Wednesday, January 20, 2010

The Coming Mobile Commerce Destruction of Retail Profits

I have been kicking around this scenario for a while. It should strike fear in all retailers (and somewhat for Brands too). It will erode customer service especially in times of economic recession when 'price' trumps all else because profits have to be made so service might be cut. And with the increasing power, abilities, and breadth of mobile smart phones and eventually tablet computers small enough to take around with you this will be the bane of brick and mortar stores.

When we shop online we have the ability to compare prices. Thank you Search Engines! Soon we will be doing this in stores that sell 'Commodities'. Commodities in this case is anything I can buy (same or equal) at multiple locations within a short drive. These could be anything small like a bag of Doritos and a case of Pepsi, to big ticket items like HDTV's or even automobiles!

This blog has discussed in the past the Point of Sale fact of life for consumer products. Anything that has a substitute is in danger of a lower price competitor getting the sale no matter how much is spent on Advertising based on the current price in the store. Often this is out of a Brand's control. I have used the Coke vs Pepsi battle as example number 1. The Supermarket not the Brand puts one on sale with the club card as a loss leader (or break even leader) so you buy what is on sale vs maybe your preference. Kiss all those Ad Dollars Goodbye!

Your Supermarket could care less as long as you buy your Cola from them. But to Coke and Pepsi its a revenue issue. I myself prefer Diet Pepsi but buy what is on sale at point of purchase.

In the future (not too far off) a consumer will be able to show up ready to buy and at the point of sale not only decide based on pricing at that store, but also compare with every other retailer within a few mile radius. I can show up at Best Buy and run the Sony 56" HDTV throw my Smart Phone and show that the store down the street has it for $250 less and I demand they match the price or I walk.
I am in Best Buy, this proves my preference to buy from them, will they let me walk?

Or I can compare a Sony and a Panasonic 56" HDTV and I can contact Sony and say I am buying the Panasonic if you don't match their price via Best Buy somehow.

This isn't a browsing dilemma. This isn't a 'let's sow the seeds so we get the sale in 3 months'. This is a 'the person is ready to buy immediately' and if you miss the sale you must wait for the next purchasing opportunity to make the sale. For Coke and Pepsi they might have to wait a few days to a week or two. For a big ticket item it could be years before the next chance. Just think Sony and Best Buy has a chance to sell a 56" HDTV right now with the next chance in 4 years! What do they do? Especially if the consumer notifies them that they prefer to buy Sony! You give a competitor a chance to not only get this sale, but all the free marketing when friends ask how you like your new TV and you say "I preferred the Sony but the price was better on the Panasonic and you know what, its a great TV. I would recommend it to others."

This could be a huge problem for Retailers and Brands. They are not allowed to collude on prices. If a retailer has to contact a brand every time this issue arises to work something out that adds costs to the picture. And worse all the Ad Spend up in smoke. Sony or Pepsi can spend millions getting a consumer to the point of purchase only to lose the sale because the Retailer or the Brand themselves refuse to match the price.

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