Think of it as> the online equivalent of the entire city of Omaha converging on a single department store. Back in August, the big retailer Gap decided to go where few large retailers have gone before using a popular discount Web site to hold a nationwide sale. Shoppers had 24 hours to go online at Groupon.com and buy half-price shopping vouchers good for everything from jeans to trendy messenger bags. And quite a few did; at one point more than 1,200 people a minute were snaring the coupons, so many that the site that arranged the flash sale had to redirect some shoppers and tell them to come back later. But by day s end, almost 450,000 potential customers had bought into the deal.
It s the new paradox for the American shopper: Just when buying online has become second nature for most consumers, retailers are shaking up the way they sell, now increasingly using the Internet to lure them back to Main Street or the mall. Electronic coupons, long a ho-hum corner of the e-commerce world, have acquired a whole new buzz, with more than 350 flash-sale Web sites springing up in the past two years, some of them generating monthly visitor traffic in the millions. And mobile phone shopping apps, once niche toys that used GPS to help the tech-obsessed find the nearest discounted latte, are moving into the shopping mainstream too. With the make-or-break holiday season approaching, big-box retailers are ramping up their technology so they can beam product offers directly to shoppers phones hoping to reach those buyers when they re within a short walk or drive of the stores. About 33 percent of retailers plan to have location-based marketing technology in place by year s end, up from almost nothing a year ago, according to the National Retail Federation.
Analysts describe this electronic push as the latest move in a psychological chess match, as retailers try to keep consumer budget-consciousness from casting a pall over the lucrative end-of-the-year shopping season. E-commerce has proved resilient, despite the recent recession; tech analysts at Forrester Research expect it to rise 11 percent this year, to $173 billion. But analysts point out that shoppers still make far more purchases in stores than online, and a well-targeted coupon can entice people out from behind their keyboards. At the same time, phones with the software and GPS technology to accommodate geo-targeted sales pitches are close to becoming ubiquitous: One in five online consumers now uses either an iPhone or another smartphone. Mobile phone based deals, which target these folks while they are shopping and even right in the store, could be something of a perfect weapon.
Of course, much of the new technology has practical and even ethical kinks to work out. The tools give retailers more ways to track users locations and habits, bringing up privacy concerns among consumer advocates. And some consumers are already reporting getting inundated by local retailers offers. (Joel Osman, who heads a mobile-technology group for consulting firm Accenture, calls this emerging hassle geo spam.) To help readers filter out that kind of hype, we ve taken a close look at three of the fastest-evolving shopping tools.
Jose Gomez-Marquez can sometimes be spotted in elec-tronics outlets near his home in Cambridge, Mass., using his iPhone to methodically photograph items on the shelves. He s taking pictures of barcodes, so he can use a mobile phone application called ShopSavvy. Once he s taken the photo, the app searches a database of retailers brick-and-mortar and online for prices. Sometimes the best deal is in the store, but other times he ll find, say, the same gadgets at Amazon.com for 30 percent less. Either way, he says, that s gratifying.
When Black Friday rolls around this year, consumers will have plenty of support in hunting for discounts. Since the 2009 holiday season, the number of shopping apps available for the iPhone alone has grown 43 percent, to more than 700, according to mobile-advertising company Mob clix. Because 93 percent of sales still happen in stores, app developers are trying to use mobile technology to enhance old-fashioned shopping, an effort that some industry insiders call Brick and Mortar 2.0. It s not altruistic on the retailers behalf, of course: Part of the idea is to give shoppers a quicker way to get information ( Is that Blu-ray player in stock? Will this sweater make me look paunchy? ), so they don t leave and shop elsewhere. Matt Murphy, a partner at venture capital firm Kleiner Perkins, which has invested in an app called Shopkick, says the idea is to create a constant conversation between shopper and seller.
That conversation is generating data consumers need for comparison shopping. Sites like TheFind.com and Milo.com let shoppers find prices and real-time availability, and will e-mail them once a missing item is in stock. ShopItToMe.com, a clothing-oriented site, allows users to register which items they want and in what size, and then alerts them when those items get discounted. All these sites base their searches on a user s zip code, steering shoppers to local deals. Some consumers lament that none of these tools are expansive enough to cover everything; because retailers vary so much in the data they put online, all the apps have gaps. And the infancy of the technology means there are occasional comic moments. When Gomez-Marquez recently tried to price-check a digital pen at a bookstore, he lost his cell signal he had to carry the box to the other end of the store to find reception. And some of the systems, he says, remain too complicated even for him: You don t want to have to read a manual, he says.
