2016 U.S. RETAIL

Mobile Maturity Model:

2016 U.S. RETAIL

RETAIL

In 2015, DMI recognized that retailers today lack the data and understanding regarding what customers want out of mobile while in store. We launched the M3: Mobile Maturity Model, a research initiative that sought to solve this problem. In 2016, we re-evaluated that mobile experience to see what had changed one year later.

We saw a year of rapid innovation where customer expectations continue to increase. We saw innovators and retail vanguards like Amazon taking the bar and raising it higher than most shoppers could imagine. The Amazon Go store provides a 100% seamless and automated experience for customers. While this type of shop remains an unattainable outlier for most retailers, there's still great opportunity across the industry to make shopping more connected. Our research suggests that most retailers are overlooking the potential to improve the in-store shopping experience, where we see the biggest opportunity today.

While retailers are fiercely competing for market share and customer loyalty, we see some sub-categories pulling away. Pharmacies, home improvement, and department stores are leading the pack while fashion retailers, sporting goods, and jewelry stores are falling behind.

This report summarizes our findings, including insights and changes we saw over the past year.

Major Retail CMO

WE KNOW CONSUMER MOBILE WILL PLAY A MAJOR ROLE IN CREATING A BETTER IN-STORE SHOPPING EXPERIENCE. WE JUST HAVEN’T FIGURED OUT WHAT THAT ROLE IS YET. IT IS IMPERATIVE THAT WE DO.

2I NTRO D U C TI O N R E S E A RC H FI N D I N G S M O B I LE M AT U R IT Y M O D E L R ECO M M E N DATI O N S

MOBILE SHOPPING TRENDSWe surveyed U.S. consumers in 2015, and then again in 2016, asking about their shopping experiences and preferences. We uncovered a few key trends.

O N LI N E S H O PPI N G SATI S FAC TI O N HA S D EC LI N E D

It appears that shoppers have grown complacent with online shopping, with online shopping satisfaction dropping by 5%. Perhaps more troubling, respondents report shopping online less frequently, with online shopping rates decreasing slightly (down 4%).

I N -S TO R E S H O PPI N G SATI S FAC TI O N R ATE S I N C R E A S I N G

Meanwhile, in-store shopping frequency has remained unchanged, yet satisfaction rates with in-store shopping have increased by 7%.

M O B I LE B ECO M I N G M O R E PRO M I N E NT AM O N G ALL S H O PPE RS

Since our 2015 study, the percentage of U.S. shoppers using mobile has increased across several key categories.

M E T H O D O LO GY A N D S A M P L I N G

The online survey was fielded in November of 2016 among 2,500 U.S.

smartphone owners age 14 to 64. Respondents were sampled as a

representative set of U.S. consumers. Urban/Suburban/Rural. Assuming a

confidence level of 95%, margin of error for the aggregate data set is +/-2%.

relying more on mobile throughout their day5%

purchasing on mobile app6%

purchasing on mobile web3%

increasing use of branded apps5%

increasing use of third-party apps3%

purchase via mobile frequently, considering it part of their

regular purchasing behavior

36%


TH E O PP O RTU N IT Y

Mobile Reliants represent significant opportunity to retailers as they:

Have high disposable incomes

Are likely to be shopping in stores more frequently

Likely have higher needs for convenience and utility as busy young parents

MOBILE RELIANTS STILL LEAD THE WAY IN RETAIL

W H O AR E M O B I LE R E LIANTS?

In 2015's retail study, DMI reported on a segment of shoppers who showed the most advanced mobile adoption. We called these users the Mobile Reliants, categorized by:

Having made a purchase on mobile

Using mobile every time they visit a store or regularly

Having 3+ mobile apps on their smartphones

account for 1 in 3 U.S. shoppers

25% of them purchase via mobile "very frequently" or "all the time"

are mostly parents of kids under 10 years old (58% have kids under 10 years old, compared to 40% of all shoppers)

are dominated by 25- to 34-year-olds (43% more likely to be in this age group) but in 2016 have expanded to include the 35- to 49-year-old age group

over-index as affluent families (30% more likely to have incomes of $150k+)

shop more often and are more satisfied with their shopping experience than general population (69% shop in-store at least weekly, compared to 55% of all shoppers)

K E Y C HAR AC TE R I S TI C S


TO P 5 AC TIV ITI E S O N M O B I LE

All shoppers are not far behind Mobile Reliants in adopting mobile shopping behaviors, and we expect that these actions will become more and more routine for all shoppers over time.

