Digital coupons may represent a small fraction of the total population of coupons, but their impact is starting to be felt in food retailing.
As delineated in a special technology report here, digital coupons are proliferating online, on mobile phones and in email. They have a particular appeal to technology-fluent younger shoppers, but are working their way into the lives of a cross-section of consumers who have become more deal-conscious in the recession.
There are still questions surrounding digital coupons, such as how best to redeem them at the POS. Mobile phone offers, in particular, present a number of redemption options, including scanning a bar code on the phone's display, entering a code from the display, and handing the phone to the cashier.
Some critics say that in a high-volume store like a supermarket, the cell phone is too much of a potential interruption to the checkout flow. The phone may need to be turned on; it may not get good reception; or it may start ringing. Any of these events would waste valuable seconds at a busy checkout.
Moreover, retailers need a handheld image scanner to scan a bar code on a cell phone. Flatbed laser scanners are not up to the task.
One solution, which has been employed by such mobile coupon vendors as Cellfire and Shortcuts.com, is to allow shoppers to download coupons to their loyalty card. Indeed, loyalty cards are becoming a common redemption vehicle, not only for mobile coupons, but for online and email coupons as well.
This approach to coupon redemption adds value to loyalty cards, which have been criticized for years for being underutilized.
On the other hand, not every store runs a loyalty program. For those stores, efficient cell phone checkout may have to wait a few years. That's when cell phones are expected to become universally equipped with near-field communication (NFC) technology, which will enable them to communicate both payment and promotion information to NFC-compliant POS systems.
Some vendors have already devised systems that enable cell phones to connect electronically with the POS. One is Tetherball, Indianapolis, which affixes a tiny RFID chip to a cell phone, enabling it to communicate with a reader at the POS.
In any event, as time goes on, consumers will become increasingly accustomed to using their cell phone for all kinds of shopping-related activities such as list-making, scanning (via the phone camera) and price checking, so using them to check out won't be as much of a stretch.
Redemption issues aside, the potential of digital couponing has only begun to be tapped. Retailers are just starting to explore the target-possibilities of electronically delivering personalized offers to a consumer's cell phone. And on the back-end settlement side, converting from paper to digital coupons eliminates the time-consuming, fraud-prone and costly process of physically transporting, sorting and counting paper coupons.
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