Tuesday, March 05, 2013

Why retail apps should worry publishers

From Best Buy to CVS and from Kroger to Macy’s, the biggest buyers of newspaper advertising have launched sophisticated smartphone apps to establish increasingly direct and profitable relationships with individual customers. 

These efforts should give publishers the shivers, because this new channel represents a major threat to the retail lineage that constitutes half of what’s left of the advertising sold by newspapers – an industry, lest we forget, whose collective print and digital ad sales are less than half the record $49.4 billion achieved in 2005. 

Smartphone apps appeal to retailers, for starters, because they are far cheaper than buying full-page ads and preprint inserts in newspapers. Perhaps even more compelling to merchants is that apps enable them to precisely target offers to individuals, thus achieving not only happier customers but also fatter tickets at the checkout line. 

At the moment, the most prominent feature in nearly every one of the free retail apps is the local version of the retailer’s weekly newspaper advertising insert. While the presence of the ads provides publishers with a tangible representation of their immediate relevance to retailers, here’s why the apps pose a long-term threat: 

The more consumers interact with apps that know their names, locations and buying patterns, the smarter marketers will get.  The smarter marketers get, the more productive their direct-to-consumer promotions will become. At some point, retailers naturally will begin wondering if they need to spend as much on newspaper advertising as they did in the pre-digital era.  

Here’s what publishers are up against: 

Department and discount – Every national department store or discount retailer puts the local version of its weekly newspaper advertising insert front and center on its app. While some apps are better than others, the typical features include daily specials, store locators, handy shopping lists and registries for weddings, babies and other life-changing events. Many, like Best Buy, let you scan barcodes to get more information about products. Several merchants, like Macy’s, allow you to manage your charge card by monitoring transactions, checking balances and paying bills. For those disinclined to brick-and-mortar commerce, Walmart and others link directly to their online shopping environments, which feature broader product selection than often found in stores, as well as user reviews and – quite often – free shipping.  

Supermarket – In addition to promoting its weekly newspaper ads and daily specials, Safeway, which has had a long-standing and well-developed customer-profiling program, dishes up customized offers based on a user’s demonstrated preferences and past behavior.  App tools make it possible to create and update a standing shopping list, as well as to organize and redeem coupons.  The more you use the Safeway site, the more the company knows about you – and the better it targets the deals you receive. As discussed here, the company is "working hard" to reduce its reliance on newspaper ads. Kroger provides many of the same tools as Safeway with the added incentive of gasoline discounts for those participating in its loyalty program.  Whole Foods takes a different approach to customization, providing a robust app that enables users to plan menus for various occasions – including high-fiber, low-sodium and gluten-free choices.  As you make your dining decisions, the Whole Foods app provides recipes and shopping lists to speed you through the store. 

Pharmacy – In addition to billboarding weekly newspaper ads and daily specials, the apps from CVS and Walgreen’s include quick clicks to refill prescriptions or print photos.   CVS publishes links to its affiliated urgent-care centers and a handy tool to identify pills based on their color, shape and other physical characteristics.  Walgreen’s has a quick link to its customer-loyalty program, so you can monitor and redeem reward points.  It also has a function that plots every item on your shopping list on a map of each store, so you quickly can find hair gel or travel-size toothpaste.  As in-store tracking technology is combined with the abundant personal information carried on most smartphones, it won’t be long before retailers dynamically tune offers to a customer’s journey through the store. 

Home improvement – In addition to prominently publishing their weekly newspaper ads and daily specials, Ace Hardware, Home Depot and Lowe’s are among the national brands providing apps that allow customers to locate stores, scan barcodes and shop online.  A tool on the Lowe’s app allows registered customers to inventory honey-do projects for each room of the house, so they don’t forget to buy a light bulb for the bedroom or paint for the deck.  At the same time the app generates a shopping list for the next trip to Lowe’s, it learns a ton about who you are, where you live, what you bought and what you might buy in the future.  And that’s the whole point of retail apps: creating a personalized relationship with the brand.

Publishers hoping to expand – or, at least, retain – their share of local advertising dollars need to find a way to join the retail-app revolution.

© 2013 Editor & Publisher


Blogger John said...

There are also other new mobile advertising models surfacing such as CouponPhone which sends coupons and other discounts directly to a users cell phone when they dial a unique phone # that is associated with the coupon. It's a double opt-in "on-demand" permission based service that is becoming popular.

8:55 AM  
Blogger davidp said...

Being a "publisher" means you publish stuff. And that is exactly what retailers are doing with their own apps, they are the originators of the content and do not need anyone else to create it, and only need someone to help distribute the message. The 21st century business that fulfills the distribution role of the publisher is the mobile carrier minus the curation and opinion. It's going to be difficult for publishers to, as you suggest, "join the retail-app revolution," without changing (overhauling) the business model.

7:16 PM  

Post a Comment

<< Home