WHAT SHOPPERS ARE DOING ON MOBILE

M O B I LE US E

check your shopping lists

scan a barcode

QSR

take a picture of something

access a coupon

compare price

of U.S. shoppers have used their smartphone in-store to help them shop

77% of U.S. shoppers use their mobile phone all day or a lot82%

M O B I LE PU RC HA S I N G

A majority of U.S. shoppers have made a purchase with their mobile phone.

via mobile app

62% via mobile web

65%

M O B I LE PL ATFO R M S O F C H O I C E

Third-party apps are competing neck-and-neck with branded apps. Brands need to compete aggressively to win against these third-party apps to own the mobile experience inside their stores.

What platforms U.S. shoppers use in store "every time they shop" or "regularly"

branded apps

39% third-party apps

41%

70%

62%61%

53%

43%

74%

66%64%

60%

54%

All shoppers Mobile Reliants


WHAT SHOPPERS WANT IN THE FUTURE

TH E TO P 5 FE ATU R E S

When we asked shoppers to rank what features they want in a store’s mobile experience, the top features were consistent with the responses from 2015.

Saving time and money continues to be most important. That means access to and visibility of inventory and pricing, the ability to find promotions and checkout easily, and empowering them with transparency to their account.

P OTE NTIAL I M PAC T: W H Y I N V E S T ?

Improving the mobile experience in store continues to promise significant benefits to retailers—both in brand performance and revenue drivers.

When considering expanding mobile in-store experiences, retailers should keep in mind that Mobile Reliants show the highest impact, and warrant prioritizing in the near future. However, all shoppers are not far behind, and have increased year-over-year, indicating that a multi-year mobile road map should be inclusive of a broader user base.

QSR

Likelihood to use an app to improve the

in-store shopping experience

It would make the store

experience more positive

It would positively

improve their perceptions of

the brand

I would be more likely to shop

your store over competitors

I would be more likely to buy

when I visit the store

All shoppers

86%

77% 80%91%98%

89%88% 85%

74%

70%

Use your mobile device to see store-specific promotions.1

2

3

4

5

Check your rewards balance anytime on your mobile device.

Instantly check an item's price and inventory availability by scanning, taking a picture or tapping the item to your phone.

Receive an alert on your mobile device when something that takes significant time to prepare is ready—such as a prescription, deli meats, eyeglasses or altered clothing.

Check yourself out through your mobile device and avoid having to wait in line.

Mobile Reliants

brand performance revenue drivers


THE CUSTOMERS' DESIRED EXPERIENCEToday, shoppers say these six categories are most important:

P R I C I N G

Customers want to easily look up and compare prices, and see pricing specific to them.

I N V E N TO RY

Customers want the ability to check in-store, online, and nearby store inventory to take action on that information, and avoid a disappointing store visit.

P RO D U C T R E V I E WS & A DV I C E

Customers want to easily access product details or brand information, view customer reviews and receive varying levels of expert advice.

P E R S O N A LI Z ATI O N

Customers want their in-store experience to be personalized to them based on their past purchases, behavior, preferences and profile.

S TO R E G U I DA N C E

Customers want the in-store experience to be more like their online experience with guidance, assistance, or information to make the visit more efficient and productive.

C H E C KO U T & LOYA LT Y

Customers want shorter checkout and return lines and loyalty programs that are automated and straightforward.

