Mobile Opportunities for Retailers

Cartesian Perspectives

October 2012

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.
www.cartesian.com No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or means (electronic,
mechanical, photocopy, recording or otherwise) without the permission of The Management Network Group.
Context for today’s discussion

1 Mobile technology presents tremendous opportunity for retailers, much

as it has already changed our personal and professional lives

2 The benefits of mobile extend far beyond m-commerce – mobile has

the potential to differentiate retailer brands, to drive in-store sales, to
streamline operations, and to provide valuable customer insights

3 Retailers are at a very early stage of implementation – a select group of

innovative retailers is leading the way, but none is yet capturing the true
potential

4 As technology specialists, Cartesian understands the potential of

wireless – we know the key trends, the enabling technologies, the
ecosystems, and business models

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 2
 Evolution of Mobile Retail

Though mobile technology has the potential to transform retail, very few brands have
begun to make the shift

Mobile Retail 2.0

• Use of mobile technology to engage with
customers in-store (e.g., augmented retail)
• Streamlining of store visits (e.g., mobile self-
Mobile Retail 1.0 checkout)
• Delivery of contextually-relevant promotions
• M-commerce via mobile web and mobile apps
(e.g., coupons based on in-store location)
• Mobile advertising
• Tying of loyalty programs to the consumer’s
• Integration with social media and third-party
mobile identity (e.g., check-in for rewards)
shopping apps (e.g., Goodzer)
• Capture of customer insights from new data
• Support for cross-channel sales (e.g., order on
sources (e.g., geofencing)
mobile, pickup in store)

Most retailers today

With our expertise in mobile technology, Cartesian is helping

retailers and technology players capture these opportunities

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 3
 Mobile 101

Retailers need to understand the transformational impact of mobile technology, which

is changing consumer behaviors and perceptions

Implications for Retailers

• Mobile technology refresh cycles are
short – customers will often own more
Consumers replace their advanced technology than retailers
mobile handsets every
22 months
have implemented
• Mobile has increased consumer
Mobile devices 8% of internet expectations for access to information
traffic comes from
account for 26% of and support – consumers expect
media consumption US Mobile Facts mobile devices
everything to be delivered on-demand
More than 40 million
• Mobile use allows for high degrees of
Americans use tablets; personalization – customers demand
The average smartphone 40% of iPad owners use flexibility and customization
user spends 94 minutes per iPad as their primary PC
day using mobile apps*
• Privacy and security are paramount, as
mobile devices are increasingly among
the most personal products consumers
use – mobile outreach must be handled
with care

* In comparison, the average smartphone user spends

72 minutes on the web (both desktop and mobile)
Source: Business Insider, Flurry, comScore, InMobi, Recon Analytics, eMarketer, Cartesian

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 4
 Mobile Shopping

Mobile technology use is already widespread within stores, and generally occurs
without the retailer’s involvement

Customer Experience Funnel

Provides alerts on deals, ads, and
coupons across retailers based on user
82% of smartphone users location
report noticing mobile ads
Gain Awareness
Finds location of nearest retailer for a
particular product
21% of smartphone users are
Locate
comparing prices in-store and
using stores as “showrooms”
Compares price of products across
Evaluate multiple retailers, and allows user to get
input from friends before purchasing
36% of smartphone shoppers
purchase items on their Purchase
smartphone in store Alerts consumers of price adjustments
post-purchase, allowing them to get
Use price difference quickly refunded
Over 38% of smartphone users
have used their phone to make Service/ Acts as unified loyalty card to replace
purchases at least once
Support existing loyalty cards across multiple
retailers

Retailers need to determine what role to play in supporting mobile technology use both inside
and outside the store, and involving owned and third-party communication channels

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 5
 Status of Deployments

Use of mobile technology by retailers is still at an early stage

Advanced Mobile Feature Penetration

of Top 100 US Retailers, 2011
(% of Retailers) • 71% of STORES.com Top 100
retailers plan to implement
Ratings/Reviews multi-channel integration within
48%
3-5 years
Social Network Integration 45% • 24% of surveyed retailers view
Associate Mobile In-store
Inventory Lookup 31% Functionality as a top priority
• 24% of surveyed retailers view
Reward Game 30% Customer Mobile In-store
Functionality as a top priority
Personal Recommendations 24% • Within the next 2 years nearly
50% of retailers plan to support
In-store Pickup 16% Mobile Phone NFC Payments
Location Based Flash Promotion 9%

