To lure customers and boost sales, stores are deploying cool smartphone apps. Will consumers buy into the latest shopping fad?
By Caitlin Keating, reporter
FORTUNE -- Scott Thompson, president and CEO of eBay's PayPal unit (EBAY), says that he is one of those people who drives to Starbucks, sees the long line, and keeps on driving. "I'm on the go. I wish I could have stopped, but I don't have time," Thompson quips over a glass of wine. "No one does."
Not surprisingly, Thompson and his competitors in the fast-growing mobile payments business have a solution for impatient consumers and harried retailers alike: software that lets consumers pre-order and pre-pay for their coffee (or sweaters, or TVs) with a few taps on their mobile phones.
"We all just don't have time to shop," says Thompson, who hosted a recent soiree in New York to unveil PayPal Wallet, smartphone software coming next year that promises to replace both the consumer's wallet (all your credit card information is stored in it) and the retailer's cash register.
But retailers aren't waiting for PayPal Wallet. Many are already going mobile, either offering mobile apps to supplement e-commerce sites, or finding new ways to let potential shoppers get information in stores using their mobile phones.
Sears, for example, has tricked out O'Hare Airport and other high-traffic areas with so-called shopping walls that feature its top-selling products. See something you like? Whip out a camera-enabled phone, scan the Quick Response (QR) code, and you'll be sent to an e-commerce site that lets you purchase the item. By the time you board your plane, the item is already in the process of being shipped.
Tom Aiello, a division vice president at Sears's parent company, Sears Holdings (SHLD), said in regards to this holiday season, "Customers are going to spend more, but shop less. We have seen people use mobile phones when electricity was out to order generators in an ice storm, or an air conditioner during a heat wave in New York City. We've also seen surprising items like lawn tractors purchased on mobile phones and tablets."
The National Retail Federation estimates more than a third of retailers say they have significantly invested in QR codes in offline advertising, such as magazines and billboards. About half of online retailers say they have significantly invested in mobile-optimized websites, and 20% have invested in tablet device apps.
Greg Ahearn, chief marketing officer of Toys "R" Us, has started accepting mobile payments in some of its stores via Google Wallet (GOOG), the search giant's mobile commerce platform. Consumers who have phones enabled with special wireless technology can "bump" their gadgets against compatible cash registers at some 200 of the toy retailer's 870 worldwide locations and complete the sale that way. "It's all about convenience," Ahearn says. "The easier you make it for someone to find the exact toy you're looking for and get it to them the way they want it is the way retail is headed."
But sometimes people can't find that exact toy, or book, or necklace. That's where gift cards come in, and no surprise, gift certificates have gone mobile, too. David Stone, co-founder and CEO of digital gift card purveyor CashStar estimates that Americans purchase some $100 billion in these cash substitutes every year. Cohen's company is trying to shift the business from plastic cards to digital chits. "This is the post-plastic card era, because we are living on our iPhones, iPads, and computers."
Stone's dream scenario: "You're walking up to your friend's kid's birthday party, and you see people bringing gifts, and you think: 'Oh my god, I forgot to get a gift.' So you take out your smartphone and instantly buy the gift, walk into the house, and you say, 'Susan or Debby, I just sent you a gift! Check your phone, and there it is.'"
Convenient, yes, but we're not sure if Miss Manners would approve.
A shorter version of this article appeared in the December 12, 2011 issue of Fortune.