W HAT W E D I D

To see how retailers stack up in each of the six areas that customers find most important, we assessed the mobile experiences 120+ retailers across the United States are providing. We did not work with any specific retailer to accomplish this study, performing all assessments as undercover customers visiting brick and mortar stores. Our scoring scale includes 40 possible points in each of the six categories. This makes the highest possible score for each retailer 240.

OUR MOBILE MATURITY MODEL

Based on our research, we built a proprietary benchmarking tool: the M3 Mobile Maturity Model.

The tool is designed to map the maturity level of retailers’ current mobile functionality against the experience and features customers desire.

RETAIL


BENCHMARKING

W H O' S LE AD I N G TH E WAY?

So, which retailers offer the most robust mobile experiences to customers today? Of the retailers we evaluated, these ten scored the highest within our M3 Mobile Maturity Model this year.

TOP 10

1 The Home Depot

2 Macy's

3 Nordstrom

4 Walgreens

5 Sephora

6 Lowe's

7 CVS

8 Bloomingdale's

9 Walmart

10 Kohl's

N OTAB LE C HAN G E S FRO M O U R 201 5 B E N C H M AR K I N G S TU DY

Walgreens loses top spot to The Home Depot; CVS works hard to catch up to pharmacy giant

Newcomers to the list: Lowe's, CVS, Macy's, Kohl's

Who fell out of the top ten? Saks Fifth Avenue, JCPenney, Target, American Eagle

S U CC E S S S TO R I E S

We took a deeper look at a few of this year’s biggest climbers to see what they did and how they did it.


Success Stories

MACY'SMADE THE GIANT LEAP TO #2 FROM #32 IN 2015

In 2015, Macy’s had the groundwork in place for a much more robust experience, but hadn’t pulled the trigger on delivering the tools that customers really wanted. In a highly competitive subcategory, we’ve seen department stores raise the bar for the rest of the industry in terms of what they are providing to their customers via mobile. A few key items that helped Macy’s rise through the ranks (and surpass all other department stores) are:

I N C R E A S E D PE RSO NALI Z ATI O N

The application welcomes you to the store upon arrival, sharing information about store-specific promotions, placing deals in your wallet, and building out a seamless scanning feature to explore any product you find in store.

S TO R E G U I DAN C E

No store guidance functionality was available in 2015, but Macy’s recognized that this was an issue for shoppers given their large store footprint and variety of product SKUs. Now shoppers can see what is on each floor at their current location, and they can make an appointment to come into the store to avoid crowds, and more.

pricing inventory

0 0

product reviews & advice

personalization store guidance checkout & loyalty

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2016 Score2015 Score

23

15

20

3134

28

18

12

5 5

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tact

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Success Stories

CVSCLIMBED TO #7 IN A COMPETITIVE CATEGORY

CVS was a true success story over the course of 2016, investing and focusing on mobile in an effort to compete with the other pharmaceutical behemoth Walgreens—and provide a better experience for their loyal customers. In our 2015 study, CVS ranked 18th with a score of 75. So how did they earn nearly 20 points, securing themselves a spot on our top 10 list? Here’s how:

CVS PAY

This is a proprietary end-to-end payment system that integrates payment, prescription pickup and their ExtraCare loyalty program all in one quick scan at checkout. This embodies what our research suggests—it helps customers shop faster, smarter, and save money whenever possible.

CVS E X PR E S S

This is another instance of CVS understanding exactly what customers want, especially when it comes to their frequent customers, and delivering on it. CVS Express allows customers to place an order via mobile for curbside pickup—receive a notification when it’s ready—and a CVS employee bring the order right to the customer's car window. For busy Mobile Reliants on the go—this is incredibly convenient.

pricing inventory

0

7

product reviews & advice

personalization store guidance checkout & loyalty

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21

30

20

2623

7

16

85

12re

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2016 Score2015 Score


FULL LIST OF BENCHMARKED RETAILERS If your brand isn't listed, please contact DMI to discuss having an assessment completed.

