But before you look at ROI, it's important to look at some app usage statistics. Stats show that consumers strongly prefer apps over mobile websites, and apps outperform mobile sites when it comes to conversions and revenue generation.

According to Comscore​, apps accounted for 87% of all U.S. mobile traffic in 2017, and that number is accelerating (see chart below). Year-over-year "shopping" mobile app usage grew 54% in 2017 — the biggest jump of all categories measured.

Shopping apps are being used by consumers like never before, and we can look to the 2018 holiday season for proof. On Black Friday last year, the top 10 shopping apps added half a million first-time users, 16.3% more than they added in 2017, according to Sensor Tower data.

While mobile commerce continues to surge, app adoption stands out with retail app usage doubling in 2018.

The vast majority of time spent on mobile devices is spent on apps. According to a Criteo report, native retail apps generated 66% of all mobile commerce revenue — twice as much revenue as mobile websites. Apps even outperformed desktop e-commerce sites — accounting for 44% of all online sales in Q4 2017, versus 33% for desktop in the same period.

And consumers typically like using apps. According to Business Insider research cited by MindSea, the app millennials rated as "most essential" was Amazon (35%), beating out all social media apps (see chart below).

Options for building retail apps

Let's shift gears and take a look at the three most common approaches for building native mobile apps. One option not covered here is an "app wrapper" approach — whereby your current mobile web experience is simply "framed" inside an app. This is not a real app experience and offers few of the benefits.

Note: Shopping apps must be integrated with the ecommerce platform a retailer is already using (Magento, Shopify, BigCommerce, etc) and using a solution provider that has experience in this regard is key.

The three most common approaches for building a native app are:

• Agency model: This typically means hiring a design agency to create the UI and then having the code written. These projects are typically in the $100,000+ range and require the retailer to support the app code for both apps. Remember, most agencies do not have deep e-commerce integration experience. So, while they might be able to deliver stunning designs, their lack of e-commerce platform integration experience might come back to haunt you.
• In-house model: This is where a retailer staffs up and has the resources to design, build and maintain an app in-house. This may be the right choice for big retailers who want their native app experience to be a core competency — one they want to strategically invest in via owned resources and infrastructure.
• Platform model: Here, a retailer works with a third party platform that's pre-integrated with the published APIs from the major e-commerce platform. The solution provider delivers custom designs on top of this proven "foundation." The partner builds and maintains the app and provides a secure control panel to the retailer for changing imagery, sending push messaging and other tasks.

As you consider these three approaches, keep the total cost of ownership (TCO) in mind over the long term. Apps evolve and change, and both Google and Apple frequently introduce new devices, platforms and software updates that can effect mobile apps.

Calculating ROI — conversions, conversions, conversions

ROI is simply a matter of generating enough revenue to pay back the investment on a net basis. This can be calculated via pure math, but there should also be a value placed on a better user experience. While the latter is harder to quantify, the former is just a matter of tracking app sales and applying the net upside (after margin) to the cost of the project. With proper tagging, this is as easy as looking at your analytics dashboard.

Native mobile apps convert sales at a rate significantly higher than mobile sites served via a browser. This all-important conversion rate metric is the first place to look when considering how to calculate app-build ROI.

Online retailers should start by knowing their current mobile website conversion rate. Put simply, this is the number of people who had a chance to buy (site visitors) and then did so (transactions), and Google Analytics breaks this out. Typically, mobile sites offer conversion rates stuck in the 1.5-2.0% range, about half the desktop conversion rate. Native mobile apps, on the other hand, boast conversion rates averaging 6%, or three times that of traffic to mobile websites.

So, if your conversion rate from mobile traffic to your responsive website is stagnant, a native app can turbocharge this important conversion rate metric.

Personalized engagement with your best customers

More revenue from higher conversion rates is just part of the reason to build an app. Statistically, only 10% of customers generate a whopping 40% of sales, and these are the VIP customers that are most likely to download and use an app. An app provides important engagement benefits for these customers. Here are some specific ways an app can help take personalized customer engagement to a deeper level:

• Push notifications: Unlike email blasts that get lost in the clutter, specific calls to action delivered via in-app push messages are rendered only to opt-in customers who have your app — the very customers most likely to act upon the offer presented. Click-through rates for push messages averaged 7.8% in 2018.
• In-store engagement: App features like location awareness, bar code scanning, product image recognition, AR, beacons, and buy online and pick-up in-store (BOPIS) can all be used to drive app users to physical stores. This cross-channel appeal is key to understand.
• Loyalty: Apps are perfectly suited to incorporate loyalty programs because the interaction with an app is inherently personalized. When the app is opened, the user is already logged in and the experience is tailored to them, including the display of points earned, discounts awarded, etc. Treating your app-download audience as a special subset of your loyal customer base can generate big rewards.
• AR and visual search: Apps can activate a phone's camera and overlay virtual products into a real scene through AR. Apps can also trigger visual search via image recognition to allow in-store interactions to drive sales. An increasing number of retailers are experimenting with these app add-ons, and the results are impressive. After all, 83% of consumers ages 18 to 44 used a mobile device in store in 2018.

These examples of app-based interactions add personalized engagement to the mobile shopping experience, which can in turn drive more sales. They also link the digital and physical worlds, so an app can support retail locations as well as better online sales metrics.

Faster checkout, less cart abandonment

Cart abandonment is a key problem on the mobile web, with over 85% of all mobile website carts abandoned.

Retail apps can help combat this in a number of ways. By simply opening an app, the consumer is already logged in — no need to enter a password, address or credit card data. This can greatly reduce checkout friction, boost conversion rates and lower cart abandonment rates. Apps also typically feature mobile wallets like PayPal, MasterPass and GooglePay to further speed the checkout process.

As consumers come to expect an experience tailored to their preferences across all touchpoints, apps provide a unique opportunity to not only track the buyer's journey, but enhance it through an integrated and personalized experience. While this can take many shapes and deliver various benefits, faster checkout and reduced cart abandonment rates add money to your bottom line and drive ROI.

Speed wins

According to a Google study, when mobile page loads reach 10 seconds, the probability of a bounce jumps 123%. The same study showed that the average mobile website loads in 9.6 seconds. In comparison, over 50% of current native iOS apps load in less than 5 seconds.

As desktop websites become more clogged with features, responsive design mobile sites are slipping further behind when it comes to performance. Even the best mobile sites with responsive web design can't hold a candle to app speed and convenience. Put simply, apps are faster because they use on-device caching to store the data used to render shopping experiences. A native mobile app is always on and in the device your best customers interact with for at least 3 hours a day.

Conclusions

Retailers considering building an app should do so with ROI in mind. After all, who wants to invest in a new omnichannel retail experience that doesn't pay for itself? Higher conversion rates are the best metric for generating this revenue. That said, there are many other reasons to offer an app, and personalized, deeper engagement among your best customers can pay off too.

Ask yourself: When was the last time you visited Amazon's mobile website using a browser on your phone? Many of you likely never have because the personalized and convenient tools Amazon boasts in its native app makes using the mobile site obsolete. The same logic should apply to retailers looking to win in 2019 and, if done right, a rapid ROI will result.