Episode 14: Consumers love shopping by mobile phones, but brands are lagging on apps

In this episode, Amie is on the ground at Shop Talk Fall and joined by Melissa Minkow, Director Retail of Strategy at CI&T. They discuss the tremendous opportunity mobile commerce presents for retailers to innovate, especially in the realm of apps.

Transcript

Intro:

Coming up, on this episode of Retail Untangled…

There's just so much opportunity here. I think retailers have just been really shy. And my advice previously to them was don't worry about your app. Don't worry about building on. And now my advice is no, it's time to build it. It's time to build it well. 

Welcome to Retail Untangled. My name is Amie Larter and this is the podcast where we speak to retail industry experts and find our business hacks to help you succeed. You won't find these gems anywhere else and we have some superb stories from the coal face as well as helicopter insights from retail industry leaders. This week we're bringing you insights live from Shop Talk Fall in Chicago.

Amie:

Today we're exploring a fascinating paradox. While consumers love their smartphones for shopping. I know I do. They often prefer browsing on laptops. Given the significant growth of mobile commerce, this presents a tremendous opportunity for retailers to innovate, especially in the realm of apps. To do so I'm joined today by Melissa Minkow, Director Retail Strategy CI & T to delve into how retailers can create shopping apps that consumers find worthwhile. Welcome, Melissa. 

Melissa:

Thank you so much for having me. 

Amie:

My pleasure. Now, your research in the Connected Retail Report, which contains some valuable insights, highlights the fact that smartphones are generally preferred for shopping, yet visiting websites on laptops is often favoured over apps and mobile sites. Mobile purchases reached $2.2 trillion in 2023, accounting for 60% of global e-commerce sales. 

This demonstrates a significant opportunity for retailers to innovate and capitalise on the growing mobile market. So to kick us off, what are the main roadblocks stopping retailers from developing successful, profitable mobile apps? 

Melissa:

Yeah, I think the biggest roadblock is just that retailers aren't confident that the consumer will download it and will use it regularly. So they find it difficult to justify the investment. There's a lot of uncertainty there if it's worthwhile and they may not have the resources or the teams fully built out because they've decided to shift away from that. 

We hear that a lot from retailers is that years ago they thought, we'll develop an app and then they totally moved away from it because they couldn't get the downloads and the regular usage to justify the expense. 

Amie:

And so where are they going wrong? I mean, obviously...you know, there needs to be some level of strategy about how the app is going to be used or why it's going to be used and the role it plays. But keen to understand where are retailers going wrong in this piece? 

Melissa:

Yeah, I think a lot of them are so focused on engagement and entertainment for the consumer and gamification is such a buzzword when it comes to apps, but the reality is consumers don't really want that. They want the most efficient, easy checkout experience, easy path to purchase journey through the app. They don't really want to have that much fun on a retailer's app.

Amie:

Does that differ per category? Because I know I see a lot more investment in sort of content and that entertainment on, you know, whether it be beauty brands or whatever it might be. Do you see differences per category or is that essentially a one size fits all approach? 

Melissa:

We haven't asked specifically per category that question, but overall if you're comparing retail versus QSR, for example, because we just did a quick restaurant survey with grocery apps and delivery and restaurant branded apps. And what we saw was there's no difference between that category and just broader retail in general where overall consumers just don't want to play around on retailer apps they want to find what they're looking for. 

Amie:
My guess would be apparel and beauty, maybe there's a little bit more openness. 

Melissa:

A little bit of room for a bit more education. and browsing and fun and gamification but in the categories where there's more of a sense of urgency like with food like with household goods personal care items they really don't want to just have fun on these apps. They have other apps for that. 

Amie:

Yeah, and I think if we put our consumer hats on, it's true, right? 100%. I'm only using my app to make a purchase. And I want you to streamline that and simplify it. But that's really why I'm there. 

Melissa:

Exactly. Exactly. We have social media apps. We have Candy Crush if we want to play Candy Crush we have Portal. We have all these other ways to have fun on our phones. And we really don't want to take up all that precious real estate. But the tides are turning.

I'm really confident that, like you mentioned with our data, consumers actually have this openness to apps. It's just a matter of retailers creating the right ones. And I think that's a really, really important part of the future landscape when it comes to retail, is creating those compelling apps. Because mobile commerce continues to grow. We are on our smartphones more than we ever have been. And there's a ton of white space here. If you build the right app-based experience, consumers will shop it. I'm really confident in that. And that's where my advice to retailers has changed over time. 

