Cell selling

The new capacities of mobile devices and a cultural shift promise to re-shape online retailing

With the rise of 800-numbers in the 1970s, the telephone revolutionized retailing. No longer were customers tied to mailing in catalog orders and waiting weeks for their merchandise—or to hear that the item was out of stock.

The Internet promised to cut the phone out of the ordering process and it looked for a while that the telephone’s days as a commerce vehicle were numbered. Now the phone is making a comeback as a shopping tool—but not in the role that it originally played.

Today, the mobile phone is beginning to supplant the computer as the link between consumers and shopping. In Japan, for example, 10.5% of all e-commerce sales last year took place on mobile devices. And what Japan has been experiencing also is occurring in China, India, Brazil and other countries across the globe. “You don’t have to be a visionary to see the day when the mobile phone will be the ultimate converged consumer device,” says Mike Baker, CEO of mobile advertising technology and services firm Enpocket Inc.

It’s about the future
Just as skeptics 10 years ago asked why retailers would go online when their stores and catalogs were thriving, some are asking that question today about mobile shopping, or m-commerce. Outdoor gear retailer Moosejaw Mountaineering has the same answer to m-commerce today that it had to e-commerce in 1995. “When we launched our Internet site in 1995, people asked us why we would put money into the web when our stores were booming,” says Jeffrey Wolfe, COO. “It’s not about cost and it’s not about the short term—it’s about trends. It’s about anticipating customer demand and jumping on it long before the competition.”

Based on inquiries from abroad, customer feedback and intuition, executives at Moosejaw Mountaineering made the call to go mobile nearly four years ago when they started using mobile phones as a marketing tool. Today they’re putting the finishing touches on a full-blown m-commerce site, slated to launch for the holiday shopping season.

“Our goal in electronic commerce is to find as many distribution channels as possible,” Wolfe says. “We don’t expect an explosion of traffic from the start, but we expect significant revenue down the line. Until then, because our store will be listed on wireless carriers’ shopping portals, our name will literally be in the hands of millions and millions of shoppers.”

Unlike Moosejaw, the American retail industry has yet to embark on m-commerce. The fact that the majority of retailers are staying put as m-commerce booms overseas puzzles some industry observers.

The U.S. lags
When Japan’s m-commerce sales exceeded 10% of all e-commerce sales last year, it represented not only a nice round milestone number but also the first time that sales via mobile phone of merchandise exceeded sales via mobile phone of digital content, according to the Japanese government’s annual “Information and Communications in Japan” report. In addition, 69.2 million Japanese accessed the Internet via mobile phone last year vs. 66 million who accessed the Internet via PC. “When it comes to mobile commerce, the U.S. is lagging the rest of the world,” Baker says.

M-commerce, a subset of e-commerce, is the newest retail channel to hit the States; it offers merchants the potential for increased sales and heightened brand awareness. While many in e-commerce may think it’s the giants pioneering m-commerce in the U.S., in actuality it’s forward-thinking smaller retailers—along with a handful of larger players—that are showing the industry the possibilities.

“Statistics from around the world don’t surprise me at all. Our overseas customers tell us about this all the time,” says Moosejaw’s Wolfe. “The success of m-commerce in so many other countries has driven Moosejaw’s decision to invest in m-commerce. We’ve put a lot of thought and work into our mobile strategy and expect to see big profits down the road.”

Founded in 1992, Moosejaw Mountaineering sells apparel and gear for outdoor activities and operates seven stores, three catalogs and an e-commerce site. With examples of success from around the world and plenty of feedback from U.S. and overseas customers, company executives examined the long-term potential of m-commerce, decided to take the plunge, crafted a general strategy to incorporate m-commerce into its e-commerce operations, and reviewed mobile commerce vendors.

Mobilizing forces
Moosejaw selected mPoria Inc. to launch it into the mobile commerce realm. The mobile technology and services vendor takes design guidance and text and image content from retailers, creates mobile commerce sites, negotiates with wireless telecommunications carriers, which work on commission, for placement on the carriers’ mobile shopping portals (or launches freestanding mobile sites not dependent on carriers), and opens and maintains the m-commerce sites. It charges retailers nothing to do this work, opting instead to take commissions on the retailers’ sales via m-commerce.

“The mobile site itself literally is costing us nothing,” Wolfe says. “What we pay for is marketing, order fulfillment, communicating with customers and so on, just like we do with all e-commerce.”

