Phoning It In

The iPhone is a bit smarter than most other smartphones, and it’s having a positive impact on m-commerce

Part of the promise of Apple’s much-publicized iPhone is that its users can browse full web sites, not pared-down versions designed for the small screens of mobile phones. In theory, that means online retailers can sell to iPhone users without creating special mobile web sites. In practice, a small but growing number of e-retailers are creating special sites for the iPhone.

Among them is the leading e-retailer, Amazon.com Inc., which launched its first mobile commerce site in 2001 and has been continually upgrading its mobile offerings as new phones arrive that are more powerful and easier to use. Within two months of the launch of the iPhone in June 2007, Amazon went live with a site optimized for the new Apple handset.

“When customers are in a mobile environment, our goal is to put the best shopping experience we can in their hand,” says Sam Hall, director, Amazon Mobile. “When the iPhone came out, we knew we could be cool and innovative.”

The iPhone-optimized sites of Amazon.com and other pioneering retailers show how optimization makes browsing and buying much easier than accessing a standard web site from the iPhone.

For all the hype around it, the iPhone is just one handset in a growing category of smartphones—increasingly sophisticated mobile handsets with PC-like brains, larger screens and keyboards with a key for every letter (known as QWERTY keyboards). While the iPhone offers some functionality that most smartphones do not, it faces stiff competition from other smartphone manufacturers with firmly entrenched brands, including Palm and BlackBerry. What’s more, mobile phones such as the Instinct from Sprint and Google’s new T-Mobile G1 offering the same or extremely similar functionality as the iPhone are now on the scene.

But all mobile phones, smart or otherwise, have one great limitation: a smaller screen than that of a personal computer. “The form factor of the iPhone limits the experience of viewing a full web site,” says Josh Martin, a Yankee Group Research Inc. senior analyst who specializes in mobile technology.

And that means retailers really should optimize sites for the iPhone and competing smartphones, Martin says. “An optimized site can offer people the same content but in a different, better package,” he says. “And getting into the optimization game early is advantageous; otherwise, the early guys will be eating your lunch.”

Amazon.com, for instance, is able to offer several features on its iPhone site that it can’t offer through most other smartphones. They include placing multiple product images on the opening screen of the home page and displaying product images with search results. “This makes it really easy for a customer to see that this is what they want and then buy it that much more quickly,” Hall says.

Until recently, the iPhone has been a standout among smartphones for a few reasons. Its screen is slightly larger, it offers a touchscreen interface, its web browser is extremely powerful, its processor is faster than most, and it links to a third generation, or 3G, wireless data network.

But this is changing as more smartphones, like the Sprint Instinct and T-Mobile G1, offer serious alternatives to the iPhone. The iPhone is no longer the unique mobile device it once was.

Apple is tight-lipped about the total number of iPhones it has sold. However, on October 21, it announced 6.9 million were sold in the quarter ending Sept. 30, and that it has surpassed its goal of selling 10 million in 2008. Daniel Longfield, a mobile technology analyst at research and consulting firm Frost & Sullivan, estimates about 90% of sales last year and 60% this year will be in the U.S.

Devices in use

When it comes to the current number of devices in use, Nielsen Mobile, a service of The Nielsen Co., says there were 2.6 million U.S. wireless subscribers using an iPhone at the end of the second quarter this year. That number is certain to increase because of the debut in the third quarter of the iPhone 3G.

And when it comes to mobile web users, Forrester Research Inc. says 89% of iPhone owners regularly browse the Internet on their devices. This compares with 72% of Palm Treo owners, 71% of Blackberry owners and 17% of all mobile subscribers. And e-retailers should take note: 25% of iPhone users and 10.8% of smartphone users overall are accessing shopping sites, according to comScore M:Metrics.

Because Apple is heavily marketing the iPhone and focusing on its ability to access the web on the go, and because nine out of 10 iPhone early adopters are doing so, the iPhone is in part responsible for a shift in mobile phone replacement purchasing: More consumers are dumping their conventional phones in favor of smartphones, experts say.

“For a long time smartphones were about 5% of the market; they are now growing faster than the rest of the market,” says Avi Greengart, research director, mobile devices, at research and consulting firm Current Analysis Inc. “The price of processing power has dropped, so smartphone prices have dropped. The Palm Centro, for example—there are more than 2 million in use across the three biggest wireless carriers. They sell them for $99. So if you’re looking at a $69 flip-phone, you can spend just a little more for 3G, touchscreen and much more.”

This is why e-retailers in m-commerce are keeping a sharp eye on smartphone users, looking to understand who they are and what they want.

“The people who have smartphones and data plans are higher-end consumers who by their nature are interested in using wireless data to access the web and buy products,” says Martin of the Yankee Group.

A flowery application

1-800-Flowers.com Inc. is betting iPhone users will buy its products. The retailer, which has operated an m-commerce site since April 2007, launched last month a downloadable mobile application, dubbed the Mobile Flower and Gift Center, for the iPhone.

A mobile application is a small program that resides on a mobile device, linking that device with a web site. Mobile applications are more powerful than m-commerce sites because they can use the computing power and functions of the device for much of their work without having to rely on the lesser power of an m-commerce site.

A mobile application, for example, can enable most of a shopping experience locally on the device without having to bounce back and forth between a web site, thus creating a speedier experience. It can do this by updating information when the device is idle, such as overnight when a user is sleeping.

Application developers use the typically free toolkits of a smartphone vendor’s proprietary, also called “closed,” platform to create the programs. However, new on the scene is Google’s Android mobile platform, which, unlike all other smartphone platforms, is an open platform that any hardware manufacturer can use. Thus mobile applications developed for Android do not have to be altered for any phones, regardless of manufacturer or model, using Android.

