Buying and celling

By Ben Thompson

The tagline was revealing. “This changes everything. Again.” As pieces of blow-your-own-trumpet marketing go, it was right up there, but Apple’s campaign to launch the new iPhone earlier this year certainly showed the impact mobile devices have had on the consumer psyche in recent years. Approximately 1.15 billion mobile handsets shipped in 2009 around the globe, with smartphones accounting for 81 percent of the estimate. And this, combined with the rise of social networking applications – the Facebook for Mobile application alone currently has over 48.3 million active monthly users, while eBay's iPhone app, launched earlier this year, has already been downloaded in excess of 11 million times – and the public’s need to be constantly connected, is driving changes in the way we consume, share and interact with information of all types. In many ways, Apple’s ad might represent excessive marketing industry hyperbole, but it does hold an essential truism: the mobile revolution has fundamentally altered the way we live.

Picture the following scene: a group of friends are sat in a pub, arguing over an obscure fact. In years gone by, the argument would have raged for hours, with neither side willing to give an inch in defence of their position; these days, however, such debates are solved easily at the touch of a button via a simple Google query. Elsewhere, a commuter on the way to an important meeting is stuck in traffic; a real-time travel update means he is able to reroute his journey to get there on time. Meanwhile a tourist is looking for somewhere to eat in a strange city; no problem, the location-aware software on her mobile phone instantly provides her with a range of choices. Mobile phones have to be one of the best on-the-spot information retrieval resources of all time - which is why they are increasingly becoming the weapon of choice for a new army of consumers constantly in search of lower prices, better deals and greater information on everything from product comparisons to user satisfaction. With consumers relying on handheld devices for everything from phone calls to web surfing, retailers are looking to mobile as the next frontier of the shopping experience. Like e-commerce before it, m-commerce is here to stay.

And with good reason, too: even in the current tough economic climate, online retailing is one of the fastest growing market segments in Europe. Worth €44.7 billion in 2003, it grew by 221 percent to €143.7 last year and e-commerce sales continued to perform strongly in 2009, growing by 22 percent and representing 4.7 percent of total retail sales across Europe. In contrast, US growth stalled in 2008, and increased by just two percent in 2009, despite the fact that online sales accounted for seven percent of the total US retail market. Indeed, the European online market has been growing faster than its counterpart in the US for the last three years, and this trend is set to continue. Kelkoo, Europe's largest e-commerce website after Amazon and eBay and the largest e-commerce advertising platform both in the UK and Europe, estimates that online growth in 2010 is set to rise by 19.6 percent in Europe (to €171.9 billion, or 5.5 percent of all retail spending) compared to 10 percent in the US, and if European growth rates continue, seven European countries - the UK, France, Germany, Norway, Denmark, Sweden and Finland - will have a higher market share than the US by 2014.

In fact, European e-retail is widely predicted to buck recessionary trends in 2010 and grow by 20 percent, compared to an overall rise in retail sales of just 1.4 percent. "2010 is when we will really start to see online sales achieving a significant share of retail trade in most European countries," asserts Bruce Fair, Managing Director of Kelkoo UK. "While the retail industry is showing slow signs of recovery, the online shopping sector bucked the trend in 2009, delivering double-digit growth, and is expected to continue to perform strongly in 2010."

"While the major sectors in Western Europe are still emerging from the impact of the financial crisis, the internet channel continues to gain awareness and traction among consumers," suggests Patti Freeman Evans, Vice President at Forrester. She believes that online commerce will remain resilient during the coming quarters as retail e-business and channel strategy executives focus on retaining customers and increasing efficiency in 2010. "In this environment, we expect that e-business and channel strategy professionals will promote online self-service to decrease costs, improve the multichannel customer experience, and keep their customers engaged," she adds. "Retailers will primarily focus on keeping costs under control and will continue to track and test emerging technologies like mobile devices and social media."

Etail therapy

Most retailers predict that the advent of m-commerce will only serve to accelerate the growth of online retailing - a view many experts agree with. Forrester analyst Thomas Husson believes that mobile presents a growing market opportunity for retailers of all types. "Smartphone adoption in Europe is growing fast, which makes traffic to websites through mobile devices easier," he says. "European consumers are starting to show interest in mobile commerce activities, and many retailers across Europe - like La Redoute, Fnac, eBay, Amazon.com, Tesco and Carrefour - are starting to improve their mobile websites and creating mobile applications for the iPhone."