To enable its web site to be accessed by and displayed on mobile browsers, sometimes called minibrowsers or microbrowsers, Moosejaw worked with mPoria on site design. It then sent the vendor its catalog data feeds, images and other web content, communicating which products, content and images were highest priority for the limited screen space of a mobile browser.

The result will be a new, pared-down version of the e-commerce site optimized for display on mobile phones. The retailer’s m-commerce site initially will appear in a few of the country’s major telecommunications carriers’ shopping portals, hosted by the carriers and separate from the Internet. The m-commerce site also will be accessible directly via the Internet through mobile phones’ browsers, independent of carrier-based shopping portals—though portals greatly boost the presence of a retailer in the mobile world as it now stands. Generally, 80% of m-commerce sales worldwide today stem from carrier-based stores while 20% come from standalone m-commerce sites, according to Telephia Inc., a mobile communications industry research firm.

Like Moosejaw, AG Interactive, a division of multi-channel American Greetings Corp., is blazing the m-commerce trail. AG Interactive began experimenting with m-commerce a few years ago, but revenue was insufficient to support the program. Today the program is going strong, with digital content—ring-tones, wallpapers, animations, e-cards and more—selling via mobile phonethrough most of the major wireless telecommunications carriers.

Cultural shift
Because of the ubiquity of mobile phones and a massive cultural shift from formal to impulse communication, there is a growing market for electronic commerce via mobile phones and other handheld devices, says Bryan Biniak, senior vice president at AG Interactive. “Though it represents only a small portion of the overall wireless revenue of telecommunications carriers today, revenue is on the rise from wireless data connectivity and services like mobile web browsing, shopping and other carrier portal visits, and text messaging,” Biniak says.

While use of wireless data services in general is on the rise, American e-retailers, technology vendors, consultants and researchers have varied opinions on m-commerce. One thing most of them do agree on, though, is that at some point m-commerce in this country will be ubiquitous and routine. Some say as soon as 2008, others several years later.

There are more than 200 million mobile phones in use in the U.S. today, many of which come preloaded with technology to enable some form of Internet interactivity—instant messaging, e-mail or web browsing; 15% have all three capabilities, Telephia reports.

At least 100 million phones in use today in the U.S. are “download capable,” according to investment firm Piper Jaffray & Co., meaning they are able to connect to a wireless carrier-based site or Internet site and download digital products such as ringtones, images and games. Most of the major wireless carriers operate sites on their networks—as opposed to on the Internet—on which users can purchase digital content, paying for it via their mobile service accounts.

Further, carriers have begun adding shopping portals, or decks, to their user interfaces. Mobile phone users access the shopping area which enables them to link to m-commerce sites—either wireless carrier-based versions of sites or Internet-based mobile-enabled sites—of retailers that have agreements with the carriers.

New browser software
A technological key to m-commerce, just like e-commerce, is the browser software—the interface between shopper and merchant. In recent years, a steadily increasing number of mobile browser companies have been successful at getting their browsers on billions of mobile phones worldwide. These vendors include Access Co. Ltd., Bitstream Inc., Microsoft Corp., Nokia Corp., Openwave Systems Inc., Opera Software and Palm Inc.

To complement mobile browsers, another m-commerce technology has been flowering: mobile payment software and systems. Companies such as Click&Buy, Obopay Inc. and UnWired Buyer Inc. already have come to market with mobile payment software that enables users to store payment and contact information in a secure account then use that account to complete purchases via mobile phones.

The development of mobile phone-based payment systems is another step in the downsizing of items Americans carry or maintain, some experts say. Retailers paying attention to the younger generation are seeing watches disappear from the wrists of teens and young adults, paper address books and calendars in the trash, land-line telephones vanishing, and soon wallets and credit cards staying at home, says John BaRoss, vice president of global sales and strategic development at Click&Buy, operated by Webpay International AG. The company’s e-payment technology is used by 6 million consumers and 6,000 merchants, it says.

“All of these common tools and tasks are being consolidated on mobile phones, which younger people everywhere continuously rely on,” BaRoss says. “In Asia, for example, it is a matter of routine for people to point their mobile phones at vending machines and via embedded RFID wireless technology pay for drinks and snacks. Mobile devices are on their way to becoming the gateway to virtually everything—the alarm clock that wakes you up, the place where you access your e-mail and instant messages, your only electronic communication vehicle, your shopping mall, and much more.”

