Consumers are increasingly turning to their smartphones to shop, and today, Apple revealed a change that is a nod to that major shift.
On Nov. 5, the App Store will debut a new “shopping” category, removing shopping apps out of the “lifestyle” section. The new shopping category will include apps that are omnichannel, auctions, coupons, price comparisons and product reviews.
Jennifer Bailey, vice president of Internet services for Apple Pay, said that mobile shopping has seen “great growth and innovation,” and that it was the fastest-growing e-commerce segment, especially in apps.
The timing of the new shopping section makes sense, with Single’s Day in China on Nov. 11 coming just before the holiday shopping season in the U.S. and Europe. Earlier this month, Facebook said that it would begin rolling out a separate shopping tab to its mobile app, which would combine all the items for sale on Facebook in one place.
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According to Forrester Research, U.S. mobile commerce, meaning shopping in both apps and on mobile-optimized Web, is expected to climb to $252 billion by 2020, up from 2015’s estimated $115 billion. Recent Google research found that shopping-related mobile searches have grown 120 percent in the past year. The research also predicted that this holiday shopping season would reflect a transition away from marathon shopping days and toward mobile shopping moments; as many as 54 percent of holiday shoppers stated that they plan to shop on their smartphones.
Still, though, most mobile transactions happen on mobile-optimized Web sites, rather than in apps, for retailers. “The challenge with apps is that shopping apps don’t get enough frequency of use for most merchants to make it useful to download them,” said Forrester analyst Sucharita Mulpuru-Kodali. She has found that the highest conversion rates still are on desktop browsers.
In the App Store’s new “shopping” category, there will be a section specifically for Apple Pay-enabled apps. While much of the focus on Apple Pay has been on paying in stores with a smartwatch or smartphone, Apple Pay can also enable payment on an app on an iPhone or iPad, in models that support Touch ID — much like when users unlock a phone using a thumbprint. (The service is similar to PayPal’s One Touch, which became available in August 2014.)
The ability to make a purchase using Apple Pay in a mobile shopping app potentially solves a major problem facing retailers trying to capture mobile shoppers: The often clunky, inefficient mobile checkout process. According to the Forrester research, although one-third of retailer Web traffic is from phones, only 11 percent of sales are on phones; it recommended that retailers improve the mobile shopping experience.
“The largest lifts in conversion we’re seeing come when companies fix their core Web site and develop better pages that have incorporated a responsive design framework,” Mulpuru-Kodali said. She said that PayPal usually has twice as much adoption on mobile devices as on desktop devices.
Bailey said that conversion rates are notoriously low, and cart abandonment is notoriously high, on mobile apps, simply because the process of logging in and entering credit card information can be so difficult. She said that merchants who have already incorporated Apple Pay into their mobile shopping app, which includes those like Sephora, Cole Haan and Etsy, are reporting doubled checkout rates and checkout times that have decreased by more than 30 seconds.
Rather than enter payment details like credit card number and address, Apple Pay users can auto-populate the fields in the transaction. The process of integrating Apple Pay in an app requires some technical development work and a new checkout flow, Bailey said.
Numbers from Gilt show that more than 50 percent of revenue comes from mobile, and there is a higher visitor rate and higher visitor conversion on mobile than on the Gilt site.
Rachel Tipograph, whose mobile video shopping app MikMak processes payments using credit cards (through Stripe) and Apple Pay, has found that Apple Pay users are “easier to convert to purchase” than non-Apple Pay users.
Still, although mobile shoppers might make a quick refill purchase on Target’s app or buy something they saw on Pinterest, there is still some hesitation to make a major, luxury purchase using one’s phone.
“Sure,” said Mulpuru-Kodali, “people buy everything on mobile devices. The question is how much they’ll buy and we’re still seeing a minority of transactions on mobile devices, and even online overall, for luxury.”
Bailey pointed out that the phone might not be the only place the consumer visits during the path to purchase, but it might be the device that sees the final transaction after a customer has browsed in-store. And, as consumers grow more comfortable with shopping on a phone, the average price of the items might increase.
“The new guys are shopping on their phones. The old-school guys, not so much — but I feel that they will,” said Khalid Meniri, who founded the men’s shopping app Curatum after working on the mobile sites for firms such as Moda Operandi and Harper’s Bazaar. “I have seen people at Moda Operandi spend thousands on a Marchesa dress, so the behavior is there, but it’s the beginning, so does everyone do it? No.”
Clothing resell app Poshmark started out as a purely mobile app in 2011, before introducing a desktop version. According to cofounder Tracy Sun, it will begin offering Apple Pay in coming months.
“You always want to think about where the puck is going,” Sun said, quoting Wayne Gretzky’s famous maxim. “If you’re not fast on mobile, you’ll lose them.”