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Jonathan Raveh
11-21-2018
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User Retention
The State of Shopping Apps 2018

In today’s day and age, eCommerce has become a nearly ubiquitous part of our lives. Some refer to it as the age of Amazon, while others are in awe of the rise of Alibaba. Now, as we venture into an increasingly mobile world, this shift introduces a major opportunity for companies to capture significant user attention and drive revenues forward through mobile devices.

 

The Rise of eCommerce and mCommerce

Currently, eCommerce transactions represent approximately 11.9% of global total retail sales [1]. Online sales are growing fast at 15%-23% annually, and are likely to constitute 17.5% of the entire retail market by 2021 [23]. Also, online shopping has proven to play a major role in offline retail, influencing over half — nearly 56% — of in-store purchases. Clearly, digital is the most significant path forward in retail [1].

Now, eCommerce is maturing and mCommerce is rapidly gaining leverage within the retail world. Currently, mCommerce accounts for almost 60% of total eCommerce transactions and 6% of global total retail sales. From 2016 to 2017, global mCommerce sales increased by 40.3%, totaling $1.357 trillion [4]. According to Flurry analytics, the market for shopping apps is growing rapidly, expanding 54% year over year in 2017 [5]. More than 1 out of 4 every eCommerce Desktop sales is  preceded by a click on a mobile device [6].

 

 

Trends in mCommerce

Advancements in mobile retail can be attributed to technological developments that have shifted how we consider digital commerce:

  1. Augmented Reality (AR) — Companies like Houzz, Amazon, and IKEA are all utilizing Augmented Reality to display items in a user’s current environment before ordering, anywhere at any time. Users of Houzz’s AR features are 11 times more likely to purchase items and spend nearly 3 times the duration in the app as opposed to non-AR users [7].
  2. Simplified Payment Technologies — Fingerprint and facial recognition are being quickly adopted. These tools directly lead to boosts in the percentage of transactions completed on mobile.
  3. AI — Companies can leverage consumer data to better understand customer behaviors and preferences, enabling increased personalization capabilities. As a result, brands are positively adapting how they communicate with users.
  4. Location Services — Apps that employ location services are likely to generate higher revenues. Location-based marketing also drives increased brick and mortar foot traffic [7].

 

 

On the user acquisition side, cost-per-install of shopping apps is decreasing substantially. In 2018, cost-per-install averaged $4.11, representing a 7.6% drop year over year. Furthermore, install-to-registration rates for retail apps are at 17.5%, growing at a rate of 20% annually. Data also indicates that the install-to-purchase rate for shopping apps, currently 7%, is up 20% year over year [5].

 

Challenges Facing mCommerce

Even with a positive outlook for mCommerce, there are urgent challenges facing this market:

  1. Smaller screens — Nearly half of all U.S adults are already comfortable with the digital retail user experience on a computer [8]. In addition, with smaller screen sizes, companies now have less space to work with when marketing or selling to users.
  2. Digital Security — Users are commonly nervous about their data in a digital world, and these fears swell when considering mobile use.

 

Yet, the primary challenge facing the mCommerce market today is untapped retention potential. Companies are not fully capitalizing on methods to increase app engagement and retention rates. Many mobile retailers see spikes of engagement only when users need to purchase items but low rates the vast majority of the time. And, while retail apps see the highest retention rates among any vertical, there is an incredible amount of room to grow:

 

Mobile Means Context

It is no secret that push notifications can drastically increase app retention. On average, retail app users receiving any notifications are retained 110% more than those who don’t hear from their retail apps. In addition, push opt-in users are retained for far longer than those who opt-out to push notifications [9].

Unfortunately, however, mobile retailers are not doing enough to drive retention upward. Until recently, companies could only communicate with customers based on simple data points (i.e. gender, ad clicks, location). Yet, this data is in no way contextually relevant to the real-world conditions in which a person might find themselves at any given moment. Communication based on non-contextual data leads, in most cases, to low retention rates.

In our mobile-first, data-driven world, the commercial potential of increasing user retention by even a small fraction should be taken seriously. Using mobile engagement platforms to segment users and automate communication can provide some help in increasing retention. Using real-world user context for meaningful communication, however, will add a highly relevant dimension to user interactions, and will ultimately skyrocket user satisfaction, engagement, and retention.