June 17, 2011, 11:54 AM

Consumer privacy fears limit the growth of m-commerce, Forrester says

M-commerce will grow to $39 billion by 2016, but remain a small part of e-commerce.

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Consumer purchasing on mobile phones will grow 39% a year from 2011 through 2016, but remain a modest portion of e-commerce, held back by consumer privacy fears and retailer wariness of a channel that has yet to prove its worth, Forrester Research said in a report released today.

U.S. consumer purchases through mobile phones will grow from $6 billion this year to $31 billion in 2016, projects the report entitled “Mobile Commerce Forecast, 2011 to 2016.” And mobile’s percentage of online retail purchases will increase from 2% to 7% during that period says the report, authored by Forrester e-commerce analyst Sucharita Mulpuru.

While projecting only modest—and not explosive—growth in direct sales through mobile phones, Mulpuru says the impact of mobile is greater than the sales numbers suggest, and that retailers should invest in this new selling channel.

“While the actual amount of mobile commerce dollars is relatively small, the influence of mobile devices is understated both by latent demand not met by unoptimized mobile sites, and by the tremendous amount of mobile ‘preshopping’ that drives transactions in other channels cross-channel holiday shopping ,” she writes.

With that in mind, she urges retailer executives to:

  • Ensure that their e-commerce sites work well on all the major mobile browsers.
  • Outsource to specialists who can keep up with the rapid pace of change in mobile technology.
  • Figure mobile’s impact on sales in other channels, such as bricks-and-mortar stores, when calculating the ROI of mobile initiatives.
  • Develop a mobile search strategy that includes landing pages optimized for mobile devices; only 22% in a recent Forrester survey for trade group Shop.org said they had a plan for mobile search.
  • Don’t count too heavily on the emerging web programming language HTML5 , as it’s not clear when it will be a viable development option and it will not replace all the features of mobile apps that take advantage of features in mobile devices, such as accelerometers that adjust the display to how the consumer is holding the phone.

The report points out that relatively few consumers shop on a mobile phone, with only 13% saying that they had ever bought something on a mobile device, excluding digital content such as ringtones.

Privacy concerns remain a big barrier. When consumers were asked in a Forrester survey in the first quarter of 2011 what would it take to cause them to buy more through mobile devices, the leading answer was “if my mobile phone number would be kept private,” chosen by 45%, with 44% selecting “if mobile payment services were more secure.” Consumers also said they would buy more if mobile sites looked more like conventional web sites and if the mobile web were faster.

Mulpuru says in the report that mobile purchasing will increase over the next few years as more consumers get comfortable with the security of m-commerce, retailers improve their sites and mobile web speed improves.

Many retailers are giving mobile commerce a try, but few are investing heavily, the report notes. A Forrester/Shop.org survey of 68 larger retailers found the average retailer plans to invest only $50,000 in mobile this year.

The survey found that 29% of the retailers surveyed have implemented a mobile strategy that they are now refining, 19% have a strategy that they are beginning to implement, 9% have a strategy, 34% are in the early stages of developing a strategy and 9% have no strategy.

The report outlines several factors keeping retailers from investing more. That includes confusion over whether to focus on mobile web sites accessible by all phones or more sophisticated apps that can only be used on a single type of mobile phone, such as the iPhone or Android devices; the difficulty in calculating ROI from mobile because much of its influence leads to purchases in other channels; and the introduction of the iPad and other tablet computers that reduces traffic from mobile phones and introduces further confusion into retailers’ plans.

Mulpuru adds that while most retailers think about m-commerce in terms of completing sales on mobile devices, the most compelling immediate opportunity for retail chains may be to give store employees mobile devices so they can work with store shoppers to locate product and save sales when the store does not have in stock an item a consumer wants.

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