Feature

The Mobile Commerce Opportunity

After all the hype, mobile commerce is at last gaining traction, as consumers become comfortable with the idea of shopping on their mobile phone, writes David Murphy.

Marketers would be forgiven for believing that headlines proclaiming mobile marketing as the next big thing have been around for almost as long as mobile handsets themselves. Yet just 18 months ago, it seemed as if many brands' mobile strategy consisted of little more than having an iPhone app.

As the Apple device grew in popularity, so the inventory of the company's App Store swelled with thousands of new products, many from brands that seemed to have commissioned an app solely to assure the board that they had one, rather than delivering any real ROI.

While it's easy to criticise this approach, Russell Buckley, chief marketing officer at mobile-couponing company Eagle Eye Solutions, believes it can be explained. 'There is some merit in being early to the marketplace, and in the early days of the App Store, it was much easier to get noticed and discovered,' he says. 'There are some cutting-edge brands that will always want to be seen leveraging new technology, because it makes a statement about their brand.'

Nonetheless, as the number of apps rose - there were about 400,000 in Apple's store alone at last count - brands have realised that a mobile strategy based solely on an app is unlikely to succeed.

Not that apps have been abandoned altogether. Retailers including Tesco and Waitrose have enjoyed great success with them. However, these are cutting-edge apps. They are fully functional and transactional, enabling customers to not only do their weekly shop from the app, but even, in the case of the Tesco and Ocado offerings, allowing them to add an item to their shopping basket simply by scanning its barcode.

More inclusive strategy

No matter how clever your app, however, it can serve only those customers who have the right type of phone. So over the past year, many retailers have adopted a different approach, developing mobile-optimised versions of their websites. These are also usually fully transactional, but, unlike an iPhone or Android app, can be used by anyone with a reasonably modern phone that has a web browser.

'With an app, you reach only people who have made the effort to download it, whereas with a mobile site, you may end up making a sale to a customer whose journey started with a search for "size eight Crocs",' says Mick Rigby, chairman of mobile agency Yodel Digital.

These mobile-optimised sites are proving a hit with consumers. In the 12 months since it launched its mobile site, Marks & Spencer has taken 66,000 orders through it, the biggest worth £5156.

In December 2010, according to research firm comScore and the GSM Association, of the 30.2m people in the UK who visited 'commerce sites', 6.3m did so via their mobile handset. During that month, there were 6.3m visits to retailer sites from mobiles, including 1.6m each to eBay and Amazon, and 850,000 to Tesco. Two retailers, Asos.com and JD Sports, enjoyed an average 300% increase in traffic to their mobile sites over the Christmas period.

'Mobile is no longer the preserve of junior members of the marketing team,' says Jason Cross, marketing director at mobile agency Incentivated. 'Brands are realising that it is business-critical and giving it the attention it deserves.'

Ian Carrington, director of mobile advertising sales and strategy at Google, agrees. 'M-commerce is happening at scale,' he says. 'In the UK, 36% of people now have a smartphone, and they are reaching for them to buy products as they watch TV. EBay in the UK does one sale every second on mobile, and globally, it sells a Ferrari every month on mobile.'

Indeed, the auction site expects global mobile sales to double in 2011 to more than $4bn (£2.4bn). Yet a few weeks ago, eBay threw a spanner in the works, when it published the results of research carried out by retail specialist Verdict on its behalf. The research revealed that m-commerce is on the verge of a potential fourfold increase over the next five years, as consumers become more comfortable with the idea of shopping via their handsets. By 2016, Verdict predicted that mobile shopping could contribute a £4.5bn boost to Britain's economy, with the figure rising to £13bn by 2021.

However, the research also warned that the market is being held back by unreliable mobile broadband. It claimed that UK retailers are missing out on at least £1.3bn of business, due to patchy coverage, unreliable connections and slow connection speeds driving shoppers away. According to the study, more than a third of consumers have failed to complete a purchase on their mobile due to problems with their mobile broadband. EBay is calling on policy-makers to do more to address consumer frustrations when rules for the fourth generation (4G) of mobile networks are agreed later this year.

Despite this, Alex Meisl, chairman of mobile-marketing agency Sponge, believes it would be wrong to criticise the mobile operators for their networks' performance. 'They are doing good work and investing in their networks,' he says. 'It makes sense, because the more people use their network, the more money they make.'

Matt Cockett, commercial director at Mobile Interactive Group, says: 'When pages are slow to load, it's often bad design that is to blame. Once the customer is in the checkout process, these pages should be no more than 20-30KB in size, but people forget the basics sometimes.'

Judging by the numbers, however, any frustrations consumers are experiencing with m-commerce are being outweighed by the convenience of being able to buy things from their phone whenever they want. For Carrington, this has important implications for businesses. 'It's not too late yet, but our message to brands is that if you don't have a mobile strategy in place by the end of this year, you don't have a future strategy,' he warns.

That statement alone should be enough to convince those brands that have not yet looked seriously at m-commerce to start doing so - and soon.

