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Mobile Blueprint - Executive Summary

The question of whether consumers will adopt smartphones and other mobile devices is becoming less relevant. The more relevant question is “What is the best way for retailers to capitalize on consumers’ rapidly evolving use of their mobile devices?” Mobile phones are changing the way retailers, suppliers, and consumers both communicate and do business. Our phones are always with us—and always on, connecting retailers to current and potential customers, regardless of location or time of day. A survey conducted by BIGresearch found that consumers plan to spend $688.87 per person during the 2010 holiday season, and 25 percent of adult smartphone owners plan to research or make purchases using a mobile device. That figure jumps to 45 percent when the subject population is young adults between the ages of 18 and 24.1

Adoption rates for mobile devices are accelerating so fast that forecasts from just a few years ago are completely outdated. In 2005, mobile payments totaled $155 million and were forecast to hit $10 billion by 2010.2 Actual mobile payments for 2010 are on track to be closer to $100 billion and double, to $200 billion, in 2011. In addition, mobile payments for digital and physical goods are forecast to reach almost $630 billion by 2014.3 There is no doubt that mobile technology for retail is no longer a trend, but a necessary way of doing business.

1.1    Consumer Opportunities

Over the past year, early adopters of mobile technology such as Target4 and The Home Depot5 have redefined how they want to interact with customers in their stores, on the Web, on mobile devices, and on social networks. These retailers (and other innovative retailers) recognize that mobile can be integrated into their business models to enhance the overall relationship between their brands and their customers. Other retailers have chosen to add mobile to current store, Web, or catalog channels without full integration. These retailers may take that approach simply because it is more straightforward than full integration, or it may be part of a broader strategy, to wait and see whether full integration yields a stronger competitive advantage.

To understand the current use of mobile technology and where it is headed, it is important to understand where we have been. Many retailers began the relationship with their customers through their retail stores or a catalog. Communication took place on TV and radio and through print advertising, in-store signage, and interaction with store associates.  Marketing brought the customer into the store, and associates conducted the transaction and satisfied the customer. The relationship was a fairly low-technology, one-to-one relationship. As retailers grew and technology evolved, this channel grew to encompass multiple channels.

Slightly more than 10 years ago, e-commerce over the Internet started to enter the mainstream; as the technology was adopted more widely, the level of sophistication of consumer shopping behavior and expectations grew.  Ten years ago, it might have been acceptable for an associate to tell a customer that the store did not match the prices on the store's Web site because "it is a separate business."  Five years ago, it might have been acceptable for an associate to honor the prices on the store's Web site for a customer but not the prices on a competitor's Web site.  Today, customers may not even set foot in a retailer's store if they are able to find what they need to purchase using a mobile device.  Even if the customer enters the store, the customer can easily use a mobile device to scan the bar code of an item of interest, find and purchase it at a lower rice elsewhere, and leave the item sitting on the store shelf.

The optimum goal for retailers is to achieve a singular brand experience for customers, regardless of the technology used to interact with that brand.  This means that legacy channel-based systems, business processes, and organizational silos must continue to evolve (Figure 1).

Figure 1

Click here to view a full size Figure 1.

While customers will not require a retailers to offer multiple integrated channels to win their business, leading retailers must focus on ways to strengthen the relationship between their brand and their customers and not necessarily focus on each channel individually.  Consumers continue to use mobile devices not only to research products and pay for purchases, but also to interact with retailers in ways that increasingly connect to social media sites and third-party pricing and promotion applications.  Consumers with a mobile device can use apps (like the ones from Amazon or eBay, which are integrated with apps such as Red Laser) to find a better price while standing in the middle of a retail store.6  Whole Foods Markets’ customers puzzled by an ingredient can use their phones to find and display recipes using that ingredient and even restrict their choices to cater to special food allergies or nutritional requirements, such as gluten or lactose intolerance. Shoppers headed for Target can search a friend’s gift registry for the perfect gift, locate the nearest store that has that item in stock (right down to the department and aisle location of the item within that store), and check the gift off the registry list—all on a mobile phone.

