E-commerce, look out! Over the last two years, there has been a major shift in retail spending to mobile platforms. In 2016, Black Friday online sales topped $3 billion, with over $1 billion in sales driven by mobile sources. Consumers are getting comfortable using their smartphones to search, shop, and purchase everything from digital media, to furniture, and more. At Wal-Mart, 60 percent of 2016 Black Friday orders were made from mobile devices. In this blog post, we will talk about how the shift from consumer spending to mobile is reshaping mobile, e-commerce, and m-commerce.
But Wait -- There’s More!
Retailers saw this coming in 2015. In this 2016 report from RetailMeNot Inc., 87% of retailers surveyed said that they would increase their mobile budgets. During 2016, many retailers followed through with increased investment in mobile apps and advertising. Some retailers, such as Kohl’s, even went so far as to create their own mobile payment system. Kohl’s Pay allows customers to pay for purchases offline (in-store) and online using their Kohl’s Charge credit card. Other major retailers, including Wal-Mart and CVS, have also rolled out mobile payment solutions that are fully integrated into their smartphone apps. Meanwhile, Nordstrom has invested heavily in mobile engagement, adding a visual search feature that allows customers to shop at specific store locations. Erik B. Nordstrom, Co-President and Director at Nordstrom, says that their emphasis on the Nordstrom app and mobile browser has caused m-commerce sales to surpass e-commerce sales. Some retailers have been slow to adopt mobile, even with compelling evidence that mobile is the future for retailers. Much of this resistance seems to be rooted in a combination of factors that include fears of high cost and a lack of understanding with respect to mobile user behavior and patterns. Another possible reason for the lethargic response may be that, as of Q2 2015, 85% of online purchases were still made on desktops.
The Rise of Mobile and Its Impact on Retail Spending
Smartphones are unique in that they are always on and within arm’s reach every moment of every day. As mobile phone technologies improve Mobile User Experience (MUX), and mobile network technologies are developed to deliver high-speed internet, consumers will rely on them more to conduct product research, comparison pricing, and make product purchases. In comScore’s Mobile Hierarchy of Needs report, Ben Martin, Director, Global Marketing Insights, shares from a Boston Consulting Group survey what people are willing to sacrifice for their mobile phones:
- 3 in 10 people would stop seeing their friends in person
- Almost a third of Americans would give up sex for a year
- 45% would put off going on vacation
- 46% would give up a day off from work
- 55% would give up dining out for a year
One may conclude from these statistics that mobile is meeting the primary needs of people, hence the reference to Abraham Maslow’s Hierarchy of Needs in the report’s title. Here’s how mobile aligns with the hierarchy:
One of the many conclusions that can be drawn from this table is that, by the statistics, consumers are increasingly seeing their smartphones as devices they can trust. This has had a huge impact on banking, with mobile-only banking the dominant choice for consumers in the US, Mexico, China, and Indonesia. Canada, the UK, Spain, and Brazil currently see about a 50-50 split between desktop and mobile banking, give or take a little by country.Another major shift has been in communicating. Video calling and Instant Messaging (IM) are quickly replacing built-in SMS functionality. In markets outside of the US, Canada, and the UK, messaging apps are by far the preferred means of communication with others. Social media still gets a lion’s share of total mobile minutes, with 20-40% of all mobile minutes spent on social media. As social media platforms expand their functionality, content sharing is growing faster than personal updates. Creative apps such as SnapChat, Spotify, and Instagram are seeing widespread use globally.
What all of this mean for advertisers
Mobile consumers now perceive their smartphones as a fundamental necessity, one that is at least as important as any of the five needs named in Maslow’s hierarchy. Advertisers who see the Mobile Hierarchy of Needs as the gateway to understanding the mobile consumer will place themselves far ahead of the competition through campaigns aligned with mobile consumer needs. Furthermore, advertisers who help their retail clients see the value in this new model of the mobile consumer will benefit from apps built around the Mobile Hierarchy of Needs by gaining direct access to consumers who fulfill all or most of their primary needs through their smartphones.
