Where`s wireless?
Despite the hype, wireless e-commerce has a long way to go in the U.S.; don`t ditch the wires and the PCs yet
By Mark Brohan
Ben Narasin is a CEO who’s willing to try risky new technologies and cut speculative business deals when others won’t even touch them. But Narasin, head of Fashionmall.com, draws the line at wireless retailing. “All I hear about is wireless e-commerce these days, but it’s one technology I’m going to take a pass on until it’s further along,” Narasin says. Narasin isn’t usually so cautious. He didn’t hesitate to buy Boo.com, the multi-language, but bankrupt, apparel portal launched by Goldman Sachs and other high-profile investors last year. And New York City-based Fashionmall is the web’s most frequently shopped clothing boutique because Narasin is a big believer in the payoff of conventional Internet retailing, where merchants can use multi-media, killer content, personalization technology and secure order taking to attract shoppers.
Wireless e-commerce is so new that only a handful of retailers are even willing to give it a try. With traditional web shopping, customers using PCs and modems can complete a transaction in just about two minutes. In contrast, shoppers have no guarantee that an order placed through a web-enabled cell phone will even be accepted because of call cut-offs, scratchy connections and other troubles that plague the nation’s wireless infrastructure. “I just don’t see the payoff with wireless retailing like I do with our present program,” Narasin says.
These days it’s hard for web retailers not to hear a lot about wireless retailing. Every technology company from IBM—which aired a commercial during the Olympic Games depicting a young woman using her cell phone to purchase a soft drink from a vending machine—to numerous wireless carriers are trying to recruit retailers by hyping the convenience of the mobile Internet. “The potential of wireless e-commerce is pretty limitless,” says Knox Bricken, wireless technology analyst with the Boston-based Yankee Group. “It represents a whole new dynamic for retailers to reach customers.”
But American e-retailers aren’t buying it yet. While mobile e-commerce is becoming big in Europe, where retailers such as McIntyre & King, a London home furnishings chain, are investing heavily in developing wireless shopping sites, U.S. merchants are limiting their mobile-device programs to a handful of customers or using the wireless Internet strictly as a marketing and shopping comparison tool.
Shop online, buy offline
FTD.com, a member of the AT&T Wireless Services shopping channel, launched a wireless retailing program just in time for Mothers Day. Customers could use web-enabled cell phones to read text messages about floral arrangements and specialty gifts for Mothers Day. FTD customers could also qualify for a 10% discount if they used a cell phone to complete the purchase.
But while FTD says the program was a success—Internet orders for Mothers Day grew 137% over 1999’s Mothers Day—sales generated by its wireless program weren’t entirely completed over the Internet. FTD shoppers could compare prices and read text descriptions of floral merchandise using web-enabled Ericsson or Motorola cell phones, but the transactions were completed offline. Once a shopper selected an arrangement, the call was forwarded to an FTD call center, where the order was placed and paid for.
FTD.com plans to add full e-commerce capability to its wireless program—eventually. But for now it is content to use the mobile Internet as a marketing tool. “There is great potential in wireless retailing, but it’s going to come in stages,” says FTD.com CEO Michael Soenen. “For the time being, we’re looking at it as an up-and-coming distribution channel.”
Translation: FTD is going to wait to see if wireless develops. So are most other Internet retailers. When PC-based shopping took off, most traditional retailers and catalogers kept to the sidelines while virtual startups marketing commodity products such as books and music took the lead in selling over the Internet. But with PC retailing, even the first-to-market web stores knew who their potential audience was: the 20 million to 30 million households with personal computers, modems and access to the Internet. And the audience was showing a nascent proclivity to transact business on a network—and had confidence that the technology to complete the transaction was reliable.
That’s not the case with wireless retailing. For one thing, consumers have not shown a willingness at all to use a cell phone to shop—other than to place orders at 800 numbers, as they already do with wired phones. And for another, a high likelihood exists that a call will be cut off in mid-transaction. After all, who hasn’t experienced the frustration of losing a cell-phone call mid sentence?