Phones can store and display loyalty, reward, and club membership cards (which most retailers then scan directly from the screen) and match a health condition with the correct over-the-counter medication. Some retailers have even enlisted the help of their consumers to retrieve competitors’ pricing using third-party apps that award the customer for taking a snapshot of a product display or scanning the bar code of an item on sale at a competitor’s location.

Using phones or other mobile devices for payment is advantageous for both consumers and retailers. Payment by phone can be combined with additional services to increase sales, speed up transaction times, and strengthen customer loyalties. Sales can close more quickly when shoppers looking at a product can access product information and reviews (for example, using their phones to read a bar code) and then pay for the product on the spot. Consumers using mobile phones as a payment method enjoy the convenience and security of not having to carry cash or a payment card. In Europe and Asia, consumers can reserve seats on a train, purchase their tickets, and use those tickets to board the train while carrying nothing but a phone. When consumers pay by phone, payment information that adheres to ARTS standards can be integrated into the retailer’s back-office systems, coordinating all-important inventory, customer relationship, enterprise resource planning, and financial data.

The mobile phone market has moved beyond smartphones to tablets such as the iPad, providing consumers with more computing power in their purses and pockets than ever before. Near Field Communication (NFC) technology, which enables short-range wireless interaction between devices (such as for payments), is rolling out to the U.S. market. The next version of the Android operating system (version 2.3) supports NFC,7 and Apple is rumored to be close behind. Mobile payments technology has been commercially available in Japan since at least 2005, with mobile Suica-card enabled devices and NTT DOCOMO’s iD mobile credit payment service. (The company issued a press release in September 2010 announcing the achievement of 15 million subscribers since the program’s launch.) In addition, 37.5 million subscribers are using handsets equipped with the contactless payment technology, which represents over 60% of the company’s subscriber base (Figure 2).8
Figure 2

Click here to view a full size Figure 2.

As more devices around the world are equipped with a mobile wallet, the number of consumers carrying payment and loyalty cards electronically will also increase. Consumers benefit—their cards are not only secure, they are easily cancelled and replaced if lost: one call, text message, or remote application does it all. Retailers benefit—mobile wallets can help solve the critical problem of wallet share and represent opportunities to offer customers new incentives to purchase, new ways to purchase, and new ways to pay.

To achieve universal consumer acceptance, mobile processing must be standardized around the world. What works in the United States must also work in Asia, the Pacific Rim, Europe, the Middle East, and Africa. There is only one way to ensure that processing is the same everywhere, and that is by creating and adopting global standards.  Fortunately, numerous organizations, such as GS1, the NFC Forum, ARTS, and the recently formed Isis project, are already working to develop and promote the necessary standards. This document will also continue to evolve to support the needs of retailers.

1.2    Opportunities Within the Retail Establishment

As technology evolves and consumer sophistication increases, retailers have an opportunity to leverage mobile technology to streamline operations and generate incremental revenue. Functions such as distribution, operations, merchandising, marketing, human resources, and customer service already benefit from the integration of mobile devices with existing systems. For example, making the point of sale (POS) mobile allows customers to avoid lines and retain receipts electronically, while retailers save on labor and materials costs, and sales associates can locate and assist customers anywhere in the store. Sales associates can also use mobile devices to clock in and out or sign up for automatic alerts from their company’s scheduling system when open shifts are available. Integration with workforce management capabilities, including appropriate labor forecasting, labor scheduling, and labor management and budgeting systems can optimize both daily internal operations and corporate-driven tasks at a store.

The retail supply chain will also benefit from the use of mobile technology, particularly when the manufacturers of specialized mobile devices incorporate new features into mobile phones, such as better bar-code and RFID readers. Both data and voice can then be transmitted effectively to receive and pick merchandise and track merchandise movement from warehouses to stores and within stores.

As with any new technology, retailers face integration challenges. Over the years, many retailers have accumulated multiple systems as point solutions and hired large onshore and offshore workforces to support them. Business processes and development lifecycles have been introduced to preserve this web of systems, while the demands of the web expand more and more quickly. Retailers now have an opportunity to alter their fundamental business models, to include mobile technology, even more significantly than they did to accommodate the introduction of the Web 10 years ago.

