The Rise of M-Commerce: How Mobile Devices Are Changing the Way We Shop

Some Statistics and trends:

• EBay generated $ 2 billion in global mobile sales in 2010 across 190 countries. 
• PayPal’s worldwide mobile transactions have skyrocketed from $ 25 million in 2008 to $500 million in 2010. 
• Smartphone sales grew 72% in 2010; 300 million smartphones were sold globally in 2010. 
• There are over 3 billion mobile phones worldwide. Over 40% of the world’s population carries a mobile phone, far more than using a computer or having internet access. 
• Mobile Phone is fast emerging as a ‘preferred’ transaction medium. 
• Online Commerce is gaining share vs. Offline Commerce as consumers change their behavior and expectations with rapid development in technology.

The Mobile Commerce Opportunity

Any discussion of the potential opportunity must first start with a basic understanding of what we mean by “Mobile Commerce.” Mobile commerce comprises two categories: (1) Mobile banking and (2)Mobile payments; Money transfers. Mobile banking refers to situations where the mobile phone is an access channel for financial services. Mobile payments and money transfers apply to cases where the mobile phone is used as a payment device to affect the transfer of value from one party to another.

Mobile Commerce has gained increasing acceptance amongst various sections of society in the last few years. The reason for its growth can be traced back to technology and demographic developments that have influenced many aspects of sociocultural behavior in today’s world. Mobile services have registered impressive growth in recent years, and m-commerce is slowly but surely showing signs of impressive and healthy growth.

With the advance of technology and internet penetration, the traditional business transaction has shifted from a brick-and-mortar store to a virtual store. For what it is worth, we can see that the development of e-commerce and m-commerce is unstoppable.

Online shopping trend with the increasing use of the mobile phone internet has derived and urged the development of m-commerce, which is the Mobile Phone-Commerce( from its attributes and advantage of unlimited mobility).

 Mobile Commerce will grow more rapidly than E-Commerce. 

The lines between mobile and social are becoming increasingly blurred. Mobile and Social are bringing about the most significant sea change in consumers’ lives, and brands and retailers should take note of the ever-changing landscape. Facebook is already generating substantial revenue from social commerce and micropayments for social gaming and virtual goods.

The rate of change and the movement to electronic payments is accelerated by the explosive growth of payments being made in non-face-to-face transactions. A critical development in the industry was the emergence of the Internet as a channel for commerce. Consumers who previously used the Internet as a novelty and a means for information gathering have gradually adopted this channel for their purchase decisions and transactions.

Growth in this channel has been facilitated by advances in technology, trusted infrastructure and applications, and improved customer experience and payment choice (e.g., traditional payment brands and new alternatives such as PayPal).

Factors driving the growth of Mobile Commerce:

• Proliferation and Convergence of Mobile Devices and The Internet: The major growth in Mobile-Commerce will happen due to an explosive growth of Internet access across the globe and a revolution in the mobile handset market. People are fascinated by smartphones and social media. The price and technology war in the mobile domain has made smartphones more capable and affordable. Similarly, the extensive and intelligent interconnectivity among people through social media & social networking is also helping as an effective marketing channel for commerce. E-commerce benefits from several positive trends, including the continued roll-out of broadband, and increasing user comfort in shopping online. 

The proliferation of Mobile Devices and The Internet

• Rising trust in online transactions: M-Commerce to see wider adoption, driven by convenience, lower-price alternatives to traditional retail, and improved trust & safety. (1) Credible eCommerce companies have helped to enhance the mobile shopping ecosystem and to decrease fraud and bad transactions. (2) Well-known retail brands are starting to sell products online, with many users having good online purchasing experiences. 
• Well-developed payment alternatives. Shoppers have adopted online banking payment and third-party payments (such as PayPal, Square, Zong, Pavyment, Boku, Amazon TextPayMe, and Obopay) based on their excellent experiences. 
• The growth of ‘Social.’ Expect social sites to be an emerging and important traffic generator for eCommerce companies. The synergistic relationship between social networks and commerce merchants will fuel growth for both segments. We are already witnessing a fundamental shift in consumer behavior and expectations in a ‘social and connected’ environment. 
• The emergence of highly personalized, location-sensitive, and context-aware applications and services. Mobile technology allows businesses to become more service-oriented in what they do for individual consumers. Consumers respond positively to companies that take the time to understand their needs and offer excellent customer service. Real-Time Social Features are Accelerating Mobile Usage. 
• A large number of Internet and Mobile users: According to Mary Meeker, Partner KPCB and Former Technology Analyst with Morgan Stanley- the world is currently in the midst of the fifth major technology cycle of the past half a century. The previous four were the mainframe era of the 1950s and 60s, the mini-computer era of the 1970s, and the desktop Internet era of the 80s. She says the current cycle is the mobile Internet era, predicting that within the next five years, “more users will connect to the Internet over mobile devices than desktop PCs.”

Meeker says that mobile Internet usage is ramping up substantially faster than desktop Internet usage did, a view she and her team arrived at by comparing the adoption rates of iPhone/iPod touch to that of AOL and Netscape in the early 1990s. According to Meeker, the adoption of Apple devices is taking place more than 11 times faster than that of AOL and several times as fast as that of Netscape. Helping to drive this is 3G technology, which recently hit an “inflection point” by being available to more than 20 percent of the world’s cellular users (although penetration is only 7 percent in Central/South America and 13 percent in Asia/Pacific — excluding Japan, where it’s 96 percent).

“One of the implications of mobile access is a growth in eCommerce,  featuring things such as location-based services, time-based offers,mobile coupons, push notifications, etc.”

The convergence of different technologies on single devices available anywhere and anytime allows existing technologies (such as the internet) to evolve and extend their reach even further. E.g., Near Field Communication (NFC).

Over the past ten years, Mobile phones have changed how we live and work.

So what is the nature of this change? On one hand, it’s a change in personal freedom; the mobile phone seems to give us more power as individuals to do what we want and be who we want to be. On the other hand, more and more smartphones and devices are on the market, retailers are increasingly launching mobile-friendly sites, applications, and SMS programs, and consumers are adapting to shopping on their mobile phones and devices.

Smart retailers such as BestBuy, eBay, and Target have already proved that they can make mobile commerce an experience worth returning to. These companies see mobile as a commerce opportunity and an opportunity to learn more about customers and serve them better across the enterprise.

As the world awaits the coming revolution that will result when Near Field Communication technology is preinstalled in every handset, and RFID readers are incorporated at every point of sale, retailers should consider launching mobile commerce-enabled sites. Established players such as Amazon.com and eBay’s PayPal have reaped the rewards of getting the mobile payments to experience right, and start-up vendors are currently jockeying for positions. 

Mobile payments players: On the more nimble retail front, Verrus, Square, Zong, Boku, and many others are creating mobile payment systems that provide that “pay me anywhere” feature. 

(Check - interesting infographic on Mobile Marketing and Tagging)

Reality check: Implication for Banks and Retailers

Mobile Commerce is fast gaining acceptance amongst various sections of society. Mobile Banking- (availability of bank-related financial services via mobile devices) builds a cornerstone of Mobile Commerce. Many banks worldwide are increasingly employing mobile applications to generate additional revenues, reduce costs, or increase customer satisfaction, often with encouraging results.

It will be long before wallets become as redundant and unnecessary as wristwatches, for we are still at the beginning of this change. The challenge for businesses is to embrace the M-Commerce trends early — and do so by paying close attention to the consumer experience. This means- embarking on a well-thought-out strategy that not only takes into consideration customer buying behavior but also focuses on creating a cohesive Web-to-Mobile experience.

So what do you think? Please write in with your comments and views.