How mobile is transforming retail

A report from The Economist Intelligence Unit

How mobile is transforming retailBricks, clicks, tweets and texts across the omnichannel shopping mall

© The Economist Intelligence Unit Limited 20151

How mobile is transforming retail Bricks, clicks, tweets and texts across the omnichannel shopping mall

Preface 2

Introduction 3

The third shopfront: The ‘fun factor’ trumps lower prices as a key mobile shopping driver 4

Whither the online pure play as mobile shoppers opt for local retailers with two shopfronts? 5

Regional differences 6

Seamlessly moving across channels—from research to returns 7

Case study: Foyles—Taking cues from the brick-and-mortar environment to ensure a seamless virtual experience

7

Basic in-store mobile drivers for consumers: Convenience leads 9

Store associates and mobility: Tightening the omnichannel experience, now and later 9

The showrooming conundrum is no longer one 11

The shift to more sophisticated mobile services 11

Quality of omnichannel experience matters 12

Case study: Rocket leapfrogs into African omnichannel 12

Key constraints on the path from online to omnichannel 12

Privacy concerns waning 13

Case study: MercadoLibre: Addressing the limitations of slow connections in Latin America through lower-speed services

14

The future of omnichannel shopping: Watch mobile wallets 14

Conclusion 16

Appendix: survey results 17

Contents



Preface

How mobile is transforming retail is one of several papers in a series that probes how mobile technologies are transforming business. Take-up of mobile technology impacts every part of consumer journey. The pace of change is dramatic in both developed and emerging markets. In the throes of disruption, perceiving the shape of things to come and anticipating future consumer expectations and actions can be difficult. Retail merits a particular focus for the way it touches consumers worldwide in their daily lives.

The findings and views in this report do not necessarily represent the views of the sponsor. The author was Marcus Leroux; Carolyn Whelan edited the report. We would like to thank all of the executives who participated on the record and anonymously.

Interviewees

l Lisa Feng, a retail executive in China

l Scott Galloway, professor of marketing and digital branding, NYU Stern School of Business

l Sion Hamilton, chief operating officer, Foyles

l Jérémy Hodara, co-chief executive Africa Internet Group, Rocket Internet

l Richard McKenzie, consumer analyst, China

l Daniel Rabinovich, chief technology officer, MercadoLibre

l Mark Ritzmann, head of mCommerce, Vodafone

In March of 2015, The Economist Intelligence Unit (EIU), for a research programme sponsored by SAP, polled 519 consumers across 39 countries on how they engage with retailers through mobile devices. The survey was circulated to a global group of users with a near-equal share of respondents from four regions: the Asia-Pacific (23%) region, Europe (23%), Latin America (22%) and North America (23%).

The balance (9%) of respondents hail from Africa, Eastern Europe and the Middle East. As for age ranges, the millennials cohort (those 18-35 years) makes up more than half (51%) of the sample. Moreover, nearly all 5-10-year age bands represent between 13% and 18% of those polled. Gender parity was also maintained, with a near-equal share of men (54%) and women (46%).

Who took the survey?



In a few short years, shopping using a handheld device on a commute to work or over lunch has shifted from a far-fetched possibility to a firmly embedded part of consumers’ lives. In many Asian markets, mobile purchases now comprise more than half of online shopping; in the UK, the proportion of online spending originating from mobile phones has risen from less than 1% to 37% in four years. The mobile revolution has arrived—and it will continue to profoundly reshape the global industry.

Mobile technology is infiltrating every step of the purchasing process. From spotting a must-have fashion item on social media to price-checking while in a physical store through to managing deliveries or returns, the mobile-enabled customer is pushing retailers into new, unfamiliar terrain. Today, retailers are increasingly offering more-advanced capabilities, such as allowing customers to check out using their mobile devices and offering responsive discounts to customers in stores via their geolocated mobile phones. Even consumers who have been reluctant to enter the m-commerce age express a willingness to engage with some advanced capabilities, which suggests the return on investment for innovative store groups is more immediate than expected and that failing to respond to these powerful and unstoppable forces could hasten loss of market share or result in missed selling opportunities.

Against this backdrop, how regions and generations use and leverage mobile technologies

for retail purposes, the ways they plan to do so in the future and the obstacles that limit mobile shopping vary widely. This report will highlight some of these key differences and analyse their implications for retailers that seek to secure a sizeable share of the purses of mobile-empowered consumers—and those who do not.

Notably, the survey data show that traditional desktop shopping is still a force to be reckoned with, with 69% of consumers using desktops to research products and services—a figure on par with smartphone use for this purpose. Similarly, 41% of respondents are using their desktops to make purchases, some 3 percentage points above those using smartphones for these activities.

These figures, however, belie the huge divergence between a smartphone-dependent generation of millennials and older consumers. This suggests a mobile time bomb for retailers that have yet to wake up to its significance.

In a few years, a generation whose shopping habits have matured alongside the evolution of mobile technology will become the mainstay of retail spending in developed economies. If retailers lack a compelling presence on the smartphones and social networks that these maturing millennials frequent, they may lose their place in the mainstream. Furthermore, slow-to-respond retailers may miss out not only on mobile sales, but also traditional brick-and-mortar sales enabled by mobile technology.

In parallel, there appears to be serious

Introduction



misalignment between retailers and the consumers they serve. Only 20% of Internet Retailer’s top 500 mobile retailers have a responsive website—or one that adjusts automatically to the screen size of a particular device—be it a smartphone. tablet or desktop. Research from Barclays in the UK also found that 70% of retailers did not have a mobile-enabled website or application in place.

Much as shopkeepers like to say “retail is detail” when talking about store standards and service in brick-and-mortar retail, consumers have a list of bugbears that prevent them from relying more on their mobile phones. Some of these factors are external constraints, such as the quality of networks, but the winning retailers are those that mitigate and plan for the worst.

In an age where data security breaches have become commonplace to the point of being mundane, concerns over privacy are never far from consumers’ minds. The data suggest that while consumers do not give in to knee-jerk reactions against, for example, sharing information, retailers must ask permission. To raise the stakes still further, the mobile-savvy mainstream consumers of tomorrow are the most likely to take to social media to sing the praises of retailers that deliver a positive experience—and air their grievances about those that do not.

