Understanding Google My Business & Local Search
Why Bricks & Mortar Retail Will Continue to Get Harder – Mobile Price Comparisons
Pew Research just released a report on The rise of in-store mobile commerce that looked at how Americans used their phones to assist with purchasing decisions this holiday season. In aggregate 52% of users relied on their cell phone to either check with a friend, look at product reviews or check pricing online. Younger users were significantly more likely to do so than users over 50.
It means that any store selling commodity retail products can look at significant price pressure from this behavior. It also means that even “super stores” will be under continuing pressure. The likes of Staples, KMart, Best Buy, Barnes & Noble and others are likely to see significantly less profitability and be under threat.
From the report:
More than half of adult cell phone owners used their cell phones while they were in a store during the 2011 holiday season to seek help with purchasing decisions. During a 30 day period before and after Christmas:
- 38% of cell owners used their phone to call a friend while they were in a store for advice about a purchase they were considering making
- 24% of cell owners used their phone to look up reviews of a product online while they were in a store
- 25% of adult cell owners used their phones to look up the price of a product online while they were in a store, to see if they could get a better price somewhere else
Taken together, just over half (52%) of all adult cell owners used their phone for at least one of these three reasons over the holiday shopping season and one third (33%) used their phone specifically for online information while inside a physical store—either product reviews or pricing information.
© Copyright 2024 - MIKE BLUMENTHAL, ALL RIGHT RESERVED.
Comments
19 Comments
I see this as a trend towards comparison.
What I would really like to see would be the percentage numbers on those who pulled the trigger on an actual purchase.
Percentage of purchases made on a cell phone vs purchases made on a laptop, tablet or desktop.
Which mobile devise is used more to make the actual sale?
I think this study looks at the decision process not the decision itself. I know for myself that using these tools help me decide 1)whether to buy the item or not and 2)whether to buy at the locale I am in…I doubt though that would likely translate to cell purchase directly.
Understanding the decision process is almost more valuable than understanding the actual decision (although you don’t want to ignore that part, do you?).
I’d be interested to see how this affects the whole “buy local” movement. Are you using your cell tom compare the option of buying from a local producer vs online, etc.
I agree that increased mobile usage will increase the price pressure put on brick & mortar retailers. However, this increased mobile usage will also allow savy mobile marketers to take advantage of mobile advertising techniques to drive new customers as well as reward loyal customers.
Smart retailers could also use mobile coupons to effectively price discriminate in order to prevent mobile shoppers from purchasing their products elsewhere without taking to much of a hit to their profits.
@David
Given that retail was overbuilt BEFORE the mobile look up capability this certainly adds to the problem that Big Box shops face… you can see the pressure in the closure of Borders, the lack of profitability of Best Buy and the difficulties that KMart/Sears are going thru. The big box boys that are competing as the lowest cost provider will be under attack unless they are very, very good at lost cost provisioning (ala WalMart).
Companies like Apple that provide a compelling online/offline experience won’t be as affected nor will places like florists or jewelry where selection is more emotional.
There will be a much smaller opportunity for SMBs selling the same or similar products that are not totally differentiated in other ways. You can see that has already happened in our rural market. There used to be a vibrant small merchant community selling shoes, clothing, sporting goods, electronics etc etc that has completely disappeared. I have to drive 45 minutes to find a shoe store that knows shoes. I have to drive 30 minutes for X-Country skis and 6 hours to find waxable cross country skis.
But all remaining local merchants are affected by the loss of the other local merchants. It is a trend that I have been watching and struggled with for a large portion of my adult life.
@Eric
You are true that there are opportunities in this to better serve the client and be in closer touch. But that technology won’t make up for dramatic differences in cost structures nor make up for the likely lost volume. Nor is it easily accessible to the smaller merchants.
@Ally
The “buy local” movement is unlikely to have significant impact on a dollar basis although it certainly offers niche opportunities for SMBs. I for example ONLY buy meat that has been produced locally by someone I know or have some relationship with. I buy (and split with friends and relatives freezer quantities of beef, pork, lamb and chicken because I think that the meat food production system is so screwed up and dangerous.
But the movement will have trouble making huge in roads otherwise. At least until oil prices skyrocket and delivery costs become a significant share of total costs or until the American dollar is worth so little that we can’t afford to import things… both long term possibilities.
