3 Contrarian M-Commerce Predictions for 2016

In 2016, we will continue to see rapid growth of mobile commerce. Here are three predictions that stand in contrast to the prevailing discussions around mobile payments, beacons, geo-targeting, Apple Passbook/Wallet, and native apps.

1. The tail will wag the dog. In-store digital strategies that drive online sales will succeed; those that attempt to drive in-store sales will fail.

Consumer confidence has grown steadily since 2011, yet store foot traffic is declining. Shoppers are going online. This is a tectonic shift in the way consumers prefer to shop and buy. Mobile is at the epicenter of this transformation, disrupting the traditional divide between the physical and online worlds. Retailers are betting that mobile devices can draw more foot traffic and in-store sales through geo-targeting, beacons and other technologies. Those approaches are years away from mainstream adoption, however. Big bets in those areas will not meet expectations in 2016.

Savvy retailers are taking the opposite approach. They're using their physical footprint as a vehicle to enhance the online (and increasingly mobile) shopping experience. Same-day shipping and curbside pickup are two salient examples of enhancing the convenience of online shopping with the instant gratification of receiving your purchase the same day.

The left column below lists a set of strategies in which online sales are the primary goal. Retailers that pursue them aggressively in 2016 will see strong return on investment and demonstrable increases in customer satisfaction. The right column lists the more traditional approach in which retailers attempt to augment the in-store experience — and sales — through technologies that shoppers aren't ready for or interested in.

Takeaway: Shoppers increasingly want to buy online, and retailers can help make that experience even better through their physical stores.

Physical Stores Support Online Sales

• Same-day shipping: Shoppers want their items immediately. Same-day shipping facilitates this with the convenience of online shopping. Same-day delivery offerings are still relatively rare, with only 15 percent of retailers worldwide providing the service, but it's rapidly expanding. Services such as Google Shopping Express, Amazon Same-Day Delivery and Postmates are becoming popular in some major cities. Amazon Prime Now is pushing even further, offering two-hour delivery of thousands of items.
• Curbside pickup: Curbside pickup is perhaps the clearest example of mobile blurring the online and offline worlds. Target and Kroger recently rolled out curbside pickup services. Sears recently expanded its in-vehicle curb services to include returns and exchanges. Expect this trend to accelerate in 2016.
• Online reservations: Online reservations/purchases of services — e.g., trying on clothes at Sears, changing tires at Pep Boys, dog grooming at Petco Unleashed, eye exams at Target — allow retailers to bring the scale of online demand generation to in-store services.
• Drop shops or guideshops: Bonobos’ and Indochino’s guideshops are stark examples of the tail wagging the dog. Shoppers get a great, high-touch experience in-store and become loyal customers who buy online for years to come. Customers don’t leave the stores with purchased items; they're shipped home through an online order.
• Showrooming: The practice of shoppers visiting physical stores to test, feel and compare products with the intent of buying those products for cheaper online (aka showrooming) is now mainstream — 46 percent of consumers do it, according to a recent Harris Poll. Some retailers, like Target, are embracing showrooming to drive sales. However, as a strategy for retailers with physical stores, it represents a challenge. Few online stores have the rich set of reviews and product comparisons that Amazon has and, as a result, showrooming tends to hurt most retailers and benefit Amazon.

