice president of global marketing and analytics at Interactions Marketing. Today's mobile apps are the latest development in digital communications that started evolving more than a decade ago. First grocery retailers moved their circulars and recipes to their websites, later featuring products and personalized offers. While many companies cut back digital investments during the recession, they started renewing their efforts in 2011. Many now make information on recipes, coupons and store locations available in formats suited to mobile devices as well as on their websites, DeMeo says.

"Like any industry, you've got leaders and followers. It's still on the cusp of where it will be," DeMeo says. "Retailers are trying to figure out what the right solution is, whether it's the industry leaders trying to experiment with growing needs and demands in the segment or others who are just starting to enter the landscape...Retailers have a huge opportunity right now."

Grimes of Catalina believes the future is in so-called utility apps for the entire shopping trip that communicate promotions, but also help shoppers organize their purchases by allowing them to scan items as they go and bag them as they like. Catalina plans to add a mobile payment component to the Scan It! app in the coming months, which could allow shoppers to skirt checkout lanes entirely.

Payment by mobile phone will be an option at an increasing number of grocers and other CPG retailers.

"Mobile payment is incredibly important. I want to be able to hit a button and pay...That's the key around these apps including mobile payment. It's the utility," he says. Grimes says at least two apps offering mobile payment will be up and running by the summer, and he predicts others will follow suit.

One of the latest third-party apps for grocery shoppers is Savings.com's Favado. It aims to help consumers find the lowest price on groceries at 65,000 locations by aggregating information from bloggers on retailers' advertised promotions and matching the offers with coupons from any source. About 150,000 people downloaded the app within two weeks of its Oct. 15 launch. "We're trending to have several million people using this in a couple years' time," says Loren Bendele, president of Savings.com.

"The belief was people wanted to buy across grocery stores. We wanted to build something to enable them to do that," he says. The company plans to add capabilities to the app, such as enabling coupons to be loaded directly to loyalty cards. It also plans to work with retailers to drive traffic to their stores.

The rapid increase in smartphone use is spurring an acceleration in mobile development in the U.S. and globally. U.S. smartphone penetration is now about 68 percent, with adults 55 and older fueling the fastest growth in adoption, First Data reports in its 2013 Global Universal Commerce Consumer Tracker study. Smartphone ownership among Americans 55 and older rose to 51 percent this year from 34 percent a year ago, according to First Data. Still, that pales in comparison to penetration of 80 percent for millennials.

"One out of every 10 consumer e-commerce dollars is now spent using either a smartphone or a tablet, and growth in this segment of the market is outpacing that of traditional e-commerce by a factor of 2x, which itself is growing at rates in the mid-teens," comScore chairman Gian Fulgoni said in a statement in August. "Any channel shift has the potential to be disruptive to established revenue streams, and it would appear that m-commerce spending has reached enough of a critical mass that key stakeholders must begin to address this new market dynamic today or risk losing competitive advantage."

Overall, m-commerce could exceed $25 billion this year, and it grew 24 percent in the second quarter to $4.7 billion, comScore reports. Smartphones drove 6 percent of total digital commerce in the first half of 2013, compared with 3.5 percent for tablets, though tablet users spent 20 percent more on average than smartphone users. Smartphones accounted for a 3 percent share of total digital commerce in consumer packaged goods, according to comScore data.

In Europe, the numbers are higher, with the mobile retail audience increasing 43 percent over the past year and one in five smartphone users accessing retail sites and apps, comScore reports. Europeans also are more likely than U.S. consumers to make purchases with their phones. About 22.8 million, representing 15 percent of total European smartphone users, bought goods or services using a smartphone in August, up 37 percent from 16.6 million in August 2012.

While many experts say consumers are ready for more apps that will help them find the best prices, others contend the opportunity for retailers lies with mobile programs targeted toward consumers' lifestyles, such as health and nutritional information.

"As far as CPG brands go, I am continually impressed with Special K's app. This is a cereal product, but the app lets you manage your overall diet. While it won't have you dropping your Jenny Craig membership, it might be enough to keep you from having to join in the first place," says Lung Huang, dunnhumby's vice president of digital advertising, global partnerships.