Like e-commerce, mobile retail is a fairly broad church, including everything from buying and downloading apps and content (a wildly successful space thanks to the emergence of the iPhone) to the concept of using your phone as a payment option at the retail counter (a segment that has yet to grow legs despite plenty of investment). Then, of course, there is selling physical goods to consumers over the mobile web - a potentially huge industry. Auction giant eBay is gunning for a whopping $1.5 billion in mobile sales this year, and Amazon's mobile site traffic is second only to eBay among vendors of real-world stuff, according to figures from Nielsen; the retailer notched up $1 billion in mobile sales in the 12 months to June this year. Meanwhile, a survey from Deloitte last year found that one in five consumers planned to use their mobile phones to shop during the 2009 holiday season, 25 percent of whom said they intended to make purchases on their phones, while in Britain, a recent report produced by analyst firm Ovum in collaboration with market research specialist Verdict predicts that UK internet shopping sales from mobile phones will more than double by 2013 as consumers get used to paying for goods on their handsets. Clearly, mobile commerce is set to be big business.

Indeed, performing mobile transactions - the physical act of buying goods via a smartphone - is just the tip of the iceberg for m-commerce. For while 28 percent of the UK adult population had internet access on their mobile in 2009, just 2.1 percent used this access to shop online while internet shopping sales via mobiles was worth just £122.9 million, a tiny 0.6 percent of the £21.2 billion that was spent online last year. Instead, rather than shop, it is clear that consumers are increasingly using their mobiles to enhance the shopping experience by comparing prices, researching products and interacting with retailers.

"Consumers are not spending significant amounts via mobiles and, for now, we believe the true potential for m-commerce is to provide consumers with a valuable tool for research, comparison shopping and retailer interaction," confirms Malcolm Pinkerton, Senior Analyst at Verdict Research. He believes that though m-commerce will still take some years to become a significant channel in its own right, its effectiveness as a marketing tool and way of interacting with customers will increase substantially over the short-term - providing a massive boost to sales growth across the multichannel environment. "If correctly implemented, m-commerce will not only ensure the needs of tomorrow's shoppers are met today, but also that growth is maximised across all channels."

Christine Bardwell, retail analyst at Ovum, thinks that retailers are at a crossroads similar to that presented by the emergence of e-commerce in the 1990s. "As consumer affiliation with m-commerce increases, retailers will need to decide if they're going to be pioneers in the market and meet consumer expectations, or wait and risk being behind the curve," she says. Already, a significant portion of consumers are leveraging the power of mobile technology to inform their shopping habits, with 11.5 percent of all UK shoppers using smartphones to do research before making a purchase and 3.8 percent using them to research, engage and interact with retailers while out shopping; clearly, the race is already on. "The opportunities are there for the most proficient multichannel retailers to claim a share of the growing cross-channel expenditure by exploiting the possibilities provided by mobiles to seamlessly link the online and in-store environments," adds Bardwell.

Embracing change

And there are signs that a growing number of retailers are embracing the enabling power of mobile technologies as they look to build better relationships with their customers. At the recent Mobile Marketing Forum in Los Angeles, Tiffany Gerhard, Senior Manager of Marketing and Emerging Capabilities at Best Buy, suggested that mobile enables the shopping experience to be more social than ever before. "The right information at the point of impulse increases desired consumer behaviour, sales, profits and customer satisfaction," she said. "We view mobile as less of a tactic and more of an integrated effort to build a relationship and drive consumers into our retail locations."

Forrester finds that European retailers have adopted mobile commerce strategy by three main routes: developing smartphone apps, optimising their website for mobile traffic and using mobile as an in-store tool. And the range of approaches being taken is extremely varied.

According to a recent study compiled by the analyst firm, European retailers, travel operators and price comparison sites are particularly keen on apps, as these allow customers to do online shopping and travel research including searches for products, prices, store locations, and sales information anywhere they go. Ocado was the first UK retailer to launch an iPhone app, and Ocado on the Go users can shop for everything from food and drink to books and toys. The app has proved to be very successful, with 4.4 percent of all Ocado orders in February 2010 being taken through the iPhone edition of its system. Meanwhile, other applications offer checks on in-store item availability as well as comparisons of online and local pricing. For example, fashion retailers Oasis and Net-A-Porter launched iPhone applications that enable customers to shop and complete transactions via their mobile devices.

Elsewhere, with the internet proving to be a strong growth channel for most retailers, many are redesigning websites in order to maximise the revenue potential of their online presence via mobile web access. For example, UK grocer Marks & Spencer recently launched a version of its website designed specifically for mobile devices where users can access the site through the original Marks & Spencer address without having to download any software or applications. Carrefour also launched a dedicated mobile channel where users can see 360-degree product views, find in-store promotions, check inventory and order products.

Mobile service can also be used without performing any transaction, such as for price comparisons or as a user review tool when the user is at the point of sale. For example, beauty retailer Sephora brings the online content and experience into the store - as well as the voice of the customer - by urging customers to read reviews on their phones in-store by going to its mobile-specific website. This enables customers to access credible word of mouth on products and services from any location. Similarly, French price comparison site Touslesprix.com launched a mobile site in order to allow users to access its comparison features on a smartphone in-store.