Mobile consumers typically download applications by registering on an e-commerce or m-commerce site and receiving a text message with a hyperlink that will download the program. Or they download directly from their device through a mobile application center, such as the new Apple App Store. Most mobile applications today are free.

1-800-Flowers.com designed its free iPhone application and a sister app for BlackBerry users, launched in August, based on what it has learned from its m-commerce and e-commerce sites.

“We learned from the mobile site that shoppers want quick and easy navigation. We had tried expanding our product offerings and found all that was really doing was slowing things down for shoppers who want last-minute gifts when on the move,” says Kevin Ranford, director of web marketing at 1-800-Flowers.com. “The e-commerce site showed us which categories and products received the most traffic and sales, and that helped us narrow mobile offerings to eight categories and 10% to 15% of our more than 600 products.”

For the BlackBerry and iPhone applications, 1-800-Flowers.com trimmed as much as possible from pages to ensure the shopping experience was as quick as possible. For example, it removed the price and some product information from some pages after the initial product page to speed page download times. Additionally, it integrated the mobile application with the BlackBerry and iPhone address books to speed entry of shipping information; shoppers also can use their 1-800-Flowers.com address books. Default billing and payment information is encrypted and stored in the application.

“We’re seeing mobile-savvy shoppers getting though an entire order in 30 seconds. And we’re seeing a fantastic repeat order rate,” Ranford says. “Once mobile shoppers try us out and see how quick it is, we’ve got them.”

A leg up

While the optimized sites and downloadable applications designed for other smartphones can be just as speedy and efficient, sites and apps for the iPhone and its direct competitors do have a leg up in some areas.

The iPhone and its direct competitors, for instance, enable a more thorough multi-channel shopping experience than most other smartphones. Shoppers with any smartphone with wireless data access can compare prices while in bricks-and-mortar stores by accessing m-commerce sites such as PriceGrabber.com, Barcle.com or Amazon.com. Shoppers with iPhones get more because of the richer experience the devices offer.

“Retailers can optimize sites for iPhones with very rich customer reviews functionality,” says Martin of the Yankee Group. “Being able to read customer reviews in a store in a quick and unfettered way can help eliminate decision-making apprehension. If you can provide much of the information available on an e-commerce site at the point of sale, that is a tremendous opportunity.”

While there is plenty of opportunity with the iPhone, there also are some hurdles. One, for example, concerns how the iPhone operating system functions: It only allows one application to run at a time.

“You can’t run background processes on the iPhone, unlike Windows Mobile or BlackBerry which run classical operating environments,” says Steve Slezak, marketing director at mobile shopping mall and application builder Digby. “We have a location-watcher sitting in the background that is tied to our merchandising server for our BlackBerry application. If a customer who has opted in to our service is driving or walking within a 5-mile radius of a retailer in our mobile mall, I can push a coupon out to the user. You can’t do that on an iPhone.”

Keyboard conundrum

Another hurdle is iPhone’s touchscreen keyboard, which appears on the screen when the user touches a keyboard command. Every computer user is accustomed to entering information into a computer or mobile device using a hard keyboard, be it a QWERTY keyboard or a triple-tap numerical keypad found on most conventional phones. Many consumers, especially those who use smartphones with hard QWERTY keyboards, are very hesitant to trade in what is familiar and efficient for something that is foreign and potentially more difficult to use, experts say.

“People are very used to having hard keyboards and seem to have a difficult time with the touchscreen keyboard. It’s one thing to place your finger on an item on a web page to zoom in; it’s another to type in a lot of information,” Slezak says. “Touchscreen is unnatural for people today. For merchants this is important because e-commerce is a typing-sensitive process.”

What’s more, the new T-Mobile G1 smartphone, with features and functions that mirror those of the iPhone, includes a touchscreen and a hard QWERTY keyboard (which slides out from the middle of the device, thus allowing for virtually the same screen size as the iPhone). So consumers looking for an advanced smartphone that enables full-page web browsing that isn’t limited to touchscreen data entry now have an alternative to the iPhone.

But to accommodate iPhone users, and move in the direction of 1-click buying on mobile devices to reduce almost all data entry for users of any mobile device, some retailers in m-commerce are trying to work around a keyboard all together. Digby has made as many steps as is possible in its ordering process require only one touch. To enter shipping information, for example, a couple of one-touch steps acquires data from the iPhone’s address book application database and inserts it into the appropriate order form fields.

Amazon.com goes a step further: It has enabled pure 1-click buying for any phone. Once a mobile user enters his Amazon.com user name and password once, and then registers his phone number with the e-retailer via the mobile web, the device is then authorized to make 1-click purchases, which use default payment, billing and shipping information from the e-commerce site.

Every smartphone presents e-retailers in m-commerce with hurdles to jump. But smartphones are where the action is in mobile web browsing and m-commerce. And while the iPhone brings advanced functionality to the table, it’s important to remember that it’s just one more device option among many, experts say.

“Consumers are starting to latch on to mobile web browsing, and the iPhone is pushing this trend,” says Greengart of Current Analysis. “But it’s important not to get carried away by iPhone hype.”

What the iPhone can take credit for is raising consumer awareness about smartphones and mobile web browsing, and pushing the market to embrace greater functionality on mobile devices.

“Since the iPhone launched, we have seen a lot of the other phone manufacturers launch more powerful devices. The iPhone has accelerated the trend toward more advanced smartphones,” says Hall of Amazon.com. “This is great for customers—the better the experience they can have when out and about, the better the experience we can put on their devices.”