The advent of mobile is changing the way marketers try to reach consumers. "It's about better understanding the daily lives of shoppers and consumers who are participating in our brands," said Ken Madden, executive vice president at Geometry Global, in a panel discussion at the Direct Marketing Association's conference in October.

Mobile Retail Activity Amongst Smartphone Owners Source: comScore MobiLens

Kimberly-Clark Corp. is using mobile apps for a variety of brands, including Huggies disposable diapers. The company examines how consumers are engaging in the category to craft the best approach to mobile strategy. "We map out those touch points, those key potential inflection points where we can connect with a consumer through a mobile tool, through a mobile service, and maybe drive a purchase immediately or engage with them to share with other consumers and talk about the brand," Kyle Mengwasser, Kimberly-Clark's commercial platform and digital strategy manager, said at the DMA event.

By and large, most retailers and CPGs are still experimenting with mobile commerce, experts say, and few are making money with it. "I'm unaware of anybody driving any real business in the grocery space. It's just a nice-to-have thing," says Nate Rosier, senior director of strategy at enVista Corp. in Indianapolis, who has held senior-level positions at a variety of retailers.

But Catalina has found a sales lift of 6 percent to 8 percent for retailers using mobile as they win a larger share of a consumer's grocery spending. Apps that integrate several functions useful during shopping are more likely to engage customers, Grimes says.

In the UK, Waitrose allows consumers to shop online for in-store pickup, and uses geo-fencing technology to alert store personnel to bring the order out once the shopper arrives, Grimes says. With location technology, retailers also can send in-store shoppers an alert when they pass by an item on their shopping list, such as, "You've just passed the milk. Are you sure you don't want it?"

Wakefern's ShopRite stores offer an app allowing users to browse circular specials, add coupons to their loyalty cards, and view products to build a shopping list, then check off items as they shop. A shopping cart started on a desktop computer will synchronize with one on the smartphone app.

Consumers also can view past purchases and add them to their carts, scan barcodes from items in their pantry or refrigerator to add to their shopping cart, and add ingredients to their shopping lists from recipes provided on the app. Other capabilities of the ShopRite app include updated pricing and locations of the stores closest to the consumer.

Walmart has developed an app to allow consumers to find, scan and bag items as they shop. While consumers still must swipe their credit cards, Grimes says, it's only a matter of time before the retailer adopts pay-by-phone. "We really think the tipping point for in-store commerce is Walmart," and particularly its adoption of in-store mobile scanning, says John Caron, vice president of Catalina. Walmart's Scan & Go app requires shoppers to swipe their credit or debit cards at the self-checkout.

Adding mobile payment can be a six-month effort depending on the retailer's existing point-of-sale system, says Grimes, who notes that Amazon also should be taken seriously as it develops mobile apps.

Grocery retailers have been cautious about diving into mobile. A mobile program can cost from $100,000 to $1 million or more, depending on functionality, the size of the universe and whether a company is doing the development in-house or using a third-party provider, DeMeo says. "I'm going to give it a little while to see where it succeeds or fails before I make any investments," he says.

"Integration is going to be key to any company moving into mobile commerce, as no customers are looking to go to one app for just one function," says Huang of dunnhumby. "The real victors of this space will be those who can provide customers with a great user experience as well as the same security of payment they'd feel purchasing on a desktop or in person. Until those needs are met, mobile commerce might get stuck in the 'browsing only' stage."

Before they make a substantial investment, some retailers are counting on improvements to smartphone design, such as larger screens that will encourage baby boomers to use the devices for shopping lists and other information.

In general, grocery retailers have lagged their counterparts in mobile development. "They're behind. In some ways initially when mobile picked up, they let the CPG companies take the lead," Rosier says. The lower prices of grocery items compared with apparel or durable goods might make consumers less likely to pull out their phones to look for the best price, he says. And for many consumers, it would require a change in their grocery shopping routine.

Ann Meyer is a Chicago-area freelance writer.