Hold the phone
So even the most aggressive web merchants are saying “hold the phone” on wireless. Eddie Bauer, for instance, is usually not afraid to try out new ventures it thinks will boost sales and retain customers. Eddie Bauer was among the first business-to-consumer web sites to try out portals, banner advertising and interactive marketing agencies as a way to build up its brand and retain customers.
But while Eddie Bauer endorses the idea of merchandising its casual clothing, outerwear and housewares through new media such as the wireless Internet and interactive TV, it won’t begin building a full-blown program anytime soon. The prime reasons: lack of shoppers and the challenge of marketing merchandise through limited text screens and simple cell phone menus.
Web shoppers are impatient. They will wait less than 10 seconds before clicking away if a retailing site fails to grab their interest. Cell phone users, many of whom already pay a premium for using their phones when roaming, are even more picky.
In PC web retailing, merchants can use e-mail as a strong marketing tool to push upcoming sales and promotions directly to the end customer. But wireless retailing is pretty much one-way. When end users must pay for all calls, they won’t put up with unnecessary messages from retailers—even if the merchant is offering a great deal on their favorite merchandise. “If it’s on their dime, cell phone users don’t want a lot of telemarketing calls and that means we can’t get our message out to them,” says Sally McKenzie, division vice president, merchandising and operation, interactive media, Eddie Bauer. “The other challenge is pushing promotions and trying to sell when you’re only limited to 200 characters of text and screen that’s only a couple of inches high.”
Eddie Bauer will re-evaluate wireless retailing when the concept is further along. But just figuring out merchandising and marketing logistics aren’t the only reasons most merchants are lukewarm to mobile e-commerce.
In Europe, wireless e-commerce will attract close to 300,000 regular shoppers by 2004 because the wireless systems are national and European countries, telecommunication companies and retailers agree on a common standard: Wireless Area Protocol, a secure specification that runs on all standard operating systems and allows users to access information immediately via hand-held devices.
Diminishing expectations
Europeans see WAP and the continent’s growing number of wireless Internet users as the catalyst for making widespread mobile retailing take off. But not so in the United States, where carriers don’t agree on a common standard and callers still can’t get universal coverage with a guarantee of not having their conversation—or sales order—cut off.
In Europe, centralized systems and shared networking arrangements between carriers allow hand-held unit users to complete secure transactions. But in the U.S., merchants must integrate their core Internet retailing systems with as many as six different mobile commerce platforms or standards, and for many it’s still not worth the effort. “If it was plug-and-play and uniform like it is in other parts of the world, U.S. retailers would be making mobile shopping a much bigger priority,” says Claudine Thompson, a wireless research analyst with eMarketer Inc., New York. “Unfortunately, the infrastructure just isn’t there yet and most merchants still see it as too risky.”
Some merchants are getting past the infrastructure problem by narrowing their wireless retailing programs to existing account holders. CD Now, for example, is rolling out CDNow Wireless because the music retailer, now a part of Bertelsmann Inc., sees web-enabled cell phones as one more way to reach its core customers—18- to 40-year-olds with annual incomes over $50,000—during the holiday shopping season. CDNow is rolling out wireless with ViaFone Inc., a Redwood Shores, Calif., mobile solutions application service provider. Under the program, CDNow customers can use a web-connected cell phone or mobile device to access a special portion of the web store and browse through music selections by category or through a listing of the day’s top 20 selling albums. If shoppers choose, CDNow will send them personalized emails alerting them when their favorite artist has a new release or if a particular CD is going on sale.
But while CDNow sees good marketing potential in launching a mobile shopping strategy, its present program still isn’t ready for prime time. Customers still can’t punch in their credit card numbers to complete a transaction and, unlike PC shopping where the technology enables music lovers to see colorful graphics of CD covers and hear sound clips from their favorite CDs, shoppers can only read terse title descriptions with their hand-held units.