Making the call
There have been constraints in the past, like device and data network capabilities; but now, as has been clearly proven overseas, m-commerce can be done, says Levi Shapiro, director at Telephia. Some U.S. e-commerce players, including Moosejaw Mountaineering, American Greetings Interactive, GameStop’s EB Games, GiftTree.com, Buy.com, Become.com, PriceRunner (see story, page 38) and eBay (see story, this page) already are up and running with m-commerce or related systems or are in the final phase of readying a launch. By Christmas the market should see more pioneering retailers in m-commerce, Shapiro adds.

Sales of digital content products via m-commerce in the United States are increasing significantly, growing 40.9% from $1.8 billion in Q3 2005 to $2.6 billion in Q1 2006, according to Telephia. An increasing number of U.S. retailers are hitting the mobile platform with digital content products; some have recently begun selling merchandise via mobile phone, the firm reports.

Regarding demographics, while women are greater consumers of digital content products in general, users of mobile shopping and auction sites are twice as likely to be male; further, four out of five are 25 to 54, with African Americans more prominently represented than in the overall wireless subscriber universe, Telephia says.

Even if a retailer cannot yet make an end-to-end m-commerce site a reality, just having a mobile presence of any kind, such as text message order tracking, coupon delivery or customer service, is important, Shapiro asserts. “It enables retailers to maintain an even closer relationship with customers and gets the retailers’ brand names literally in the hands of millions and millions of people.”

But jumping in with a complete m-commerce site is not as risky a proposition as many might think, contends Dan Wright, CEO of mPoria. By year’s end the company will launch its own e-retailing site, a mobile online shopping mall along the lines of Shop.com with numerous e-retailers, mallwide search functionality and direct-to-merchant payment.

Doesn’t get much better
“When it comes to selling via mobile phone, the business model today usually involves an e-retailer aligning with a wireless carrier’s shopping portal via a vendor or other third-party that has relationships with carriers,” Wright says. “Typically both the carrier and vendor each earn commissions on e-retailers’ m-commerce sales, not requiring any initial investment by the e-retailers. So the risk for e-retailers is minimal—they’re only paying for mobile capability if they sell products.”

Additionally, while retailers spend huge sums on marketing across channels, launching a mobile site and having the company name in wireless carriers’ shopping portals means the name will be seen by millions of mobile phone users, which can greatly boost brand awareness, he adds. “For a marketer, I don’t know how it gets a lot better than that,” he says.

But why should retailers get into m-commerce if their web-based sales are growing and they’re in the black? Many mobile communications experts point to the rapidly growing and evolving role of mobile phones in people’s day-to-day lives.

“Even 10 years ago most retailers didn’t consider the Internet as a sales channel. But people’s lifestyles evolved and now the Internet is an integral part of their routine, which includes shopping online,” says Shapiro of research firm Telephia. “Today use of the mobile platform for data and other services is growing even faster than the numbers for Internet use years ago. Most major retailers by now realize they are part of the lives of their consumers. To exclude a major platform that virtually all of their consumers are connected to seems shortsighted.”

There also is the competition. “Retailers’ competitors are looking into this channel,” says Hossein Mousavi, co-founder and vice president of products at mPoria. “If a retailer wants to sit back and see what happens, their competitors may very well come in and position themselves well not only in m-commerce but in the pecking order of mobile shopping portals.”

On the whole, m-commerce customers are connected to the mobile platform around 16 hours each day and do not need a computer to shop, says Curt Barry, president of retail consulting firm F. Curtis Barry & Co. “Retailers should meet the customer in whatever channel they want to shop.”

However, m-commerce is not for everyone, Barry contends. “Certain shopping categories may apply better than others,” he says. “And if a product requires a long, educated decision before purchasing or if there are technical questions regarding the product, then m-commerce is not the path for that retailer.”

Enter the moose
Moosejaw Mountaineering, however, is quite confident it has chosen the right path. Even though e-commerce is booming for the retailer, with web sales growing 61.3% in 2005 to $12.5 million compared with $7.8 million in 2004, according to Internet Retailer estimates, company executives say expanding into m-commerce simply is a must.

The retailer actually delved into the mobile world three years ago using text messaging to expand branding and marketing efforts and maintain routine communication with customers. Since then, thousands of Moosejaw e-commerce customers have signed up for its opt-in text messaging service, Wolfe reports, through which customers obtain exclusive coupons and receive order confirmations, order tracking numbers and loyalty program updates. The service also sends free entertainment content from the pages of its Moosejaw Madness online funhouse.

