Apps: The New Corporate Cost-Cutting Tool

Yesterday I was reading the LinkedIn article “Jujitsu 2013: How Apps Turn Customers Into Workers” by Dennis K. Berman. It pointed me to Anton Troianovski’s article in The Journal about the impact apps are having on branding and the overall structure of businesses these days. Great read.

TRUMBULL, Conn.—The biggest mall in town stopped staffing its customer-service desk in January. But perched on that same desk recently was a plastic cutout of a hand holding a smartphone. “Download the free app,” it said.
Apps may be creating new jobs for developers and marketers. But around the edges of the rest of the economy, they’re also starting to become a substitute for people who earn a paycheck.
Businesses often say their main goal in developing smartphone applications is to make things easier for customers and to build brand loyalty. Yet they’re finding it doesn’t take much effort to turn the smartphones carried by most Americans into payment terminals or data-entry forms.
As a result, Americans increasingly are becoming their own bank tellers, loan officers, insurance adjusters, checkout clerks, restaurant order takers, citrus-crop inspectors and mall concierges. In the case of mall owner Westfield Group, apps are giving the company a way to give directions and answer questions without paying for concierge staff, which it had begun trimming anyway.
Other companies are explicitly pushing mobile technology in hopes of paring back or redeploying workers. Domino’s Pizza Inc. Chief Executive Patrick Doyle, speaking to analysts in a conference call last week, said such savings are showing up now that mobile and online orders combined have reached a “critical mass” of more than a third of total sales.
“We are certainly in the range where you start to see some labor efficiencies,” Mr. Doyle said. Mobile orders have been growing fastest, driven by apps the company has developed for Apple Inc.’s iPhone and Google Inc.’s Android software.
Domino’s won’t say how much its apps cost to build. But a company official said in a meeting with investors in January that the company charged franchisees 17 cents for each order placed digitally, according to a transcript of the event.
Personal computing and the Internet have been pecking away at the labor landscape for decades, undermining demand for everyone from travel agents to call-center workers while creating jobs in other fields. The mobile-device boom, which is putting a camera, touch screen, and a high-speed Internet connection in more and more pockets and purses, is giving businesses a new way to shift work from employees to customers.
Retail chains including Stop & Shop, owned by Ahold NV of the Netherlands, and Wal-Mart Stores Inc., are both enabling self-checkout apps in some U.S. stores that let customers use their cameras to scan items as they put them in their shopping carts. Both retailers said they were seeking to give customers an alternative way to shop. A Wal-Mart spokeswoman, Ashley Hardie, said there could be opportunities to redistribute jobs in its stores as more shoppers use the app.
“It has the potential to make more associates available to assist customers with questions or restock shelves,” Ms. Hardie said.
Catalina Marketing, a retail-focused digital media company based in St. Petersburg, Fla., provided some of the technology behind the self-checkout apps at both chains. The company’s sales brochure promises its app technology “lowers your front-end labor costs by 10%-15%.”
“If a retailer is all about passing operating costs on to the consumer, you’ll probably see, yes, a reduction in labor,” said Todd Morris, Catalina’s head of mobile. “If a retailer’s strategy is a better, more pleasant shopping experience, you might see an equal cost of labor but kiosks or roaming store associates.”
For some companies, mobile apps are filling a void as they cut positions. Australia’s Westfield, one of the world’s biggest mall owners, has been closing the customer-service desks at some of its 47 U.S. malls in recent years, including, recently, the one in Trumbull.
The company has been encouraging customers to download an app that provides mall maps, turn-by-turn directions and even a “concierge” feature that encourages users to ask things like, “Where is the bathroom?”
Tushar Patel, whose Miami company Simplikate Systems LLC developed the Westfield app, points out that these are functions traditionally done by a human concierge. His company builds similar apps, in which directions are a key selling point, for other facilities like casinos and airports.
“They can physically replace people,” Mr. Patel said of those apps. He said Simplikate charges clients around $100,000 to build apps with features like mapping, weather, the ability to remember parking spots, and detailed information about stores or venues.
Westfield spokeswoman Katy Dickey said the company has been closing the concierge desks because shoppers didn’t want or expect that sort of service. Even without staffed concierge desks, Westfield malls still have personnel available to answer shoppers’ questions, she said.
The smartphone camera is what allows auto-insurance companies to create apps that let policyholders report their own claims. When photos of car damage are sent in by a mobile app, Allstate Corp.’s Esurance can sometimes avoid sending a claims adjuster into the field altogether, said Lisa Ward, Esurance’s vice president of customer experience.
Banks large and small use the camera to offer remote-check deposit via mobile banking apps. Some financial institutions are now going even further.
First Financial Credit Union, in Chicago, recently added a feature to its app that lets customers sign loan documents via a phone or tablet’s touch screen, eliminating the need to go into a branch to close a loan. Chief Executive Patrick Bassler said the credit union wrote 287 loans in November, the month the feature was introduced. That was more than double the monthly average, and the bank didn’t have to add a single temporary or permanent employee.
Mr. Bassler says he doesn’t plan to lay anyone off, but that the app’s features will help him grow without adding staff. One of his challenges, he says, is to convince employees that their jobs are safe.
“Our intent is not to use technology to eliminate employees, but it’s hard for everybody to see that,” Mr. Bassler says.
The government is also getting into the act. The Department of Agriculture spent $40,000 developing an app called “Save Our Citrus” that allows people to photograph and report diseased lemons and oranges. The department hopes the app will do the work of “two or three hundred inspectors in the state of Florida and dozens in Texas and dozens in Arizona and a couple hundred in California” that it can’t afford to hire, said Lawrence Hawkins, the USDA public affairs officer who heads the citrus initiative.
But there are risks. Even smartphones-savvy consumers sometimes prefer human interaction. At the Trumbull mall in Westfield several employees of stores near the decommissioned concierge desk said shoppers were asking them for directions instead.
Shopper Kim Farmer, marching through the mall with three young daughters and three Build-a-Bear Workshop boxes in tow, stopped by the unattended desk on a recent Saturday looking for information about gift cards and a sporting-goods store. She voiced a tinge of frustration as she walked away.
“I have my hands full,” Ms. Farmer said. “I’m not going to waste my time putting an app on my phone.”

Source: The Wall Street Journal


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