“We know our wireless program is bare bones and doing something like this now is pretty bleeding edge,” says Benam Yerushalmi, senior director of product services, CDNow. “But who’s to say this isn’t the next killer application and a technology we can really be on top of if it takes off?”
Wireless shopping isn’t going to supplant PC-based retailing anytime soon. And the list of big retailers who aren’t moving into mobile e-commerce is lengthy. JC Penney, which was the first big chain to launch an Internet store in 1994, has no immediate plans to roll out wireless e-commerce. And while Wal-Mart is recognized by industry analysts as having the best retail technology infrastructure, it, too, is taking a pass at mobile e-commerce.
Among catalogers and progressive online retailers, Lands’ End, which is using interactive customer service and 3-D modeling technology to attract shoppers, doesn’t see a payback on linking to web-connected cell phones or mobile devices. Likewise, neither do SkyMall and Sharper Image, which were among the early adopters to invest in personalization technology, a rules-based software package that can analyze and predict consumer buying habits.
Where’s the payback?
Before the e-retail shakeout began and Wall Street and venture capitalists started demanding that merchants put profits ahead of technology innovation and branding, SkyMall would have shelled out the $100,000 to $300,000 needed to launch a wireless program. But not now. SkyMall spent almost $500,000 launching a personalization program, yet for cost containment reasons its won’t be making any more big technology investments and that includes making changes to its computer system to handle wireless shopping.
“If there is no immediate payback, we just won’t do it and I think that pertains to other retailers as well,” says SkyMall CEO Robert Worsley. “Retailers are throwing a wet blanket over promising technology such as wireless because they have to emphasize making a profit over everything else.”
Aside from worrying more about the bottom line, finding out just who the real wireless shoppers are is the biggest reason more Internet retailers aren’t being more aggressive with mobile e-commerce. “I don’t think I’ve ever met an actual web-enabled cell phone shopper in the United States,” Narasin says. “If they are out there, I don’t know where they are.”
But those who are in the early stages of a rollout believe they do know and it’s a prime reason they’re moving quickly to sign up with leading wireless services and mobile device manufacturers. Amazon Anywhere, for instance, occupies prime space on three wireless shopping channels and Amazon is working with hardware manufacturers such as Palm Computing Inc. to embed hand-held devices such as the Palm VII Organizers with WAP applications that can provide mobile access to the Amazon site.
Amazon isn’t talking about its wireless program. But those who work with the Internet’s biggest retailer, including Palm, know that Amazon’s wireless program targets returning customers who already know in advance the merchandise they want to order or just want a more convenient way to shop when they’re away from the computer. With the Palm VII and access to Palm.net Service, the company’s PDA wireless plan, Amazon shoppers can shop Amazon’s U.S. site as well as customized sites in a number of European countries.
The target audience isn’t large compared to Amazon’s established base of 5 million shoppers. But Amazon shoppers who have invested in a Palm 7 hand-held device that’s web-enabled and connected to a wireless Internet carrier can pull-up Amazon Anywhere, see a menu of products in the book, CD, toy, video game and electronic merchandise category and place a secure shopping order.
“The wireless shopper is an extremely attractive demographic to go after and Amazon is seeing that now,” says Jim Kruger, director of product marketing for Palm Computing. “They know that the wireless market will evolve eventually and they are preparing for the day it will become more mainstream.”
For the immediate future, most merchants—if they are doing anything at all—are using wireless retailing as a marketing tool to drive off-line traffic. And while mobile e-commerce isn’t expected to catch on quickly, some analysts contend that a “wait-and-see” attitude is better than no attitude at all.
“The barriers are large and mobile web shoppers in the United States today are a very fragmented group, says Peter O’Kelley, a senior wireless analyst for the Patricia Seybold Group. “But if Europe is an indicator, then wireless retailing is going to catch on sometime. It’s potentially too big to ignore and retailers at least need to keep it on their business development radar scope.”
Mark Brohan is publisher and editor of Chicago-based EC Technology News.