When I needed a heating pad the other day I had little choice but to go to Walmart and make a choice.
I don’t mind seeing big box retailers get screwed by this, but we’re going to have to adjust our buying habits as a society to pay a premium for SMB customer service. This is a terrible trend for us, IMHO.
Good article and feature on the very live real time ability to pivot on a buying decision even while in a store. That is a vexing problem for retailers.
Retail has faced endless problems over many decades. It is a constantly changing environment. The big box stores killed many local operators. The big box stores killed one another over time. Department stores continue to take beatings. The whole environment of department stores is an ever changing world.
Do you realize that as shopping center anchors they could be paying $5, 6, 7, 8/per foot for rent while all those small stores could be paying $15/20/30/50 foot.
Even with that enormous rent break…the department stores are having endless issues and problems and have for decades.
Brick and mortar is tough. and frankly the web cannibalizes florists and probably jewelers as well. Florist visibility is overwhelmed by the 1-800 florists that are brutalizing real brick and mortar stores.
I know I just totally pivoted on a purchase and after price comparisons I purchased something at Amazon rather than a local B & M b/c of price…..and as Mihm would tell you….I’m a freaking dinasour.
Finally, as you noted Mike, this huge lasting recession has shone a light on nation wide over retailing. There are overall less consumers with less money.
B& M Retailing is tough…but tougher than anything in the past is this ability to price compare/see reviews/get instant advice while in the store…and have easily accessable handy alternatives.
I also think Apple is the big exception to the rule….CURRENTLY. Frankly, nobody is close to replicating their dominant position these days…despite ample study of the phenomena and Senior Apple execs moving to other retailers.
Apple is the result of many things coming together…each one working extremely well…and its the result of years to get there. Its not simply replicable.
I think you nailed it, Mike. Its a tough nut
@Earl
Just to be clear, I wasn’t suggesting that florists and jewelers weren’t under pressure just that they were no under pressure from this particular vector.
Mike, I think Olean is a bit of an outlier. There are plenty of amazing independent and very successful retail shops in a lot of places I’ve lived in my life (small-town Massachusetts, Oakland, Portland). Granted the most succcessful ones do tend to be selling niche / emotional products. There does need to be a critical mass of conscientious shoppers. But even in Portland, I see more and more big boxes and strip mall chains every day 🙁
It may be an outlier or it may be the canary.
Because of the lack of density and the suburbanization that occurred, the impacts of big box and internet retailing were more obvious very early on. This is true across rural America and has been for the past 10-15 years. However the recent decline of the inner ring of suburbs is also a symptom and you see many empty store fronts there as well.
The economy, the region, the size of the town all make a difference but the pressures are the same. When you add in the fact that there is “approximately 46.6 square feet of retail space per capita in the U.S., compared to two square feet per capita in India, 1.5 square feet per capita in Mexico, 23 square feet per capita in the United Kingdom, 13 square feet per capita in Canada, and 6.5square feet per capita in Australia” you can see that there will be continued closings. Add to that the affect of large scale capitalization and favored pricing schemes that the larges chains receive and the ever growing impact of the internet, then the outcome seems in little doubt to me. Standardized products and services will be sold by the big boys. Niches, if they grow and become profitable, will become the province of the efficient and well capitalized.
Portland has a unique approach to density and that favors both diversity in retail and botique retail. But as you point out, the trend even there is towards big box and strip mall chains. To me, unless the current social and economic reality changes, these trends will continue. This new technology that allows instant on site look ups is but one small piece of bigger picture that doesn’t really favor small, independent retailers.
My hope is this trend reminds small business owners of the importance of differentiating themselves by providing excellent customer service. I find fewer businesses are providing any better service than the big box stores.
Case in point. This fall my husband was looking to purchase a motorcycle helmet. Such a purchase is not one that is easily made online as you really have to try it on to be sure it fits. He went to a local shop and found one that fit well so while there he did look up the price offered at online shops
The helmet was an XXL and was priced $20 more than the same helmet in a smaller size at this retail shop. Online the same helmet even in the XXL was priced the same as the smaller sizes.
My husband told the salesman he wanted to purchase the helmet but not at the increased price, at the same price as the other sizes. The salesman said he couldn’t do it so my husband asked to speak to the manager who refused to drop the price as well so my husband walked out and will never go back.
