By combining offers with other retailers or entities, retailers can avoid being victimized by the “adverse selection” of consumers who simply look for the largest discount they can find at a given time, Alex Rampell, CEO and co-founder of offer-based payment platform TrialPay, told attendees at the recent Retailer Roundtable event sponsored by digital gifting platform CashStar.
“Offering a massive discount just gets people to go elsewhere for a bigger discount,” said Rampell. “Those consumers do not develop into loyal customers.”
However, by enticing consumers who fit a retailer’s customer profile with combined offers, such as a promotion from Whole Foods that provided a free month’s subscription to the New York Times, retailers can help eliminate customers who only want a low price.
In addition, Rampell said digital gift cards can serve as an effective and traceable online inducement for consumers who are searching for a product that they can only buy offline, such as a fast food burger.
“Clicks on a banner ad for burgers don’t matter,” stated Rampell. “But a gift card proves its effectiveness.”
Rampell said an above-average online offer of a gift card to an established good customer can produce a click-through rate of more than 30%, compared with the .02% click-through rate of a typical banner ad.
In addition, Denee Carrington, senior analyst for Forrester Research, told attendees that mobile commerce is a bridge connecting the digital and physical worlds. Although today mobile commerce only accounts for 8% of e-commerce sales, which only account for 9% of all retail sales, she said retailers need to focus on it for a simple reason.
“Mobile enables access to the big prize,” said Carrington.
According to Carrington, Forrester data shows that U.S. mobile commerce will reach $90 billion in sales by 2017 and mobile commerce will reach a hockey stick-shaped point of inflection in 18 months, with adoption of in-store and proximity mobile commerce increasing at a 140% annual compound growth rate.
“Digital disruptors will tear down and rebuild every industry,” said Carrington.
In the case of mobile retail, Carrington advised the use of value-added mobile services, such as coupons, enhanced product information, open payment and loyalty rewards, to help reap the benefits of the digital disruption mobile commerce will cause. She also advised that these services can be proprietary and do not have to be offered in partnership with a third party.
As an example, Carrington cited a mobile advance ordering system Jamba Juice is piloting in some California stores.
“Order ahead services help you predict future traffic and provide a better customer experience,” Carrington said.
There will not be a single technology that dominates the digital wallet space, said Carrington, although she agreed with other speakers that there will be a general shift away from hardware-based solutions. She concluded her presentation with some advice for retailers who want to successfully launch digital wallet applications.
“Swiping a card is quick,” said Carrington. “A digital wallet has to offer a better, more convenient alternative. The potential benefits must outweigh all barriers. Retailers who play an active role in creating a viable digital wallet business model, including e-gift and m-gift cards, will win.”