Amie:

Right, and for retailers that don't have an app right now, and I don't know, is it a large portion of most retailers that have apps? 

Melissa:

Surprisingly, a lot of retailers do not have apps, especially brands. A lot of brands don't have apps, whereas, maybe retailers are more likely to have them. But what I think is so fascinating is there's even room for brands in the CPG space, for example, or beauty brands, for example, to have their own apps because they know that consumers are brand loyal a lot of times and maybe they need to figure out which retailer to go to to find them. 

And so they might be more likely to even download that branded app to help them navigate to the store that has those items in stock. So there's just so much opportunity here. I think retailers have just been really shy. And my advice previously to them was don't worry about your app. Don't worry about building on. And now my advice is no, it's time to build it. It's time to build it well. 

Amie:

And when you look at the stats that we mentioned in regards to just the scale of mobile purchases, it's a space you want to play in, right? 

Melissa:

Absolutely. Absolutely. This is where consumers are spending the most amount of time overall. They embrace this as a channel. They just haven't been faced with the opportunities to shop in the ways they want to from an app perspective. 

Amie:

Okay. And so from your research, and I'm keen to understand, you know when people are using it or abandonment patterns and that type of thing. What factors really contribute to low user engagement or that app abandonment piece? 

Melissa:

Yeah, it's things like I don't want to take up precious real estate on my phone, it's taking up too much data, it's not providing a convenient, frictionless experience, or it's not adding value. If you download this app, you go through all that trouble, you have to get a password, you have to get it all situated, and then there's no added value and you could have just shopped the mobile site, that was a big waste of your time. 

If it doesn't make the payment process more efficient or easier, if it doesn't help you find products faster, if it doesn't help you navigate to deals and discounts more often, there's no benefit to the consumer and they don't understand the reason for downloading it.

Amie:

I mean, if we just step back before that piece, which I probably should have started with, but what influences consumers' decisions to download in the first place? 

Melissa:

So our Connected Retail Report from last year said that the number one reason consumers would download a retailer's app and use it was because it would give them access to better prices. The second most common choice or reason why they would download a retailer app was because it would give them exclusive benefits. And the third most frequently chosen reason was they're already shopping at that retailer so much that they may as well have the app. 

So those are the three variables that would compel someone right now to download the app. It's the better deals and discounts, those exclusive benefits. Again, it's that driving value that they wouldn't get in another channel. 

Amie:

And would you say you're catering to more of your loyal customer base? 

Melissa:

Yes. And that's where I think it's tricky too because maybe retailers can't understand the benefit in creating an app if they don't see the loyalty return there. But I think starting to think about apps as an opportunity for acquisition, just as much as retention, is really important. So what perks can you build in there that will drive acquisition? Also, definitely pay attention to retention because to your point, the most loyal consumers are typically the ones who have your app downloaded and their baskets are bigger and their frequency is higher, but you also need to think about the app as an acquisition tool. What are the reasons that someone would choose that? There was a fast fashion retailer a while back who launched an exclusive line with a celebrity stylist solely through their app. And I love that celebrity stylist so I downloaded the app and I wanted to shop that collection early before it hit the website. That's a huge perk. That's an acquisition tool right there.

Amie:

So do you still have the app? 

Melissa:

I do not. no! But that's important, right? It's important that they see that then that app abandonment occurred because they didn't build it. That was the only time they did an exclusive range with a stylist through their app. I never saw any additional value to having the app. 

Amie:

And so that might have been quite transactional. Yes. You know, from your perspective, it is very transactional at that point. And they really needed to consider the journey post that nurture campaign through the app.

Melissa:

Exactly, that's where I think sometimes they forget it's a great acquisition tool and then sometimes they forget how important retention is and to keep that customer. They immediately got data from me that said I follow the celebrity stylist, I'm interested in trends, right? How could they leverage that to their advantage? Why didn't they create more exclusive drops or you know, special discounts for someone who just downloaded it then? They should have figured out a way to hold on to me. 

Amie:

Yeah, okay and so you've touched on it a little bit but keen to understand from the research that you guys have done. How can retailers design apps that are more appealing and engaging and valuable? 

Melissa:

So in our QSR research, what we found was the importance there is with payments. The app has to make the payment process easier, whether that's in the store or the restaurant or paying from home. You also have to make it really easy to find the food that you're looking for and craving, which translates directly to retail in so many ways. I want to make sure that the search functionality in an app is useful and is just as strong as it would be on the website or even through Amazon or Google search engine. 

Deals and discounts are also what people are looking for through the app. 

Amie:

Which makes so much sense. which, and I'm very keen to get you, I'm very keen to get your perspective on this, which retailers are excelling in mobile app strategies and I'm assuming getting exceptional results and why? 

Melissa:

Yeah, so Target is the golden child here. You even had someone from their C-suite today saying that so many of their shoppers start their journey by using the app. I think that's really important, but what's also so great about their app is it is a wonderful tool when you're in the physical store because it has all your returns logged visually. I can very quickly facilitate my returns process in stores by using the app. It has your payments linked right there, my red card, my discounts. I always pay through the app.

They have connected to their Starbucks in their venues. They just have so many services through the app that you would need when you're in brick and mortar. And that's very rare. A lot of times retailers are designing apps that are exclusively useful when you're at home. And that's really important that you have that aspect, but you also really need to create an interface that's useful when you're in the brick and mortar. 

Amie:

And I suppose that's the next struggle is not creating an app that stands alone or is siloed outside of the customer experience. 

Melissa:

Exactly, exactly. I don't know why there isn't a grocery app for my local grocer that tells me when my number one brand of cereal is back in stock. That should be something that is easily accessible for me and I know then I can go into my brick and mortar store because of that app channel. I don't have any grocery store apps downloaded personally and in our research the average US consumer only has one grocery store app downloaded and it's because they're not that useful right now and Americans especially do most of their grocery shopping in stores. 

So why would they have an app? You have to build this channel for both the omnichannel usage and the exclusive usage at home. 

Amie:

It makes, it makes actually, it just makes so much sense So given the continued growth of mobile commerce, which we have said is you know, really big How do you envision the role of apps evolving in the retail industry over the next few years? 

Melissa:

I think they will definitely become more efficient. They will definitely become easier from a search perspective and navigation perspective, I hope they will help consumers achieve more of that omnichannel shopping approach like we've just said. I also wouldn't be surprised if some retailers band together and create super apps when they don't compete with each other, so you're only downloading one app. And it's kind of like opening a bunch of tabs in your phone. I shop at so many different retailers that don't compete with each other. 

If they created one super app together and let's say their products kind of support or complement each other, I might download that and they kind of get this overlapping data that they can leverage on a consumer who shops multiple stores. I think that would be fantastic. I really do see apps being such an important part of the retail landscape moving forward, but they just have to be more productive for the shopper. 

Amie:

Makes sense. So watch this space for super apps. 

Melissa:

Exactly. We'll see who embraces that, but I don't know why they wouldn't. 

Amie:

And when it comes to, you know, our favourite word of the moment, AI, generative AI. How is this technology really going to change the game for retail apps?

Melissa:

Yeah, I think because apps are such a one-to-one channel for consumers to engage. It won't necessarily be about entertainment and engagement in that kind of fun gamification way, but it will, Generative AI specifically, allow consumers to get more creative and also more strategic with their purchasing behaviours. So, we did see in our QSR research, for example, that consumers were very trusting of QSR brands that created meal deals and bundling.

Apps are a great chance or a great channel to do something like that. If I were to type in, for example, the budget that I want to spend on an app, and this could be in retail, could be apparel easily, if I want, I'll type in, I want three dresses for an upcoming vacation. I want these colour palettes or this colour scheme, and I want this price point. Generative AI can kind of recommend three dresses for me, and I can say yes or no, I like those, you know, update. I think that's really important. 

And AI can just synthesise so much of this data and make those fantastic recommendations that are not necessarily in a generative way, but can really kind of leverage all the data that these apps are collecting, synthesise it, give it to the retailers in a very cohesive, streamlined way, and then that can be used also to optimise the app experience. There's just so many opportunities when it comes to generative 

AI and being creative with consumers, and apps are such a perfect channel for that because we are creating content all the time via our phones, thanks to social media. So we're already in that head space to use something like generative AI with a retailer app. 

Amie:

Yeah, okay. And just to finish, are you seeing any kind of, you know, upward spike in the amount of retailers that are moving into and adopting the apps? 

Melissa:

It's a great question. I haven't seen any numbers on how many more retailers are creating apps right now, but stay tuned in terms of the holiday season. Every holiday season, mobile commerce grows significantly. Exactly. So I think this year perhaps we'll see even more growth specifically when it comes to apps for m-commerce because holidays are right around the corner. 

Outro:

A big thank you to Melissa from CI &T and we hope you enjoyed this episode of Retail Untangled. To hear more insights as they land, feel free to like and subscribe wherever you listen to your podcasts.