Why everything may depend on Mobile Offline-to-Online

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Moda Pacific - Jaime Syjuco - PhotoIn this post, Jaime Syjuco, Managing Partner of Moda Pacifica – licensee for Havaianas in Singapore – gives an overview of which retail technology can improve the performance of brick and mortar stores. This is re-posted with permission from LinkedIn.

In my last post, I promised to explain how we plan to implement 17 projects rapidly, cheaply and with minimal impact on our organization and wallet.

But with just 3 weeks away from the test-launch of our Mobile App, I thought it would be a great opportunity for my readers to actually follow along a live example of an actual test.

So please join me over these next 3 weeks of pre-launch, as I journalize our activities and keep you in the loop. I will also share day-to-day details on Facebook and Twitter.

  1. The reason why Mobile will be critical to Offline Retail: Because it’s the new “Bridge” to the customer.

I now believe that Mobile Apps may be the lynchpin that everything else in Offline Retail will depend on, which is why I’m prioritizing this test above all else.

My big aha moment happened during development of my other projects in retail tech…I realized that all of these needed to be integrated to work together to be effective, and that Mobile is a critical component of this.

If you notice from my Retail-Tech Systems Map below, with a customer database at its core, the system must integrate at the very least with my CRM, offline POS, membership card, eCommerce and direct email to give a 360-degree view of my customers.

Yet when I realized that direct email no longer works, and that my customers prefer to search, consume content, communicate and pay with their mobile phones, it was obvious that these interactions will flow through their mobile phones and that a mobile app had to be the main bridge between the customer and the whole system.

I realized that no matter how this whole “Save Offline Retail” questy-thingy turns out, whether Offline Stores can remain profitable or not, or whether they still deserve to be a place of customer interactions and transactions or not…no matter what happens, we Offline Retailers will still always need to:

  1. Communicate: We will still need to communicate to our customers
  2. Search/Find: Help customers find the products they need
  3. Drive-to-Store: Drive visitors to our offline stores
  4. Store Experience: Provide quality offline experiences
  5. Payments: Allow customers to easily pay for products
  6. eCommerce: Also allow customers to buy online
  7. Customer Knowledge: We need to know our customers
  8. Reward: We need our customers to feel rewarded, both directly and indirectly

retail-tech-systems-map

And I realize that the only scaleable and affordable way for Offline Retailers to perform the above will be through the customer’s mobile phone.

The same way eCommerce has been able to greatly surpass offline’s ability to know, track, predict, recommend, communicate, transact with, and reward the customer, Mobile will be surpassing Online in this regard too.

  1. Building and Testing our Mobile App

Ok, with the importance of Mobile out of the way, let’s get into the thick of how we are building and testing our Mobile app. Over the next 3 weeks, I will also be sharing with you:

This week

  1. Defining the purpose and targets of the Mobile App

Next week:

  1. Designing the Mobile App
  2. Financing the Mobile App

 Next Next week:

  1. How to work with your developer
  2. How to organize your team

Next Next Next week: Launch!

2.1 Setting the purpose and targets for the Mobile App

Because a Mobile App can generate data on every aspect of the customer’s use (i.e. geolocation patterns, products searched, saved, and bought, shares with contacts, chats, marketing clicks, app visits, etc), I therefore broke down our typical retailer business profit equation into variables that could match with what a Mobile App could do.

Let me explain this method better with the chart below:

  1. Profit = Sales – Costs. My objective is to increase store profit, so that I can open more stores. My underlying objective of the Mobile App therefore is to increase profit by increasing sales, not decrease costs.
  2. Sales = Units Sold x Transaction Price(8). I intend that the Mobile App should increase both Units Sold & Transaction Price.
  3. Units Sold = Visitors (1) x Conversion into purchasers (3). To Increase Units Sold, the Mobile App will need to drive more outside visitors (2) to store (“Drive-to-Store”) AND help convert these visitors into paying customers.
  4. Conversion(3) = Product Searching(4) = Sizing(5) x Choices(6) x Information(7). In order for the Mobile App to increase Conversion(3), it will need to help the customer find the right product(4), which is a function of the customer finding the right size(5), right style(6) and information they need(7).
  5. Transaction Price(8) is the 2nd variable that increases sales. It is a function of = Cross & Upselling(9) x Marketing(10). Therefore the Mobile App will need to improve the Transaction Price(8) by improving Product Choices, Product Views/Placement, Information and volume and effectivity of Marketing Communications(10).

From the above, we can therefore derive the following business variables which the Mobile App needs to affect, and against which we will measure the App’s success:

  1. Store visitors (“Drive to Store”).
  2. “Conversion” by improving customer’s ability to find the products they want (“Search” & “Information”).
  3. “Transaction Price” increases from communicating to the customer and convincing them to buy more and higher-priced items.

SCALE

Using the above formula and improving each of the variables by just 10%, the effect could be quite astounding, as calculated below:

Baseline (as-is):

  • Assuming that currently 500 visitors visit the shop a day x a 10% conversion into buyers = 50 buyers a day x each currently spending $100 per transaction….then this typical store model will generate sales of $5,000 per day.
  • Over a month’s time, that would be $150,000 sales per month.
  • Reality check: Assuming a typical store is 1,000 square feet, then the store would be performing at $150 per square foot, which is about right for a strongly-performing store.

Improvement (example):

Now if the Mobile App improved each variable by just 10%, then we potentially have:

  • 550 visitors per day (+50 more visitors)
  • 11% conversion (+1% more conversion)
  • $110 per transaction (+$10 more per transaction)
  • Results in $200,000 sales per month…a Sales Improvement of $50,000 (33%)!

Remember in my last post that I mentioned that since the Retail Industry downturn, Sales for many typical offline retailers have likely dropped as far as 30%, hence this model can move in the right direction of magnitude.

Closing Remarks

Thanks for joining me this week, as I shared how we defined the purpose and targets of our upcoming Mobile App.

Next week, I’ll be speaking about:

  1. How we Designed the Mobile App
  2. How we are Financing the Mobile App

 

Until next week, my best regards.

Previous posts:

  1. How retail tech can solve the tricky economics of falling mall traffic
  2. What retail technology can save brick and mortar

Syjuco is set to join more than 200 other e-commerce, retail and payments professionals speaking at Seamless Asia. For more information, download our brochure here, or go right ahead and register here.

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