This report seeks to illuminate current strategies and suggest next steps for retailers navigating this new mobile world.

The third shopfront: The ‘fun factor’ trumps lower prices as a key mobile shopping driverMobile shopping is fundamentally changing the retail landscape just as Internet shopping did two decades ago. Its arrival then ushered in the era of desktop shopping—opening up a “second shopfront” for retailers and exposing them to fierce new competitors, such as Amazon and eBay, which continue to be formidable forces.

But the smartphone has since put a shopping mall of incalculable size into a staggering nearly 2bn pockets and handbags globally. The addition of this “third shop front” is a critical part of the aspiration of omnichannel shopping to offer a seamless journey across all three channels—from the physical store, to desktop computers, to mobile devices including smartphones and tablets. This connected and fluid approach is qualitatively different from that in traditional e-commerce and, accordingly, has profound implications for the first two shopfronts.

In the mature markets of developed economies, mobile-enabled commerce (m-commerce) is invariably the brightest spot in a low- or no-growth market. In parallel, its take-up is galloping along in developing countries because eager consumers do not have to wait for stores to be built or need expensive computers to research or purchase the goods and services they seek. In many parts of the world, the third shopfront is opening before the first two.

05

101520253035404550

When purchasing products or services, how often do you use a smartphone? (% respondents)

Source: Economist Intelligence Unit survey, 2015

Daily Weekly Monthly Rarely or never

Under 35 35+



Mobile technology also brings near-perfect real-time price transparency to the market, empowering consumer research as never before. The first wave of e-commerce is credited with hitting profit margins as cost-conscious shoppers searched for lower prices. This fostered a view in some quarters that online retail was intrinsically low on gross margins—and low on creativity.

But EIU survey data show that with the rise of mobile shopping the fun factor is back in modern retailing. Some 51% of respondents say that mobile has made shopping more fun, versus just 15% who say the opposite. Moreover, nearly half (47%) believe using mobile devices for shopping makes them more loyal to certain stores, well above the 17% who claim it makes them more disloyal.

So the prize is potentially huge. Some even suggest that the smartphone will serve as catalyst for the end of the Internet pure play.

Whither the online pure play as mobile shoppers opt for local retailers with two shopfronts?

Because about 60% of smartphone searches relate in some way to the user’s location, according to Scott Galloway, professor of brand strategy and digital marketing at the NYU Stern School of Business, consumers may increasingly lean towards more specialised online retailers that have a physical store in their orbit over an online pure-play option. This preference for local purchasing options, particularly among millennials, is also

perhaps pushing established online-only retailers to establish physical stores.

“Mobile phones, as suggested by the name, are used when you’re mobile. When you’re on the go there’s a very real chance that you will be around one of these flexible warehouses that we call stores,” explains Mr Galloway. “We believe that the future looks more like Williams-Sonoma, Sephora or Macy’s than it does Net-a-Porter or Amazon.”

Amazon has been expanding its network of delivery lockers to provide more of a local presence and convenience to its customers; Mr Galloway thinks the purchase of a chain of petrol stations would be a neat solution.

Today frequent mobile shoppers show a predilection for entertainment, fashion and

How has mobile shopping changed your feelings or behaviour when it comes to shopping?

More fun 1 2 3 4 Less fun 5

Shopping is 26 25 33 12 3

More loyalty 1 2 3 4

Less loyalty 5

My loyalty to certain retailers 19 28 35 13 4


Which of the following purchases have you made using a mobile device within the past six months? Select all that apply.(% respondents)

Clothing, apparel or jewellery

Books, music, videos or movies

Electronics

Household goods

Food or groceries

Event tickets (eg, sports games, concerts)

Travel

Personal services (eg, automotive repairs, laundry services, tutoring)

53

53

48

38

32

32

23

13



electronics. Within these categories, online-only businesses still hold a strong share of their mobile shoppers’ spending (see charts below).

Regional differences

Smartphone users exhibit some striking regional differences when it comes to their mobile shopping preferences, according to the survey. In many categories European and North American respondents lag their peers in other regions in the frequency of their mobile shopping, save for items

where online shopping is well-entrenched and where online has an established market share, such as in books, music, videos and movies or clothing. Respondents in Latin America, by contrast, purchased event tickets and electronics from their mobile devices significantly more often than did their global peers. Finally, those polled in Africa, the Middle East and Eastern Europe are twice as likely to have used their mobile devices for purchases in the nascent personal services category as their peers who make this claim in the US.

Local retailer National/global chain retailer

Online-only retailer

Other

Food or groceries


Household goods

Electronics




Travel

What types of retailers have you made these purchases from using a mobile device? Select all that apply. (% respondents)


47 31 22 1

17 42 39 2

21 38 39 2

13 44 42 2

15 32 50 3

21 39 36 3

39 37 21 3

12 43 40 5

0

10

20

30

40

50

60

70

Which of the following purchases have you made using a mobile device within the past six months? (% respondents)


Food orgroceries


Householdgoods

Electronics Books, music, videos or movies

Event tickets(eg, sports

games, concerts)

Personal services (eg, automotive repairs, laundry

services, tutoring)

Travel

Asia-Pacific Latin America North America Europe



Seamlessly moving across channels—from research to returns

This blending of virtual and physical—and a growing consumer preference for retailers that offer both options—underscores the importance of a seamless transition across storefronts.

This is a distinct departure from the desperate efforts of major retailers just three years ago to maintain a firewall around their brick-and-mortar stores, to keep fierce price competition in an online arm from cannibalizing sales in a physical store. Their websites would have separate price files and, occasionally, separate brand identities, even different products or services. Not anymore. The

pervasiveness of mobile—consumers can use it anywhere, anytime and at any point while shopping, from research to purchase, to delivery and returns —has left no place to hide.

A compelling finding in the EIU survey is that consumers are pushing the “online-to-offline” (o2o) behaviour that is already characterising the mobile age. This o2o acronym applies to online activities that dovetail with the physical world—for instance, checking a local store’s inventory before reserving a product for store purchase or picking up an online purchase item at a local store. This o2o behaviour is spreading beyond early adopters.

Most consumers surveyed by the EIU—about 60%—are already using their smartphones to

If physical bookshops have a spiritual home it is on London’s Charing Cross Road, where, until recently, independent sellers offered everything from antique rarities to hardback best-sellers.

