How mobile is changing retail to create a new type of store:
The rapid uptake of smartphones has had a significant impact in retail. Many stores are seeking ways to combat ‘show-rooming’, where consumers browse in-store and then buy elsewhere on their mobile. Some, such as Best Buy are simply matching online prices, others such as Macys and Toys-R-Us are creating a more immersive app-based experience to win their customers on the service side.
The other trend has been the re-invention of the store. Take the products away, and instead use posters to display the products. It means that the shops can be pretty much anywhere. Whilst some have described these as ‘virtual stores’, arguably they are not virtual as they clearly exist in the real world. Instead I am calling these ‘unstores’.
The first to appear was Tesco Homeplus in Korea, with their QR-based metro posters. Since then retail brands including PayPal (Singapore), eBay (London), Argos (London), Delhaize (Brussels) and John Lewis (Brighton) have delivered similar offerings. Net-A-Porter’s (London and New York) pop up window used augmented reality rather than QR codes, and Tesco’s F&F pop up store (London) used iPads and QR tags to allow users to order products.
These examples were all short-term, largely PR exercises, however the future looks more permanent. Chinese supermarket retailer, Yihaodain, plans to open 1000 unstores. It makes complete sense in that market. Chinese have no tradition of desk-top retailing, but the rapid uptake of smartphones creates an opportunity to engage the time-poor Chinese worker. This is likely to be just the start. I would expect many brands in Europe and the US to follow suit.
A new study from eBay, suggests that the UK could be seeing if £4.5bn in mCommerce by 2016. The only thing holding it back are the poor mobile data connections. In a survey conducted for the online auction site by retail specialist Verdict, they estimate that 16% of the UK lacks the coverage for mobile broadband with a further 20% below average. That could result in a loss of over £1bn per year in revenues. In a study of 1500 UK consumers they found that lack of coverage, low speeds and reliability were the major barriers for mobile shopping. The costs of data is also an issue for many customers. The DMA/Empirix study published last week also found that consumers were ready to shop, but the brands were not providing the service.
eBay has sent the results of Ofcom and are pushing to speed up the delivery of 4g which will provide much faster broadband. Although 4G networks are rolling out in the US and elsewhere, the UK has yet to agree the terms on which it will be auctioned off. The operators claim they have not seen their return on the £30bn + cost of the 3G licences. Mobile is the fastest growing channel for eBay who expect to see over $4bn in sales this year. More on the report here.
ebay have been regularly reporting on the success of their mobile-based sales. In 2009 that was $600 million, but in 2010 that lept up to $2bn. These figures are the merchandising turn over, rather than revenues, but however you look at it, the company’s early entry into mobile has paid dividends. Interestingly 1/3rd of these sales came from the UK and Germany – it seems that the British were quick to adopt ebay’s mobile app and website. 30 million versions of the ebay app have been downloaded, half of which are for the iPhone. It was only a few months ago that ebay were predicting $1.6bn revenue for 2010, surpassing these predictions led the VP of ebay Europe said, ‘it’s staggering to think that $2billion worth of sales has been generated through a platform that didn’t exist a couple of years ago, and on a device that didn’t exist three years ago’.
All the signs are there that mCommerce – people buying stuff through their mobile phones – is on the increase. Along with the recent appearance of some good mCommerce websites (M&S and John Lewis), eBay and Amazon have continued their mobile strategy. Ebay’s iphone app saw purchases of $350,000 sports car, a Bentley and a $150k boat. The point here is that where there is trust, mobile users will spend. Amazon are expecting to do $1 billion through mobile this year. Ebay, who made around $600 million last year through mobile now expect it to grow to at least $1.5 bn next year.
That’s interesting. But what is very interesting is that Ebay expect mobile sales to outstrip fixed internet sales within the next few years. Thinking about ebay and the immediacy of bidding on some items, it kind of makes sense.
Product manager, Oliver Cockcroft said “For eBay, mobile commerce is the future, and our plan is to innovate and hit the gas pedal—we don’t see the steep growth trajectory of mobile commerce changing”.