Mobile: The Death Of Impulse Purchases

Nick Holland has spent the last decade covering the intersection of the mobile and payments industries. He currently covers all things mobile-transaction related at Yankee Group.

Until recently, physical-world merchants have had location and expediency to their advantage. If the customer has entered a store and tried on the shoes, there is a good chance that she has passed the point of no return and is going to leave the store encumbered by a shoebox in a glossy plastic bag. That's a classic impulse buy. But once you insert a smartphone into that process, the impulse buy becomes an endangered species.

Now the customer enters the store, tries on the shoes, opens a price-comparison app, scans the barcode on the shoebox, finds the same shoes for 20 percent less online with free overnight shipping, takes off the shoes and leaves the store looking a bit smug because she's just found a bargain—and another impulse purchase is dead.

But this is just a few tech savvy folks using their phones for price comparisons, right? Wrong. Yankee Group 2010 data shows that 38 percent of smartphone users are performing price comparisons using apps and mobile browsers. In four years, we can expect a quarter of the entire U.S. population to scrutinize retail prices using their phones before opening their wallets.

Not everyone agrees that price comparisons will kill impulse buys, though—including StorefrontBacktalk Editor Evan Schuman, who lays out his alternative view this week. But the pressure on impulse buying will only get greater. If a quarter of the population in four years will be comparing prices over mobile, what percentage of the population will it be in eight years? Or 10? Smartphone penetration will only continue to grow, as will the level of consumer comfort with using price-comparison services.

Further, we can expect people to articulate to friends and family how they scooped up a bargain on their new plasma screen using their smartphone rather more than how they didn't really do the research and got swept away by all the shiny lights. Price comparison shows intelligence and cunning when confronted by aggressive sales staff—it is a personal story of David versus Goliath. Impulse purchases are the opposite, showing personal weakness—they are a dirty little secret that probably isn't to be shared with others.

Will price comparison kill impulse purchases? For some areas that really aren't that significant, and where the impulse is in the context of a larger sale, probably not. We can, for instance, still expect to see copies of People magazine and boxes of Tic-Tacs at the checkout aisle for the foreseeable future. There also will be mission-critical impulse purchases where the component of immediacy makes buying there and then a 'no-brainer.' Imodium, for example.

But, for single item purchases and especially for bigger ticket items, the connected consumer will increasingly shop around while shopping, and shopping around now means anywhere on the planet. This is where the balance will really be tipped for impulse buys—where the customer trying on a pair of shoes is no longer over the threshold from window shopper to buyer.

So how can retailers counter the globally price savvy consumer? Because frisking visitors for smartphones at the door may be frowned upon by shoppers, it will be up to retailers to match knowledge with knowledge, particularly understanding where they can provide immediate advantages over the competition. Can they beat the price? Are there hidden costs that the competition isn't divulging? What is the actual difference between the time of purchase and the time of delivery? How is the competition's reputation for service and after-sales support?

Irrespective of how retailers compete, empowered consumers will continue to grow in numbers, with a corresponding decrease in purchases made without research. The thrill of immediacy will inevitably be trumped by the strength of savvy. Impulse purchases will eventually go the way of the Furby. Which, incidentally, I bought as an impulse purchase (I still have buyer's remorse). Please reach out to me and share your thoughts.