Mobile phones to overtake physical stores by 2020 - report

According to the report, one in three retailers cited a more empowered customer (32 percent), alongside increased choice (competition from other retailers – 37 percent), as amongst the top causes of change in the retail sector in the past five years.

The report has also revealed that retailers are ramping up investment in new technology solutions to keep pace with customer demand. It is expected that in 2013, 44 percent of retailers will offer contactless payment technologies in-store, voting this the single most important area for short-term investment. More than one in three (35 percent) will invest in new technologies to enhance e- and m-commerce. Furthermore, a personalised service is key to retail success, as retailers vote data the second most important area for short-term investment to retain customer loyalty and grow market share. 41 percent say they will use data to deliver an improved customer experience in the coming year, whilst 38 percent are increasing customer segmentation and 39 percent are delivering personalised customer experiences across multiple channels.

However, the report has found that the industry feels hostage to the next game-changing technology. 34 percent of respondents believe that some yet unknown technology will be a main driver in changing customer expectations by 2020, hindering confidence in how to invest. This feeling of uncertainty rises to 49 percent in companies with a turnover of EUR 500 million or more. Larger retailers are also more likely to cite legacy issues as holding the industry back when it comes to offering the multi-channel opportunities that consumers want: for example, 70 percent cited speed of adoption across different global market, versus 60 percent amongst smaller retailers.

Moreover, the report has found that whether it is through the use of near-field communications technology or using geographical positioning capabilities to offer targeted discounts, mobile will be the shop front of tomorrow. Whilst today mobile phones are being used by just 32 percent of retailers to communicate with customers, by 2020 43 percent suggest it will become the most important channel overtaking stores, PCs, call centres and direct mail.

The study has also found that, whilst short-term retail investment may focus on enhancing e and m commerce offers, they will aim to revolutionise their in-store service provision in the longer-term, providing a seamless service across all channels. 41 percent of retailers envisage they will provide mobile points-of-sale in-store by 2020, whilst 33 percent will provide self-service kiosks and 35 percent will use location-based technologies to attract new sales.

Finally, the study has found that there is widespread recognition that first-generation consumers in emerging markets will reshape the industry. Only 20 percent of people see it as a factor behind changing expectations in the last five years but 36 percent believe it will be a driving force over the remainder of the decade, making it the single biggest factor behind changing consumer expectations in years to come.

The report titled “The I Factor: how consumer demand is driving retail innovation” was sponsored by MasterCard and written by the Economist Intelligence Unit (EIU), an independent business within The Economist Group.