The Future of Retail: ‘In-Store Mode’ and In-Aisle Payments

I’ve said for years that the real mobile opportunity isn’t about buying things on a tiny screen (m-commerce); it’s about driving offline commerce. Despite the disproportionate media attention for the former, the latter is where 93 percent of U.S. retail still happens.

The world is slowly catching on to that reality, which is good to see. A recent Deloitte report exposed the online-to-offline (O2O) principle, and the Washington Post covered it last week, framing it as “surprising.” It’s neither surprising nor new, at least to some of us.

But there was an under-recognized trend WaPo acknowledged: the dual modality of shopping apps that switch between a regular mode and “in-store mode.” The former gets you to the store while the latter helps you find product details, store associates, or aisle placement.

Target started doing this after it discovered that the top mobile site visited from within the store was… Target. Walmart has offered it for a while, and Whole Foods’ app lets you order coffee and sandwiches once you enter the store. Expect to see a lot more of this.

In-store mode makes sense because there are inherently two completely different use cases, deserving of their own feature sets. Think: deals, directions and “add to shopping list” when you aren’t in the store; inventory-check, ordering and aisle maps when you are.

Moreover, most of the retail world — and the ad tech that supports it — has focused on marketing to get people into the store. And this most often happens out of context, such as banner ads when you’re playing Words With Friends, or “buy” buttons in social feeds.

Wouldn’t it stand to reason that higher receptivity to promotional messaging comes when consumers are truly in buying mode. And wouldn’t the probability of that mode be greatest when someone is in-store, as opposed to browsing Instagram on their couch?

To step back from a marketing context, in-store mode would ideally not be about promotions but a true shopping utility. The goals would be bigger basket sizes and a more functional shopping experience that engenders repeat visits and overall brand equity for retailers.

In-store mode could also support a parallel retail effort that everyone loves to talk about: beacons. One underestimated beacon drawback is that users have to turn on bluetooth and opt in at the app layer. In-store mode could be a Trojan horse for that opt in.

Moreover, conditioning shoppers to use app-based shopping companions gets to where I believe this is all going: in-aisle payments. As I’ve written, scanning and buying throughout the store space can transform retail: smaller checkout bottlenecks and bigger basket sizes.

This is where Apple could dominate, given that owns the hardware (iphone), software (iOS), payment processing (Apple Pay) and it already has your credit card number (iTunes). It already offers in-aisle payments in its own stores, which is a rather obvious clue.

The next step — the hard part — is retailer relationships. But Apple has proven it can talk embattled industries into playing ball with new distribution models. And the results here could be bigger than anything its done with digital music and movies — $3.7 trillion big.

Speaking of embattled industries, it always struck me as ironic and even a little comical that some retailers took the RIAA-esque cease-and-desist approach to mobile shopping. They haven’t learned from recent history, which is really the only “surprising” thing here.

Put another way, the winners of the next era of local retail will be those that run towards in-store shopping apps, not away from them. Those so far include Target, Tesco, and Whole Foods. Retailers in the other camp: Don’t say you weren’t warned.

Michael Boland is chief analyst and VP of content at BIA/Kelsey. Previously, he was a tech journalist for Forbes, Red Herring, Business 2.0, and other outlets.