Retailers must hop on the connected consumer bandwagon before it's too late

By Michael Carney , written on November 5, 2012

From The News Desk

It’s hard to blame brick-and-mortar retailers for fearing the connected consumer. We’ve heard countless tales of shoppers using physical stores as showrooms for their online competitors, a place where items can be touched and felt, but need not be purchased at prices that support the infrastructure required to offer them. Until recently, retailers seemed content to ignore the mobile technology phenomenon as if it would slow down (or more ridiculously, reverse course). We are beginning to see signs of adoption, but there remains a long, long way to go.

Retailers are at a crossroads. There are three basic paths forward. First, they can stay the course and hope their current offering is sufficient. (This is suicide.) Second, they can try to compete directly with online retailers. This will likely have to be a component of any solution, but the offline crowd has proven generally inept at online innovation, meaning most are likely to swing and miss. Third, retailers can differentiate their offline value proposition. This is the best choice, and one where mobile technology needs to play a bigger role.

Online shopping offers convenience, discovery, and typically price advantages. Brick-and-mortar shopping offers a tangible experience, and in some cases immediacy, but often little else as far as competitive advantages go. Real world retailers hard pressed to compete on price need to embrace mobile technology to deliver elements of discovery and social sharing if they want to remain relevant through the next decade.

A report came out today detailing the worst kind of reaction to mobile techology. Offline commerce-enabling startup Kickscout released a blog post describing one of its users getting kicked out of a Victoria’s Secret store for using its app while shopping to share pictures of coveted items with friends. There’s no way to verify what actually happened, and it’s equally likely that the shopper was just being a pain in the ass snapping pictures throughout the store. But the reaction speaks to a bigger trend of head-in-the-sanded-ness gripping the retail industry.

Examples of this type of denial can be found among the industry’s biggest names. A year ago during the holidays, Best Buy declined to match Amazon’s prices, despite the fact that its prices were determined to be 11 percent higher, not to mention the etailer offering free shipping and no sales tax in most states (something that’s changed since, notably in California). This holiday season, the beleaguered big box retailer is reversing course in an extremely risky but likely necessary move sure to be watched by others in the industry.

Amazon then twisted the knife last year by offering shoppers a 5 percent discount on any item that they scanned with the company’s Price Match app in a Best Buy, Target, or other big box store. The national retailer association responded hamfistedly by campaigning aggressively against the uneven playing field created by sales tax loopholes for ecommerce retailers. Target, on the other hand, asked its vendors to provide exclusive products that would attract shoppers to their physical locations. What was missing was a method of fighting fire with fire.

None of these brick-and-mortar companies have succeeded in using mobile technology to outduel their online rivals. The most successful to date has been Apple, a technology company at its core, but also the world’s most successful retailer. The company pioneered a number of techniques that are starting to percolate through the rest of the industry, including showroom touch displays, handheld checkout devices for employees, and online service department appointment setting. These ideas were innovative in years past, but the goalposts have moved and those who wish to survive must continue to think differently.

More recently, Target announced that it would use QR codes emblazoned on the store’s most popular products to offer product information, reviews, and comparisons through the company’s app. Shoppers who then make purchases through the app get free shipping. While this might get an “A for effort,” it gets a “D- for execution.”

First QR codes are an already outdated niche technology that only the nerdiest consumers know how to interact with. Secondly, and more fundamental, reviews are nice, but free shipping isn’t enough of an incentive to convince a consumer standing in store with a product in their hands to go home without it and wait for it to be delivered. The implementation directly defeats one of the lone advantages of in person shopping: immediacy. Target is positioning the feature as a tool for “secretive” shoppers, although I’m not buying it. It reeks of an effort to “incorporate technology,” without doing so in a way that adds real value.

One of the more interesting uses of mobile technology is a product called Footpath from Path Technology that anonymously tracks shoppers’ smartphones through retail locations. The data is the offline equivalent of the online behavioral metrics that etailers use to optimize and target advertising and promotions. The technology shows real promise of helping retailers drive more revenue, but it fails to perceptibly improve the experience for consumers. If anything, it will likely creep out those who discover that it’s happening.

Ideally, retailers would flip the script on their ecommerce brethren, not only agreeing to price match or discount against the catalogs of Amazon and others – an admittedly dangerous game – but also allowing users to immediately locate items within a store using their GPS enabled device. Also, stores should generously reward consumers for installing their apps (if they even have one), checking into their physical locations, and sharing items and promotions on social networks. The idea is to have consumers associate shopping in store with the convenience, serendipity, and connectedness common to online commerce.

I argued previously that Best Buy take a similarly disruptive path by creating its own in-house crowdfunding platform as a means of sourcing innovative and exclusive products for its stores. Nordstrom has been among the most progressive, acquiring flash sale site Hautelook, investing in online brands Sole Society (a Hautelook spinout) and Bonobos, and partnering with wedding marketplace As interesting as these moves are, however, they represent entering entirely new business categories, rather than innovating within its existing one. Maybe beggars can’t be choosers.

Whatever the flavor of innovation, the clock is ticking on the retail industry. Brick-and-mortar companies need to demonstrate that real world shopping not only offers advantages of immediacy and tactile feedback, but also can deliver the convenience, discovery, and social connectedness typically associated with ecommerce. Social shopping apps like Kickscout and social opinion apps like PodNod offer retailers a preview of what’s possible when he tangible benefits of real world shopping are combined with the magic of connectivity.

Whether it be through internal development, joint venture, or acquisition, it’s imperative that retailers get serious about integrating the smartphone into their turnaround strategies, rather than viewing it as the enemy.

[Illustration by Hallie Bateman]