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Retailers Respond to Changing Digital Shopping Habits

By Daniel B. Kline - Jun 24, 2016 at 8:36AM

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Target is leading the charge to embrace mobile over web shopping.

As digital sales started to become a thing during the early days of the Internet, they were entirely website-based.

In the '90s and pretty much through the launch of the iPhone in 2007, the idea of buying something on a phone was absurd. Flip phones and other non-smart phones were difficult to use to text, let alone to do anything more complicated, and even early BlackBerry models and Palm Pilots were fine for basic tasks, like checking the weather, but using one to make a purchase would be difficult if not impossible.

Since 2007, however, smartphone use has increased, with Pew Research reporting that about two-thirds of all Americans had one as April 2015. Because of that and the explosion in app usage, buying things on your phone is no longer ridiculous, it's becoming the norm. Because of that, retailers led by Target (TGT -4.94%) have shifted their sales focus from the web to mobile devices.

"'Mobile First' is the mantra of 2016, and retailers are slowly accepting this by designing their mobile experience before their desktop," Amit Bhaiya CEO of DotcomWeavers, a web development/design company told The Motley Fool via email. "Most of the shoppers at Target will be millennials, and the way this audience behaves is to shop through mobile first."

Bhaiya also noted in his email that Goldman Sachs predicts that mobile sales will reach the same level as all of e-commerce was at in 2013 -- $630 billion in sales -- by 2018. "And according to Nielsen, nearly 20-30% of all retail sales across the United States are in some way influenced by mobile."

Target wants to integrate mobile and shopping it its stores. Image source: Target.

What is Target doing?

Target has embraced the mobile world and has specifically updated its website, Target.com, to prioritize the phone/tablet experience over desktops or laptops.

"People rely more than ever on their phones for everything in life, from interactions with friends to scheduling to shopping," said Target Chief Digital Officer Jason Goldberge in a June 2 press release "We've talked for years about being a mobile-first retailer. This move takes us from mobile first to mobile only."

Target, like many retailers, previously had two versions of its website, one for desktop and one for mobile. Now it's moving to one with a clear focus on providing a seamless experience as customer switch between devices, something the chain said 80% of its customers do. The change is being driven by changing user behavior.

"We also continue to see big gains in Target's conversion rate -- when browsing turns into a purchase -- on mobile devices," the company said in its press release. "Last year, Target's mobile conversion rate shot up almost 90% and is now higher than our desktop rate in 2013 -- another clear sign that mobile is at the center of our guests' lives and that they crave convenience."

Wal-Mart (WMT 0.21%), a key Target rival, has also focused on improving its digital experience, moving toward a single, mobile-first platform, while also working on lessening the time it takes for customers to get their order.

"We have developed a new platform that we can scale across the business," said CEO C. Douglas McMillon in the company's Q4 2016 earnings call, which was transcribed by Seeking Alpha. "We have improved our fulfillment capabilities with new fulfillment centers that are helping us get orders to customers' doors faster and more efficiently. And we continued to see growth in store pickup for online orders."

It goes beyond digital commerce

For retailers like Wal-Mart and Target it's not just about creating viable mobile or web experiences, it's competing with the always-open, always-on aspect of pure-digital rivals.

"It is not even about e-commerce anymore but the removal of friction from the consumption model," Mike Doonan, partner at executive search firm SPMB, told The Motley Fool via email. "By giving consumers multiple options to do business with you, where they don't need to think 'I need to get to my computer to transaction with this company,' you are creating affinity and stickiness. This is becoming table stakes for any company that wants to transact with a consumer."

In some cases, if a store does not have a strong mobile presence, it has no chance at making the sale, according to Venky Shankar, Ph.D., director of research, Center for Retailing Studies of the Mays Business School at Texas A&M University.

"Customers, led by millennials and centennials (Gen Z), are increasingly using mobile as the first stop in everything (search, communication, entertainment)," the professor told The Motley Fool in an email. "Retailers that mobile optimize their web, leverage mobile apps and integrate mobile channel as part of the 360 customer experience will be the successful businesses of the future. This means the retailers should prepare for significant digital transformation and even disruption."

Don't forget about the store

Both Target and Wal-Mart have improved their mobile experience, but neither one has forgotten that ultimately most of their customer still complete the actual transaction in a physical store.

"The store still remains the center of the shopping experience," said Mindtree Senior Vice President Gaurav Johri in an email to The Motley Fool. "In fact, 80% of retail sales are transacted in stores. As such, investing in omnichannel technologies will enable sales reps to have a single view of their shoppers by using all sources of data available to personalize the experiences in store and ensure a truly, seamless phy-gital [physical + digital] experience for the shopper."

Basically Wal-Mart, Target, and other retailers have to be whatever their customers want them to be. If that's a mobile-first experience, or a store-first one, it really does not matter as long as the chains deliver. It's challenging to do all those things well, but mobile can help physical retailers marry the digital and in-store shopping experience, which is really the only advantage they have over pure-online plays.

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Stocks Mentioned

Target Corporation Stock Quote
Target Corporation
TGT
$146.30 (-4.94%) $-7.60
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$122.86 (0.21%) $0.26
The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
GS
$309.47 (-2.25%) $-7.14
BlackBerry Stock Quote
BlackBerry
BB
$5.78 (-2.86%) $0.17
Nielsen Holdings plc Stock Quote
Nielsen Holdings plc
NLSN
$25.28 (-1.44%) $0.37

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