Bricks Mobile How Smartphone Technology is Transforming the Store Experience1 INTRODUCTION Over the past twenty years e commerce has established itself as a popular convenient attractive and sophisticated means of connecting consumers and goods As technology has advanced it is now commonplace for retailers to complement their brick and mortar institutions with user friendly e commerce channels For quite some time now with the click of a button a customer has been able to visit Gap com and purchase the same pair of jeans she d previously been able to find only in store As e commerce booms though what are the implications for brick and mortar retailers Will there come a point when our Gap shopper no longer has any need for her Main Street store Doubtful While the web is sometimes viewed as a cannibalizing force for brick and mortar retailers the savviest stores are those actively using the internet particularly mobile technologies to their advantage These retailers have recognized that the web presents a unique opportunity to both drive new foot traffic and enhance the shopping experience within their four walls Such stores are pushing mobile platforms that bridge the gap between brick and mortar and e commerce rather than bifurcate it and smartphone applications are paving the way for this new blended tech forward shopping experience Precisely how retailers are accomplishing this is the topic we investigate in this paper What follows is an in depth exploration of emerging trends in smartphone and mobile technologies as they relate to shaping the shopper s evolving in store experience The goal is to shed light on retailers that are encouraging and enabling use of smartphones as a shopping tool for a host of novel purposes including payment entertainment and loyalty rewards just to name a few In the brick and mortar world the reality is that mobile presents a disruptive technology Those stores which choose to resist it risk becoming left behind in the footsteps of those choosing to embrace it 1 This report was written by Neil Davis T 11 and Kathryn Malinick T 11 under the direction of Professor M Eric Johnson of the Tuck School of Business at Dartmouth It was written as a basis for discussion and not to illustrate effective or ineffective management practices Version April 1 2011 2011 Trustees of Dartmouth College All rights reserved For permission to reprint contact the Center for Digital Strategies at 603 646 0899 1 THE MOBILE MARKET The market for smartphones is growing at a staggering rate According to comScore in 2010 over 45 million U S consumers owned smartphones which represent the fastest growing segment of the mobile phone market 2 In Stat projects that by 2012 more than half of U S handset shipments will be smartphones 3 What does all this mean for retailers First smartphones present a relatively new opportunity for stores to connect with customers through means of a dedicated mobile enhanced website mobile applications or various other forms of mobile marketing According to research smartphones are already a significant store traffic generator 5 7 of total visitors to brickand mortar stores are driven by mobile and 3 5 of revenue in stores is driven by smartphones in either an app based or alternative mobile marketing manner 4 With increasingly fast speeds robust browsers refined keypads dazzling multimedia features and technologies like augmented reality and social couponing smartphones deliver retailers a powerful opportunity to engage with shoppers inside of the store environment The combination of rising smartphone usage a growing range of mobile retail apps and location based capabilities is setting the stage for continued growth of mobile as a marketing channel The implications for customers are important as well According to Forrester Research U S adults are now as likely to own a mobile phone as they are to own a PC 5 While customers can certainly expect to be inundated soon with highly targeted retailer advertising via their phones they should have some recourse in the fact that with smartphones in hand shoppers are more empowered now than ever before The mobile phone serves as a potent comparison shopping tool offering customers a plethora of barcode scanners and mobile websites for efficient access to price comparisons and product review information in real time while they roam the aisles The objective unfiltered nature of this new information available 24 7 through mobile phones puts branded in store computer kiosks and price scanners to shame and more control in the hands or fingers of the shopper With that said a very wide variety exists in mobile devices While there are 82 million mobile devices currently used in the U S 6 not all are smartphones And while smartphones are the fastest growing segment of the mobile phone market they still represent only half overall As such retailers must tailor their efforts not only to highly powerful smartphone devices e g iPhone Droid models but also to simpler mobile handsets Questions remain Despite the hype will this finally be the year that mobile technology makes a significant impact in not just online buying but in driving store traffic Leading retail executives including Walmart CEO Mike Duke certainly think so According to Duke during the 2011 holiday season the company noticed a more dramatic involvement of new 2 Quart Alissa Branded The Buying and Selling of Teenagers Pp 40 In Stat January 24 2011 Report http www instat com newmk asp ID 3012 SourceID 00000501000000000000 4 BNET 7 Ways Brick and Mortar Retailers Are Moving into Mobile Commerce July 16 2010 5 Forrester Research Understanding The Changing Needs Of The US Online Consumer 2010 Anderson Jacqueline Eight two percent of US adults report having a mobile phone 6 Ibid 3 2 technology in shopper spending habits whether through use of mobile devices to make purchases or through rising customer comfort frequency and know how in utilizing cell phones to check prices across stores 7 MOBILE PLATFORMS Today s most sophisticated smartphones are like miniature computers In the same manner that PCs run on specific operating systems e g Windows Mac OS etc smartphones depending on their various make model and wireless service provider also operate on mobile operating systems or platforms A smartphone s platform dictates much of its mobile functionality with respect to applications Currently the leading mobile platforms are as follows iOS Known as iPhone OS prior to