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Summary:

Downloadable smartphone applications may be the hottest thing in mobile these days, but another segment is quietly generating money: selling physical goods to consumers over the mobile web. And it’s a potentially huge industry.

In the mobile industry, hype usually outpaces true performance by a substantial margin. But mobile commerce -– the business of conducting transactions on mobile phones –- is gaining real traction, much of it driven by the mobile web. So while downloadable smartphone applications are the hottest thing in mobile, retailers looking to hawk their stuff to on-the-go users need to make wireless websites their top priority.

“Mobile commerce” is an overly broad term; it includes everything from buying and downloading apps and content (a wildly successful space thanks to the emergence of the iPhone) to the concept of using a phone as a kind of credit card at the retail counter (a segment that has yet to grow legs despite plenty of investment). But another segment is quietly generating money: selling physical goods to consumers over the mobile web. And it’s a potentially huge industry.

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. An annual survey from Deloitte last year that 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.

Of course, many mobile purchases of real-world goods are being conducted through handset-specific apps that provide a highly optimized user experience. But building an iPhone application isn’t a surefire path to success. Some offerings are plagued with performance problems or inadequate functionality, and many simply aren’t much better than a mobile site. More importantly, mobile applications by definition can address only a small fraction of the potential market.

The iPhone accounted for only 16.6 percent of worldwide smartphone shipments in the fourth quarter of 2009, according to ABI Research, and Strategy Analytics pegged the iPhone’s share of the overall handset market at a mere 3 percent. Meanwhile, it’s difficult –- if not impossible –- to find a mobile phone on retail shelves that doesn’t have at least a rudimentary browser.

As I describe in my column at GigaOM Pro this week, there are a few approaches online retailers can take to maximize mobile sales regardless of which device users have in hand:

  • Develop clean, simple mobile pages that require minimal data transmissions.
  • Offer mobile storefronts with stripped-down but still innovative features targeting phone users.
  • Focus on simple, secure payment systems, whether you’re selling via apps or the mobile web.

Make it easy for users to tune into the mobile web to comparison shop, get product information and close the deal. Vendors who do those things will watch their mobile sales ramp up dramatically. Read the full post here.

Image courtesy of Flickr user 2 dogs

By Colin Gibbs

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  1. Mobile commerce is gaining a lot of attention. That’s why we in CatchyTech.com can help you build a web mobile store. Our mobile store is based on open source code (so you get the source). It’s compatible not just with iPhone, but with majority of the modern cellphones. Currently it supports google mobile checkout and paypal mobile checkout.

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  2. Sears experience was that the iPhone consisted for over 80% of the customers visiting Sears-to-Go, so they created an application. I have no problem with the perspective that the web is a real and viable solution, I have a problem that it is the best solution. The web is the data and the transmission. We needed browser because that was the viable presentation mechanism.

    As with software, abstracting the visual layer is critical. The most interesting aspects to mobile commerce are things like sharing and open store APIs ala Best Buy. Open is lovely except for the fact that mobile behaviors and the mobile networking environment are critical road blocks to success. And, they affect things like secure purchases.

    I believe in apps at the moment — open API and behaviorally interesting apps.

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  3. Thanks for this article; good stuff. Something not touched on…how we use our mobile phone to gather on-the-spot information, to synch up lists with our spouses, to have our children see the MMS picture we send them to make sure we are purchasing the exact right (star wars clone wars) action figure.

    Even if the ‘commerce’ isn’t taking place via the mobile, the process of making the buying decision is greatly influenced by our use of mobile phones.

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  4. I agree with you on this. Mobile commerce is the thing most users want. I am waiting for my discount brokerage house to offer me the ability to trade stocks while I am on the go. I can see real time quotes on my mobile device so why not trade in real time on my mobile? Hey, I won’t mind paying a few cents more for this feature.

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  5. I think the trend here is that everything is moving toward being accessed in a mobile fashion… the days of people waiting til they get home each evening, powering up the PC and so on, just to check their email — well, those days are gone, and that routine sounds pretty antiquated at this stage. When people can access their email, their facebook, their twitter stream, from anywhere, at anytime — well, why would they wait? Why bother with the PC? I think this is going to be the dominant trend, and anyone that offers goods or services online should be prepared for it.

    When the term ‘m-commerce’ first started being bandied around over a decade ago, I resisted, because I don’t see it as an entirely new channel. I see it as a new way of accessing e-commerce services, with its own set of requirements and advantages, but ultimately it’s just the same thing, but on the hoof.

    If it’s easy to get this stuff done on the go, people will use it. I thought of an album I wanted to buy recently, and thanks to the excellent Amazon MP3 app, I could purchase and download instantly, and listen to it on my device. People love instant gratification. Other stuff, like tickets, restaurant bookings and so on, are starting to work well too.

