Mobile Cannibalism: Get Used To It
Written by Evan SchumanWith several major retail mobile sites starting to yield significant traffic and/or sales–Pizza Hut’s iPhone app, for example, is about to pass the 2 million download mark–senior execs at various chains are grappling with what should be expected of the telephone terminals, what Lily Tomlin’s Ernestine the switchboard operator might have called Ringy Dingy Revenue.
What is a realistic near-term goal? Is it to generate true additional revenue or is it acceptable–initially, at least–to simply shift purchases from Web to mobile? Moving from revenue to the much-beloved profit margin, is it possible to say whether mobile or Web has lower operational costs?
That last point–determining whether an $80 sale in mobile is more profitable than an identical sale on the Web site–gets almost impossible to answer. That’s especially true when the technology architecture for mobile is partly, but not completely, shared with its Web site sister.
For example, some sites, such as American Eagle Outfitters, Walgreens and Chico’s, have mobile sites that rely almost 100 percent on their Web counterparts to function, while others, such as ToysRUs, Ghiradelli and 1-800-Flowers, have more expensive sites that function completely independently. That has two advantages. First, it allows the site to be much more aggressive–and creative–in being designed precisely for the mobile environment and to take advantage of pure-mobile features.
Second, it allows the mobile site to act as an emergency backup for the Web site, when the site is down for a prolonged period, such as what happened to American Eagle Outfitters last month when its Web site was either down or sharply limited for eight days. How do you allocate costs between mobile and Web when one is a backup for the other?
It doesn’t end there. An IT executive at one of the nation’s largest chains added that the cost differences are also dictated by lots of programming decisions after the general platform is chosen. “From an technical perspective, it depends on how much legacy architecture requires enhancement to support mobile,” she said. Moving to a service-oriented architecture brings efficiencies for cross-channel development. Using HTML5 simplifies developing mobile apps for multiple platforms, such as Apple iOS, Palm WebOS, Windows Mobile and Blackberry. But that loses access to some native capabilities. And using some mobile technologies, such as SMS, means a per-use cost is built in.
Then there’s the problem of what we mean by mobile commerce. Is it a mobile site that allows for purchases, which will be funded by a credit card, such as the Pizza Hut app? Or is it an in-store application where the phone acts as a card-swipe, such as what Apple Stores use? If the phone is being used in-store–or even remotely–to swipe a mag-stripe, then it has a clear financial margin advantage in the form of turning a Web site’s card-not-present interchange rate into the much lower mobile-swipe card-present fee. (If the card is a contactless card, the equation can get more complicated.)
-Marc
September 2nd, 2010 at 6:45 am
True. Its more about customer retention than acquisition.
September 2nd, 2010 at 10:18 am
Yes, mobi-ordering will disintermediate transactions from other channels. So did ATMs in the 1980s at the bank, as did pay-at-the pump did at the gas station in the 1990s, and the web has for retailers over the past decade.
Mobi-ordering begins with eliminating the “hassle-factor” for customers – whether making it easier to order a pizza or making a last-minute change on an airline ticket, as well as improving operational and labor effectiveness for merchants.
Mobi-ordering will become a consumer expectation sooner than most realize for reasons that include convenience but go much deeper.
I’ve been working with a mobile technology client who builds mobile ordering apps for food service operators and entertainment venues. The challenge is less about supporting the devices (iPhone, iPad, Android, Blackberry, et al). That’s actually easier than you might first think.
The bigger issue for operators (not our client, I might add) not mentioned in your article, is having the skill and tenacity to integrate the ordering app into the multitude of POS networks/software iterations, and vintage systems a multi-unit operator tends to support.
The other issue is bandwidth. Mobi-devices can find it challenging to find/grab a signal to complete a transaction, even with 3G and 4G promises. I’ve had those Bill Gates/Steve Jobs moments where I can’t finish a live demo in front of an audience because the AT&T signal fails on my iPhone or iPad.
The biggest opportunity/threat of all for your readers? Mobi-ordering is agnostic when it comes to payment choices. Your mobile phone is indifferent to Visa, AMEX, or any other form of payment available to the customer. That creates opportunities for merchants and entrepreneurs to use mobi-ordering platforms for card-less alternative payment choices that have yet to be dreamed of that can reduce expenses or add value in new ways.
September 3rd, 2010 at 7:08 am
People around the world today are using smart cards for debit and credit payments. Contactless payment
applications are gaining momentum as new contactless devices are being introduced like Secure Contactless
Tokens, NFC Stickers etc.As far as on security concern Dynamically generated codes, high encryption standards
and biometrics can be employed in the security mechanisms for the contactless devices.
And very nice and informative news on contactless payment technology
September 4th, 2010 at 4:35 pm
It’s not the “same dispute” if you acknowledge that we’re moving to one device in our pockets. Then your vision to make purchases happen via mobile is all about planning for the future. The future incorporates an audience that’s grown up on using the technology and your infrastructures grew along with them. Otherwise you will kiss your stockholders good-bye!