But one bookseller, Foyles, is seizing the mobile opportunity to fill a niche in a permanently connected world.

“Jeff Bezos started Amazon because books were easy to put on a computer: They have barcodes and they are easy to post,” says Sion Hamilton, Foyles’ chief operating officer. “It’s been a challenging market.”

Those challenges prompted Foyles, now a six-store mini-chain, to ask consumers, the publishing industry and high-tech giants such as Google about the future of book-selling before a planned move of its flagship store on Charing Cross Road two years ago.

“There was real anxiety in the retail market at the time, you could sense it. People were asking: ‘What’s the future for the High Street?’” he recounts.

Yet this exercise confirmed a sustained appreciation among consumers for the hands-on experience of perusing books in a brick-and-mortar store. However, Foyles wanted the store experience to be digitally enabled as well.

The outcome is Ariadne, a web-based application that gives consumers access to Foyles’ inventory of 200,000 or so titles and guides them to the correct bay. Foyles’ flagship store now

has about four miles of shelving—and nothing drives book buyers towards Amazon faster than befuddled shop assistants unable to locate a title that a computer tells them is in stock.

Ariadne—named after the mythological figure who guided Theseus through the Labyrinth—is found on the landing page that shoppers hit when they log into the staff’s WiFi. Thus, Ariadne does not rely on consumers downloading and accepting updates for an application they use only occasionally.

The tool is still in its beta phase and Foyles is exploring ways to make it richer and more appealing by, for example, using Ariadne to copy and post versions of the physical store’s themed tables. By so doing, Foyles hopes to capture the environment book lovers seek in the physical store. Overlaying authors’ own maps also allows shoppers to navigate the store through the eyes of a favourite writer.

More immediately, Foyles found Ariadne to be immensely useful for staff.

“When it was busy at Christmas and I was helping on the floor, I used [Ariadne] to help consumers. This means you don’t have to break off a conversation with a customer to check if a book is in stock. You can [virtually] walk them to the book. In terms of conversion, that makes a difference.”

So, when Foyles opens its next store, in Britain’s second city of Birmingham, staff will be using Ariadne to help consumers, and to clinch the sale.

case study: Foyles—Taking cues from the brick-and-mortar environment to ensure a seamless virtual experience



compare prices and products, while 47% are using these devices to transact. About the same percentage use their mobile phones to track orders. Perhaps more important, a significant proportion of those who do not yet use their mobile device for researching or transacting would like to do so.

This is good news for retailers. According to other research by Deloitte, in-store shoppers who used a digital device before and during a shopping trip had a conversion rate that was 42 percentage points higher at 84% (or subsequently purchased items from the same retailer from their devices), while loyalty also improved significantly. Moreover, nearly double the proportion of digital researchers said they would definitely return to the store versus those who were not digitally influenced.

This process varies slightly across storefronts, however. Desktop users can tap product aggregators—such as Google Products, Shopzilla or Shopstyle—to find the best prices. They can flit between different tabs to compare retailers’ offerings. Mobile users, meanwhile, are more likely to be on the go and will either need to find a product locally or may want to fill downtime by seeking out inspiration from a favourite retailer. So, mobile shopping can potentially return some pricing power to retailers. To take advantage, however, many will need to overhaul their systems

to give the customer a real-time view of inventory at local stores.

This shift towards o2o behaviour suggests that mobile services with a local presence are more important than ever. Alibaba, the dominant e-commerce force in China, has placed a bet on consumers ordering local services—a restaurant booking, for example—through their mobiles. It has embarked on an ambitious joint venture, called “Koubei”, with Ant Financial Services Group. “By developing a broad spectrum of consumer offerings … Alibaba is able to fulfil our vision of becoming central to the everyday lives of our consumers,” an Alibaba spokesman explained.

Alibaba, dubbed the Chinese Amazon, has 289m active users of its mobile apps in its home market, which at the last count was up 77% year-on-year, with 51% of sales now coming via mobile.

Last year Alibaba took an 18% stake in Weibo, China’s Twitter equivalent. Driving this purchase, a company spokesman said, was increasing “user acquisition and engagement on our marketplaces, as well as gain[ing] insights into our and Weibo’s users for improved service offerings and targeted marketing”.

Through Weibo, Alibaba can seek out customers of a specific demographic who have interacted with a particular feed—perhaps those who had

0 10 20 30 40 50 60 70

When researching or purchasing products and services on your mobile device, which of the basic following activities do you conduct now? If you are not conducting these, would you be interested in the future? Select all that apply.(% respondents)

View catalogues, products or information

View and compare products or services

Pay for purchases

Track purchase shipments

Maintain loyalty-card information and track rewards points

Request product support or assistance

Request, ship and track returns

Save credit-card information in apps to speed purchases

Scan QR codes


Now In the future



expressed interest in a particular event or brand.While Alibaba is by far number one in direct

online sales, it has a lower market share in o2o, which will become increasingly important as Chinese consumers grow more and more comfortable with booking takeaways or cinema tickets from their mobiles.

Basic in-store mobile drivers for consumers: Convenience leads

For the in-store shopping experience for consumers, convenience is a major driver, followed by cost savings. Among those polled who do not use advanced services provided by retailers in physical stores, they singled out bypassing a register or kiosk by paying through mobile devices, receiving personalised recommendations or offers, and using virtual fitting rooms as most appealing. And among age groups, millennials express the most interest in these services or applications.

Store associates and mobility: Tightening the omnichannel experience, now and later

Just as intriguing for retailers are the mobile services consumers would like to see shop staff offer. Among services that appeal most to respondents, 59% say it is “very desirable” and 29% say it is “somewhat desirable” for retailers to use mobile devices to check prices or stock

availability and to reserve out-of-stock items. Some 76% say mobile-equipped staff taking payments would be somewhat or very desirable. For retailers considering the return on investing in mobile devices for shop floor staff, these figures are well worth considering.

Retailers are increasingly ensuring that all three shopfronts—physical store, online store and mobile- or application-based store—speak to one another. This involves granting consumers access to services (for example, finding one’s way around a store or locating a store associate) on their mobile devices well beyond peering into inventory. But this practice also raises questions about how staff are equipped, trained or incentivised. Attributing sales from mobile devices to local stores may help address this issue.