How Barnes & Noble built a successful wireless app
Others may be holding back when it comes to wireless, but not bn.com—the web site of bookselling giant Barnes & Noble. It jumped on wireless and today has one of the few operational wireless connections that is actually moving product. “We hope to open a new distribution channel,” says Robert Albert, director of mobile strategies of bn.com’s On the Go program. “We’d like to capture new customers as well as provide a convenient and accessible product to our old ones.”
Barnes & Noble didn’t hesitate when it learned about wireless in the summer of 1999. “We had an early partnership with Palm and Sprint,” Albert says. “Preliminary examination of the idea showed there would be a huge niche in the market, and we wanted to be on the leading edge.” The project was a little under a year in development.
On the Go, an extension of the Barnes & Noble web site, allows customers to shop online anywhere. The program allows users access to nearly everything in the bn.com inventory and includes a store locator with auto dialing and the Listening Wall, which allows users to hear clips from the top 10 CDs via a toll-free number.
Once Barnes & Noble decided to pursue the On the Go strategy, coding for the Palm aspects of the program took three months. The cellular portion required somewhat longer because of the wide variety of phones consumers use. The Palm 7 portion of On the Go was launched last December, while the mobile phone portion went live in May.
In deciding which features to include in On the Go, the company’s biggest concern was how to parse down bn.com for wireless access. “We had to asking ourselves what features and functionalities will fit, given the medium the user will be accessing us through,” Albert says. In the end, Barnes & Noble relied on market research, focus groups, input from fellow booksellers and just plain common sense.
A major challenge was designing the site for the smaller Palm or cell phone screen. The site was run through two and a half weeks of usability tests. The Palm 7 aspects of On the Go require the user to download program-specific software (available at the web site) before accessing the site, while Palm 5 users need only an OmniSky modem, which installs the bn.com application with the modem software.
A customer uses one of two methods to find the desired purchase. On cellular phones, On the Go uses drill-down menus to reduce the need to type search queries. “It’s difficult to use the keypad on a cell phone to input anything but numbers,” Albert says. “So we presented our merchandise in a series of categories that grow as the user selects them. “Users browse through the lists, following links downward in the hierarchy until they find the title they want.”
Information is presented differently on the Palm, which has a more user-friendly interface. “The drill downs are still there,” Albert says, “but they aren’t as important, and the users can type in specific search queries.” On the Go allows users to access their existing online accounts with Barnes & Noble, offering the convenience of not having to re-input information such as shipping and billing specifics.
In addition, On the Go is integrated into backend services and databases that drive bn.com, says project manager David McCarthy: “The upshot from a database perspective is that we required no new servers, software, or coding.”
Barnes & Noble did, however, add web servers that could handle On the Go content in handheld device markup language. Also, an XML application server was needed to communicate with the backend Microsoft SQL Server databases and generate the HDML pages accessed by users. Albert won’t tell On the Go’s start-up costs but says it was a significant investment. “This was not a weekend project,” he says.
Despite the relative ease of integration and rapid production, On the Go hit a few minor technological roadblocks. The largest potential problem, McCarthy says, was designing a system that could deliver the same content to the many different wireless platforms. “We accounted for this by isolating our backend services from the various presentation formats,” he says. “We use an XML engine as a common data source for all devices rather than integrating each device into our backend data individually. Although we have to maintain the different presentations, we only have to maintain one integration point.”
The wireless site is integrated directly into the same SQL Server database as the regular site. No new software or hardware was required for the backend of the site, although a couple of new web servers were needed for the front end. Front-end and back-end systems are integrated through XML. While company officials are mum on specifics, they say the site is exceeding sales expectations for the year.
With partners such as Sprint PCS, Verizon Wireless and AT&T, users can access On the Go with Internet-ready phones through not only the URL (mobile.bn.com) but also the browser menus present on the phone itself. “We’re No. 1 under ‘Shopping’ on AT&T,” Albert says. With cell phone use expected to grow from 90 million today to 131 million in 2004, bn.com could be tapping into more than a niche. 
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