Retail App Engagement Down in Q1 Versus Q4 2015

Much has been written about the plight of the retail industry this year. Whether it’s major retailers like Wal-mart predicting flat growth for fiscal year 2017 or various large brands closing their doors, the reality for many companies is that the retail landscape is changing and businesses are struggling to grow revenue and retain customers.

Despite the struggles, e-commerce continues to represent a major growth opportunity as a retail distribution channel. According to Mary Meeker’s 2016 Internet Trends report, e-commerce sales represented 10% of total retail sales in 2015 in the U.S., as compared to less than 2% in 2000. While the growth of e-commerce has been slower than expected, it remains the most promising channel for retailers to focus on, particularly as mobile shoppers tend to be their most loyal and have been shown to make more in-store purchases.

In her recent report, Meeker highlighted a new class of entrants to this market that are rising to capitalize on the growth of e-commerce, while also fighting the challenges facing traditional retailers. She referred to companies like Blue Apron, Birchbox and StitchFix as, “Internet-enabled retailers, products and brands [...] bolstered by always-on connectivity, hyper-targeted marketing, images and personalization.” Personalized experiences, which these apps provide, are the key to strong mobile engagement, so it is concerning that there is such a vast disconnect between how retailers perceive personalization and what consumers are actually seeing.

Of course, mobile apps are a huge piece of the success of these retailers, as they offer an extremely personalized channel to reach customers and help retailers gain an immense amount of customer data which can help to drive future campaigns and offerings.

However, many retail brands are failing to capitalize on these tools effectively. The challenge is that consumer expectations are higher than ever. Additionally, users are increasingly fickle when it comes to mobile usage -- with 23% of them only launching an app once after downloading it. Furthermore, many retailers that have invested in mobile tools like push and in-app messages have done so ineffectively, frequently causing more damage than good to their relationships with customers -- half of which find them an annoying distraction.

 

Mobile Customer Engagement Growing More Challenging for Retailers

According to our data, mobile customer engagement is more challenging than ever for retailers. Specifically, we uncovered that e-commerce and retail apps saw a decline from Q4 2015 to Q1 2016 in key benchmarks for user engagement and user retention.

When looking at metrics for app engagement, including app launches (average number of times an individual app is launched per month), session length (average time spent in an app across all sessions per month) and time in app (total amount of time spent in apps in a month), retailers saw a decline across the board:

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Additionally, in Q4 we found that 63% of e-commerce and retail app users were no longer using the app one month after they downloaded it. In Q1, that number grew to 68%.

Logic would tell us that this is likely due to three factors: 1) the holiday season in Q4 boosted the engagement numbers for the quarter, 2) the plethora of app choices available to consumers is expanding even more rapidly than we think, which is lowering the bar across all apps, or 3) apps are doing a bad job keeping users engaged and interested. As the architects of the mobile engagement crisis, we can tell you it’s likely a combination of all three.

On the plus side, e-commerce and retail apps did show higher-than-average click-through rates, meaning that app users were actually clicking through to what was being offered in the message, for both push messages and in-app messages in Q1. E-commerce and retail apps saw push click through rates of 10.9%, as compared to an average of 8.3% across all other app categories. Additionally, click through rates for in-app messages were 18.6%, as compared to 15.1 for other app categories.

While this is definitely a positive for the industry, oftentimes metrics like click-throughs only give companies a superficial understanding of what’s working, and are not always indicative of a truly engaged user.

 

Mobile Engagement - You’re Doing it Wrong

We recently looked across 50 retail app push messaging campaigns in which the retailer enabled a control group. In these scenarios, the control groups did not receive the push message, which allows the retailer to see what effect sending a push had on engagement, retention, and conversion. While these organizations are taking the right steps toward segmenting their users, we actually saw an overall negative impact across the board:

  • 40% of the campaigns resulted in a decrease in user engagement
  • 45% resulted in a decrease in revenue
  • 33% resulted in a decrease in conversions
  • 60% had a negative lift from the control group in at least one metric

Unfortunately, the data shows that retailers, like many businesses, do not truly know their users or what they want. And these same businesses are focused on the wrong metrics when it comes to mobile engagement -- like customer acquisition or click through rates - without understanding the data behind those numbers and the true impact on the business.

It’s not all doom and gloom though. Some retailers are creating better mobile experiences and thinking about how to engage with their users beyond just the mobile purchase. These retailers recognize that mobile represents a critical opportunity as an experience enabler. They are leveraging user location data, their previous behavior, interest and other tools to deliver messages and campaigns that truly meet customer needs.

But there is still work to be done. It’s time for retailers to think outside the box and beyond the device. Take inventory of the data around you and try to truly appreciate what mobile has to offer. Retailers must become more insights-driven to improve mobile engagement and build better, long-lasting relationships with their mobile users, both now and in the future. The fate of their industry depends on it.

Methodology

Localytics is the leading mobile engagement platform across more than 2.7 billion devices and 37,000 mobile and web apps. Localytics processes 120 billion data points monthly. For this analysis, Localytics focused on retail apps. We measured engagement, defined as app launches, session length and time in app. Time in app is a function of app launches and session length. The click rates are derived from only apps that have incorporated push or in-app. For the control group analysis, we looked across 50 push campaigns from retail apps and measured the lift of engagement, revenue and conversion from users who did not receive the push message. The timeframe for the analysis was Q1.

Forrester Research: Mobile Mind Shift Maturity Framework

 

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