One retailer following this route is hardware store chain Home Depot. It credits online and mobile sales to local stores to limit resistance to guiding consumers online. The company reckons that roughly 40% of its online sales “leverage a physical store”—because, for example, the item or service was collected there, shipped from there or ordered there. In fact, some 10% of the do-it-yourself retailer’s online orders are carried out in stores—a practice boosted by the roll-out earlier this year of the second generation of Home Depot’s “First Phone” device.

The First Phone is a mobile phone that acts as a walkie-talkie, telephone and point-of-sale device for store associates. It enables access to Home

Very desirable

Somewhat desirable

Minimally desirable

Not at all desirable

Know when I enter the store

Offer personalised recommendations and offers

Take payment without going to a register or kiosk

Demonstrate virtual fitting rooms or virtual design centres

Collect my contact information for personalised offers, recommendations and/or follow-up calls

When visiting a physical store and browsing products or services, is it desirable when salespeople use mobile devices for the following? Select one in each row. (% respondents)


27 29 22 22

34 38 18 9

42 34 15 9

30 35 22 13

27 33 21 19



Depot’s applications, locates products and allows consumers to purchase items and check out—which proved helpful over the peak spring period.

This device also helps consumers expand or narrow their range of options. The million or so stock-keeping units (SKUs) on Home Depot’s website—including items shipped directly from vendors—dwarfs average Home Depot physical store SKUs of about 35,000. “In a Home Depot location we might have 300 faucets for you to look at. Now you can say, ‘I’ve got 10,000 more in my other stores’ and you can show them pictures, videos and reviews”, says Kevin Hofmann,

president of Home Depot’s online operations. Home Depot’s application has been downloaded

10m times, but Mr Hofmann says that the mobile website will always be vitally important because most customers visit home improvement stores infrequently.

The app’s most basic features, such as its item locator, are the most widely used. But it also has more advanced features, including a function that allows customers to take a picture of their room and visualise what it would look like painted in certain colours. Another application, now in the beta stage, uses image recognition so customers can search for

Very desirable

Somewhat desirable

Minimally desirable


Provide product information, comparisons, ratings or alternates

Check prices

Check inventory for product availability

Locate and reserve out-of-stock items

Schedule personal-shopper appointments

Schedule shipment, delivery, installation

When visiting a physical store and browsing products or services, is it desirable when salespeople use mobile devices for the following basic tasks? Select one in each row. (% respondents)


46 36 13 4

57 32 8 3

59 29 9 3

50 34 13 4

27 32 28 12

42 38 16 4


When in a physical store, what technology features would prevent you from making the purchase elsewhere using your mobile device? Select the top three. (% respondents)

Faster shopping because store personnel can process payments with mobile devices

A more seamless experience across the retailer’s website, mobile services and store

Personalised store experience based on my history, profile and/or location

More proactive store associates who effectively use mobile devices to improve customer service

Offering of more product or service options

Digital tools that help me make my purchase decisions (ie, offered in the store or via mobile)

Quicker response to locating and offering out-of-stock items

38

36

36

34

33

26

22



similar items using a picture they have taken, for example, of an item in a friend’s home.

The showrooming conundrum is no longer one

Salespeople have an opportunity to crimp “showrooming”—consumers using stores as showrooms to research items that they later purchased online—by improving the quality or frequency of these services or applications, with a focus on speedier or more convenient purchases or customisation. (Earlier US concerns of showrooming reportedly prompted some US stores to block WiFi signals and remove product codes from displays.)

When respondents were asked what activities by salespeople might prevent them from showrooming, they pointed most often to processing payments from mobile devices to save time (38%), a more seamless experience across a retailer’s website, mobile services and physical store (36%), and a more personalised store experience based on their history, profile or location.

The shift to more sophisticated mobile services

But as we peer into the future, survey responses suggest that mobile users are ready to, at a minimum, experiment with a variety of more sophisticated retail services from their mobile devices in all aspects of mobile shopping—from trying on goods in virtual dressing rooms to purchasing products from a mobile-empowered store associate. This suggests a missed opportunity for retailers without these advanced capabilities.

For instance, some 37% of survey respondents have used mobile devices to request product samples, but 32% anticipate doing so in the near future. Roughly 30% of those polled believe they will soon begin trying on clothes in virtual fitting rooms, an ability that will make shopping for apparel less fraught for mobile consumers and—for retailers—more profitable because of the likely reduction in costly returns.

0 10 20 30 40 50 60

When researching or purchasing products or services on your mobile device, which of the following advanced activities do you conduct now?If you are not conducting these, would you be interested in the future? Select all that apply.(% respondents)


Request product samples

Receive and/or redeem personalised offers, promotions, specials or coupons

Manage shopping lists through the retailer’s app or mobile site

Participate in product design and testing

Optimise shopping budgets (ie, through a money- or budget-management app)

Try on products in virtual design centres or fitting rooms (ie, using virtual or augmented reality to see how apparel fits, or envision physical spaces)

Request and track in-home services (eg, installations, repairs)

Use delivery services to make and receive purchases from retailers (eg, Seamless, Instacart, delivery.com)

Manage shopping lists through a third-party app or service to shop with several retailers

Now In the future



It would be all too easy to assume that m-commerce is nascent in Africa, since 20 of the world’s poorest countries in terms of spending power are in sub-Saharan Africa. To the contrary, Africans, starved of conventional organised retail options, are mobile shopping with an alacrity that rivals that among the gadget-loving Asia-Pacific.

Witness Rocket Internet, a German online retailer that invests in emerging markets. Rocket has taken a commanding lead in Nigeria and already has about 100 websites across 30 African countries.

“It’s not a question of if—it’s already happened”, says Jérémy Hodara, co-chief executive of Rocket’s Africa Internet Group, referring to an environment in which users first gravitate towards mobile shopping options, then to a physical store.

“In Africa, the complexity to secure land, complexity of building infrastructure and the cost of doing it mean that the traditional store isn’t developing fast. If you go to Lagos, there are two or three malls and 20 million consumers.

“E-commerce is the first experience of organised retail for a lot of consumers.”

And for a majority of consumers, the store arrives on the small screen in their pocket in the absence of a big screen at home or work.

