Why Smartphones Are Forcing Retailers To Rethink Their Business Models

    November 18, 2013
    Sean Patterson
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As smartphones become more ubiquitous in established markets, traditional business models have begun to quickly shift and adapt. Entire markets based on specific technologies have been wiped away by a handful of smartphone apps. The instant access to information that smartphones provide has also superseded a number of traditional information-based businesses.

Perhaps more than any other, the retail industry will have to change significantly in the face of advancing mobile technology. With an ever-growing variety of products available online, physical retailers are now competing with both massive online retailers and niche product sites that do not have the overhead of real retail locations.

Specifically important to physical retail channels is combating the phenomenon of “showrooming” – when customers use retail stores to look for products they intend to order online. In recent years physical retailers (such as Best Buy) have begun to combat showrooming with price matching and service schemes, with varying success.

How can retailers battle showrooming? Let us know in the comments.

Market research firm ABI Research today released its quarterly “Retail Technologies” report, which predicts some of the changes coming to the retail industry. The firm believes that technologies related to NFC, RFID, apps, analytics, and even signage will “revolutionize” the retail space, turning it into something that might not have been recognizable even just a few years ago.

Smartphones create a platform on which to unite the variety of different technologies deployed in-store,” said Dominique Bonte, practice director at ABI. “This creates huge potential to significantly improve the customer experience as well as streamline existing pain points such as staff efficiency, product discovery, queue management, coupon redemption, linked loyalty programs, and closing the redemption loop on offers/advertising.”

The most obvious application of smartphones for retail come on the customer side. Retailers (especially grocery stores) are now offering well-designed apps tuned to keep consumers engaged with stores and their products. These apps are a direct way for brands to manage their customer relationships by providing discounts, coupons, and other offerings that keep consumers coming back to physical retail locations.

These same apps can serve as a vector for roping consumers into loyalty programs. Online wallet services may already be ahead in that space, but retailers have the advantage of mailers and employees to help push adoption of such programs.

In addition to consumer-facing applications, smartphones could end up significantly altering the point-of-sale systems that businesses use. Already some retailers are using associates with smartphones to help relieve POS lines and check customers out while on-the-move. Holiday shopping customers will see more of these systems than ever in the coming months.

NFC mobile payments and mobile wallet services are finally rolling out in the U.S. and Europe. Though Apple has resisted leading the NFC industry by leaving the technology out of its iPhone devices, banks and mobile providers have already invested heavily into NFC infrastructure.

For consumers, NFC technology will mean easier, faster payment processing and a reduced need to carry around cash or credit cards. For retailers, the ease of mobile payments with NFC and competing technologies will mean faster POS interactions and less employee overhead.

Another, more radical change coming for retail could be the tacit adoption of showrooming as an alternative to retail sales. ABI believes there is plenty of opportunity for retailers to take on lucrative advertising contracts for their in-store displays and signage. With convenience and pricing now being won by online retailers, the physical space that retailers inhabit could be among their most lucrative assets.

Should Advertising become a major revenue source for retailers? Let us know your thoughts in the comments.

This advertising opportunity could easily extend to retailers’ new apps. Indoor location services technologies are ramping up and hold the promise of pinpointing customer desires in a way that only online retailers currently can. Consumers browsing store shelves in the near future could soon begin receiving competitive offers from the brands they are comparing in real life.

“Smartphones will completely revolutionize the existing analytics, CRM, digital signage, loyalty and POS markets, not to mention opening up a whole new medium for retailers to sell advertising to brands,” said Patrick Connolly, senior analyst at ABI. “Major grocery stores generate as much as 20% of total revenue from standard in-store branded advertising today. Imagine the potential of personalized in-aisle advertising.”

Even just a few of these technologies becoming widely adopted in the retail space would be enough to change the industry in significant ways. Inferring from Apple’s success in the retail space, store locations could increasingly become true showrooms for products as store employees begin to take on the role of marketers for different brands.

Malls of the future could become only extensions of online services and businesses, with customers perusing specific products in small, branded kiosks before making split-second purchases with their smartphones. With these same technologies affecting the distribution industry as well, those products could even be waiting for customers at their doorstep as they return home.

What will the future of retail look like? Leave your ideas in the comments.

  • Williamson

    Technology such as this will improve the retail shopping experience and help retailers market effectively. I work for McGladrey and there’s a whitepaper that readers of this article will be interested in, it offers great insight into the future of the retail. Thinking about tomorrow: Post-recession strategies for retailers

  • Nick Maton

    Five years ago this would have been news. Small retailers have fallen by the dozen, is this really going to change anything for the small guy?

