Your Customers Are Shopping in Apps. Are They Shopping in Yours?

How is this for a growth story? In October 2022, the shopping app Temu had 850,000 weekly active users in the U.S. A year later, it had 38 million.

This eye-watering statistic says a lot about the buying habits of U.S. consumers in the post-COVID era. First, it reveals the insatiable desire of shoppers to go mobile — to search, browse and buy from native apps. Second, it suggests that they're prepared to do their mobile shopping with previously unknown brands, especially if the price is right — and the deals are there. Third, it confirms the dominance of overseas companies in the mobile retail space; Temu is based in China, as are the No. 2 and No. 4 apps by growth in time spent in H1 2023 (Shein and AliExpress, respectively).

Evidently, mobile technology is reshaping the retail landscape. Now, as consumers switch their allegiance from physical malls to virtual shopping apps, the pressure is on traditional brick-and-mortar retailers to stay relevant.

The Mobile Shopping Habit Hasn't Peaked

Mobile shoppers are set to spend more than 50 billion hours in shopping apps globally (on Android phones) for the second straight year in 2023. The total represents a 42 percent increase since 2020. Despite a seasonal dip in February, we still expect the graph to keep climbing upwards in the coming years.

The Top Shopping Apps Share the Same 'Must Have' Features

Retailers are continually experimenting with new app features to differentiate themselves from the competition. However, it appears that some offerings are non-negotiable. Looking at the global top 10 apps, there are three features that appear in all of them: third-party payment, curated shopping content, and daily/hourly deals. Other features such as member rewards and buy now, pay later (BNPL) are also highly popular.

The central theme across these features is mobile-first. They're uniquely suited for an optimal mobile experience — giving discounts on the go, access to loyalty programs, and app-based payment solutions.

Consumer Expectations of Shopping App Quality Are Growing

As consumers get used to mobile shopping, they're starting to demand more from their apps. Our report found that in 2021, 85.5 percent of shoppers downloaded apps with a mobile performance score (MPS) of 80-plus. We think this could rise to 89 percent by 2025.

Consumers expect the entire experience to be high caliber — from discovery and onboarding to fulfilment of their first purchase as well as features that keep them coming back for more.

BNPL Apps Have Exploded Into the Market

As stated earlier, BNPL has become an in-demand feature of the top shopping apps. However, many BNPL firms now offer their own standalone apps in addition to integration at the point of sale in many apps. These products have enjoyed stellar growth in recent years. Globally, downloads of BNPL apps climbed nearly 7x between the first half of 2018 and the first half of 2022.

E-Commerce and Retail Store Products Dominate the US Retail App Space

People can shop for anything inside mobile apps. However, our data reveals U.S. consumers overwhelmingly prefer two product categories. In H1 2023, they downloaded around 140 million e-commerce apps and 100 million retail store apps. The next most popular categories were supermarket and convenience store, coupons and rewards, resell, BNPL, pharmacy and drugstore, malls and shopping centers.

While e-commerce brands are the most in demand, we see mobile permeates all parts of the shopping experience: from ordering groceries to deal hunting to buying second-hand. In 2023, the name of the game has been price — something sophisticated Chinese players have executed well. Consumers have felt the inflationary squeeze on their income and much of the mobile shopping experience has centered on saving money or accessing more value.

So given the market shifts, how do retailers look to improve monetization, engagement and, more importantly, basket size in a mobile-first shopping experience? Consider these tips:

1. Enhance your keyword strategy. Understand which apps are ranking for a given keyword, analyze ASO keyword reports at the individual app level, discover new keywords, and optimize for the terms people are searching for.
2. Optimize paid search to protect your brand. Discover competitive threats from app store advertising. Find out which keywords are safe, threatened or exposed.
3. Get creative ideas. Explore app advertising creatives to draw insights from competitors' campaigns.
4. Find the best partners. Analyze potential social, gaming, loyalty, payment and other partners based on their popularity and audience overlap in a particular market.
5. Understand what your users are doing. See how much time users spend in different retail apps. See which versions and feature updates are driving or hurting a retail app's engagement.
6. Find out which features shoppers love in other apps. See what other apps are doing to make their first-time user experiences boost retention and revenue.
7. Devise strategies that drive lifetime spend. Find out how to make your customers loyal — and keep them that that way. Leverage mobile-native gamified and social features native to drive long-term usage.
8. Discover how your users feel about your brand. Check your MPS in real time to see how your app is performing by acquisition, engagement, sentiment and monetization to quickly rectify any leaks or respond to competitive threats.

The mobile shopping app space is incredibly dynamic. It’s full of innovation and novelty, and this has allowed newcomers to dominate the space in quick time. However, the sudden rise of companies such as Temu and Shein should not deter others. Quite the opposite. Their success proves that with a great product and a solid mobile-first strategy, there’s everything to play for.

Lexi Sydow is the director of corporate marketing and insights at data.ai, a mobile data analytics provider.