CASE STUDY: SHOPSTYLE

ShopStyle aggregates content from thousands of online stores and brands. Consumers browse products on the ShopStyle site, then click through to the retailer's site to place their order.

The company launched an iPhone app in the UK in 2009, followed by an iPad version in 2010. The iPhone app has 996,000 users globally and the iPad app 155,000. Between them, they account for 4%-5% of overall clicks to the ShopStyle website. The company also has a mobile version of its website, which launched in November 2010.

'The app launched at a good time,' says Shannon Edwards, ShopStyle's European director. 'We got a lot of interest, principally because the app is so useful, aggregating lots of useful fashion information and brands and enabling consumers to research items and see the different colours, wherever they are.'

Edwards admits the company does not have complete visibility into sales coming via any of its mobile properties, but adds: 'We know from the number of clicks they are generating that they are having a positive impact on revenues.'

She concedes that conversion to a sale is less with mobile than for the company's computer website, and believes this is due to the fact that not all the retail sites that customers are clicking on via ShopStyle's app or mobile site are optimised for mobile users. 'The interest is there - the retailers need to catch up,' she adds.

CASE STUDY: MARKS & SPENCER

In May 2010, Marks & Spencer became the first major high-street retailer to launch a transactional, mobile-optimised website.

'We launched the site to provide our customers with a truly convenient shopping experience, enabling them to shop where and when they want to, on the device of their choice,' says Sienne Veit, head of new technology business development at M&S.

Since then, she claims, the site has 'completely and utterly beaten all predictions in terms of how many people would shop on it, what they would buy and what the order value would be'.

In September 2010, M&S revealed that the site had attracted 1.2m unique visitors who had placed 13,000 orders, the biggest being £3280 for two sofas. In February, that record was beaten, when a customer spent £5156 on the mobile site on Sonoma Light freestanding kitchen units, including a sink and taps. The rate of orders has also accelerated, with 66,000 placed between 12 May 2010 and 30 April 2011.

'The site has attracted millions of customers, many of them new, and most of them women,' says Veit. 'It's not techie young males, but mums, and even grandmothers, buying clothes and shoes.'

Womenswear is the biggest-selling department on the site, while the iPhone is the top device for accessing the site 'by a long stretch'.

M&S is now looking to extend its m-commerce activities, with in-store kiosks enabling customers to order out-of-stock items for home delivery or collection. It is also investigating the costs of offering Wi-Fi in-store, though Veit concedes that for a retailer with such a big store estate, this will be a challenge.

EXPERT VIEWS: THE M-COMMERCE CHALLENGE

We asked mobile specialists for their views on the biggest platform and brand challenges that could slow the uptake of m-commerce.

Platform challenges

Fragmentation This applies to handsets and operating systems, as well as retailers' back-office systems. 'There is a great diversity of mobile platforms with iOS (iPhone), Android, RIM, Windows Phone 7, Bada and others,' says Sponge's Meisl. 'This is a fact of life in mobile; brands need to decide which platforms to address.'

Fragmentation also affects retailers' back-office systems. 'The top-20 retailers tend to use the same systems, but once you go beyond those, you have all sorts of different systems, many of which have no plans to open up their APIs to mobile commerce providers,' says Mobile Interactive Group's Cockett. 'That's just a challenge we will need to overcome.'

Reach 'Customers are still embracing the technology, and not everyone has a handset or a data plan that allows them to get involved with m-commerce,' says Google's Carrington. 'We need the penetration of smartphones to continue to increase, for brands to be able to justify investing in the space,' says Yodel's Rigby. 'In the US, you have five times the audience of the UK, so you can recoup investment five times more quickly. The market is much more buoyant over there. You can spend $100,000 and recoup it within a couple of months.'

Integration 'The biggest challenge with mobile is integrating it as a core part of your business,' says John Andrews, vice-president of marketing and product management at customer-experience management firm Endeca. 'Consumers expect to have things joined up, whether they are dealing with you on mobile, online, at an in-store kiosk, on a dotcom website or on Facebook. These cannot be separate experiences for the consumer, so the challenge for brands is to manage each of these touchpoints consistently and efficiently.'

Brand challenges

Budgets 'Mobile does not get the attention it should because big-spending brands in FMCG and retail do not spend very much on digital,' says Eagle Eye's Buckley. 'Tesco, Nestle, Procter & Gamble and Unilever spend less than 2% of their total marketing budgets on digital, compared with an overall figure in the US of 15%.'

Resources 'After budget, the biggest challenge is the availability of IT staff to work on these projects,' says Cockett. Incentivated's Cross says: 'I would love to be able to get stuff to be developed more quickly. Having said that, over the past 12 months, we have seen clients waking up to the opportunity, acting on it more quickly and putting more investment into it.'

Making the right call 'There is so much you can do on mobile that working out what you should do can be hard,' says Rigby. 'Depending who you turn to for advice, you will be steered down a certain route.

It worries me sometimes that clients are being served with one-dimensional solutions, such as mobile advertising, search or SMS, and not having their eyes opened to the bigger picture of what an integrated mobile strategy can do for them.'

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