How cell phones are changing shopping

More and more people are doing their Christmas shopping on their cell phones.

Shopping on cellphones and portable tablet computers like iPads accounted for about 5 percent of online sales in November, while last year mobile shopping sales were too insignificant to measure, according to Coremetrics, an e-commerce measurement service.

“There were early adopters last year, but it’s absolutely real this year,” said Kelly O’Neill, director of industry marketing for ATG, which provides online and mobile commerce technology to retailers like Best Buy and J. C. Penney. And mobile shoppers are buying high-ticket items like diamond rings and cars, not just virtual goods and ring tones. 

EBay is so convinced of the future of mobile phone shopping that on Wednesday it acquired Critical Path Software, a mobile phone app developer, to speed its move into this new arena. 

An interesting reference to Best Buy, because that company and similar stores aren't doing very well.

The challenges faced by electronics stores were highlighted this week when Best Buy, the world’s largest consumer electronics retailer in revenue, reported that third-quarter net income fell 4.4 percent, to $217 million, and sales fell 1.1 percent, to $11.9 billion. Sales at stores open for more than a year declined 5 percent. 

“The market, which is already weak, is dramatically shifting away from stores and toward online,” said Colin A. McGranahan, a senior analyst at Sanford C. Bernstein & Company.
Online sales in the United States are forecast to account for 20 percent of total consumer electronics sales of $250 billion by the end of this year. 

This doesn't include shoppers using their phones to check prices in stores.

Marketers must contend with shoppers who can use their smartphones inside stores to check whether the specials are really so special, and if the rest of the merchandise is reasonably priced.

"The retailer's advantage has been eroded," says Greg Girard of consultancy IDC Retail Insights, which recently found that roughly 45% of customers with smartphones had used them to perform due diligence on a store's prices. "The four walls of the store have become porous."

Power to the people.

When free shipping isn't

Online merchants offer various inducements labeled "free shipping," because they know it will keep you from comparison shopping. And the odds are in their favor, Smart Money reports. “Shipping clubs” charge an annual fee to cover postage on all your orders no matter how small.

The math works out solidly in favor of the retailers. Stores that offer free shipping -- whether as a regular policy, a prepaid club or a special promotion – sell a lower average number of items per order, but consumers come back more often, says David Bell, a professor of marketing at the Wharton School of the University of Pennsylvania. Also, joining a shipping club discourages shoppers from comparison shopping. “You’re going to go where you’ve already got free shipping,” says Karen Machleit, a marketing professor at the University of Cincinnati. The psychological effect is that you’ll actually spend more with that retailer in the long run, and maybe in the short-term, too, if you’re adding filler items to push your order above the free-shipping threshold. 

Three things to do.

1. Before you sign up, review your online and in-store purchases from the retailer in question -- and its competitors -- over the past year. If there’s a convenient store nearby, or if sales and price differences led you to spread recent purchases among several retailers, a shipping club doesn’t make sense.  At Amazon you’d have to order 27 DVDs with a $2.98 shipping charge per disc, or 16 video games with a $4.98 shipping charge, to cover the site’s $79 annual Amazon Prime membership.

2. Consider other perks. At SmartBargains.com, the $10 Smart Shoppers Club gives members access to new and marked-down merchandise 48 hours in advance. Free shipping – on most items – is standard as part of all three programs.

But “most items” does not mean “all items.”

3. Know what you're getting into. Free trials are common shipping club enticements, but as soon as the period expires, you’ll be charged. Most clubs give you 30 days to ask for a refund. But by signing up, you may also be agreeing to auto-renew – they’ll keep charging you until you explicitly tell them not to. Check the policy so that you know whether the company will contact you before charging you again in a year, or whether it’s up to you to closely monitor your credit card statements.