Jumia, Rocket’s Amazon equivalent, is by far the biggest online retailer in Nigeria, Africa’s biggest market. With about two-thirds of the online market, Jumia makes more than half its sales from mobile devices as middle-class Africans leapfrog the desktop era of Internet shopping and reach immediately for the

smartphone—ordinarily an affordable, Chinese-made device that runs on Google’s Android operating system.

“There’s been a very significant increase in the smartphone market with Chinese brands entering Africa with very positive prices, making it affordable for the middle class. If you go to Lagos, your taxi driver will have a smartphone. It’s not fantasy, it’s happening,” says Mr Hodara.

As a result, Jumia has a mobile-first mentality: Its developers and technology team devote at least half their energy to mobile; Jumia’s commercial team introduced mobile-only promotions to pull consumers onto their platforms.

“We don’t want to just be in line with the market, but to proactively shape the way people use their devices. This is important because mobile is changing. The rules of the game are changing. People have limited space on their phone. You’re fighting not only for a share of their purse or a share of their attention but for a share of their screen,” says Mr Hodara.

The lack of infrastructure has also nudged Jumia towards handling its own logistics. One of the most-cited obstacles to e-commerce in Africa is the speed of delivery. “You need to ensure a flawless customer service and it doesn’t come through delegating logistics to someone else. You have to deliver it, control it. We have built our own last-mile logistics network,” Mr Hodara adds.

This also gives Jumia the flexibility to offer different payment options—as in many developing markets, cash payments on delivery are popular.

case study: Rocket leapfrogs into African omnichannel

Quality of omnichannel experience matters

But as the reliance on mobile phones grows, the consumer becomes less forgiving of poorly functioning mobile websites and applications. As part of its own drive towards seamlessness, Walmart, the world’s largest retailer, for example, has integrated its e-commerce and m-commerce sites into a common, in-house platform called “Pangaea”. In 2013, the company’s sites ran on different platforms, making it difficult for Walmart to transfer best practices between markets. For

mobile, the investment appears to be working. In May, the company said that mobile traffic in the first quarter was more than double that of the same period last year; conversions were also up.

Key constraints on the path from online to omnichannel

Despite the enormous opportunity mobile shopping offers, the EIU’s findings suggest many internal and external constraints still weigh on its take-up among consumers. A chief obstacle today is the stubborn popularity of shopping from a desktop.



Strongly concerned

Moderately concerned

Minimally concerned

Not at all concerned

Personalising products or services

Personalising the display of products or services

Sending targeted marketing messages

Sending targeted promotions or coupons

Sharing my personal information with business partners

How concerned are you about retailers collecting and using your personal information (eg, name, location, purchases and habits) for the following purposes? Select one in each row. (% respondents)


29 38 26 8

22 42 27 8

27 38 27 8

24 33 30 13

50 31 12 7

Indeed, EIU findings show that desktop computer use for online shopping matches that of the smartphone for this activity in its proportion of consumers, with some 69% of respondents using this medium daily to research products. The desktop also still enjoys a far higher rate of converting traffic into sales.

A variety of factors hold back the growth of mobile shopping. Infrequent users of smartphones for shopping most cite small screens (74%), awkward navigation (42%) and slow Internet speeds (29%) as primary obstacles to greater use of mobile shopping. All of these could be mitigated by better application or website design, according to retail executives.

A cautionary note: Dismissing the persistence of the desktop as a formidable force may be a pitfall for unwary retailers. More than two-thirds of respondents use their smartphone daily to research purchases; among millennials, however, this figure rises to 81%. A similar gap exists between the two groups’ propensity to buy goods using their smartphones rather than a desktop computer.

To raise the stakes yet further, millennials are by far the most likely age group to review their experiences of a product or transaction through social media—both positive and negative, potentially impacting more negatively retailers

who eschew mobile. The implication is clear: As millennials become the critical mass of consumers in the coming decade, they will be brutally unforgiving of laggards who fail to offer goods or services through mobile. Today’s profits are flattered by residual desktop use that is set to decline markedly. Ignore the omnichannel consumer at your peril.

Privacy concerns waning

Surprisingly, when it comes to mobile shopping, the importance of security to consumers is fading. High-profile hacks and breaches of data security do not appear to translate into a knee-jerk reaction that will harm the growth of m-commerce or curtail its potential applications. While the sharing of customer information with third parties is a serious concern for half of respondents, the majority of those customers would be appeased by the retailer offering an “opt-in” system. The advice for retailers that want to share their customers’ personal information is straightforward: Ask first. Some resistance is also apparent to granting specific applications access to certain functions on the smartphone, particularly its camera and photos (62% were not at all willing to allow access) and the microphone (60%).



Latin American respondents who rarely use mobile devices for researching or making purchases most blame this on the slow speed of connections. They are twice as likely to complain of this problem as their North American, Asian or European counterparts.

MercadoLibre, Latin America’s top e-commerce and m-commerce player, is addressing these limitations through its mobile strategy and services. The company’s mobile business has grown spectacularly fast, outperforming the company’s wider business (which has grown about 25% a year for the last three years), according to Daniel Rabinovich, MercadoLibre’s chief technology officer.

Ironically, that rapid success is based in part on embracing failure.

“If you live here, you design your applications for failure all the time,” says Mr Rabinovich. This is particularly true for the popular Android applications, which typically use slow

connections. This results in lots more offline features and more caching—and absorbing extra costs.

“WhatsApp is a great application, at least in part because it works. We try to do the same, we don’t like fancy animation, we don’t like fancy pictures. Our current application is being redesigned and the new version is going to be ten times simpler. But to achieve simplicity is very hard. All the complexity should be under the hood,” Mr Rabinovich says.

At the MercadoLibre development lab a very physical reminder underscores the need to cater to the weakest link. “We created a wall of cell phones from the cheapest to the most expensive, all [of] different sizes, and we’re all forced to test our applications there,” Mr Rabinovich says. “A lot of big organisations have released applications that look great on PowerPoint but in the heat of use, the experience is completely different. We’re forced to think of that in Latin America because of the lower quality of devices.”

case study: MercadoLibre: Addressing the limitations of slow connections in Latin America through lower-speed services

The future of omnichannel shopping: Watch mobile wallets

Although the rate of mobility growth suggests that m-commerce will soon be the primary channel for online retail, its trajectory offers few clues on the future shape of e-commerce. How will the battle for control of mobile payments play out? Will location-based special offers take off? Will personalised promotions and vouchering migrate to mobile? Will applications or dynamic mobile websites be the primary vehicle of delivery?