The company has begun marketing its soon-to-launch m-commerce site to customers via text messaging, its e-commerce site, e-mail and other avenues. “While we have no set marketing budget for m-commerce, we are prepared to invest whatever it takes to form an enduring mobile relationship with our customers,” Wolfe says.

As for what the risks might be if Moosejaw had not gotten into m-commerce, Wolfe has a simple answer: “I have no clue, but I’m not going to find out.”

bill@verticalwebmedia.com

Playing ‘The Price is Right’ on a mobile phone

Merchants aren’t the only m-commerce pioneers in the United States. Last month PriceRunner launched a mobile version of its comparison shopping site. Now if shoppers aren’t in front of their PCs but want to evaluate prices and features of the 6 million products PriceRunner compares, all they need do is type the product information into a text message and send it to PriceRunner, which generates the comparison information and sends a reply back via text message.

“Shoppers can be in a store examining TVs and wanting to make sure they’re getting the best price,” says Martin Andersen, general manager at PriceRunner U.S. and head of operations at PriceRunner International. The text messaging service is based on technology from UpSnap Inc. “All they have to do is grab their mobile phone and send us some basic information and we’ll let them know prices, retailer names and other information within seconds.”

That’s just the latest from the comparison shopping site. In May it launched a mobile version of its web site using mobile web browser and other technology from Opera Software. When mobile phone users access the site, the system displays the mobile browser-enabled version of the home page and search box. Web pages are optimized and graphics compressed before being sent to phones.

As is the case with m-commerce buying, other countries are far ahead of the United States in m-commerce comparison shopping: European shoppers, for instance, have been using the mobile PriceRunner site since 2002. ValueClick Inc. acquired PriceRunner in August 2004 and today operates the online comparison site in the U.S. and five other countries. Today PriceRunner receives millions of unique visits every month; the company declines to release usage figures on the mobile services, saying it is too soon to obtain meaningful numbers.

“It all comes down to retailers having another way to influence purchasing decisions anytime and anywhere,” Andersen says. “As consumers are moving from a PC-centric society to a mobile society, they’re expecting fast access to their favorite web sites. And they want product information at their fingertips to help with buying decisions wherever they may be shopping.”

Going once ... going twice ...

When an item being auctioned is on the verge of being sold, bids can come fast and furious. If an interested party is out of the room, he’s also out of luck. To rectify this situation, online auctioneer eBay now offers a tool that helps bidders sneak in last-minute bids on desired items regardless of where they are—and helps itself boost revenue.

Bidders can submit bids to eBay via mobile phone using a certified eBay-compatible application created by UnWired Buyer Inc. Further, the application sends bidders updates when items they’ve indicated interest in are near closing. The service has placed 300,000 bids by e-Bay users since its launch in October 2005. EBay handles the checkout and payment process for all items purchased through UnWired Buyer.

“There are 75 million eBay users in the United States, and our surveys show more than half miss the close of an auction because they are not at their computers,” says Indraj Gill, chairman and CEO of UnWired Buyer. “Our system has helped eBay actively reach out to this audience.”

The service is free to users. EBay receives a percentage of all auctions closed via the mobile system. UnWired Buyer gets its share via commissions per transaction. The company reports up to a 20% lift in final selling prices when an UnWired Buyer user is participating in the bidding.

“Additionally, about 50% of all listings on eBay receive no bids at the close of the auction even though there are some users watching the items,” Gill says. “These ‘zero-bid’ auctions then are relisted for free by eBay. Because our service notifies users via mobile phone based on their watch lists, 26% of zero-bid auctions now are won by UnWired users.”

On other fronts, eBay is using text messaging to power a mobile phone-based service called eBay Alerts and leverages Java technology for its eBay Wireless system, which enables mobile phone users to browse, bid and buy items via a mobile browser-enabled web site.

“EBay generates revenue from buyers and sellers connecting in the marketplace. These mobile offerings make it easier for eBay users to place bids and complete transactions and ultimately will drive increased activity in the marketplace, which drives revenue,” says Eric Shoup, group product manager at eBay. “The main limitation to these systems is getting people over the age of 24 to try using their mobile phones for more than just calls. But there already are indications this is happening, and we believe mobile usage in the United States will mirror that in Europe and Asia.”