    Doing this right will lead to higher sales overall I believe, as more and more, people choose to do this stuff on the go rather than waiting until they get home.

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  6. Hi Celeste,

    Anuj Nayar here from PayPal’s communications team. Great article highlighting the different avenues merchants can take with mobile commerce. You’re spot on with your assessment that merchants need to look beyond specific applications in order to succeed on mobile platforms. However, that should not negate the importance of specific platforms like the iPhone – Apple recently reported that the company sold 9 million iPhones in Q1 (or nearly 20% of the 50 million iPhones on the street today). The surge they, and other platform developers, have seen in market adoption means that platform-specific apps could really go mainstream.

    PayPal has certainly noticed the popularity of iPhone applications. Our PayPal Mobile app for the iPhone (http://itunes.apple.com/us/app/paypal/id283646709?mt=8) is a tool for the m-commerce generation and was downloaded more than 1 million times within three weeks of its release. This shows what you also reference in your article, that mobile commerce is here and that consumers are ready for their wallets to live safely and conveniently in the cloud and use their mobile phones to access those wallets. I agree that in the long term, the mobile Web may win out over apps, but in the short term apps are helping tech savvy consumers adapt to using the mobile phone as a payment device. The biggest challenge is changing consumer behavior.

    Mobile commerce has major implications for developers too. For example, our open payments platform, PayPal X (www.x.com), gives developers the chance to take PayPal’s payments technology and implement it directly into applications. Just this week, we released our PayPal Mobile Payments Library (https://www.thepaypalblog.com/2010/04/paypal-to-open-mobile-payments-library-to-developers/), which is a quick and easy way for developers to add checkout functionality for physical goods and services sold through the iPhone (other platforms are coming soon). The Mobile Payments Library and other developer tools we’ve released come as a direct result of the high demand from a developer community eager to monetize on mobile applications.

    At PayPal we’ve been looking at mobile commerce since 2005 but it has only been in the last two years that we have seen any level of consumer adoption. We saw our $25 million in payment volume in 2008 jump six fold to $141 million in 2009 and we expect that figure to grow substantially in the coming years because of the extraordinary innovation taking place in the mobile space. That innovation, as well as the high levels of consumer adoption paint a bright picture for the industry.

    Share
  7. Hi Celeste,

    Anuj Nayar here from PayPal’s communications team. Great article highlighting the different avenues merchants can take with mobile commerce. You’re spot on with your assessment that merchants need to look beyond specific applications in order to succeed on mobile platforms. However, that should not negate the importance of specific platforms like the iPhone – Apple recently reported that the company sold 9 million iPhones in Q1 (or nearly 20% of the 50 million iPhones on the street today). The surge they, and other platform developers, have seen in market adoption means that platform-specific apps could really go mainstream.

    PayPal has certainly noticed the popularity of iPhone applications. Our PayPal Mobile app (http://itunes.apple.com/app/paypal/id283646709?mt=8) for the iPhone is a tool for the m-commerce generation and was downloaded more than 1 million times within three weeks of its release. This shows what you also reference in your article, that mobile commerce is here and that consumers are ready for their wallets to live safely and conveniently in the cloud and use their mobile phones to access those wallets. I agree that in the long term, the mobile Web may win out over apps, but in the short term apps are helping tech savvy consumers adapt to using the mobile phone as a payment device. The biggest challenge is changing consumer behavior.

    Mobile commerce has major implications for developers too. For example, our open payments platform, PayPal X (www.x.com) gives developers the chance to take PayPal’s payments technology and implement it directly into applications. Just this week, we released our PayPal Mobile Payments Library (https://www.thepaypalblog.com/2010/04/paypal-to-open-mobile-payments-library-to-developers/), which is a quick and easy way for developers to add checkout functionality for physical goods and services sold through the iPhone (other platforms are coming soon). The Mobile Payments Library and other developer tools we’ve released come as a direct result of the high demand from a developer community eager to monetize on mobile applications.

    At PayPal we’ve been looking at mobile commerce since 2005 but its only in the last two years that we have seen any level of consumer adoption. We saw our $25 million in payment volume in 2008 jump six fold to $141 million in 2009 and we expect that figure to grow substantially in the coming years because of the extraordinary innovation taking place in the mobile space. That innovation, as well as the high levels of consumer adoption paint a bright picture for the industry.

    Share
  8. Great piece, Colin. It’s easy to overlook the mobile web when it comes to retail. Here’s an interesting post about how marketers and retailers can make the most of mobile web: http://lunchpail.knotice.com/2010/05/07/easy-mobile-web-retail-solutions/

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