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Upwardly mobile

Written by Hannah Prevett
09/03/2010

As uptake of internet-enabled smartphones hits an all-time high, is
m-commerce finally coming of age? Hannah Prevett reports


It was only a matter of time. Mobile commerce, or m-commerce as it is known, has been threatening to become a disruptive force since its 'birth' in Finland in the mid-to-late 90s. But it is has recently been thrust into the spotlight, as 2010 is being billed as the year it is finally set to take-off. This is mainly thanks to increased usage of web-enabled smartphones and a better under standing among retailers of how customers use these devices. As a result, many analysts believe that m-commerce could be poised for explosive growth in the next 12 months. But how can we be sure it's not just another false start?

The UK is by no means a trailblazer when it comes to m-commerce - and unlike with most technologies, it is not looking to the US for its inspiration, but to the East. The opportunities presented by m-commerce have been exploited in Japan for nigh on a decade. The fact that Japanese mobile phones are far more advanced than those in the West helps: here it is commonplace for smartphone users to buy a coffee, watch the morning news on their commute to work, and swipe through a train barrier all with one device. Indeed, we have a lot of catching up to do.

We now may have the technical know-how, but as ever it's a case of supply and demand: up until recently the majority of UK consumers haven't been in a hurry to shop, or even browse, online from their mobiles. Expensive browsing rates and small screens were just a few gripes. But the explosion of smartphones, and in particular the arrival of Apple's iPhone, has changed all that, only for customers to find that most sites aren't optimised for mobiles. A recent consumer survey from ATG found that 38 per cent of UK consumers have attempted to shop online from their mobiles, but more than a quarter of those who did found it difficult. The research also showed that while m-commerce holds promise for many disparate industries and sectors, some are more suitable than others. "It is currently more suited to convenience products and services such as travel tickets, music, cinema tickets and takeaways," argues Frank Lord, VP EMEA at ATG.

Variety of options

The options for retailers wanting to explore m-commerce are wide-ranging and costs vary accordingly. Building a mobile application (probably an iPhone app) and optimising websites for mobile use are two of the most popular routes retailers are currently taking when it comes to m-commerce. Often retailers
will plump for what seems to be the simpler solution: building an iPhone app. But it is important to consider whether the back end infrastructure already in place is strong enough to deal with the fall out, as Lord explains. "Before launching, it's
important retailers invest in the infrastructure to support the roll-out of a new app. For example, if demand for a new app is high, retailers must ensure they can fulfil orders. Disappointing first time users will have a significant impact on the long-term success of the channel."

But this is the problem for many retailers: they're not convinced of the viability of the mobile channel in the first place. "It isn't proven yet," says Will Jones, IT director at e-tailer, The Book Depository. "There is no best practice for the less innovative retailers to follow yet - and there is an obvious lack of experience."
As a result, retailers are understandably nervous about splashing out on mobile solutions. "Costs have generally been prohibitive versus return," admits Jones. And he's not alone in his scepticism. Zak Edwards, founder of gift and gadget e-tailer Prezzybox, says there needs to be a more convincing business case for a full mobile offering. "It comes down to necessity and cost,' he explains. "Is there a genuine business need for online retailers to offer a stripped down version of their sites? The statistics currently say no, so in this poor economic climate the resources are being used/spent elsewhere."

But this isn't putting off some of the pure plays: both Amazon and eBay are already offering stripped down versions of their websites, to try and attract mobile users. And on the application side, ATG has been working with fashion retailer Tommy Hilfiger to integrate its iPhone app with its main website to ensure that every sales opportunity is capitalised upon. "For example, if a shopper using the main app decides not to checkout on their iPhone, their cart will follow them back to the main website," explains ATG's Lord.

But the Amazons, eBays and Tommy Hilfigers of this world can afford a little trial and error when it comes to experimenting with new technologies, in a way that many smaller retailers cannot. This doesn't mean, however, that some aren't prepared to give it a shot. Jones refuses to be drawn on what The Book Depository's mobile offering will look like, but promises one will be launched in 2010 "to give us a competitive advantage and address genuine customer needs and wants."

And therein lies the problem: exactly what the customer wants is not yet clear as research in the area is often contradictory. Research recently conducted by Essential found that over three quarters of mobile phone users don't use their mobile to access the internet. And despite the prevailing wisdom which says that internet-enabled mobile use is more or less ubiquitous, the research suggests otherwise: Essential found that 60 per cent of UK mobile users claim to not even own a mobile with internet access, and just 30 per cent of these are interested in getting one. Alex Charlton, partner at Essential Research says: "There is an enormous gulf between the perceptions we hold about mobiles being a big part of our internet lives and the reality."

There are strategies retailers can deploy to try and persuade customers of the viability of the mobile channel - incentivising them with coupons and vouchers which can then be redeemed either online or in retail stores will certainly help. So too will the continued growth of the smartphone market. But ultimately, the demand has to be driven by customers if the true potential of mobile commerce is to be realised. We only need to look at e-commerce: the technology was there, but it took multi-channel retailers such as HMV a while to catch on. Once it became clear that customers wanted to shop online, and were going to
competitors' sites, such as play.com, HMV realised it had to get its act together.

But will we see the same kind of pattern with m-commerce - specialised mobile retailers forcing the established players to get with the programme? Either way, it's the app developers who are currently salivating; their programming fingers poised to start work for whoever decides to conquer the market first.


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