Ace Hardware

Aeropostale

American Eagle

Ann Taylor

Anthropologie

Apple Store

Athleta

Banana Republic

Barnes & Noble

Bath & Body Works

BCBG

bebe

Bed Bath & Beyond

Best Buy

BJ's

Bloomingdale's

Brookstone

Charlotte Russe

Chico's

Children's Place

Coach

Costco

Crate and Barrel

Crazy 8

CVS

Design Within Reach

dressbarn

DSW

Eddie Bauer

Ethan Allen

Express

Finish Line

Foot Locker

Forever 21

Free People

Gap

Giant

GUESS

Gymboree

H&M

Harris Teeter

hhGregg

Hollister Co.

The Home Depot

HomeGoods

IKEA

J. Crew

Jared The Galleria Of Jewelry

JCPenney

Jo-Ann Fabric and Craft Stores

Jos. A. Bank

kate spade new york

Kohl's

La-Z-Boy

Levi's

L.L. Bean

Lord & Taylor

Lowe’s

lululemon athletica

Macy's

Madewell

Marshalls

Men's Wearhouse

Michaels

Neiman Marcus

New Balance

Nordstrom

New York & Company

Office Depot

PacSun

Petco

PetSmart

Pottery Barn

Reebok

Restoration Hardware

Rite Aid

Ross Dress for Less

Safeway

Saks Fifth Avenue

Sears

Sephora

Staples

Sunglass Hut

Target

Tiffany & Co.

T.J. Maxx

Toys "R" Us

Trader Joe's

ULTA Beauty

Under Armour

UNIQLO

Urban Outfitters

Victoria's Secret

Walmart

Walgreens

Wegmans

west elm

White House Black Market

Whole Foods Market

Williams Sonoma

World Market

Zara


TAKEAWAYSShoppers in the U.S. today continue to rely on mobile to make their lives easier. The computing power of mobile can be utilized to improve customers' in-store experiences. It can close the gap between the cold, unguided and unsatisfactory in-store shopping experience of today and the futuristic experience of Amazon Go.

Our research shows that consumers want tools on their mobile devices to help them save time, save money and shop smarter. Retailers that are providing those tools to their customers will see that shoppers will reward them with increased loyalty and more frequent repeat store visits and purchases. While we've seen improvement across the industry year-over-year, consumers' expectations continue to increase too. Retailers who fail to meet these expectations, with the tools and features customers want, will suffer.

We expect 2017 to be a year of great growth, with increased investment in mobile in-store experiences, kiosks and technology, bringing actionable data into the store to make the shopping experience better.

RECOMMENDATIONS 1 Keep innovating: Brands are

evolving fast, and if you stop moving forward, you will get left behind.

2 Invest in infrastructure: To create a seamless experience, systems need to be integrated. It’s not a flashy endeavor, but it provides a critical foundation for innovation.

3 Deliver for Mobile Reliants: This audience presents the greatest opportunity and most immediate reward.


ABOUT DMI Delivering successful mobility solutions requires a variety of distinct skill sets. Between mobile strategy, UX and app development, brand and marketing, data analytics, and device and app management, there's a lot to coordinate.

At DMI, we've brought together all of these services to create the first end-to-end mobility company. Our integrated approach allows us to take care of everything for our clients, from start to finish. That means no back and forth with multiple vendors or stakeholders. Mobility isn't just a part of what we do, it's why we exist—to reinvent business through mobility.

WHY CHOOSE US?DMI is built to deliver integrated solutions for specific industries, the largest of which is retail. We provide innovation through emerging technologies.

Our key retail service offerings are:

1 Industry and customer research and development

2 Proximity-based marketing solutions

3 Distribution and inventory optimization solutions

4 Predictive services

5 Customer loyalty program and survey solutions

6 Managed online mobile ordering platform and native app design and development

CONTACT US

One Rock Spring Plaza 6550 Rock Spring Dr. • 7th Floor Bethesda, MD 20817 P 240.223.4800 • F 240.223.4888

DMI Sales TeamU.S. Sales: 855.963.2099 International Sales: 240.200.5848 [email protected]

Documents

2016 U.S. RETAIL