Mobile Opportunities for Retailers

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Cartesian Perspectives

Mobile Opportunities for Retailers

October 2012

2Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.

Context for today’s discussion

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Mobile technology presents tremendous opportunity for retailers, much as it has already changed our personal and professional lives

The benefits of mobile extend far beyond m-commerce – mobile has the potential to differentiate retailer brands, to drive in-store sales, to streamline operations, and to provide valuable customer insights

Retailers are at a very early stage of implementation – a select group of innovative retailers is leading the way, but none is yet capturing the true potential

As technology specialists, Cartesian understands the potential of wireless – we know the key trends, the enabling technologies, the ecosystems, and business models

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Evolution of Mobile Retail

Though mobile technology has the potential to transform retail, very few brands have begun to make the shift

With our expertise in mobile technology, Cartesian is helping retailers and technology players capture these opportunities

Mobile Retail 2.0

• Use of mobile technology to engage with customers in-store (e.g., augmented retail)

• Streamlining of store visits (e.g., mobile self-checkout)

• Delivery of contextually-relevant promotions (e.g., coupons based on in-store location)

• Tying of loyalty programs to the consumer’s mobile identity (e.g., check-in for rewards)

• Capture of customer insights from new data sources (e.g., geofencing)

Mobile Retail 1.0

• M-commerce via mobile web and mobile apps

• Mobile advertising

• Integration with social media and third-party shopping apps (e.g., Goodzer)

• Support for cross-channel sales (e.g., order on mobile, pickup in store)

Most retailers today


US Mobile Facts

Mobile 101

Retailers need to understand the transformational impact of mobile technology, which is changing consumer behaviors and perceptions

• Mobile technology refresh cycles are short – customers will often own more advanced technology than retailers have implemented

• Mobile has increased consumer expectations for access to information and support – consumers expect everything to be delivered on-demand

• Mobile use allows for high degrees of personalization – customers demand flexibility and customization

• Privacy and security are paramount, as mobile devices are increasingly among the most personal products consumers use – mobile outreach must be handled with care

Implications for Retailers

Source: Business Insider, Flurry, comScore, InMobi, Recon Analytics, eMarketer, Cartesian

Consumers replace their mobile handsets every 22 months

The average smartphone user spends 94 minutes per day using mobile apps*

Mobile devices account for 26% of media consumption

More than 40 million Americans use tablets; 40% of iPad owners use iPad as their primary PC

8% of internet traffic comes from mobile devices

* In comparison, the average smartphone user spends 72 minutes on the web (both desktop and mobile)


Mobile Shopping

Mobile technology use is already widespread within stores, and generally occurs without the retailer’s involvement

Customer Experience Funnel

Gain Awareness

Locate

Evaluate

Purchase

Use

Service/ Support

21% of smartphone users are comparing prices in-store and using stores as “showrooms”

82% of smartphone users report noticing mobile ads

36% of smartphone shoppers purchase items on their smartphone in store

Retailers need to determine what role to play in supporting mobile technology use both inside and outside the store, and involving owned and third-party communication channels

Finds location of nearest retailer for a particular product

Acts as unified loyalty card to replace existing loyalty cards across multiple retailers

Alerts consumers of price adjustments post-purchase, allowing them to get price difference quickly refunded

Compares price of products across multiple retailers, and allows user to get input from friends before purchasing

Provides alerts on deals, ads, and coupons across retailers based on user location

Over 38% of smartphone users have used their phone to make purchases at least once


Status of Deployments

Use of mobile technology by retailers is still at an early stage

Advanced Mobile Feature Penetrationof Top 100 US Retailers, 2011

(% of Retailers)

Source: Wells Fargo, Cartesian

• 71% of STORES.com Top 100 retailers plan to implement multi-channel integration within 3-5 years

• 24% of surveyed retailers view Associate Mobile In-store Functionality as a top priority

• 24% of surveyed retailers view Customer Mobile In-store Functionality as a top priority

• Within the next 2 years nearly 50% of retailers plan to support Mobile Phone NFC Payments

