The e-commerce world just got real. Amazon and other online e-commerce giants are accelerating their efforts to open physical outlets while the world’s largest physical retailers are streamlining store operations and finally doubling down on digital. 

After all this time, why?

Mobile Trends Shaping the Consumer World

If digital ate the world over the last 15 years, mobile just ate digital in a heartbeat. According to eMarketer, the average American adult spent less than an hour a day using their phone in 2011. Five years later, that number has increased to just over three hours a day.  

Kleiner Perkins Caufield & Byers (KPCB) annual Internet Trends Report stated that of all the digital media consumed by adults per day, more than half is spent on mobile as compared to desktop or other connected devices. In essence, mobile capability finally reached the point where the human race walked back out into the light after many years sequestered in their darkened kitchen staring at their laptop.

This dramatic (indeed tectonic!) transformation in consumer behavior over a relatively short amount of time has massively changed the playing field for both e-commerce and physical-format retailers alike. 

A Shifting Playing Field for Commerce

A few years ago, in the digital dark ages, the online world held a massive advantage over the physical format world. 

E-commerce understood every shopper who entered their site, whether they bought anything or not. Online businesses could build rich digital personas and provide recommendations and reviews based on personalized interests. They could also provide self-service, self-check-out and reward programs. 

In contrast, retailers with a physical venue footprint might not have any idea who the vast majority of customers are in their store unless the customers purchase something. The other perhaps 70 percent in a department store or specialty retailer have remained a mystery.

And yet, more than 90 percent of all retail transactions still occur in person according to A.T. Kearney Omnichannel Shopping Preferences Study. The form of payment may have evolved, but the need to show up has not. Eighty-four percent of consumers now regularly use their phone while shopping. The same trend holds more or less true for dining, travel, entertainment, hospitality, healthcare and everywhere else consumers visit.

For consumer-facing businesses with a physical footprint, this mobile shift is and should be a tremendous equalizer that re-levels the playing field. If the consumer can get all the benefits of the digital experience in their hands while out and about in the physical world, it is surely better. No longer does a consumer need to decide whether to be at home and digital or out-of-home and offline.

Changing Priorities and Changing Marketing Budgets 

Consumer-facing businesses have clearly noticed. Players such as e-commerce giant Amazon have aggressively entered the physical venue format. Older guard players such as Macy’s have announced plans to reduce some physical stores while investing heavily in digitizing the consumer experience in their remaining stores, working to improve the link between a consumer's digital footprint and their in-store experience.  

The quick service retail world has been sprinting toward new order-ahead apps and curbside pick-up capabilities. And consumer-facing brands across consumer packaged goods, food and beverage, fashion and automotive — brands that historically had neither a digital footprint or physical channels of their own — have started to invest significantly in creating in-venue customer experiences triggered when they stand directly in front of the brand's product or service.

Also experiencing this tectonic shift is the budget trail for marketers, although it is still far behind. KPCB annual Internet Trends report noted that internet ad revenue grew more than 20 percent in 2015 from the year prior. Mobile ad revenue grew by more than 66 percent, while desktop was up just 5 percent. 

Spending on martech and solutions, and investment in retail-oriented in-store start-ups is at an all time high. Moreover, in-store merchandising, also called shopper marketing (a sum that massively dwarfs media spend), has only begun to shift from the world of circulars and shelf-level materials to engaging, interactive in-store experiences. Even out-of-home advertisers, by far the most disadvantaged players in the digital era, have a new and exciting role to play. 

Knowing the 'Real' Customer as Well as the Digital

All of these shifts add up to an unbelievable opportunity for marketers seeking to create more contextually relevant experiences in the right magic moment, but has also broken a digital model that marketers had come to accept as 'how things work.'  

They grew up in a digital world where it was possible to know virtually everything about a consumer visiting websites in real-time:

  • Where are they?
  • How long are they there?
  • Where did they come from?
  • What specific products are they viewing?
  • What are their favorite locations?
  • Who are their friends?
  • How can we tie that back to reach data repositories about their demographics, their economic history, their loyalty and so much more!

But in the mobile, and hence the physical world, their knowledge has been curtailed.  

GPS only sees people outside, and indoor technologies such as Wi-Fi or video are inexact. Procurement data only sees the minority of people who buy something and well after the fact. Knowing the exact location of a people, especially when indoors or at a product/shelf level, has been impossible. Knowing consumers favorite locations or favorite real people in the physical world also poses a huge challenge. 

Newer technologies, including enterprise-class geofencing, proximity beacons and location-powered marketing solutions, make it possible to digitize the world and make “physical” sites operate just like “web” sites.  

Think of the possibilities. What could you do if you could treat every physical site in the world the same as a web site and get all the same kinds of real-time information and do all the same kinds of real-time things in response?

Looking Towards a Bright Commerce Future 

These technologies open up vast opportunities for marketers and mobile developers. MediaPost estimates that 84 percent of shoppers use their mobile device in-store, and 77 percent of users are willing to share location data in return for superior, more tailored, mobile experiences.

For the consumer, the benefits are nothing short of a delight. Why would anyone stand in line for coffee every day if a business recognized you as you walked through the door, automatically made you the usual, and automatically charged your debit card? Why not expect the same opportunities you can find online, but in the moment of a retail or dining or hospitality or sports environment? 

These technologies promise to level the playing field between e-commerce and venue-based formats, by opening up a whole new field of real-time location and proximity capabilities. The best practices have yet to be fully worked out.  

What experiences would consumers most welcome — and perhaps demand — in mobile applications, and how can businesses respond to compete most effectively for their loyalty and business? How can we best bridge the physical and digital divide and combine the best of both?

Title image Khara Woods