For a sense of mobile’s shopping trajectory, look to the evolution of mobile wallets, which, because of improved security safeguards and ease of use, may entice many would-be mobile shoppers to join the fray. Apple Pay and Google Wallet are two well-known competitors in an increasingly crowded field that now includes retailers (MercadoLibre and Alibaba both have their own versions), a consortium of retailers (Walmart et al.’s CurrentC), network operators and banks.

Mark Ritzmann, head of m-commerce at Vodafone, Europe’s biggest mobile operator, reckons it is too soon to call the mobile wallet winner. But a clear enabling technology is emerging: Near Field Communication (NFC), which many handset makers now prefer over incumbent technologies such as low-energy Bluetooth (NFC is less energy intensive than Bluetooth, does not require customers to manually set up connections and is more targeted). Yet Mr Ritzmann is sanguine about which type of mobile wallet wins out in the end. “In the UK and Spain, we’re beyond critical mass and in other markets we’re getting there”, he says. “The more accepted [mobile wallets are] by consumers, the more it enables this market. I guess there will be a point in time when we will have strong competition, but right now there’s a lot to share.”

Each of the different models has its own drawback, which Mr Ritzmann suggests will ensure some market diversity. Google Wallet, for instance, runs off the cloud and therefore cannot be used



with a low battery. Venmo, owned by eBay’s PayPal, is the dark horse in the space. It enables peer-to-peer transfers via mobile, thus, for example, allowing friends to split restaurant bills. In Latin America, MercadoLibre has recently introduced its own equivalent. In China, Alibaba has floated the possibility of using facial recognition for its mobile payment system. Alibaba is also at the forefront of harnessing social media, according to Richard McKenzie, a Hong Kong-based specialist in consumer behaviour.

“Adoption of social media is driving shoppers onto the phone and driving screen sizes larger,” says Mr McKenzie. “A lot of shopping behaviour seems to look at what is popular on social media and then use that to link to an e-commerce site. The catchphrase I use is ‘the mobile phone is becoming the remote control of life.’”

Lisa Feng, a retail executive in China, also highlights the importance of social media, but underscores specific cultural factors. “China has never had a culture of privacy, so people talk very openly about purchases.”

More broadly, as the case study on Rocket

shows, retailers should not expect mobile retail in the developing world to chart the same trajectory as it has in developed countries. As Daniel Rabinovich of MercadoLibre puts it: “In many emerging countries, the mobile phone is the first computer people have.”

Mr Ritzmann says Vodafone’s mobile wallet strives to enable users to store everything normally kept in a conventional wallet. This may usher in a new era of personalised, targeted offers that would enable more engaging offers on a more fluid basis than the ongoing mail-shots of tailored vouchers that have been the norm in many markets for several decades. Similarly, if NFC enters the mainstream, personalised, location-based offers will be within reach.

Already some 37% of mobile shoppers use their devices to receive or redeem personalised offers. Adding NFC will integrate this powerful tool into the physical store as a missing piece of the omnichannel puzzle. Yet, some retailers, some shoppers and perhaps some regulators may find this uncomfortably close to price discrimination—possibly crossing privacy boundaries.



Mobile technology impacts everything it touches. The spectacular rise of mobile shopping in developed and developing economies alike in just three years bears testament to its transformative power. In developing economies, the growth of 3G technology and affordable Chinese-made smartphones have short-circuited the orderly path to retail maturity.

What can retailers that seek to future-proof their businesses learn from mobile shopping’s high-speed trajectory?

Retailers need to wake up to the importance of having a thoughtful omnichannel strategy, based not just on the device used but also the place of research or purchase (home, store, on the go) to anticipate and address consumer needs and wants. Desktop shopping is surprisingly sticky due to its sustained popularity among older consumers. But shopping and research from desktop computers are far more rare among tech-savvy millennials and those in the Asia-Pacific region. Legacy desktop traffic is propping up the performance of some retailers—it will not last forever.

The mobile is the remote control for life. Online-to-offline (o2o) is fast becoming the norm. Customers will use their mobile devices in stores

irrespective of retailers’ attempts at control or store preferences. Retailers may want to push mobile usage in a direction that adds value to consumers’ visits. Showrooming is inevitable, but the sharpest brick-and-mortar retailers will find ways to limit showrooming to their own channel.

Less-developed markets offer lessons. Emerging markets are not copying mature markets. They are innovating in ways that offer lessons for mature markets.

Those with physical stores should think mobile. Consumers want to see store associates armed with the same mobile capabilities consumers have. This will enhance the customer experience and boost conversion.

Mobile consumers are unforgiving. Retailers should design applications and mobile sites to pre-empt and mitigate failure.

As smartphone penetration creeps towards 100%, the window of opportunity to carve out a popular mobile shipping niche is narrowing. For retailers weighing investment decisions, the temptation can be to retrench in tough economies. But time is running short to stake a claim on the mobile shopping frontier.

Conclusion



Appendix: survey results

Percentages may not add to 100% owing to rounding or the ability of respondents to choose multiple responses.

What kind of mobile device have you used in the last six months to browse or purchase products or services? Please select all that apply. (% respondents)

Smartphone (eg, iPhone, Android, Windows Phone, BlackBerry, LG, HTC, Xiaomi, Huawei)

Tablet computer (eg, iPad, Microsoft Surface, Samsung Galaxy Tab)

Feature phone (ie, a basic phone for calls and texts; may have simple games and Internet capabilities)

I do not use a mobile device

92

74

31

0


Feature phone

Smartphone

Tablet

Personal computer (eg desktop PC, laptop)

When researching products and services, how often do you use the following device(s)? Check one in each row. (% respondents)

16 9 4 71

69 16 8 8

38 27 8 27

69 22 5 4



Why don’t you research products or services using your mobile device more often? Select the top three reasons.(% respondents)

The screen is too small

Navigating information is awkward

The Internet is not fast enough on my device(s)

