INNOVATION HUB
8:03 pm
Tue December 18, 2012

Innovation Hub 12/22/12: Smart (phone) Shoppers

Guests:

  • Jack Philbin: Co-Founder and CEO of  Vibes
  • Ben Saren: Vice President of Marketing at Litle

More shoppers are coming to stores ready and armed — with smartphones.
Credit Robert Scoble / Flickr Creative Commons

If you've been out fighting the crowds at the mall this holiday season, you may have noticed a small but significant change: shoppers slipping their smartphones in and out of pockets to quickly and quietly do merchandise comparisons or even make payments.

There are now four times as many mobile phones as there are landline phones in the world — and 20 percent of those mobile phones are smartphones. That may not seem like a big percentage, but it’s growing all the time. And the people who use their smartphones to shop cut across all demographics — gender, age, and class. It seems that everyone is reaching into his or her pocket during the shopping process.

Customers use their phones to help them make comparisons — even while they are in a store.
Credit Editor B / Flickr Creative Commons

Have Smartphone, Will Bargain Hunt

Customers aren’t just using their phones to scope out deals before they visit a store — they’re also using them to comparison shop. In a recent survey, Litle found that almost 1 in 4 customers have used their mobile device to browse reviews and investigate prices. Industry insiders call this process “showrooming,” and it turns every shopper with a smartphone into a formidable, well-informed opponent.

“[If] you know that you can get a better price, perhaps somewhere online, or another retailer locally, and you have your phone open — you’re looking at the price at Best Buy or another retailer — you might be comparison shopping with your phone, and you might be prepared to walk out of that store and go somewhere else,” explains Ben Saren, a vice president of marketing at Litle.

But consumers’ desire to comparison shop shouldn’t leave retailers quaking in their boots. Jack Philbin, the CEO and co-founder of Vibes, says that what shoppers really want is information — they may not actually leave Best Buy to buy a cheaper product at Target, but they want to feel confident and informed about their purchase. By developing mobile apps or sites that provide fast and accurate information, Philbin believes retailers can win consumer trust and loyalty.

“Everything that you want to use your phone for is actually an opportunity for retailers to provide that information in a format that is easy to digest, and that is exactly the kind of information that consumers want,” Philbin argues.

What company is the best at getting shoppers to pay with their phone? It's Starbucks.
Credit Esparta / Flickr Creative Commons

Debit, Credit, or Iphone?

Unlike the rapid transition to mobiles shopping, using your mobile phone to make payments is still in its embryonic stage. Though venture capital firms are investing heavily in the idea, consumers seem reluctant to reach for their phones at the register. Saren thinks that’s because shoppers already have a fast and easy option for making payments — the credit card.

The mobile app LevelUp rewards customers for their store loyalty with discounts.
Credit LevelUp

“When I go into a store and I use my American Express or my Visa card, that’s a painless process. It takes less than three seconds for me to get an authorization back,” Saren explains. “So unless mobile payments are going to make that process easier, more convenient for me, it’s going to have a long way to go.”

Some companies have been successful at doing just that — Philbin points to Starbucks, which has been successfully encouraging customers to pay for their lattes with their phones. The Starbucks Mobile App replaces the traditional loyalty card, giving customers one less thing to carry in their wallet. It also enables customers to get rewards —like free music and drinks — with their caffeine fix. According to Philbin, Starbucks averages 2.1 million mobile transactions per week, which have created over 100 million dollars in total revenue.

And it’s not just retailers who are creating a mobile experience.  Big credit card companies like American Express have linked with social media to offer customers discounts based on their current location. Startups like LevelUp give loyal customers discounts each time they return to their favorite stores. The change to mobile payments is happening — bit by bit.

“It doesn’t happen fast enough for our impatient society,” Philbin says. “But when you take a step back and think about the pace of innovation when compared to 20, 30, 40, 50 years ago, it is pretty remarkable — things are moving pretty quickly.”

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