It’s the time of the year when cash registers ring out holiday cheer for merchants and retailers, and ring up big spends for consumers. This year, however, there was a lot of attention, both inside the mobile commerce world and in the mainstream media, being focused on whether people would be taking to their phones to shop and pay for their festive purchases. The results so far appear to indicate that while a lot of shoppers are enjoying very ‘appy’ holidays, few appear willing, just yet, to ditch the flexible friend in their real wallet for the virtual card in their mobile.
A Black Friday for Apple
Back in September, a Mondato-commissioned poll on Apple Pay sounded a word of caution that, despite the hype and excitement caused by the Cupertino tech giant’s embrace of NFC and construction of an entire payments ecosystem, consumer adoption was still a challenge that had to be overcome. The poll indicated that a mere 29% of respondents said they definitely or probably would use Apple Pay, if they owned an iPhone 6. Interestingly, this figure aligned with a survey conducted by Stratos, makers of a Bluetooth card platform, which found that 30% of American smartphone users planned to use either Apple Pay or Google Wallet to make purchases during the holiday shopping season.
Research from Infoscout, however, has shown that even these figures were on the optimistic side, at least on the basis of consumer behavior on Black Friday. Using an iPhone 6-owning subset of a170,000-strong household consumer panel, Infoscout’s data suggests that less than 5% of consumers with Apple Pay-enabled phones who shopped in Apple Pay participating stores actually used Apple Pay to make the payment. That figure, 4.6%, is just over half the number who reported having ever tried to use Apple Pay. That is to say that out of every 20 consumers who stood in front of a cash register in Toys R Us or Whole Foods or some other participating retailer (presumably) with an iPhone 6 in their hand, pocket or purse, only 1 of them took out their phone to make the payment. That has got to be a disappointment for Apple, and indeed for everyone who may have been hoping that Apple Pay was going to light a fire under mobile payments.
On the plus side, those who had used Apple Pay at some point rated it above paying by card by significant margins for ease of use, speed at checkout, security, and convenience. That being so, however, it raises the question of why then half of those who had used Apple Pay in the past didn’t do so on Black Friday when they could have. Thankfully, Infoscout asked these consumers why this was the case. 31% said they didn’t know if the store accepted Apple Pay, while 25% simply forgot. This is certainly suggestive, at a minimum, that even though the Apple Pay user experience is rated significantly higher than paying by card, for one in four users it wasn’t enough to break their habit of paying by card or to prompt them to look or ask whether it is accepted (which may amount to the same thing). While this issue may not be insurmountable, it demonstrates that for Apple Pay (or indeed Google Wallet) to truly succeed, retailers are going to have to be more proactive in nudging consumers to use it.
For consumers who decided to avoid risking getting caught up in a Black Friday stampede or fist fight, however, their phone or tablet computer proved to be an increasingly attractive option for checking items off their holiday shopping list. According to data from IBM, as reported by Pymnts, more than half of all traffic to retail websites originated from a mobile device, though tablet users were more likely than smartphone shoppers to seal the deal and make a purchase. On the plus side for Apple is the fact that iOS users accounted for 25% of sales, compared to only 7% for Android, while Apple users spent on average 24% more than their Android-enabled counterparts.
It is significant, though somewhat intuitive, that there appears to be a correlation between screen size and conversion rate. In recognition of the problem, a number of major retailers, including Amazon and eBay, made offers available to users of their mobile apps that were unavailable to desktop and in-store shoppers. An unexpected surge in mobile traffic on the morning of Black Friday saw Best Buy’s website go offline for 90 minutes as it struggled to cope with the demand on its servers. By way of contrast, JCPenney invested in upgrading its app and mobile website in advance of the start of the serious holiday shopping period, which helped overcome some of the drop-off in conversion.
Of course, just because the consumer does not complete the transaction via the app or mobile browser, irrespective of the exclusive incentive to do so, does not mean all is lost for retailers, if the price is right. Consumers are now better equipped than ever before to browse and compare prices, whether directly or by using any of a plethora of apps and price comparison websites to make sure they are getting the best bargains. The challenge for retailers is how to further leverage their mobile presence and deliver a true omni-channel shopping experience for savvy shoppers.
Part of the all-encompassing experience is the use of iBeacons in stores such as Macy’s, which has rolled out the BLE-based technology in all 840 of its department stores in time for the holiday shopping blitz. The conversion rate for iBeacon push-ads is an impressive 30%, according to research carried out by marketing technology company Swirl, and 60% of shoppers who received a push-ad in-store opened it. While clearly there is an element of bias in these sample figures, in that the shopper will have to have allowed the retailer access to their location, have Bluetooth on their phone turned on and have push notifications enabled. Nonetheless, Macy’s investment indicates that the American retail powerhouse sees great promise in beacons. This shopping season will likely begin to tell whether consumers are wary of what some see as Big Brother marketing spam interrupting their in-store shopping experience, or are happy to have a more personalized shopping experience that delivers up a bargain.
Irrespective of the future of the iBeacon, this year’s early numbers indicate that mobile is becoming an indispensable element of the holiday shopper’s experience, particularly as a starting point. And while retailers appear to be getting better at delivering to consumers via the mobile channel the sort of experience that shoppers want, even big name stores like Best Buy are still getting caught on the hop by the volume of mobile-initiated site visits. However, if retailers are to make mobile both the start and end point of the shopping experience, whether it is entirely online, or as part of an omni-channel experience that starts on a smartphone and ends in payment a bricks-and-mortar store with Apple Pay or Google Wallet, they are going to have to invest more in encouraging consumer adoption of NFC-enabled mobile payments. The big question is, do they have sufficient incentive? 2015’s holiday shopping will probably yield the answer.
©Mondato 2014. Mondato is a boutique management consultancy specializing in strategic, commercial and operational support for the Mobile Finance and Commerce (MFC) industry. With an unparalleled team of dedicated MFC professionals and a global network of industry contacts, Mondato has the depth of experience to provide high-impact, hands-on support for clients across the MFC ecosystem, including service providers, banks, telcos, technology firms, merchants and investors. Our weekly newsletters are the go-to source of news and analysis in the MFC industry.
Click here to subscribe and receive a weekly Mondato Insight direct to your inbox.