Do Apps Hypnotize Retail Shoppers?
Retail is dead. That was the overwhelming sentiment for the last half decade as malls disappeared, retail stores shrunk, and retail spending all but vanished.…
Retail is dead. That was the overwhelming sentiment for the last half decade as malls disappeared, retail stores shrunk, and retail spending all but vanished. But it turns out mobile app companies may be spearheading the effort to bring retail back. Mobile applications are just growing retail through in app purchases, but they are influencing consumers’ in store purchase decisions.
The growth is to the tune of an additional $700 billion by 2016 – an enormous amount.
Mobile app companies have long realized the potential revenues associated with the development of apps. But the idea that mobile apps can influence purchase decisions in a non-digital or web-bound environment is unprecedented. At the same time, it isn’t particularly surprising.
Apps provide information, and information makes purchasing things easier. A mobile phone can now serve up facts about an object; the origin, the producer, and almost any other information necessary when a consumer is making a purchase decision. Making the information more accessible means that the time a consumer spends searching for information to justify a purchase disappears – encouraging quicker, “gut” purchase decisions.
Those “gut” purchases will total nearly $700 billion by 2016.
Hypnotized: The Purchase Daisy Chain
The traditional purchase decision chain goes something like this. A consumer needs to paint his house, so he looks for different types of paint, then he decides between generic brand blue or Behr blue. He buys the Behr blue and uses it, and he is either satisfied or disappointed with the results. But today, mobile apps are changing the way this model works.
The plethora of apps created by burgeoning mobile app companies essentially condenses the most important parts of the purchase process – info search, alternative evaluation, and purchase decision - into one glance of a smartphone. With apps such as Amazon Mobile, Google Shopper, and RedLaser, consumers can check prices and availability just by pulling out their phones. What mobile apps are enabling is not just snap purchasing decisions, but the ability to make an informed judgment on a product in less time.
So what does this mean for retailers and mobile app companies?
First, there is no longer one model of purchase decision acting upon consumers. The traditional concept of the purchase decision is still very much alive and functional. But the changes in the way consumers obtain information, and the speed at which they can do so, has changed the paradigm. Second, recognizing the fundamental ways the consumer has changed in purchase behavior means recognizing that a new purchase decision model has come into play.
A survey by the Pew Internet and American Life Project reveals the proliferation and use of mobile phones in making in-store purchase decisions. The results show that more than half of adult mobile phone owners used their phones in the store during the survey period – a 30-day period centered on Christmas.
- 24-percent of cell owners used their phone to look up reviews of a product online while they were in a store.
- 25-percent of adult cell owners used their phones to look up the price of a product online while they were in a store, to see if they could get a better price somewhere else.
The survey concluded that 52-percent of all adult mobile phone owners used their phone for information search and alternative evaluation in store. Nearly 33-percent of consumers surveyed used their mobile device to specifically find product reviews or pricing online – while in a physical store.
Catch Up Marathon
As more and more consumers take their in store queries into the Internet, it becomes clear that retailers are missing an opportunity to communicate with the customers. After all, a consumer who has taken their information search online will likely not engage an employee in the retail store. And the consumers are in looking in the Internet for a reason; the retailer was not able to provide a satisfying answer, or the consumer distrusts retailers to be transparent in their answers.
Starbucks is leading the charge to change how retailers view the development of mobile apps. The Starbucks app simplifies things for the consumer, offering on-the-fly mobile payments in store and push notifications about specials and deals. While this is a far cry from the full range of functionality consumers are looking for, Starbucks’ approach has gained a large following. Not only does their app pull in customers, it also offers the company a cost savings on credit transactions.
Aside from generating more revenue, developing mobile apps can also help stores cut costs. Credit transaction fees remain one of greater costs for businesses, especially smaller retailers. Embracing mobile app technology can help business reduce costs on that front by cutting out the middleman. Services like Dwolla and Square already offer cheaper, more flexible, and more portable credit transaction app technology.
Moving forward, retailers should reconsider the importance of the mobile space and how it can benefit them. By partnering with mobile app companies retailers can better improve their engagement with their customers and cut their costs.
And who knows, maybe those 700 billion dollars by 2016 will be even greater.