0% 10% 20% 30% 40% 50% 60%

More sophisticated functionality such as location-based capabilities or cross-channel support

have been enabled by a minority of large retailers, but are a focus area for the future

Source: Wells Fargo, Cartesian

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 6
 Retailer Examples

Some retailers are adopting innovative approaches that employ mobile technology to
increase customer in-store interaction and brand awareness
Retailer Case Studies

Vendor/
Service Provider Interactive App and
Augmented Reality In-store Kiosks Store-centric App

Location Global US US

• Lego has created a personalized,
interactive experience with the
brand, not available online
• Special screen shows full 3D
product when box is held in
front of screen’s camera
• Customer’s phone or tablet can
be used as lens to see alternate
Description product features (colors,
recipes, etc.)
• Sephora has created an interactive • Apple has created an app that
in-store experience promoting brand focuses on in-store customer
engagement and additional sales experience and is tailored to
during checkout wait customer service and expedited
• Tablets are integrated into makeup store services
stations, designed to engage • App recognizes and customizes
customers who are getting their information to current store (events,
makeup done etc.)
• Sephora-branded beauty magazine • App allows customers to make
lets customers browse latest beauty purchases for in-store pickup, or to
trends and purchase items in app scan items in store for self-checkout
• Virtual mirror lets customers follow • Customer can scan a product to see
Sephora makeup tutorials using detailed info, then click to request
tablet help from a sales associate who is
• Store associates estimated 3 out of immediately summoned
10 customers used mobile app in
stores

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 7
 Retailer Examples

Some retailers are adopting innovative approaches that employ mobile technology to
increase customer in-store interaction and brand awareness
Retailer Case Studies (Cont.)

Vendor/
Service Provider Self-checkout with
Mobile Payment Coupon Integration Virtual Store

Location US & UK US South Korea

• Starbucks has designed a mobile
payment solution that ties
customers to the Starbuck’s
loyalty program
• Users download the Starbucks
app and link it to gift card or
debit/credit card
• At time of purchase, cashier
Description scans personal barcode for
payment processing and loyalty
tracking
• Solution currently processes 1M
transactions per week
• Stop & Shop has created an • Tesco has created a revolutionary
innovative shopping experience that way to shop, turning wasted time
helps customers reduce wasted time spent waiting into productive time
during checkout spend shopping
• Shopper picks up a wand when • Subway stations in South Korea are
entering the store, or uses own wallpapered with posters of virtual
smartphone with a Stop & Shop app stores with many grocery products
• Shopper scans and bags items as displayed
they are placed into shopping cart • Using Tesco app, customers scan QR
• Related items and coupons are codes for each product they want to
shown to user after item is scanned add to their online shopping cart
• Checkout occurs at any POS, without • Store assembles and delivers
need for employee interaction or shopping cart to user after user is
rescanning of items home
• Stop & Shop reports a labor savings • As a result of the virtual store,
of 10-15%, and basket lift of 10% registered members grew 76%, and
online sales increased 130%

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 8
 Apple Retail App

Apple’s mobile app is service-oriented and designed around customer activities; the
app enhances store visits by presenting real-time store information

Apple Case Study: Mobile Smart Store Experience

Main page presents customer with store-specific

App automatically
information to help them best manage their visit:
identifies customer
location Customers who already know what product they
want can use EasyPay’s mobile self-checkout to
quickly get in and out of the store

Customers seeking in-store support can make an

appointment with the Genius bar
• Real-time estimates on the number of
customers in line and the next appointment
opening help customers gauge wait time

Customers are informed of upcoming store-

specific workshops

This best-in-class example illustrates the potential for

mobile technology to enhance the in-store experience
Source: Apple, Cartesian

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 9
 Innovative Use of Mobile

Mobile represents a natural complement to many loyalty programs, with many

retailers looking to mobile to provide further functionality and differentiation

Mobile Elements of Loyalty Program Mobile Technology Enabler

• Starbucks created an app that combines loyalty and mobile
payments
• App replaces card-based system rewarding customers for
predefined number of purchases Mobile payments
• Encourages loyalty program participation & improves
Retail – Café Starbucks’ ability to capture customer data

• Maurices pushes ad or coupon to mobile phone when customer

is located within predefined range of store Geofencing & push
• User must opt in to receive promotion notifications
• Improves ad targeting through increased contextual relevance
Retail – Clothing

