Smartphones & Mobile Applications
When web 2.0 enabled people to share content through the World Wide Web, retailers were quick to use the technology to their advantage. For the most part, it has impacted the retail industry for the better. The retail industry is continually changing, and retailers must be able to adapt to the habits of consumers.
About 1.75 million people in the world have smartphones, where 90% of these adults have their smart phones in arm’s reach and 85% of these people favor mobile apps over web sites (Safko, L., 2014). This statistic has increased the adoption rate of mobile applications by retailers. Retailers are able to data mine better than before while receiving user-generated content from their customers. This content provided to retailers without charge and volunteered by customers in order for them to receive better experience while shopping online.
There are issues regarding mobile applications and the invasion of privacy to users. The number of applications requesting for permission; not directly aiding the app’s service is growing (Greenberg, 2014). The majority of these permissions are to collect user and device information, but due to the network effects, more and more people are forced to let these businesses track them(Greenberg, 2014).
Geo-location technology within mobile applications can influence customers at point of purchases by presenting promotions or other brand-related content (Adage.com, 2015). Geo-location technology motivates customers to check-in thereby increasing top of mind awareness and brand loyalty. This is important to many retailer brands as customers have increased their rate of research prior to point of purchase. Whether it is to compare prices, brands, or reviews; customers are doing all the above on their mobile devices while in retail stores (Emarketer, 2014). Because customers are using different technologies when shopping, retailers are altering themselves as omni-channels, “allowing customers to find, buy, receive, and return merchandise using whichever channels suit them best” (Inboundlogistics.com, 2015). This is important for retailer’s websites to fit the screen on different devices without the website being skewed. Customers will often leave a website if it is not properly displayed on their device (Inboundlogistics.com, 2015). Many people multi-task using different online devices while commuting, watching TV, or even going to the toilet. Retailers have welcomed these multi-taskers and even enabling Wi-Fi for better access when customers are in their stores.
Physical retail stores have now become more of a showroom to customers due to the mobile internet. The mobile internet has changed the habits of consumers who often leave physical retail stores to buy online versus offline (Adage.com, 2015). Furthermore, due to increasing online transactions, small retailers are now able to compete with big box retailers. This is because “70% of mobile searches lead to action within an hour” (Safko, L., 2014). Small businesses such as those working from their own home are able to reach customers globally without having to open a physical store. Businesses such as Etsey, and Ebay were founded because of these small businesses and have taken off drastically.
Due to an increasing use of the mobile internet, many advertisement dollars are going into mobile marketing. This stream includes online games. Studies show that males and females aged 25 – 35 play online games on a regular basis (Conner, 2014). Women in the last few years have increased dramatically within the gaming industry (Conner, 2014). As mentioned earlier, mobile apps have effective advertising due to the collection of user information. Businesses are reducing their marketing dollars, but are reaping high rewards when marketing through Mobile advertisement. Currently mobile advertising accounts “for more than 50% of all digital ad expenditure for the first time” (Emarketer.com, 2015). Mobile advertising dollars are often a better use of a company’s marketing budget than on traditional marketing such as TV or Billboard (Forbes.com, 2015). This is because analytics showcase where the ad is effective and where it is not. These analytics is able to see in detail how many people have clicked on the ad, how far through the buying process he or she was prior to leaving the shopping cart, etc. A traditional advertisement, such as a billboard ad is harder to gauge success. Not to say that traditional advertising is not effective, but call to action is only through visiting the website or seeing a change in the number of transactions. Many traditional advertisements are being combined with online tools such as social media.
The importance of social media has become a necessity for all businesses. With many users of social media, businesses must stay connected to customers by curating content that is valuable to customers. They must do so while still maintaining the business’s values and goals (Small Business – Chron.com, 2015).
Retailers often use social media to connect to customers and offer promotions. This is in hopes that customers would create word of mouth (Small Business – Chron.com, 2015). Word of mouth through social media can determine a business’s return on investment through: reach, site traffic, leads generation, sign ups, and conversions (Hootsuite Social Media Management, 2014).
The downfall of social media is that any error that a business makes may be potentially shared to the public. Any negative press would then create havoc on the business brand. In other words, due to the easy access of the internet, businesses are always recorded. Careful attention to customer service, business’s products, and their operations must be heavily controlled.
Many subscriptions, websites, and promotions from retailers will try to personalize their messages to the customer. This could be as simple as “Welcome back, Brad” through your email subscriptions. Personalization will increase a customer’s experience while simultaneously encouraging a customer to return (Vocell, 2015). Furthermore, it allows the customer to go through the business website easier making their purchasing process more smooth (Vocell, 2015).
Change in supply chain
Sizeable retailers are changing their supply chains by keeping one inventory to serve customers within their retail stores and another inventory for direct-to-customer channels. The latter inventory would have separate facilities and information systems (Inboundlogistics.com, 2015). Some issues that may arise with this merge of inventories is the inability to hold an item online by a salesperson as one could in a retail store. Another issue is having data systems continually be up-to-date when there is a change in inventory units. This can be a conflict due to the merge of inventories.
Some big box retailers are able to complete online orders from nearby stores rather than from distribution centers which could potentially be very far from customers (Compass.ups.com, 2014). The objective is to obtain sales that would have been lost if the strategy was not implemented. Consulting firm Kurt Salmon states “fulfilling web orders from store inventory when the warehouse is out of stock improves revenue 10 to 20 percent” (Compass.ups.com, 2014). Retailers that adopt this strategy would achieve a reduced shipping time to customers, at a reduced cost. Furthermore, retailers would be able to gain a better visual of inventory across all store fronts. Management would be able to make decisions to send inventory to other stores that would sell better, rather than to push inventory straight to markdowns (Compass.ups.com, 2014). The result is an increase in inventory turnover and lowering of costs.
Retail in the Future
With increase online shopping and a decrease in physical retail shopping, one stop shop stores may exist in the near future. This is where stores are reduced in size and amount in a given area. As mentioned earlier if customers continue to buy online versus offline, physical stores will progress into a showroom. Retailers will comprise most of their hiring to fulfill the e-commerce department, as most orders go into that area. The following retail operation objectives will continue to increase in the future:
- Reduce freight and delivery charges
- Expand facilities to include shipping stations
- Software development to effectively link distribution channels
New areas will be developed to gain traction of bettering personalized service to consumers through online channels.
Question: What effects on inventory would retailers have if more customers are buying online versus offline?
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