The Bougainvillea barrier between retail consumers and m-commerce
The Bougainvillea bush has petite leaves and delicate flowers that make for a beautiful addition to almost any yard. When you try to push through that hedge, however, it’s a different story. Behind the pretty petals are thorns that prevent any human from passing through without experiencing profound pain. Retail MUX shares some painful qualities with our beautiful, if thorny, hedge. Painful retail MUX causes most customers to abandon their mobile purchases outright or turn to their desktops to complete their purchases. So, what exactly are those mobile thorns? Most e-commerce sites:
- Load slowly on smartphones: Many e-commerce sites were originally built for desktop/laptop users. While a conventional website might load quickly over an ethernet connection or wi-fi, this is rarely the case for mobile.
- Have layouts that are not smartphone-friendly: This is a huge thorn in the side of anyone trying to use a website that wasn’t designed for mobile. Either the web pages are shrunken to fit in the smartphone browser making everything too tiny to read, or the web pages are HUGE, allowing the user to see only a small part of the page at a time. Either way, mobile users quickly abandon the website, even when they really want to buy something.
- Are difficult to navigate: Conventional websites were built with desktops and laptops in mind. There was plenty of room to create navigation that looked and worked great at these larger resolutions, but become impossible on a smartphone. Difficult mobile navigation quickly leads to website abandonment.
- Difficult to view and compare multiple items: The small screen size of smartphones makes it virtually impossible to perform side-by-side comparisons of similar products. This leads to site abandonment and lost sales.
- Are difficult to complete purchases on: It’s no secret that smartphones are notoriously difficult to type on. In spite of that, retailers still require mobile customers to fill out forms the way they would if they were on a desktop. This leads to high mobile customer frustration and cart abandonment.
- Limited payment options available to mobile consumers: Most conventional retail website payment options are limited to PayPal or card payment only. With multiple other payment options available to mobile consumers, they often will abandon a purchase that doesn’t offer the payment option they need or prefer.
For m-commerce to meet its huge potential, retailers must fully embrace mobile. Scott Steinberg, a technology and digital lifestyle expert, says “...shoppers will increasingly expect one-touch purchases, rapid-fire order placement solutions and the ability to easily browse, buy or research transactions of the fly whenever the mood strikes.” No truer words have been spoken. Retailers who are able to develop apps and mobile solutions that meet or exceed these expectations will gain a dominating advantage over retailers content with their e-commerce sales. However, retailers who continue to put off integrating mobile into every aspect of their digital presence will soon be left behind. So, what’s in it for advertisers? The single greatest advantage of an m-commerce app for an advertiser is direct access to the user. User behavior can be accurately tracked within a retail app from initial product searches to making the actual purchase. This data can be collected and analyzed to create effective campaigns that deliver targeted content and incentives to the consumer inside the app, increasing customer engagement while cultivating brand loyalty and increasing LTV.
The Impact on E-commerce
As retailers address the pain points detailed above, a larger consumer shift away from e-commerce to mobile can be expected. This shift is already happening with retailers such as Nordstrom, which has seen m-commerce sales pass e-commerce sales by a significant margin. This may take longer in countries such as the US, where most consumers are still using desktops to make online purchases. E-commerce is tied to the desktop and, like the desktop, is showing its age. As mobile continues its rise to become the primary way people access the internet, e-commerce will decline, replaced by m-commerce that is driven by apps built around the primary needs of mobile consumers.
The Writing’s on the Wall
Consumers perceiving their smartphones as a fundamental need has brought about a sea-change in how those mobile devices are used. Increased trust in smartphones has led to people begin using them for tasks one carried out on desktops. Mobile is taking over banking, health, and retail purchases. Retailers who take advantage of this shift will benefit from gaining a competitive edge over retailers who still don’t believe that mobile is the future of retail. Retail apps that remove the current pain points in MUX will give their retailers a huge advantage by offering easy, secure, effective MUX that facilitate purchases rather than ensnare them in a thorny thicket of legacy UX intended for desktops.Advertisers who recognize the full value of the perception of a smartphone as a fundamental human need and how it meets all other basic human needs will gain a strong competitive advantage.