Saving research results is difficult

Sharing information across multiple mobile devices is difficult

Sharing information with friends and family is difficult

Other

63

39

31

24

15

8

10


Feature phone

Smartphone

Tablet

Personal computer (eg desktop PC, laptop)

When purchasing products or services, how often do you use the following device(s)? Check one in each row. (% respondents)

11 8 6 76

38 18 16 29

26 22 16 36

41 28 24 7

Why don’t you purchase products or services using your mobile device more often? Select the top three reasons.(% respondents)

I prefer to use a personal computer

I am concerned about the privacy of my data

I am concerned about the security of my data

It is too difficult to use the retailer’s mobile website to make a purchase

It takes too long to make a purchase

It is too difficult to use the retailer’s app to make a purchase

I prefer to visit a physical store

It feels too impulsive to make purchases on a mobile device

Other

51

32

31

28

21

17

14

8

5



Which of the following activities do you perform most often when researching products or services on your mobile device? Select the top three.(% respondents)

Check reviews on third-party sites (eg, Yelp, Google Maps, Consumer Reports, blogs)

Check reviews on retailer apps or sites (eg, Amazon)

Research products or services using non-retailer services (eg, Google search, product manufacturers)

Visit deal sites for coupons (eg, RetailMeNot, coupons.com)

Use retailer apps or sites to browse products and services

Use retailer apps or sites to check for weekly promotions

Receive and use retailer emails to learn about promotions

Research products or services on social media services (eg, Facebook, Instagram, Twitter)

48

44

37

27

25

24

21

18

Which of the following purchases have you made using a mobile device within the past six months? Select all that apply.(% respondents)



Electronics

Household goods

Food or groceries


Travel


53

53

48

38

32

32

23

13



Local retailer National/global chain retailer

Online-only retailer

Other

Food or groceries


Household goods

Electronics




Travel

What types of retailers have you made these purchases from using a mobile device? Select all that apply. (% respondents)

47 31 22 1

17 42 39 2

21 38 39 2

13 44 42 2

15 32 50 3

21 39 36 3

39 37 21 3

12 43 40 5

When researching or purchasing products and services on your mobile device, which of the basic following activities do you conduct now? Select all that apply.(% respondents)



Pay for purchases






Scan QR codes (ie, black-and-white images that mobile-device cameras can read to obtain online information)

61

59

47

47

26

25

21

19

15



In your answer to the previous question, you indicated that you are currently not engaging in the following basic activities when researching or purchasing products or services on your mobile device. Are you interested in doing any of these in the future? Select all that apply.(% respondents)



Pay for purchases






Scan QR codes (ie, black-and-white images that mobile-device cameras can read to obtain online information)

52

45

39

39

35

34

31

26

22

When researching or purchasing products or services on your mobile device, which of the following advanced activities do you conduct now? Select all that apply.(% respondents)










37

37

30

24

24

22

21

20

16



In your answer to the previous question, you indicated that you are currently not doing the following advanced activities when researching or purchasing products and services on your mobile device. Are you interested in doing any of these in the future? Select all that apply.(% respondents)










51

38

34

31

27

27

27

26

25

How has mobile shopping changed your feelings or behaviour when it comes to shopping?Make a selection. (% respondents)

Shopping is

1 More fun

2

3

4

5 Less fun

Time spent on shopping

1 More time

2

3

4

5 Less time

Per item, I spend

1 More money

2

3

4

5 Less money

My loyalty to certain retailers

1 More loyalty

2

3

4

5 Less loyalty

Per month, I spend

1 More money

2

3

4

5 Less money

26

25

33

12

3

18

18

35

20

9

9

15

43

20

13

19

28

35

13

4

11

20

44

18

7



When visiting a physical store and browsing for products and services, which of the following basic activities do you conduct on your mobile device now? Select all that apply.(% respondents)

View the retailer’s catalogues, products or information

Search for coupons, offers and promotions

View and compare products and services from other retailers

Receive recommendations for alternate products

Scan barcodes or QR codes to get product information

Communicate with friends for advice on buying decisions

Locate out-of-stock items in other stores and locations from the same retailer

Locate out-of-stock items from other retailers

Hold or order out-of-stock items

Schedule personal-shopping appointments with preferred sales associates

47

46

44

28

25

24

23

19

18

8

In the previous question, you indicated that you are currently not doing the following basic activities when visiting a physical store and browsing for products and services. Are you interested in doing any of these in the future? Select all that apply.(% respondents)

Search for coupons, offers and promotions

View and compare products and services from other retailers

View the retailer’s catalogues, products or information

Receive recommendations for alternate products

Scan barcodes or QR codes to get product information

Locate out-of-stock items in other stores and locations from the same retailer

Locate out-of-stock items from other retailers

Hold or order out-of-stock items

Schedule personal-shopping appointments with preferred sales associates

Communicate with friends for advice on buying decisions

42

39

36

34

31

31

28

25

15

12



When visiting a physical store and browsing for products and services, which of the following advanced activities do you conduct on your mobile device now? Select all that apply.(% respondents)

Use store maps for navigation within a store or shopping mall

Receive personalised notifications, recommendations or offers based on my preferences

Receive in-store notifications, recommendations or offers based on my location

Access shopping lists through the retailer’s mobile services

Scan barcodes or QR codes to receive offers and promotions

Make payments without having to go to a register or kiosk

Use digital fitting rooms or design centres

Request or schedule a home service (eg, delivery shipment, installation)

Access shopping lists through third-party mobile services to shop at several retailers

37

35

33

26

25

23

17

16

14

In the previous question, you indicated that you are currently not doing the following advanced activities when visiting a physical store and browsing for products and services. Are you interested in doing any of these in the future? Select all that apply.(% respondents)

Make payments without having to go to a register or kiosk

Receive in-store notifications, recommendations or offers based on my location

Scan barcodes or QR codes to receive offers and promotions

Receive personalised notifications, recommendations or offers based on my preferences

Use store maps for navigation within a store or shopping mall

Use digital fitting rooms or design centres

Access shopping lists through the retailer’s mobile services

Request or schedule a home service (eg, delivery shipment, installation)

Access shopping lists through third-party mobile services to shop at several retailers

