The holiday season, particularly in Western developed economies, is the retail high spot of the year, when sales surge and high-ticket items get bought. For the shoppers it is also a pre-cursor to the post-holiday sales season when bargains abound, increasingly important in the post-recession world where frugality is a new-found virtue. This year, however, highlighted the shape of things to come, summarized in a Wall street Journal headline: “Phone-wielding shoppers strike fear into retailers.” M-commerce is here and as it grows will radically reshape not only the retail industry but how people shop – it’s power to the people in yet another industry. Traditional trolley wars, often focused on delivering the best price on a basket of goods, will no longer be relevant. Walls of bricks and mortar stores have become transparent and porous. Consumers, armed with smartphones plus an increasing array of mobile shopping and price comparison apps, can now pick and choose the best deals on individual products and services without the hassle of visiting multiple stores. And they can check what their friends like, real-time, too. Soon, if not now, they can also pay with their smartphone – or virtual wallet. Welcome to the world of virtual trolley wars!
M-commerce is at an early stage with various studies suggesting it is still just a fraction of e-commerce sales today. For example an Ovum and Verdict Research report suggested the UK m-commerce market was worth around UK£ 122 million in 2009 versus UK£ 21.2 billion for total e-commerce. However, m-commerce will grow fast with UK sales expected to more than double by 2013 to UK£ 275 million, and some global estimates suggesting a global m-commerce market in excess of US$ 119 billion by 2015. A 2010 Forrester report on the state of mobile commerce in Europe suggests a similar picture, with only 2% of respondents to their survey reporting purchasing products via their mobile phones, although 16% have used phones for shopping-related activities such as researching products. However, smartphone owners are much more likely to engage in mobile shopping – and this is a rapidly growing group worldwide. The Gartner Group suggests that smartphones will account for 46% of total mobile phone sales worldwide by 2013, with Italy and Spain leading the way –in 2009, Nielsen estimated smartphone penetration in new mobile handsets purchased was 28% and 23% respectively, with the U.S. following at 17%. The message is clear: Smartphones are going to be key mobile shopping devices in future so it’s time for retailers to act, but they need to think about it from the consumer perspective.
Many smartphone-wielding consumers don’t really think about differences between channels like businesses and retailers do; many simply see the phone as an additional device from which they can access existing e-commerce offerings, e.g. buying tickets, or stay in touch with social networks, or access information. As such, m-commerce appears to be developing as an add-on channel to existing ones, rather than a pure substitute. For retailers it offers the potential to develop differentiated, interactive and location-based engagement with consumers, including showcasing in-store specials, delivering money-off coupons, providing store directions or offering product reviews. However, a key downside is large investments to build m-commerce capabilities and applications that integrate across channels, for example to ensure seamless consumer account information. Together with uncertainty over technology development and future consumer response, it seems that these factors are holding a number of retailers back from investing actively in m-commerce, according to a late 2009 survey of retailers by Olswang. In their survey only 50% of respondents were thinking of implementing an m-commerce strategy, but those that were intended to move rapidly to do so. So there is a potential gap emerging between retailers that are embracing the future of m-commerce and those that are still sitting on the fence, with obvious risks on both sides.
So who is ahead of the game? eBay for one is looking to m-commerce to help reinvent itself after losing its way in recent years. According to Fast Company, eBay expects mobile users to generate around US$ 1.5 billion in transactions in 2010, more than double the total for 2009, with its VP of mobile platforms quoted as saying that merely offering search, buy and sell features is “table stakes.” eBay is experimenting with much more interactive, social network-linked apps, such as the “pocket closet” fashion app which offers suggestions for stylish looks and allows shoppers to store their finds from across eBay’s many stores as they build an outfit. Extensions on this idea include shared closets, modeling outfits virtually and more. The benefit? Being able to engage with consumers when they don’t have a purchase in mind, building loyalty for when they do – a next-generation approach to m-commerce which is capturing the attention of major brands. Other features in development include: a vehicle-identification-number scanner that lets car owners easily replace parts, software that can identify clothing brands from photos and augmented-reality technology that could for example show users what the glasses they have selected would look like on themselves as they stare into the smartphone camera.
Amazon, already a major m-commerce player through its Kindle devices, is also pushing boundaries, with its Price Check app allowing shoppers wherever they are to take a picture of the item they are interested in, scan a bar code or even say the name. The app then let’s Amazon instantly tell the consumer what similar products are available on Amazon and at what price. The best thing for those who don’t want to wait in line and carry the big purchases home is – it’s just one click to buy on Amazon. Similar apps are available for Android and other smartphones, offering broader price comparisons than Amazon, with one ShopSavvy, boasting 2.15 million downloads of the app in November 2010. RedLaser is another name to watch, offering bar-code-scanning technology which is being implemented in many shopping apps, helping to offer broader price comparisons than Amazon. Where this is heading: The ability for the consumer to check out multiple stores, online and physical, with a click or two – and then use integrated social network links to see what their friends like best.
The social dimension is perhaps as important as price comparison capabilities – word of mouth and peer recommendations are an increasingly important part of consumer purchase decisions. As this capability gets built into mobile shopping apps, retailers’ ability to influence their target market falls even If the potential purchaser is in their store. So it will require a new level of differentiation, beyond price, towards the total shopping experience across channels, to make a retailer stand out and build positive word of mouth.
For the retailer this is a whole new world, where uncertainties abound, including: Whether the new styles of shopping will lead to store fragmentation (virtual or physical), how brands can develop/maintain differentiation, what it will take to build consumer loyalty, how to integrate offerings across channels, and what technology platforms will win (including for mobile payments, which is a current battleground).
For the consumer, it’s a whole new world of shopping – anywhere, anytime, with more choice than ever and the best price in easy reach. As a self-confessed e-commerce shopper, it could be a lot of fun sharing virtual shopping trips, but could also be just a little dangerous for the bank balance!
