The long slow crawl to m-commerce: Can pizzas revive a comatose marketing idea?

During the Olympic Games two years ago, a television ad for wireless phones featured a woman using a cell phone to buy a soda from a vending machine. While full of the gee-whiz! factor, the ads also provoked many to think: “Who needs it? Why doesn’t’ she just put change into the machine instead?”

While wireless commerce was exciting back then to the developers of the concept, the more general reaction was the Who needs it? one. And that is just how the market has developed—or, rather, not developed.

Some high-profile online retailers made a big deal about their wireless tests—including Amazon, 1-800-Flowers and Barnes & Noble’s bn.com. But in 2002, the concept of using wireless devices to buy goods and services is still in development. And although research firms have projected substantial growth down the line, mobile commerce has not taken off as expected and probably won’t in the near future. According to New York-based e-Marketer Inc., which aggregates industry research, the average forecast for U.S. m-commerce transaction value in 2004 is $12.8 billion. If there are 150 million mobile phone users in 2004 and 40 million users of PDAs, two-way pagers and pocket PCs, then there will be a mobile audience of nearly 200 million. E-marketer suggests that a middle-of-the-road estimate of wireless users with web-enabled devices would be 20%. And they would have to spend between $158 and $700 each per year to hit the various value estimates.

While several big online retailers have tested wireless applications, most of them have come up dry. The reason: Consumers aren’t interested in m-commerce and the technology is not sophisticated enough yet to support such programs. Barnes & Noble.com started testing wireless in December 1999 partnering with Palm, which manufactures personal digital assistant devices, and Sprint, the telecommunications company. The program, called On the Go, was an extension of Barnes & Noble’s main web site. It allowed customers to access any information, including books and music, and order via Palm pilot or cell phone. Barnes & Noble declines to say how well the pilot worked, but it ended it a year ago because consumers did not have the capabilities to use it. “The market was not big enough at the time and we got into it early,” says a spokeswoman.

Such failures notwithstanding, some retailers won’t give up. And in fact, Donatos Pizza Corp., a subsidiary of McDonald’s Corp., Motorola Inc. and Food.com in January announced a new wireless ordering initiative that could re-spark interest in m-commerce.

The main problem, analysts say, is that even if consumers have web-enabled phones, wireless services may not be attractive enough to entice them to activate the web functions. “Mobile commerce cannot start without an underlying infrastructure,” says Ben Macklin, senior analyst on broadband and wireless at e-Marketer. “The fact that there could be 50 million web-enabled wireless devices in the market does not guarantee m-commerce usage. Only a small percentage will actually subscribe to an m-commerce service. People really are just feeling out the medium at the moment and it’s a small user base.”

But the question is how can retailers take advantage of the potential market for mobile commerce. E-marketer says taking advantage of the unique characteristics that mobile commerce can provide will help make applications successful. It identifies four attributes on which retailers who want to build a wireless offering should focus (see box).

Quality mobile content and applications must display one or more of these characteristics to induce mobile users to pay for them, eMarketer says.

The program that Food.com, Donatos and Motorola plan to roll out nationwide by mid year fits neatly into eMarketer’s four-point plan. In January, Columbus, Ohio-based Donatos announced an m-commerce deal that would use Motorola’s wireless mobile shopping technology and Food.com’s patented Retail Ordering System platform to allow customers to key in pizza orders from their wireless devices and transmit them to a Donatos restaurant. Donatos sees the m-commerce offering as a way for customers to reach the pizzeria more conveniently at the same time helping the chain build a more loyal customer base.

Furthermore, she says consumers typically order out two times a month, an opportunity for food sellers to tap into with a mobile service. Leskun says putting a brand on a wireless device that allows consumers to set preferences for menu items, payment and delivery, avoid busy signals and being placed on hold, and insure order accuracy by putting the power into the consumers’ hands can pay off in loyalty in the long run. “4 p.m. is a decision point at which consumers decide what they want to eat for dinner. And that decision point is worth $136 million a day,” Leskun says. “If I could have my brand in your pocket, literally, clearly I’d have a chance to increase my market share.”