  • http://www.becsouthernsydney.com.au Maria Cook

    I am a Business Coach and would appreciate any advice or suggestions re aps that provide a POS solution for a fashion retailer who also does sewing workshops,sells sewing machines and sells fabrics by the meter. Looking for an economical solution that is flexible can provide training and local support.

  • a laird craig

    Rather like literacy, there will be a superior hi tech equipped elite with an increasingly low paid smaller desperate workforce. Of course no one ever considers the costs of enablement to use these hi tech solutions, or counts them into the price – after all they’re telephones aren’t they? Similarly just the same as buying a car to go to the supermarket ( its principle activity)isn’t bound in to the cost of shopping.

  • http://www.centurymills.co.uk Garry Osborne

    Well the future for retail shops is bleak,i can image over the next 20 years high streets will be a thing of the past,as all the major high street chains cut down on there retail shops.one because of the ex-pence and for two the internet shopping is easier for the shopper and the shop owner.why does a store chain need 400 stores?
    even the supper markets will cut down on stores eventually and how many jobs will it all cost??
    We are a small business in Sheffield we have our own large store and internet site,And we are noticing the changes how our customers are buying our items.

  • http://www.chanskydesign.com Matt

    I think that an interesting follow-up article would be something like “How The Little Smartphone Created Massive Unused Retail Sprawl And No One Knows What To Do With It.” Business is a tough business.

  • Frank

    I work in retail as it for 5 years now, and I see show rooming all the time. Clients come in with smart phones. Check out products and google prices. The pos on the go solution is not going to work for now as trust in these technologies is not adopted. Would you pay / swipe your card on a smartphone? All is emv chip based these days and no phones have that. For NFC yes it will work, when all banks are on board. Online have no overhead , rent , salaries etc but need more marketing then a shop in a mall. Of course when you pay 15k a month I. Rent plus the % that goes to the mall , it could be best invested in online marketing. Salaries is a high overhead as well , we have 35% more of our revenue that goes rent and salaries. So yes online will win. As far as sell marketing to brands………they are far from even thinking about this for now. Bands are not paying retail until retail stops buying from distributors for lack of sales, which also means they go bankrupt before the brands will react.m!!!!!!!!!!!!

  • http://www.lerentech.com Lerentech

    Don’t forget about payment processing via smartphone with NFC and Bitcoin!

  • http://www,DaltonPhoto.com Rick

    Last week I walked through our neighborhood and noticed some remarkable cloud formations. I quickly grabbed my phone and snapped a couple shots. Within a minute or so I had enhanced one of the images, and my friends from around the world could see the image in any of several on-line social media outlets. As a professional photographer that is both wonderful and dreadful.
    I now have competition from people who don’t know an f-stop from a truck stop. As the bride comes down the aisle, I may have 4 or 5 people step into the aisle to grab a shot with their smart phone or tablet, not knowing that they are blocking me from getting my once in a lifetime shot.

    At a recent portrait session the couple was accompanied by a smart-phone toting grandma. She watched as I found a great location with beautiful lighting. Then, as soon as I posed the couple and their baby, grandma took advantage of my 20+ years of expertise and captured images with her smart-phone. At that point I could ignore the distraction and just accept the fact that grandma was not going to order any of my images, or try to protect my family income by being a bad guy, and telling grandma to put her phone away. This is one of many “no-win” scenarios professional photographers are now facing due to these omnipresent cameras.

    One area that is seeing significant changes due to advances in cell phone technology is the consumer camera market. Canon is watching as the demand for their consumer cameras is shrinking. Nikon, Canon, etc are working very hard to maintain a demand for their products, and come u with a plan “B” as well. With the decrease in demand for their consumer cameras comes a decreased need for camera stores as well. We’ve already seen the demise of Wolf Camera, a national camera chain. Smart phones with equally smart cameras can be used to shoot not only still images, but high quality video as well. Add to this the switch from physical prints to digital galleries, and we are seeing a total transformation of the imaging industry.

    The domino effect will no doubt include such photo related businesses as photo labs, album and frame companies, as well as companies that make after market products like flashes, battery packs, camera cases, etc. Kodak is all but gone, and other will follow. Professional photography studios are declining rapidly. Olin Mills… gone. Wal-mart studio… gone. Mall studios are as rare as a roll of Kodak film. In the past few years I’ve watched as many of my well established pro photographer friends with decades of experience closed their studios and are now working as TSA agent, real estate agent, hardware store employee, school teacher, etc.

    The recession isn’t helping a bit. Since most families don’t have much discretionary income, why purchase another camera when you already have one within your phone?

  • http://www.bizzappsconsult.com bizzappsconsult

    Apps are the future!
    Desktop will be replaced by tablets i think.
    Apps are the most effecient way for bizz to talk to your clients