Point of sale redemption is key to mobile vouchers/codes

There is an interesting article in the FT today talkingabout the rising influence of mobile in commerce generally – largely driven byrising smartphone penetration  – up to 30% of new phones sold in the US in Q1 from 21% in Q1 2009.  In summary people are using the mobile web to:

  •         Check competitor’s prices whilst they are instore
  •         Research products
  •         Read product reviews
  •         Buy products
  •         Access and redeem coupons

Retailers are rightly worried about the increased price transparency that comes with the mobile internet and whether they will have to reduce prices as a result, but from a startup perspective I think the mobile coupon opportunity is the most interesting one here.  I think I first saw a business plan based around mobile vouchers back in 2000, and I have probably seen one every year since then, but recent developments have me wondering if it might finally be an idea whose time has come, and that is because smart phones are enabling point of sale redemption.  According to the FT article US retailers Kroger and Target have begun issuing money off ‘digital coupons’ that can be downloaded to mobile phones and scanned against purchases at the store check out.  Similarly in Japan at McDonald’s users can download a coupon and then wave the phone over a reader at the till to receive a discounted price, and if they are on the right network they can even have the cost of the meal added to their mobile bill.

The point of sale redemption is usually based on 2D bar codes called QR codes (see picture) and it is this which makes the end to end coupon experience low friction enough that it could really take off.  The major barrier now is retailers updating their EPOS systems, which is expensive and won’t happen over night, but is clearly starting.  The obvious consumer oriented startup opportunity lies in driving people into real world stores by getting them to download coupons onto their mobile phones, and then taking a slice of the transaction – this is in many ways a real world parallel to the online affiliate network opportunity.  There might also be opportunities in technologies which enable this process.

Turning quickly to the other areas described in the FT article, I’m a big fan of the Amazon iPhone app, but forthe next little while I think m-commerce will be limited to big brands like Amazon thatusers already trust and who can afford to build high quality rich mobile apps.  As a result mobile price comparison and research sites will struggle to make direct links to transactions and the cost per action advertising model which supports these sites on the web won’t translate directly to mobile. Once mobile couponing gets underway, that will change.