Smartphones store-owners' new friend?

stuff.co.nz

Retailers are hoping to use smartphones to lure consumers back into stores.

Could high-tech loyalty schemes designed in New Zealand help save the global retail industry?

In the United States, where the retail industry was perhaps hit hardest by the global financial crisis and the trend towards internet shopping, desperate times have resulted in an appetite for innovative measures.

The Wall Street Journal reported in January that the number of people walking into malls and large stores during the pre-Christmas holiday season almost halved between 2010 and 2013, with a drop from more than 32 billion to fewer than 17.6 billion visits.

Semble's digital wallet allows ASB and BNZ bank customers make 'tap and go' purchases.

The amount of new retail shop space opening in major US retail centres fell off a cliff, plummeting more than 90 per cent during the three years after the downturn struck in 2008 and has barely begun recovering.

Auckland software firm VMob hopes to help retailers lure shoppers back through the sliding doors using the one thing store-owners can be fairly confident consumers will always have to hand; their smartphones.

Its cloud-based software, which runs in datacentres operated by partner Microsoft, is designed to help retailers pitch offers to consumers based on their previous purchasing, their proximity and even factors such as the weather.

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Converts include McDonald's, which signed an agreement in January allowing it to use VMob's service worldwide, and Anheuser Busch, the world's largest brewer. 

VMob chief executive Scott Bradley argues most loyalty programmes date back to the 1960s and 1970s when air travel became widely affordable. They need to evolve to appeal to "digital-savvy" millennials, he says.

"If you are a kid and you need to wait two years to accumulate enough points to get a toaster that is not going to meet your expectations of brand engagement."

Retail New Zealand chief executive Mark Johnston estimates New Zealand retailers typically spend between half and one per cent of revenues on loyalty programmes.

Mobile-based rewards schemes, when combined with "big data", give retailers opportunities to personalise their offers better than before, he says. That could be especially true with the arrival of new mobile payment technologies such as Semble, backed by eftpos company Paymark, which lets customers pay for goods in store using their smartphones.

"Let's face it, we have all got our smartphones with us '24x7'," he says.

Johnston says the kinds of promotions that had been trialled overseas include one where visitors to a Westfield mall would automatically receive offers of discounts from different stores on their smartphone that they might have five minutes to redeem.

"It is putting 'loyalty' and sales promotions together and making it really time-bound and specific to individual customers, based on the insights loyalty programmes have into your shopping habits," he says.

Bradley argues the most successful retailers are recognising rewarding loyalty needn't equate to awarding "points" and offering discounts. Instead, they should be setting out to "surprise and delight", he says.

Strategies could involve recognising a high-value customer at a music concert by giving them "VIP" seating, or giving someone access to new products 24 hours in advance of other customers.

Instead of discounting, which he describes as "the death of retail", Bradley forecasts a higher investment in such "differentiated brand experiences".

He points to client Anheuser Busch which offered Budweiser Light drinkers who engaged with the brewer through social media access to themed "House of Whatever" parties at this year's Superbowl.

"We are doing a range of projects with them that revolve around using the 'internet of things' to piece together multiple digital touch-points, whether it is mobile phones or beacons in a beer tap or the fridge, to understand and reward customer behaviour."

More than 20 million McDonald's customers in Japan have enrolled in promotions using VMob's platform that include "status-based" rewards, such as access to a normally-locked level in a mobile game app, Bradley says.

"One of the problems with fast food is you don't want to reward customers on their consumption. If you have just eaten your tenth cheeseburger, the last thing you want to be rewarded with is another one."

Naturally enough, he hopes retailers will decide it is worth spending at least 2 per cent of their revenues rewarding loyalty.

"It is a far more sophisticated landscape in the US. All of the big retailers - McDonald's, Walmart, Target - are setting up innovation labs in Silicon Valley where they are experimenting with these technologies.

"These are teams of up to 200 digital specialists looking at emerging technologies and the way they will affect customers' loyalty. It is not 'more points for toasters'."  

Investors are in the dark as to whether VMob itself is set to profit significantly from its big-name deals.

The loss-making company is listed on the regulation-light NZAX exchange and is talking bullishly about "large and timely market opportunities" and a full listing on the Australian stock exchange. But the financial terms of its recent deals with McDonald's, Anheuser Busch and Seven Eleven haven't been disclosed.

PETROL VOUCHERS COULD GO ELECTRONIC

Supermarket petrol discount vouchers could go electronic following last month's launch of mobile payment platform Semble.

Semble lets ASB and BNZ Bank customers "tap and go" for goods in stores using smartphones that have NFC (near-field communications) chips built in.

At the moment, Semble offers few advantages over using a traditional credit or debit card in store.

But chief executive Rob Ellis says Semble will start supporting loyalty schemes later this year.

Loyalty programmes such as Fly Buys, AA Rewards and Countdown's OneCard schemes could all benefit from aligning themselves with Semble, he says. Storing petrol vouchers within Semble's electronic wallet is an obvious opportunity.

At the other end of the scale, Semble could also replace paper cards provided by cafes that reward repeat purchasers with free coffees, Ellis says. "People lose those things and forget them."

Down the track, consumers might only need to tap their smartphone against an eftpos terminal once to make a payment, redeem a voucher such as a petrol voucher and accumulate any loyalty-based rewards, he says.

"Nirvana would be a single tap experience through the terminal. That is the experience we are striving for"

Ellis says that if the right proposition is there it should "definitely draw people back into stores".

"It is about providing an integrated experience that is a better experience than shopping online."  

But he forecasts there will be mistakes made along the way as retailers test consumers' limits over the messages they are prepared to receive. "Even if customers have opted-in to receiving messages on their smartphones, that is not a licence to bombard them."