And in yet another innovative development, Oasis recently launched a peer-to-peer SMS gift voucher service that allows customers to purchase vouchers through the website, to be sent to the mobile phones of friends and family and redeemed in-store. This technical development embraces the emerging mobile market and creates a roadmap for the future integration of online and in-store commerce.

Such a wide range of differing approaches to mobile adoption suggests that the majority of retailers are still very much in an exploratory phase with regards to strategy development right now, but commentators insist that the fact they are doing so at all is encouraging, as it shows a willingness to get onboard at an early stage and that progress is being made. "Mobile is definitely a big deal," confirms Sri Shivananda, Senior Director of Platform Development at eBay. "We have to look at what consumer behaviour is - where and when people are spending their time and money - and make sure that we leverage consumer behaviour in building the right retail experiences. Mobile and social networks can certainly help, and are definitely here to stay."

The next generation consumer

And here is where the biggest driver for the further adoption of mobile technologies within the retail environment comes into play: it is being driven not by the retailers themselves, but by consumers. As more consumers switch to smartphone technology and the increased features and functionality such devices offer, expectations will rise as to what retailers need to offer - and those that fail to adapt will quickly be left behind.

"Mobile commerce is beginning to change the mobile retail landscape," says Dr. Peter A Johnson, VP of Market Intelligence for the Mobile Marketing Association. "Rapid adoption of smartphones and use of app stores has provided fertile ground for mobile commerce growth to date and this will only accelerate in the coming years. Our research provides a clear indication of how the convenience of mobile commerce is gaining traction. As consumers become increasingly comfortable and confident with paying for goods and services through their mobile it is possible to see m-commerce becoming mainstream or perhaps even the dominant form of transactions."

"You have to be everywhere where the customer is," agrees Anish Sheth, Senior IT Director for Retail Systems at video rental giant Blockbuster. "10 years ago you would come to a store for 15 minutes and we had you for 15 minutes only; now, you have an iPhone app for Blockbuster where you can virtually put movies in your queue and interact with us at any time of the day, and that's opened up so much potential. If you leverage that in a smart way and serve the customer what they want, be consistent and engage in a relationship where customers trust and like you, you'll understand them better. You've met your goal and that customer is going to stick with you for much longer."

Much of the initial attention has been focused on retailers embracing new digital marketing techniques aimed at mobile users, such as sending text messages, using digital money-off coupons and on steps to make their existing websites function on mobile browsers. But retailers are also facing a world that is more profoundly altered by the fact that shoppers will now increasingly be online, via their phones, even as they visit a physical store. They will expect a unified shopping experience. "Mobile has great promise for bringing major, positive changes to the shopping experience, payments, marketing and other aspects of retail," says National Retail Federation President Tracy Mullin. Her colleague Scott Silverman, Executive Director of the NRF's Shop.org industry group, agrees. "People are going to be making decisions on what to buy in the store with their mobile phones," he says. "What's going on will affect the mothership - the store - and all of a sudden the store experience is going to completely change."

The mobile device is changing the way consumers pay for content, goods and services, and m-commerce essentially provides retailers a wealth of opportunities to motivate and enable their customers to purchase goods and services whenever and wherever. "We have to be able to know where the customer is, be able to predict where the customer is going and respond to that proactively and quickly," suggests Mike Hazell, VP of IT at Footlocker. "Anybody can create a website that sells somebody something, but I think customers are looking for more of an engagement point. And that's the bottom line: the customer rules."

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GOING ONLINE

Online retailing is a market dominated by the traditional powerhouses of European industry: between them, the UK, Germany and France account for 70 percent of total online sales in the EU. But other countries are catching up fast. Denmark, for instance, has an online spend per capita of €716, the highest in Europe, while its Scandinavian neighbour Norway - where online retail accounts for a substantial share of overall retail trade - spends €694 per head online compared to a European average of just €358.  

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FIELD OF VISION

Near field communication (NFC) is a short-range high frequency wireless communication technology that enables the exchange of data between devices over a 10-centimetre distance. In other words, if you have an NFC enabled phone and opt-in, your mobile phone will be able to communicate with another proximate electronic device automatically.

And with NFC chip shipments predicted to reach 785 million units in 2015, according to a new report from IMS Research, the types of applications for NFC on mobile are numerous:

• Electronic payments: swipe your phone and make a payment without a credit card; NFC technology is already being used in Japan in more than 30,000 stores

• Mobile ticketing: swipe your phone on readers placed in buses, airlines, trains, stadiums and other entry points

• Electronic keys: swipe your phone and open hotel doors or your house door

• Smart posters: use your phone to read RFID tags on billboards and other signs to receive additional information and to let the billboard know you are there