Pros: Quick price checks; local focus.
Cons: Databases incomplete; software can be slow.
Deals by GPS
Here s a Big Brother is shopping with you scenario: Picture a skier waiting in the lift line for an early-season downhill run. She s bundled up, but the weather is colder than she expected. Anxious and chilly, she glances at her phone, where a text message tells her that she can buy a thermal fleece jacket at the local branch of The North Face, the outdoor gear retailer. Voil , problem solved thanks to her willingness to let the retailer track her exact location and push deals to her in-box.
Last year was the first since 1992 that consumers coupon use increased. Part of that, of course, was due to people looking for bargains in the sluggish economy, but it s also a sign of the popularity of online coupons, which consumers redeemed four times more often than a year earlier. Now marketers are seeking ways to turn coupons into a trigger for an impulse buy by beaming them directly to mobile devices. The North Face encourages customers to opt in to geo-fencing technology, which enables it to reach them when they re near the store or even when they re someplace related to the store, like the slopes or a hiking trail. The app Shopkick uses geo-locating in partner stores like Best Buy and Macy s to send users redeemable points and coupon offers when they re in or near those stores. And for the holidays, consumers can expect a handful of retailers to experiment further, combining limited-time-offer psychology with locator technology to promote offers like a two-hour sale or an offer for the first 100 people to the door, says Julie Ask, a mobile analyst at Forrester Research. That s what mobile works for: immediacy, highly targeted, she says.
Of course, any shopper who wants in on these services needs to forfeit some privacy. I know what you re doing and where you are, says Accenture s Osman. And so far, retailers aren t offering huge deals in return for that scrutiny. At Best Buy, for example, Shopkick users can get 10 percent off smaller items like DVDs and video games, but bigger-ticket electronics remain off-limits. For now some consumers who are on board with the GPS movement have found that human error can still be a problem. Sandy Paben, a 50-year-old tech executive in Cazenovia, N.Y., says she s been rejected twice by cashiers after presenting a coupon on her phone. The kids behind the counter had no idea how to use them, she says.
Pro: Wide range of deals offered.
Cons: Can generate junk e-mail; savings usually modest.
This summer Ken Tisdel saw a deal on Gilt.com, a site that offers luxury items at huge discounts for very short windows of time. The terms: more than 70 percent off on Invicta watches, but only for shoppers who acted within three days. Ken called his sister, and within minutes she had bought more than a dozen, mostly for her husband. By now Ken has bought everything from luggage to perfume on the site, and he says the purchase process often triggers an adrenaline rush; after all, the deals can sell out incredibly quickly. You ve got to be ready to buy, he says.
For consumers, the flash-sale trade-off is simple: They get big markdowns, but only on a limited selection and only for a day or two. Mark Beccue, an analyst at market-research firm ABI Research, calls the sales impulse buying on steroids. The retailers get access to big audiences of motivated shoppers, while the sites get a cut of the sales. Many of these sites have a mostly local focus think discounts at the mom-and-pop pizzeria or at a new boutique looking to create buzz. But luxury-goods makers increasingly see them as a good place to unload inventory without having to advertise. That trend has let sites like Gilt.com and Rue La La build brands by focusing on designer apparel, jewelry and upscale home furnishings. And many sites are expanding their offerings for the holidays. Gilt.com says it ll offer personalized advice from fashion experts, along with recommendations based on members shopping patterns.
Although it s growing, the selection on these sites pales next to that of even a modest department store, and flash-sale sites can leave customers frustrated when supplies run out. Most maintain calendars or blogs that give users a week or so of advance notice, but that hasn t always helped Suzanne Hupy, a former retail executive in Milwaukee. She says she s logged on to Gilt.com to buy clothes for herself and her kids only to find the items sold out sometimes less than a minute after the announced launch. When it s gone, it s gone, she laments. She and other shoppers also point out another drawback in the flash-sale model: There s often a much shorter time limit on returns than they d see at a traditional retailer in one case, as little as five days after purchase.
Pros: Big sales on luxury items; spa deals.
Cons: Sales are brief; items often run out.