M-commerce- can retailers ride this wave?

Context

With the risk of stating the obvious; the retail ecommerce landscape is rapidly changing. With the exponential uptake of smartphones and tablets, the retail industry is struggling to optimize the sales and shopping experience from the new m-commerce sales channel (mobile phones and tablets).

In January 2014, mobile apps overtook personal computer usage in the United States. Almost 55% of internet usage was through mobiles devices and tablets versus 45% through personal computers. Because of this growing consumer dependence on mobiles and tablets the m-commerce space cannot be ignored.

Exhibit A:

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Exhibit B:

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Problem

Currently there are two key issues that retailers face in this m-commerce space; firstly the time spent on a retailer’s website on a mobile device does not translate into purchases at the same rate. Although about a third of the online store visits are via mobile devices, the conversion rates are as low as 4.3%. Customers mainly use mobiles and tablets for out of store and in store research (e.g. to compare prices, find similar products). Secondly if and when the purchase is made, the dollar value spent is significantly lower through m-commerce., the dollar value spent is significantly lower through m-commerce.

Some critics of m-commerce argue that these devices can be viewed as aiding the ultimate purchasing decision; whether on consumer’s desktops or in stores. Hence the conversion rate is not that much of an issue.

However, when we do delve into understanding why customers make fewer purchases through m-commerce, the reasons that stand out are; the smaller screens make it harder to view items on sites that are not optimized for mobile devices; typing is difficult on a smaller device; and comparing prices to make the final purchasing decision is often viewed as much easier on desktops.

If this is true, then how do Amazon and e-bay manage to get higher traffic than other retailers and decent conversion rates through m-commerce? Part of the reason could be that both these retailers have had very high usage through the traditional e-commerce channels. This means that the customers are used to the interface and find it easy to follow and use on their mobile/tablets as well.

Exhibit C:

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Potential solutions

Two ways in which I think retailers could solve the issues identified:

1. Create a store specific mobile app: This mobile app would be optimized for usage on smaller screens, which will make it easier for consumers to look through potential shopping options. If the user’s card and shipping details are stored on this app, it could also potentially reduce the shopping cart abandonment rates

2. Use location based capabilities: In order to make customer interactions more relevant, stores can use location based capabilities to make their interactions with customers more relevant. For example; send the consumer a coupon when he/she in the isle or in the area. Retailers should consider Apple’s new product; the ibeacon to achieve this

Sources:

Comescore; CNN; Custora; Forbes; The mobile retail blog; Neilson.com


1 Comment

  1. Jon Sariaatmadja

    This blog highlights one of the most important problems facing the online industry, namely – the lack of monetization/conversion in m-commerce despite significant visitor traction. As it has highlighted, the main reason for this lack of conversion is due to the lack of trust users have when making transactions on mobile – especially when they are doing it for the first time or if the price of the good is relatively high. I agree with the point of resorting to mobile apps rather than the usual mobile web (browser) version as a means to attract more mobile conversion. There are two reasons as to why this is the case:

    1.Creating a mobile app signals to the mobile users that you do care about them and their safety (by making an irreversible investment).
    2.Creating a mobile app allows you to optimize the unique mobile user experience by providing less function (as compared to your desktop version), while still remaining functional. The job of the CTO here is to look at the user flow of the mobile app (usually available via Google Analytics) and try to lessen the number of ‘pages’ a user has to go through before making a transaction. The aim is to make transactions easier and faster than the desktop version.
    3.Tailor-make the mobile app by reducing encumbrances that are usually available in the desktop version. For example, if you have ad banners in your desktop version, you can tailor your mobile app such that these banners do not appear. Reason being is that mobile screens are smaller and will more likely clutter the user with unnecessary information (and will more likely lead to failed conversions).

    Additionally, I think that m-commerce can leverage the geo-location functionality in their users’ mobile phones/tablets. Mobile users tend to use their devices on the go and so companies that aim to target the mobile scape should use this functionality as part of their app’s standalone value.

    Figuring out the mobile market is still very new and will require a lot of iteration before the right formula is achieved. However, as Eric Ries said in his ‘The Lean Startup’ book, companies should aim to create the Minimum Viable Product that has limited functionality rather than waiting for the perfect app. In so doing, development teams should make adjustments on the next app version based on what the market wants, rather than what the producer wants.