Will Cell Phones, PDAs Become Retailers Promo Tools?

Updated: Vivotech wants to leverage consumers' own hardware in a trade-off: accelerated shopping and special offers for customers, and a chance to display customized ads for retailers.

With PDAs and cell phones getting more advanced, one retail transaction vendor wants to turn those consumer gadgets into two-way, advertisement-friendly checkout devices.

A major roadblock for razor-thin-margin retailers adopting new checkout and loyalty programs is the cost of buying the many new pieces of hardware, plus the cost of integrating the software into legacy POS (point-of-sale) systems.

The approach being advocated by Vivotech is to leverage the hardware that consumers already own. After all, the fundamental display and communications capabilities of todays latest RF (radio frequency) cell phones and infrared PDAs is not that different from entry-level checkout pads.

On top of the consumer PDA or cell phone, said Vivotech CEO Jorge Fernandes, would be a small application that would take up about 100KB of RAM and cost between $1 and $2. Company officials speculated retailers would typically pay for the consumers software, and theyd also fund "minimal changes" for their own POS systems.

Jupiter Research analyst Bruce Cundiff questioned how easy or cheap these changes would be for the typical retailer.

"The merchant infrastructure is key," Cundiff said. "At $100 per lane—which is what Vivotech has quoted me—a large chain is talking about a multimillion-dollar investment. Is there going to be a return on that investment?"

Many retailers are likely to pressure vendors such as Vivotech to pay a lot more of the cost of the transition than theyll want to, Cundiff said. "The early adopters are really going to push for investments on the part of the payment networks."

Although the cost and the ROI (return on investment) are being debated, there are clearly benefits for both sides.

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Consumers, for example, would benefit from being able to use their own devices to accelerate their shopping. The retailer would benefit because of the increased loyalty and the potential to display customized advertising and promotions. Some consumers might regard those electronic promotion coupons as an incentive and a bonus, while others would regard them as an intrusion and a price to pay for convenience.

Fernandes estimated that there are as many as 40 million compatible cell phones today and many more PDAs. "Its quite exciting because its a very large and well-established market," he said. "Youd be literally carrying your token within your cell phone" or PDA.

There is nothing new about doing a quick analysis of the contents of a consumers purchase and then rewarding that consumer with a free item or a discount coupon.

But todays typical options either present the coupon in a customers credit card bill—which could be as long as five weeks after the purchase was made—or in the checkout lane at the end of the purchase.

That approach is problematic, Fernandes said, because the coupon can only be used on a future shopping trip, and the customer is just as likely to lose that coupon by then.

Next Page: Instant incentives.