• Power Up Rewards members gain points for checking in at store

locations
• Non-members are encouraged to join after checking in Check-in
Retail – Consumer
• Drive foot traffic & customer engagement
Electronics

• Stop & Shop pushes mobile coupons and deals to customers

that use the mobile self-checkout system (requires loyalty card)
• User adds item to cart and discount is automatically applied Indoor location
• Drives basket lift and a differentiated shopping experience
Retail – Grocery

Source: Company websites, Cartesian

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 10
 Overview

Looking beyond the customer experience, sourcing data from mobile devices enables
retailers to significantly expand their view of consumer behavior and preferences

Customer Behavior Metrics Enabled by Mobile

Consumer Behavior Consumer Preferences

Traditional Transactions General Brand Perception

Metrics Average Basket Value Post-Purchase Customer Satisfaction

Foot Traffic Real-Time Brand Preference

Dwell Time Real-Time Customer Satisfaction
Mobile-
Enabled In-Store Traffic Patterns Omni-Channel Customer History
Metrics Out-of-Store Location Trends
Mobile Ad Conversion Rates

Furthermore, mobile enables Best Buy to link the two

types of data – behavior can be linked to a unique
customer profile via the customer’s mobile device

Source: Cartesian

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 11
 Key Questions

Retailers face a challenging set of questions around how to maximize leverage from
mobile technology
1 Mobile Web / App: What role for your mobile app vs. mobile
website? What app / web platforms to support (e.g., HTML5)?

2 In-store Technology: How to equip and train sales associates?

What form factors and functionality for customer terminals?
Where are the best ROIs?

3 Mobile Advertising: How to maximize relevance of promotional

message delivery? How to balance user privacy / control and your
promotional objectives?

4 Omni-channel: What use cases to support across mobile, online,

and in-store channels?

5 Mobile Payments: When to start adopting mobile payments, and

what types? How aggressive a role to play in this nascent market?

6 Social Media and Third-Party Apps: How to best leverage third-

party sites and ecosystems? What to control and what to open?

7 Loyalty and Customer Analytics: How to involve mobility in loyalty

programs? What novel data sources does mobile technology
enable? What insights can be gleaned?

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 12
 Importance of Mobile

Mobile technology has the potential to influence nearly every aspect of a retailer’s
interaction with customers as well as its own internal operations

E.g., mobile app E.g., mobile inventory

In-store customer Multi-channel
displaying product info check and ordering
and expert reviews experience sales and support with in-store pickup

Mobility
Marketing and Corporate and
social media store operations

E.g., pushed promotional E.g., warehouse workforce

messages, both in-store mobilization
and on-the-go

Customer identity
and loyalty program

E.g., analysis of in-store

traffic patterns using mobile
device traces

Source: Cartesian

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 13
 Cartesian Expertise

Cartesian has direct experience across many areas of relevance to retailers

Mobile Customer Experience Mobile Payments

• Supported a major US retailer seeking to • Assessed the mobile payments landscape with
improve on in-store and out-of-store customer a focus on NFC-based payment methods
experiences via mobile • Evaluated mobile payments solutions and
• Conducted a mobile shopping market scan: business models from major players
retailer activities, consumer shopping • Studied the enabling technologies and ongoing
behaviors, and vendor solutions standardization efforts
• Supported the development of a mobile • Considered market evolution scenarios and
strategy, with a roadmap for implementation implications for ecosystem participants

Mobile Coupons Reward Programs

• Developed a mobile coupon strategy for a • Assisted a major US brand in developing a new
wireless operator reward program
• Assessed the couponing ecosystem and • Performed cross-industry benchmarking of
identified business model options for mobile reward programs to understand program
couponing structures, economic drivers, and trends
• Evaluated alternative mobile advertising • Develop multiple options based on corporate
campaign types and proposed specific strategic and financial objectives
campaign structures • Tested options via qual + quant research and
modeled financial impacts

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 14
 Contact Information

Two Financial Center

60 South Street, Suite 820
Boston, MA 02111
Ed Naef USA

Vice President 7300 College Blvd

Suite 302
ed.naef@cartesian.com Overland Park, KS 66210
+1 617 999.1138 USA

Descartes House
8 Gate Street
London WC2A 3HP
UK

400 Atrium Drive

1st Floor
Somerset, NJ 08873
USA

www.cartesian.com
8260 Greensboro Drive
Suite A-30
McLean, VA 22102
USA

Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved. 15