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The challenge of making mobile profitable

Tuesday November 6 2012

Mobile sales to be a source of growth for retailers sooner than expected, but the challenge of profitability must be tackled head on, argues e-retail expert Andy Lloyd

Mobile sales to be a source of growth for retailers sooner than expected, but the challenge of profitability must be tackled head on, argues e-retail expert Andy Lloyd

 

 

The retail industry is at the heart of the British economy, contributing up to 20% of the country’s GDP. It is a core indicator of economic health and recovery; if there are signs of instability, retailers are the first to bear the brunt as evidenced by the sad departure of a number of household names from the High Street in recent years, including Woolworths, Borders and Coffee Republic.

 

Not wanting to fall victim to the same fate, one thing has become clear to the retail industry: innovate or sink. Andy Lloyd, general manager of commerce products for cloud-based software provider NetSuite, said that finding a way to transform retail operations in light of current customer demand, and somehow do so profitably, will likely be the key driver for sustained growth and success on the High Street in the years ahead.

 

Going mobile to stay ahead

 

“This is exactly what many innovative High Street retailers are intent on doing,” he said. At least, that’s according to new sponsored research by Vanson Bourne of 200 UK High Street managers, including seven of the top 10 retailers in the UK. The NetSuite Retail and Wholesale Distribution Trends Report, which includes economic forecasts from the Centre for Economics and Business Research (Cebr), found that retailers are pushing full steam ahead with their multichannel retail strategies, particularly in m-commerce, and that it is already paying dividends worth billions of pounds.

 

The study found that 80% of High Street retailers now have a mobile optimised e-commerce site or smartphone app, or plan to build one in the next year. What’s more, retailers already trading through m-commerce report that 19% A further 23% growth in m-commerce sales is expected over the next year, taking next year’s m-commerce turnover to £56 billion. This includes sales via all mobile devices, including smartphones and tablets.

 

Speed to market vital

 

Lloyd said: “For many traditional retailers, the initial move to e-commerce took a long time, which makes the speed at which m-commerce is being adopted even more surprising. Yet it would be incredibly hard to deny the phenomenal impact that smartphones and tablets have had on consumer habits in recent years, and retailers seem aware that they represent an invaluable new sales channel opportunity that could be lost to their rivals if they don’t act fast. Indeed, the research found that more than half of retailers (52%) view their competitors’ mobile offerings as a threat.”

 

Hand in hand with the rise in m-commerce is the concept of social commerce, another area retailers are eager to embrace, with nearly a quarter already operating in this area. He continued: “Anyone familiar with Facebook or Twitter is likely to have witnessed some form of retail activity – whether simply using it as a shop window, or taking a more advanced approach, being able to monitor and react to social ratings, reviews and conversations and devise a social strategy, with personalised product recommendations or even direct sales. While it remains to be seen whether social media platforms, and in particular sites such as Facebook and Pinterest, will deliver on their dream of becoming fully fledged virtual shopping malls, extending customer outreach and engagement to these channels is increasingly vital.”

 

Recipe for sales success

 

Lloyd suggested: “Maybe it’s this faith in innovation and the positive results retailers are already seeing from their multichannel retail strategies, especially in m-commerce, that is driving their optimistic outlook for the future, despite recent retail sector gloom and doom.” According to the study, 87% of retailers predict positive revenue growth and an average expected revenue increase of 10%, far outstripping the UK GDP forecast of 0.4%. “Only time will tell whether their positivity will bear fruit in this difficult macroeconomic climate, but it is clear that new sales channels and revenue streams will be a crucial component for retail success moving forward,” he added.

 

The proliferation of smartphones and tablet computers is rapidly transforming consumers’ shopping behaviour and Lloyd said retailers need to take advantage of this channel and align it with their existing offerings. However, he also warned: “Adding these channels ‘ad-hoc,’ however, can result in extra administrative costs over and above the cost of developing a mobile site or app – given that not every retail sector will see an equal rate of adoption, finding a way of adding these cost effectively is vital. And indeed, close integration of all channels, operations and suppliers will ensure a smooth customer experience and limit the cost of having to otherwise ‘manually’ integrate processes for sales and fulfilment staff.

 

Managing extra integrations

 

“You don’t want to end up with staff having to transfer m-commerce sales data from one system to another, among other logistical challenges – a concern for 38% of the retailers surveyed,” Lloyd added. “Rather, a commerce-as-a-service approach that saw retailers adding – via cloud platforms – the capability for whatever channels were best suited to their customer base, will deliver the best returns, and best scale, for retailers.

 

“And so things are all fundamentally interconnected; meeting new consumer demands and combatting your competition requires you have your enterprise systems in order. The more systems you have, the bigger the challenge – for many, consolidating their core business systems – particularly e- and m-commerce, social monitoring, ERP [enterprise resource planning], fulfilment and stock management – are vital components as they make the transition to the increasingly social and mobile High Street we have today,” he concluded.

 

The 'Money' feature in Retail Technology magazine's September/October 2012 issue includes more detail on the NetSuite Retail and Wholesale Distribution Trends Report (p29). Click here to register for the print or e-version.