40

40

33

32

31

30

25

19

18



Very desirable

Somewhat desirable

Minimally desirable


Provide product information, comparisons, ratings or alternates

Check prices

Check inventory for product availability

Locate and reserve out-of-stock items

Schedule personal-shopper appointments

Schedule shipment, delivery, installation

When visiting a physical store and browsing products or services, is it desirable when salespeople use mobile devices for the following basic tasks? Select one in each row. (% respondents)

46 36 13 4

57 32 8 3

59 29 9 3

50 34 13 4

27 32 28 12

42 38 16 4

Very desirable

Somewhat desirable

Minimally desirable


Know when I enter the store

Offer personalised recommendations and offers

Take payment without going to a register or kiosk

Demonstrate virtual fitting rooms or virtual design centres

Collect my contact information for personalised offers, recommendations and/or follow-up calls

When visiting a physical store and browsing products or services, is it desirable when salespeople use mobile devices for the following? Select one in each row. (% respondents)

27 29 22 22

34 38 18 9

42 34 15 9

30 35 22 13

27 33 21 19

When in a physical store, what technology features would prevent you from making the purchase elsewhere using your mobile device? Select the top three. (% respondents)

Faster shopping because store personnel can process payments with mobile devices

A more seamless experience across the retailer’s website, mobile services and store

Personalised store experience based on my history, profile and/or location

More proactive store associates who effectively use mobile devices to improve customer service

Offering of more product or service options

Digital tools that help me make my purchase decisions (ie, offered in the store or via mobile)

Quicker response to locating and offering out-of-stock items

38

36

36

34

33

26

22



Which of the following shopping-related social media activities do you conduct on your mobile device now and which would you be interested in doing in the future? Select all that apply. (% respondents)

Get bonus reward points or coupons via social media

“Like” or “follow” my favourite retail stores to learn about products, services and promotions

Use social media to make complaints or express disfavour to retailers

Use social media to ask retailers questions

Use social media to praise or thank retailers

Notify friends and followers when I’m in a retail store

Notify friends and followers when I’m in a retail store expressly to redeem special offers

54

51

46

42

42

36

34

Why don’t you share positive experiences about retailers online? Select two. (% respondents)

I am not interested in sharing my opinions online

There are so many online reviews that my review will not matter or get attention

Posting online reviews is too difficult or time-consuming

I do not use social media

I never read online reviews

I do not think online reviews are useful in general

I do not want to help the retailer’s business

49

23

22

22

7

6

4

Less than once a month

1 to 3 4 to 8 9 to 15 More than 15 I do not share these experiences on social media

Positive experiences

Negative experiences

On average, how many times a month do you share a positive or negative experience about a retailer online (eg social media platforms, retailer sites or third-party review sites)? Select one. (% respondents)

26 24 11 7 5 27

33 14 7 5 6 35



Strongly concerned


Minimally concerned


Personalising products or services

Personalising the display of products or services

Sending targeted marketing messages

Sending targeted promotions or coupons

Sharing my personal information with business partners

How concerned are you about retailers collecting and using your personal information (eg, name, location, purchases and habits) for the following purposes? Select one in each row. (% respondents)

29 38 26 8

22 42 27 8

27 38 27 8

24 33 30 13

50 31 12 7

Under what circumstances are you comfortable with retailers sharing your shopping behaviour with third parties? Please select all that apply. (% respondents)

When I am asked permission and opt-in

When I am notified and can opt-out

When I am rewarded (ie, with coupons, rebates, loyalty points)

When it is disclosed in the terms of service or privacy policy

When it yields offers that are relevant or valuable to me

I am not comfortable sharing my shopping behaviour with third parties

50

38

27

26

23

23

Why don’t you share negative experiences about retailers online? Select two. (% respondents)

I am not interested in sharing my opinions online

There are so many online reviews that my review will not matter or get attention

Posting online reviews is too difficult or time-consuming

I do not use social media

I do not want to hurt the retailer’s business

I never read online reviews

I do not think online reviews are useful in general

42

24

21

17

12

8

8



Strongly concerned


Minimally concerned


Location data (ie, GPS)

Social media data

Financial data

Personal or behavioural data from my mobile devices (eg, contacts, calendar, photos, mobile usage)

Personal or behavioural data from other connected devices (eg, fitness data from smartwatches and monitors)

How concerned are you about retailers collecting and using the following types of data? Select one in each row. (% respondents)

49 32 14 5

41 35 18 6

61 26 8 4

54 31 11 4

50 32 12 5

Very willing Somewhat willing

Not at all willing

Location

Contacts

Calendar

Notifications

Camera and photos

Microphone

How willing are you to grant retailers permission to access the following information and functions on your mobile device? Select one in each row. (% respondents)

21 36 43

15 28 56

17 33 50

20 40 40

16 22 62

13 28 60

Very high Somewhat high

Moderate Somewhat low

Very low

Two years ago

Today

How would you rate your level of trust in a retailer to keep secure your personal and financial information (ie name, address, payment information, behaviour data) two years ago and today? Please select a response on a scale from “very high” to “very low” in each column. (% respondents)

17 17 30 15 21

16 20 29 14 20



Asia-Pacific

North America

Western Europe

Latin America

Africa

CIS

Middle East

In which region are you personally located?(% respondents)

23

23

23

22

4

3

1

Under 21

21 to 25

26 to 30

31 to 35

36 to 40

41 to 50

51 to 60

61 to 70

Over 70

How old are you?(% respondents)

2

18

16

15

13

18

13

5

0

Male

Female

Are you male or female? (% respondents)

54

46

Under $10,000

$10,000 to $15,000

$15,001 to $20,000

$20,001 to $25,000

$25,001 to $30,000

$30,001 to $35,000

$35,001 to $40,000

$40,001 to $45,000

$45,001 to $50,000

$50,001 to $55,000

$55,001 to $60,000

$60,001 to $65,000

$65,001 to $70,000

$70,001 to $80,000

$80,001 to $90,000

$90,001 to $100,000

$100,001 to $125,000

Over $125,000

What is your annual income in US dollars? (% respondents)

18

10

6

6

8

6

3

4

4

5

3

2

3

3

3

4

6

6

Elementary/secondary school

High school diploma or equivalent

College degree

Master’s degree

Doctorate, law or medical degree

Other

Please indicate the highest level of education you have completed.(% respondents)

4

24

48

19

4

1



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Technology

How mobile is transforming retail