More sophisticated functionality such as location-based capabilities or cross-channel support have been enabled by a minority of large retailers, but are a focus area for the future

9%

16%

24%

30%

31%

45%

48%

0% 10% 20% 30% 40% 50% 60%

Location Based Flash Promotion

In-store Pickup

Personal Recommendations

Reward Game

Inventory Lookup

Social Network Integration

Ratings/Reviews


Retailer Examples

Some retailers are adopting innovative approaches that employ mobile technology to increase customer in-store interaction and brand awareness

Retailer Case Studies

Vendor/Service Provider

Location

Description

Augmented Reality

Global

• Lego has created a personalized, interactive experience with the brand, not available online

• Special screen shows full 3D product when box is held in front of screen’s camera

• Customer’s phone or tablet can be used as lens to see alternate product features (colors, recipes, etc.)

Interactive App andIn-store Kiosks

US

• Sephora has created an interactive in-store experience promoting brand engagement and additional sales during checkout wait

• Tablets are integrated into makeup stations, designed to engage customers who are getting their makeup done

• Sephora-branded beauty magazine lets customers browse latest beauty trends and purchase items in app

• Virtual mirror lets customers follow Sephora makeup tutorials using tablet

• Store associates estimated 3 out of 10 customers used mobile app in stores

Store-centric App

US

• Apple has created an app that focuses on in-store customer experience and is tailored to customer service and expedited store services

• App recognizes and customizes information to current store (events, etc.)

• App allows customers to make purchases for in-store pickup, or to scan items in store for self-checkout

• Customer can scan a product to see detailed info, then click to request help from a sales associate who is immediately summoned


Retailer Examples

Some retailers are adopting innovative approaches that employ mobile technology to increase customer in-store interaction and brand awareness

Vendor/Service Provider

Location

Description

Mobile Payment

US & UK

• Starbucks has designed a mobile payment solution that ties customers to the Starbuck’s loyalty program

• Users download the Starbucks app and link it to gift card or debit/credit card

• At time of purchase, cashier scans personal barcode for payment processing and loyalty tracking

• Solution currently processes 1M transactions per week

Self-checkout withCoupon Integration

US

• Stop & Shop has created an innovative shopping experience that helps customers reduce wasted time during checkout

• Shopper picks up a wand when entering the store, or uses own smartphone with a Stop & Shop app

• Shopper scans and bags items as they are placed into shopping cart

• Related items and coupons are shown to user after item is scanned

• Checkout occurs at any POS, without need for employee interaction or rescanning of items

• Stop & Shop reports a labor savings of 10-15%, and basket lift of 10%

Virtual Store

South Korea

• Tesco has created a revolutionary way to shop, turning wasted time spent waiting into productive time spend shopping

• Subway stations in South Korea are wallpapered with posters of virtual stores with many grocery products displayed

• Using Tesco app, customers scan QR codes for each product they want to add to their online shopping cart

• Store assembles and delivers shopping cart to user after user is home

• As a result of the virtual store, registered members grew 76%, and online sales increased 130%

Retailer Case Studies (Cont.)


Apple Retail App

Apple’s mobile app is service-oriented and designed around customer activities; the app enhances store visits by presenting real-time store information

This best-in-class example illustrates the potential for mobile technology to enhance the in-store experience

Source: Apple, Cartesian

Apple Case Study: Mobile Smart Store Experience

Main page presents customer with store-specific information to help them best manage their visit:

App automatically identifies customer

location Customers who already know what product they want can use EasyPay’s mobile self-checkout to quickly get in and out of the store

Customers are informed of upcoming store-specific workshops

Customers seeking in-store support can make an appointment with the Genius bar

• Real-time estimates on the number of customers in line and the next appointment opening help customers gauge wait time


Source: Company websites, Cartesian

Innovative Use of Mobile

Mobile represents a natural complement to many loyalty programs, with many retailers looking to mobile to provide further functionality and differentiation

Mobile Elements of Loyalty Program Mobile Technology Enabler

• Starbucks created an app that combines loyalty and mobile payments

• App replaces card-based system rewarding customers for predefined number of purchases