Digital Supports Physical Store Sales

• Store locators: Shoppers using their smartphones to look up store hours and locations is commonplace, either via apps such as Google Maps or the retailer's mobile website. Few retailers have translated this mainstream activity into a richer experience once the shopper arrives in-store.
• Beacon-based strategies: Although 29 percent of retailers have implemented beacons in their stores, there's little shopper engagement with beacon-based offers and other in-store digital engagement strategies. The problem is twofold: one, most shoppers don’t have the retailer’s app installed and two, even for those few who do, there are no established patterns of consumer behavior around in-store digital engagement and offers. This will not tip in 2016. Software vendors are selling a vision to retailers of collecting rich data about shopping behavior and new levels of in-store engagement, but consumers aren't there yet and may not get there for years.
• Mobile payments: Mobile payments (e.g., Apple Pay, Android Pay, etc.) are slightly more convenient for shoppers than using a credit card. There’s nothing about this added convenience that will materially drive more in-store sales.
• Geo-fencing: The idea is simple: Retailers can draw more foot traffic by providing offers or other reminders to people who are nearby — and who opted in to receive such offers. Starbucks did this through its app and Apple Passbook. While the vision is compelling, few people have retailers’ apps and fewer opt in for these notifications. Consumers aren’t ready. Another example is Neiman Marcus, which used geo-fencing to enable salespeople to see when VIP customers were in-store, look at their purchase history and provide more personalized service. The reality is this technology is still too slow to catch on with consumers.
• Store associate app and sales checkout: These apps are designed to enable enhanced engagement between customers and sales associates. They also allow sales associates to provide real-time product, inventory availability and location information to shoppers based on historical patterns and profile data. The key for retailers is developing these apps so they expand the customer experience, while making it easy to use for sales associates. The only retailers that have successfully weaved this into their retail strategy have been Apple and Nordstrom.

2. The mobile web will continue to outpace mobile apps for m-commerce. Mobile apps represent a small fraction of the total mobile revenue for all but a handful of the biggest brands. Amazon has more app revenue than mobile web revenue. Wal-Mart is getting close to parity. However, most aren't even close. Why? Benedict Evans summed it up most succinctly: “Do people want to put your icon on their home screen?” The answer for most brands is “no.”

Does this mean retailers shouldn’t create native mobile apps? Absolutely not. But the goals are different. Apps are for retailers’ most loyal customers by definition (who else will download your app?). Therefore, instead of a generic shopping app, consider a VIP program for your best customers, delivered through an app. This will not only drive more revenue from these customers, it will also make their experience better.

A recent Forrester Research report shows shoppers prefer to buy from mobile sites while on the go. The reality is that shoppers show up to your mobile site, not your app. Your mobile site is intimately connected with all of your marketing activities, including email, SEO/SEM, affiliates, etc. Your app, even if the shopper has it, is not.

But what about data that shows over 85 percent of mobile time is spent within apps? On the surface, this number would indicate that offering an app is an imperative. However, if you dig deeper, it becomes clear that a few apps dominate our time: Facebook, YouTube, games and music. In fact, 80 percent of our app time is spent in our top three apps.

The data is clear — apps are for fun, the mobile web is for getting things done. This is why mobile web represents the vast majority of mobile revenue for most retailers.

3. Mobile web checkout will be a big area of investment for retailers. Brands are losing $18 billion annually due to shopping cart abandonment. Research shows over two out of three users who add items to their online shopping cart leave without making a purchase. The numbers are even worse on mobile, where conversion rates are 70 percent lower than desktop.

2015 was a pivotal year for mobile shopping. Accounting for over 57 percent of online traffic and over 30 percent of revenue, mobile dominated this holiday season. It was a wake-up call for those brands that haven't optimized their mobile experience, including the most critical part, checkout.

The mobile checkout experience today is miserable. Baymard Institute, a leading e-commerce usability research firm, says, “for the past three years, we’ve audited numerous multimillion and billion-dollar sites, and during every single site audit, we’ve identified lingering technical errors, layout bugs or flawed interactive features.”

Mobile checkout can be made significantly easier. Many brands will invest in radical improvements through payment options that accelerate checkout, and there are products focused on this problem. With the rapid growth of mobile traffic and the incredible pain associated with buying via mobile today, the key pages that represent the mobile web checkout will soon be viewed as the most valuable pages on the web.

In summary, while in recent years there's been a lot of noise around some m-commerce technologies — e.g., mobile payments, beacons, geo-targeting, Apple Passbook/Wallet, and native apps — retailers would benefit from a simpler approach in 2016. Increase your online revenue by one, using your physical stores and two, improving your mobile web experience. This approach is not only easier to execute, it will yield better results — and your customers will notice.

Ajay Kapur is CEO and founder of Moovweb, a cloud-based platform that delivers optimized mobile experiences.