This local retailer not only lost a $250 sale but also lost a long term customer over $20.
Small businesses will continue to be successful if they go back to the principles of providing an excellent experience for the customer.
@Michelle
Your response indicates the nature of the dilemma for the retailer. They had the helmet in stock, they provided it for you to try on, they had a sales person spend time with you. Yet you were unwilling to pay the 8% differential (not counting tax and shipping). I can attest to the fact that their cost differential given property taxes, heat, light, carrying costs, floor salaries and other costs unique to Bricks and Mortar is a lot more than 8%.
I am not saying that you should or shouldn’t pay the 8% premium but you did certainly receive value for the difference. You just didn’t think it was enough to warrant the purchase and the store was unable to create the feeling for you that it was.
I doubt that the solution for the B & M retailer lies in lowering the price. But your story certainly reinforces my point that a small retailer can no longer easily sell standardized, off the shelf products and make money at it.
@mike valid points but in this instance my husband had to seek out a salesperson, there was no one assisting him in the process and no one greeted him upon entering the store. I’m sure had he received any assistance, possibly even a valid explanation as to the increased price simply due to a size difference he would have purchased at the store.
The lack of service compounded with what he learned about the pricing from his search on his phone while at the store ensured this business lost not only a sale but a customer.
The point I had hoped to make by relaying my husband’s experience is over the years I’ve noticed fewer small businesses providing the service that in the past has always set them apart from the big box stores. If I have to make a purchasing decision on price alone, I will purchase the lower priced item.
@Michelle
I hear you.
As I said, the SMB failed at their primary task of helping you perceive the value.
It is a vicious cycle for most SMBs. They lose a chunk of their sales to a big box store or to online, they struggle with the same cost structure but less profit, they chince out on employee pay and employee training…. its a downward spiral that is hard to arrest.
Michelle’s anecdotal experience is brutally telling especially in conjunction with the survey results. The ability to instantly price shop is brutal on the SMB….a form of price competitiveness that was never available before at such an instantaneous basis.
It puts enormous pressure on the smb.
I came out of a retailing background, serviced retailers for years as a commercial RE broker leasing space, etc. I’ve seen those numbers about retail space in the US versus other nations over the years. News about it is more stark now.
The info didn’t really sink in until the huge recession/ the growth of unemployment and its impact on retail. SMB’s and large chains alike are falling into bankruptcy and closing. OTH, astonishingly those spaces are being filled pretty successfully on a nationwide basis….though much of the space is being filled by services…not retailers. —You can’t buy a sweaty gym workout on the web….though you can buy gym equipment on the web and from b&m’s.
The pressure and ante are upped on local B & M’s. Its a tough environment.
As the cheif executive of a local brick-and-mortar / online business, I can attest to the fact that my company is trying to find a less expensive location (one where foot-traffic would be greatly reduced) in order to focus on the online side of the business at the expense of the brick-and-mortar side. We spend roughly four times more on the latter, but the former brings in a ROI that’s about equal to the physical storefront.
Needless to say, we’re shifting strategies to focus on our online business in hopes of making that portion successful enough to close the walk-in store.
In addition to the increased costs of doing business, in-store customers are about 20 times more likely to want to return something, and if we accept that return, we have to eat it because we can’t sell it again as new. Customers don’t seem to care much about the fact that we have to pay the employees who deal with them for 20 minutes, fitting their stockings until they fight the right size, then ringing them up – totalling half an hour in some cases for a single customer for a margin that doesn’t even come close to covering costs. This is especially true after they decide two weeks later they don’t want the item (or no longer need it) and believe they are entitled to a full refund for a product we had to pay for, not to mention the cost of employee time, rent and utilities needed to provide them with a physical storefront.
Anyway, Mr. Blumenthal (or is it plural?) hit the nail-on-the-head with this one. As a retailer who competes in both arenas, I can relate 100% to just about everything covered in this piece.
Bricks & Mortar vendors are screwed, and Michelle’s example is a big reason why. Ten years ago, we all thought it gauche to buy discount on the net after demoing in a store in our neighborhood. Now, it’s assumed.
But her husband would never have bought that helmet from anyone at anyprice if he hadn’t tried it on.
Her husband only got price-sensitive after his local store assumed the risk by giving him a free demo. Which, of course, isn’t free — it’s an expensive bit of good-faith.