As retailers address the challenges of integration, software companies like MicroStrategy are partnering with their retail customers to enable seamless integration of mobile devices with their best-in-class business intelligence platforms. MicroStrategy’s platform has enabled mobile business intelligence for years using Blackberry handheld devices, and the platform has supported the iPhone and iPad since early 2010. The company has chosen to invest heavily in research and development to integrate emerging mobile device technology. Using their software, retailers experience multisource capabilities expressed in business terms, a consistent analytic foundation that can be shared and reused across common functional areas, and security that protects customer information. Retailers can use the platform to conduct a variety of transaction types. This approach to integration on a single platform means minimal risk and fast return on investment (ROI) for retailers.

1.3    How This Document Can Help

This updated version of the Mobile Retailing Blueprint is a product of the NRF Mobile Retail Initiative. The mission of the Initiative is to be a catalyst for mobile-inspired innovation that enhances the retail shopping experience and improves internal business processes. This retailer-led initiative will guide and direct the industry in the dissemination of mobile-related best practices and the development of standards and documentation for the purpose of maximizing benefits and minimizing implementation expense, ongoing maintenance, and fees.

Creating this document involved retailers, vendors, analysts, and standards organizations. The Blueprint relates the shared experiences of retailers and vendors who have experimented with mobile applications, leverages their experience, and tailors it to retail.

The Blueprint was created by members of GS1; NACHA; the NFC Forum;, the NRF and its ARTS, Shop.org, and RAMA divisions; RSPA; and the Smart Card Alliance to help retailers understand the current mobile retailing landscape, recognize the types of applications on the horizon, and determine how best to embrace this new technology. Based on the technology’s rapidly increasing pace of change, we anticipate that future updates to this material will be published online to capture the most current information within the industry.

Retailers should use this document as a reference, to understand what is possible using mobile devices. The Blueprint can help readers answer the following questions:

  • How can our company create a total-enterprise mobile plan that improves our business?
  • What capabilities do mobile devices currently offer, and how can we create a policy for privacy and security?
  • What types of mobile applications help consumers shop, and how do we differentiate the needs of teenagers from the needs of our guests who are young at heart?
  • How are mobile payment technologies evolving?
  • What types of mobile applications help associates be more efficient?
  • What technologies and standards apply in the mobile field?
  • What implementation options should be considered?

The reader will come away with a better understanding of how mobile devices can and are affecting retailing and more ideas about how this trend can help the reader’s particular business.

The different sections in this document contain the following information:

  • Section 2, “Introduction,” introduces the topic of mobile retailing in more depth.
  • Section 3, “Mobile Marketing,” and Section 4, “Mobile Commerce,” describe some of the customer-facing applications to which mobile retailing lends itself and explore options for implementing different applications. Section 4 also describes the different mobile payment methods, their advantages and disadvantages, and the implications of adopting one method rather than another.
  • Section 5, “Mobile Operations,” applies the concepts of mobile retailing to internal retail operations and illustrates how adopting a mobile approach can improve efficiency and drive incremental revenue.
  • Section 6, “Mobile Implementation Strategy,” focuses on implementation, detailing some of the technical and business process challenges that implementation can entail.
  • Section 7, “Mobile Standards,” describes the technology standards that underlie a successful implementation effort.
  • Section 8 defines the terms and acronyms used both in this document and in discussions of mobile retail in general.

    1 http://nrf.com/modules.php?name=News&op=viewlive&sp_id=1016
    2 http://juniperresearch.com/viewpressrelease.php?pr=14
    3 Juniper Research, "Mobile Payments Markets: Strategies & Forecasts 2010-2014.”
    4 http://www.mobilecommercedaily.com/target-is-2010-mobile-retailer-of-the-year
    5 http://risnews.edgl.com/retail-news/Home-Depot-s-$64-Million-Mobile-Investment-Rolls-Out-to-1,970-Stores56966
    6 A recent Wall Street Journal article, “Phone Wielding Shoppers Strike Fear Into Retailers” is a great point of reference on the subject. http://online.wsj.com/article/SB10001424052748704694004576019691769574496.html
    7 http://android-developers.blogspot.com/2010/12/android-23-platform-and-updated-sdk.html
    8 http://www.nttdocomo.com/pr/2010/001484.html