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Leskun and Orton Katz also say that because the mobile orders connect directly to the line orders, it can save retailers the labor costs of taking manual orders. Automating a percentage of the roughly 4 billion annual pizza orders could result in a significant profit improvement, Motorola argues.

Amazon.com also introduced a mobile commerce effort in July 2001 with AT&T Wireless, giving AT&T PocketNet customers access to Amazon’s wireless web site. The service uses the Amazon Anywhere wireless platform, which incorporates many Amazon.com features such as 1-Click ordering, recommendations, customer reviews and all product searches. Amazon Anywhere has alliances with 12 major mobile phone carriers and service providers worldwide. Amazon, too, has been mum on the progress of its m-commerce service.

But even though early adopters are not reporting massive consumer response, keeping m-commerce on the radar screen could be important to retailers if telecom services emerge to support it. In spite of its experience, Barnes & Noble, for instance, is not ruling out m-commerce for the future.

Experts who think m-commerce will develop like online shopping say simple transactions that consumers don’t have to touch and feel, like flowers, CDs and books, are likely to be among the first m-commerce items in demand. 1-800-Flowers’ Latimer is one such believer. “Our view was that the wireless Internet would develop the same way the Internet did,” he says. “First things were free, then you started doing easy transactions like buying pizza and movie tickets. Once that happens, our category should be one of the first for shopping.” 1-800-Flowers is still evaluating the market and has not made plans to re-establish its m-commerce plan. “There is no major consumer demand right now or any sales opportunities that we are missing,” Latimer says.

E-Marketer’s Macklin agrees that wireless carriers that have the capabilities to develop mobile commerce portals, similar to Yahoo and AOL on the Internet, could attract retailers and build an m-commerce community as a first step toward getting consumers used to the idea of ordering goods and services from wireless devices. That would mean a major portal or services provider would market a feasible m-commerce solution to a large and active user base. Think AOL, Yahoo and MSN customer base development. It took some time but now these are huge organizations that push all kinds of technology, shopping and marketing efforts.

But technology has to catch up with the idea of m-commerce first. “To support the idea of shopping with a mobile device, we’ll have to see more convergence with technology platforms,” says Latimer. “Right now the phones are not that easy to navigate. Wireless screens are small. But the devices will get better.” Food.com’s Orton Katz reiterates that the devices are improving the odds for future m-commerce applications. “New phones are coming out with web access, bigger display screens and integrated PDA and cell phone functions. People already are saying the upcoming Trio and Nokia Clamshell are going to be hot products with consumers,” Orton Katz says.

Industry analysts say there may be other ways to entice the consumer into mobile commerce. “We’re skeptical about transferring traditional e-commerce items like CDs and books because there’s no instant gratification; they still have to wait for delivery,” says Adam Zawl, mobile commerce analyst at the Boston-based Yankee Group. “The real question is what will incent someone to actually use the phone to make a purchase?” More reasonable applications in the near-term, says Zawl, include receiving a wireless alert when items are available, such as when a new song is released, or alerting a consumer that he is being outbid on eBay. “Receiving alerts for new items and auctions have the time element where it makes sense to consumers to be contacted on a wireless device,” says Zawl.

E-marketer’s Macklin also notes that a first step to getting consumers used to mobile services is by basic marketing. “In Europe, they promoted the Lord of the Rings film on wireless networks.” And he says a major alcoholic beverage company has talked of targeting mobile users for a basic brand campaign in North America. Macklin also says retailers could ask customers if they’d be interested in receiving coupons through their mobile devices so they could use them at the store. “Those types of things take advantage of always being on wherever the customer is with their wireless device,” he says. “It’s the obvious place where retailers should take advantage.”

andrea@verticalwebmedia.com

What will make a successful m-commerce venture

eMarketer says m-commerce will have a future if retailers can meet these consumer requirements: