Retailers try to use smartphones to drive sales

In the brave new world of retailing, stores are going to be less concerned about what’s in shoppers’ wallets and more interested in what’s on their mobile phones.

Retailers and a wave of start-up companies are rushing to create smart-phone and iPhone applications that let shoppers compare prices, redeem coupons, lend a friend $25, buy movie tickets and make dinner reservations, and even find the nearest bathroom in the mall.

Right now, most of what’s happening in mobile retail is marketing and promotion, rather than sales and revenue-producing activities. but Web developers and retailers say the day is coming when consumers will be able to wave their cellphones to pay at the grocery checkout line, department stores, and restaurants and movie theaters.

“Consumers love their cellphone,” said Conrad Sheehan, founder and chief executive officer of Chicago-based mPayy, which is developing a mobile payment system that shoppers can use instead of credit and debit cards. “They’ll walk out naked, but they’ll have their cellphones.”

This past Christmas, Wayne-based Toys “R” Us Inc. let shoppers shrink the company’s 80-page holiday toy “wish book” down to cellphone size, through an iPhone app. Toys “R” Us also introduced mobile shopping in November, allowing customers to make purchases from their phones, as well as read customer product ratings and check if items sold out at one store were available elsewhere.

Pizza Hut Inc. and Chipotle Mexican Grill are selling thousands of takeout orders that were placed via mobile phone.

Verasoni Marketing in little Falls is helping Rod’s Steak and Seafood Grille in Morris Township create a phone app that will allow diners to access the restaurant’s reservation system, check if a table is available and make a reservation.

Aetrex Worldwide, a footwear company based in Teaneck, has developed software that lets stores scan impressions of a customer’s feet and send the images to a cellphone, along with the store name, address, phone number and information about the customer’s shoe size.

“The app world right now is where the Internet was 15 years ago,” said Abe Kasbo, CEO of Verasoni. “It’s still young.” He has no doubt that apps are the future. Having a Web site now without apps, Kasbo said, is like having a typewriter instead of a computer.

The National Retail Federation, at the beginning of this month, held a daylong “mobile boot camp” conference in San Francisco attended by 160 retail executives from around the country. “Retailers are at various stages with mobile,” said NRF Vice President Ellen Davis, whose organization represents 1.6 million U.S. retail establishments. “Most of them can understand and see the power of cellphones and smartphones with today’s shoppers, but they are trying to figure out how to leverage it,” she said. “Where to start seems to be the biggest hurdle.”

The NRF is preparing to introduce a mobile-retail initiative within the next month that would combine representatives from the federation’s various divisions to study issues related to mobile shopping and applications.

The NRF doesn’t have statistics on how many retailers have launched mobile applications, and speakers at the mobile boot camp conference cautioned against the rush to mobile retail.

Research firm Parks Associates estimated recently that the number of smartphone users is expected to reach more than 1 billion by 2014, four times as many as in 2009. And those users love their apps. the iPhone App Store has more than 25,000 apps, most of them free downloads, and users performed more than 2 billion app downloads in the first year that online store was open.

“We’ve seen the major retailers – Target, Macy’s, Walmart, Best buy, Amazon — launch great iPhone apps, but the theme of the boot camp seemed to be ‘start slow,’ ” Davis said. Retailers need to examine if their proposed app “makes the shopping experience easier, or are you doing an app for the sake of having an app?” she said.

Right now, Davis said, consumers seem to be wary of making purchases via cellphone, or transmitting their credit card information over a phone, the same way many initially were wary of using their computers for online purchases. “People use their phones to find the nearest Banana Republic or to figure out what’s on sale at the grocery store before they go,” she said. but many consumers are reluctant to use their phones to make a purchase, she said.

The most successful mobile apps, experts say, link to the retailer or restaurant’s Web site, where the credit card and other personal information is stored. the mobile app recognizes the shopper’s log-in, and the shopper doesn’t have to transmit any information over the phone.

Sheehan, founder of mPayy, was a senior vice president at JPMorgan Chase & co. and head of its consumer-payments business before he founded the mobile payment service. the mPayy app uses a person’s mobile phone number as an identifier, because mobile phone numbers are “globally unique – there’s no two the same,” Sheehan said. “If I want to make a payment online, I simply enter my mobile number and password. If I want to send a friend some money from my cellphone, I type in their cellphone number as the address.”

Users of mPayy can link the service to their bank accounts, or set up a stored value account with mPayy, by sending money to mPayy. the advantage for retailers, Sheehan said, is mPayy fees are about half the price of a debit-card transaction. Companies that have lots of “micro payments” – for example publishers that charge 50 cents for online newspapers – find mPayy’s model attractive, he said. “We can move 50 cents profitably for you,” Sheehan said. “The key is not using the legacy credit-card networks, because those are very expensive.”

The day when shoppers can wave their cellphones at cash registers and walk out with their groceries won’t arrive, Sheehan believes, until the cellphone wireless carriers form partnerships with retailers to create payment devices that work with the phones. “The wireless carrier plays a big role because the device would need to have a chip inside of it for it to work really well,” he said. “And that’s what people expect. You have to give them a reason to do that versus pulling out their credit card.”

Another application that retailers are eager to add to their mobile marketing arsenal is the ability to send targeted coupons or discount offers to shoppers when they are in the retailer’s stores. Most mobile coupons are delivered through coupon collection sites, such as Coupon Sherpa or Cellfire, that let mobile users search among hundreds of online coupons for ones they can use.

Mindsmack, a Web-development company with offices in North Brunswick and New York, has created an app, FastMall, that hopes to eventually be able to deliver targeted coupons to shoppers who use their phones to let retailers know when they have arrived at particular malls or stores.

Fast Mall currently is an application that provides detailed maps and store-locating directions for malls around the country. a popular feature of FastMall is the bathroom finder – users can shake their phone to see all of the nearest mall bathrooms pop up on the map.

Eventually, Mindsmack Chief Executive Officer Sam Feuer would like to line up deals for advertising, sponsorship, and revenue sharing tie-ins. “We can work with Fandango [an online movie-ticket sales Web site] and sell movie tickets in the app, and every movie ticket that’s sold we make a percentage off it, the mall owner makes a percentage, Fandango makes a percentage,” he said. “That could be the same for anything that’s sold at the mall.”


Retailers try to use smartphones to drive sales

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