What can retailers learn from Amazon, Groupon and eBay?
As the finish line for the 2011 holiday season comes into focus, promotional activity is heating up with big digital brands such as Amazon, Groupon and eBay trying to drive uptake of their services – which all have significant mobile components – via special offers.
There is some question as to the benefit these broad offers have for retailers, especially in the case of the Amazon discount which was specifically designed to draw shoppers away from in-store purchasing. However, given the significant increase in mobile shopping this year, it is likely that retailers will look for ways to continue to take advantage of the mobile offers environment in the coming months.
“It is part of a broader trend – the vast majority of consumers are already dealing in an offers environment with Kohl’s, JCPenney and Sears all providing offers to drive traffic at this time of year,” said Stephen Burke, vice president of the mobile practice at Resource Interactive, Columbus, OH.
“Next year, we will see an increased emphasis by retailers on the deployment of retailer-specific mobile offerings,” he said.
“When you are a national brand and you have a large and loyal customer base, you want to provide them with offers that are as particular to your brand as possible. These broader offers are a training ground for retailers but necessarily their ultimate destination.”
The lemming effect
Amazon started the recent spate of promotional activity by offering consumers a $5 discount to anyone who used its price comparison app while in a store.
Others followed suit with Groupon offering a $10 credit for the first 150,000 people who purchase a local Groupon by Dec. 24 and EBay providing shoppers with a $10 coupon good toward an in-store purchase at Toys R Us when they spend $100 at the retailer’s eBay store and use PayPal to pay for their purchase.
“There’s a bit of a lemming effect, with lots of people piling on,” Mr. Burke said. “Mobile becomes an extension of that impetus because it is in the consumer’s hand and you don’t have the big drop between what’s in print and what they take to the store.”
“The primary goal is to build their customer base in the service of selective retailers who choose to participate,” he said.
Amazon has taken some heat for its promotion because of the way it was designed to take sales away from retailers.
In comparison, the Groupon and eBay offers appear to be trying to drive sales to retailers while also driving uptake for their services.
“Much of the buzz created with daily deals has defined a new vocabulary and expectation that can be translated for online retailers as well,” said David Hewitt, Atlanta-based global mobile practice lead at SapientNitro. “While the focus is not driving in-store traffic for etailers, it is about capitalizing on driving online traffic and incremental sales.
“And fortunately for retailers like Amazon there is much less operational impact to worry about with flash-mob traffic that can easily crush a boutique brick and mortar retailer,” he said.
With so many offers from so many different sources, the potential is there for consumers to become confused.
The promotional environment also presents a challenge for retailers who must manage their own offers as well as offers through different daily deals sites.
“The basic challenge Groupon and other similar players will face is the willingness of retailers to take such large margin hits while the daily deals space is becoming very saturated,” Mr. Hewitt said.
While retailers are taking advantage of what the daily deals sites have to offer, they are likely to start to investigating ways to build similar services into their own offerings now that mobile’s success this holiday season has caught their attention.
However, this could present retailers with some challenges as well.
“Businesses can easily offer the same discount as third party daily deal companies with much less margin hit, however they risk cannibalizing their own customer base instead of finding new customers that the daily deal companies have the potential to offer,” Mr. Hewitt said.
“Google’s play as a tech company is further reaching as they are looking for multiple avenues – Google Wallet included – to connect SEO and online advertising to real dollars earned at the point of sale,” he said. “The more Google can close this loop, the more they will continue to dominate the digital advertising space.”
What is clear is that mobile is playing a big role in the daily deals space as well as for retailers. Both areas will continue to evolve next year.
“The trend to mobile will continue for this space as there is no better place to search and redeem a deal then on the smartphone that is always on our person,” Mr. Hewitt said. “In addition, it is through mobile value-added services that many of them are differentiating themselves and hoping to keep up with the consumers’ desire for mobile and digital everything.”
Chantal Tode is associate editor on Mobile Commerce Daily, New York