(Michelle doesn’t seem aware that her husband could have negotiated before trying on the helmet — ie, before taking value.) That would have been fair.
I think Main Street is doomed, because Michelle isn’t an odd case — she really thinks her husband’s behavior was fine, and the vendor’s was outrageous. In 2002, no one would have agreed, and she would have been ashamed to have her picture on her post. It would have been incredibly tacky. Now, it’s fine.
It’s all pretty scary when you think about what this means for the social contract, local communities and their tax bases.
@Tom
In Michelle’s defense, it sounds like the service was terrible but you are right that there has been a huge shift.
The assault (I can attest from experience) on Main Street has been going for a very long time. And is based in Federal and State policies that have favored large retail over small retail.
During the Great Depression, laws were enacted (the Robinson Pattman Act for example) that prevented large companies from getting any discounts greater than the actual savings due to the reduced costs/efficiency of distribution of larger quantities. It created an even playing field for small business on price and terms & conditions. Starting in the late 1970s and early 1980s, the US government stopped enforcing this law (which still on the books). In a meeting with Senator Schumer in the late 80’s he baldly stated that not only was the US government NOT going to enforce this law but was going to get rid of it and any others that prevented large corporations from getting greater discounts.
This led to pricing AND the T & C’s (like return policies) differentials that effectively created a 30-40% cost difference between the largest retailers and the smallest retailers on most items. It takes an incredible amount of service to make up that much profit. Even on very technical, support driven sales a B&M can not make up the difference. Many manufacturers used this lack of federal oversight to squeeze the very smallest of their dealers out.
Financing also became much more difficult for B&M as local banks were replaced with national or international banks. The large scale retailers were often financing their inventory costs with stock offerings while small retailers financed theirs with ever more expensive bank loans.
State and local development policies incented new buildings in the suburbs with 10 year property tax abatements. Older city center buildings, often occupied and owner by traditional B& M retailers, were not similarly discounted. The likes of Walmart took particular advantage of these rules and essentially lived for 10 years or so property tax free in a building before abandoning it. Creating yet another cost differential.
The federal government has had a role to play as well in passing a law that made all internet purchases tax free. One of Amazon’s huge competitive advantage has been that 8% differential.
As the retail economy has shifted from small to large retailers a number of structural issues have resulted. The one mentioned above relates to rural America. Roughly 50% of every dollar spent stays locally with a small retailer vs. about 15% with national B&M stores. This loss of circulating dollars has had a huge affect on many smaller towns. In isn’t just that Main Street is threatened. In smaller markets this has all lead to the near complete demise of the towns as well.
Ultimately local & state governments will be able to collect sales taxes from the likes of Amazon. In fact they have been forced in that direction of late. Land use policies are slowly changing and perhaps will be forced to change due to environmental and local cost issues.
It has taken 60 years to get to this state of affairs and it could easily take another 60 to get it straightened out. Whoever called markets efficient didn’t ever look at real ones to see that in that “efficiency” is a whole lot of disruption and pain and wasted costs. The “smart” retailers have figured out how to shift those costs to the greater society whereas the small retailers did not.
But small business folks are a resilient even stubborn bunch though and as David pointed out, many have managed to survive in the more active and lively markets. What the future holds is not clear but the trends are and they do not bode well.
Mike’s response to Michelle was brilliant, but it and others left out one important point.
Non-retail people seldom see the stores selling as a paycheck.
If after working, they were asked to take an 8% pay cut (whatever their source of income) because someone in India will do the same work for less money, they would be furious.
If the same negotiation were done BEFORE their employment, they would be upset, but not as angry.
That is what they did to the store owner. And they had no idea they were insulting him and everyone they came in contact with. Their shopping experience may not have been perfect (maybe people were sick that day, or there were more customers than expected,), but it was 100% better than what is physically possible on line.
Like she said, you have to try the helmet on. On line, that could have meant mailing several helmets back & forth. If they get paid even $10/hour the time wasted could easily be over $100.
Too bad the store owner couldn’t, on the spot, think of a diplomatic people to tell these people that they weren’t spending an extra $20, they were saving at minimum an extra $80. But then, if Michelle & her husband were as intelligent as they appear, they should have figured it out on their own.
Fran
Retail store owner
Comments for this post are closed.