• Encourages loyalty program participation & improves Starbucks’ ability to capture customer dataRetail – Café

Mobile payments

• Stop & Shop pushes mobile coupons and deals to customers that use the mobile self-checkout system (requires loyalty card)

• User adds item to cart and discount is automatically applied

• Drives basket lift and a differentiated shopping experienceRetail – Grocery

Indoor location

• Power Up Rewards members gain points for checking in at store locations

• Non-members are encouraged to join after checking in

• Drive foot traffic & customer engagementRetail – Consumer

Electronics

Check-in

• Maurices pushes ad or coupon to mobile phone when customer is located within predefined range of store

• User must opt in to receive promotion

• Improves ad targeting through increased contextual relevanceRetail – Clothing

Geofencing & push notifications


Overview

Looking beyond the customer experience, sourcing data from mobile devices enables retailers to significantly expand their view of consumer behavior and preferences

Source: Cartesian

Customer Behavior Metrics Enabled by Mobile

Furthermore, mobile enables Best Buy to link the two types of data – behavior can be linked to a unique customer profile via the customer’s mobile device

Traditional Metrics

Mobile-Enabled Metrics

Consumer Behavior Consumer Preferences

Transactions

Average Basket Value

General Brand Perception

Post-Purchase Customer Satisfaction

Foot Traffic

Dwell Time

In-Store Traffic Patterns

Out-of-Store Location Trends

Real-Time Brand Preference

Real-Time Customer Satisfaction

Omni-Channel Customer History

Mobile Ad Conversion Rates


Mobile Web / App: What role for your mobile app vs. mobile website? What app / web platforms to support (e.g., HTML5)?

In-store Technology: How to equip and train sales associates? What form factors and functionality for customer terminals? Where are the best ROIs?

Omni-channel: What use cases to support across mobile, online, and in-store channels?

Mobile Advertising: How to maximize relevance of promotional message delivery? How to balance user privacy / control and your promotional objectives?

Social Media and Third-Party Apps: How to best leverage third-party sites and ecosystems? What to control and what to open?

Loyalty and Customer Analytics: How to involve mobility in loyalty programs? What novel data sources does mobile technology enable? What insights can be gleaned?

Key Questions

Retailers face a challenging set of questions around how to maximize leverage from mobile technology

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Mobile Payments: When to start adopting mobile payments, and what types? How aggressive a role to play in this nascent market?

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Importance of Mobile

Mobile technology has the potential to influence nearly every aspect of a retailer’s interaction with customers as well as its own internal operations

E.g., analysis of in-store traffic patterns using mobile

device traces

E.g., pushed promotional messages, both in-store

and on-the-go

E.g., warehouse workforce mobilization

E.g., mobile inventory check and ordering with in-store pickup

E.g., mobile app displaying product info

and expert reviews

Source: Cartesian

In-store customer experience

Multi-channel sales and support

Corporate and store operations

Customer identity and loyalty program

Marketing and social media

Mobility


Cartesian Expertise

Cartesian has direct experience across many areas of relevance to retailers

• Supported a major US retailer seeking to improve on in-store and out-of-store customer experiences via mobile

• Conducted a mobile shopping market scan: retailer activities, consumer shopping behaviors, and vendor solutions

• Supported the development of a mobile strategy, with a roadmap for implementation

Mobile Customer Experience

• Assessed the mobile payments landscape with a focus on NFC-based payment methods

• Evaluated mobile payments solutions and business models from major players

• Studied the enabling technologies and ongoing standardization efforts

• Considered market evolution scenarios and implications for ecosystem participants

Mobile Payments

• Developed a mobile coupon strategy for a wireless operator

• Assessed the couponing ecosystem and identified business model options for mobile couponing

• Evaluated alternative mobile advertising campaign types and proposed specific campaign structures

Mobile Coupons

• Assisted a major US brand in developing a new reward program

• Performed cross-industry benchmarking of reward programs to understand program structures, economic drivers, and trends

• Develop multiple options based on corporate strategic and financial objectives

• Tested options via qual + quant research and modeled financial impacts

Reward Programs


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Mobile Opportunities for Retailers

Business

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