10/03/13

Mobile commerce blasts off

A 63% increase in U.S. mobile commerce sales in 2013 illustrates the trend. Simple but powerful is the mantra for mobile-oriented retailers.

Mark Brohan , Research Director

"Mobile commerce is a big part of reinventing ourselves as a retailer that wants to engage customers anytime and anywhere," says Wall, group e-commerce director since 2010. "Mobile is making us relevant to new groups of shoppers."

That's a big shift for Shop Direct, a nearly 90-year-old direct marketer of apparel, accessories and home furnishings that generates $2 billion a year in sales from such well-known U.K. brands as Littlewoods and Woolworths. Just three years ago, the retailer had only a basic e-commerce site and no strategy to attract consumers in their 20s, 30s and 40s who were shopping online using the mobile web and apps.

With its sales plateauing, Shop Direct in 2010 refocused the company's strategy squarely on trendier e-commerce sites for clothing and accessories and mobile commerce sites to reach a broader range of shoppers.

Today, Shop Direct generates nearly $400 million in annual mobile sales, roughly 20% of its online sales, up from virtually nothing in 2010. It ranks No. 7 in the 2014 Mobile 500, Internet Retailer's research publication that ranks online retailers by their 2013 mobile commerce sales. And mobile commerce could account for one-third of its online sales next year, the retailer says. Over three years, mobile traffic to Shop Direct from smartphones and tablets has grown from practically zero to around 3 million monthly visits and now accounts for about 40% of all traffic. "Mobile is at the core of our e-commerce strategy and the key area where we see substantial potential for growth," Wall says. "Mobile is our way forward."

It's a big part of the way forward for many retailers, suggest data from the Mobile 500. The list includes a wide variety of retailers and consumer goods manufacturers, including e-retail giant Amazon.com Inc. (No. 2), TV and web retailers QVC Inc. (No. 3) and HSN Inc. (No. 9), daily-deal site RueLaLa (No. 11), niche web-only merchants such as JackThreads (No. 88), and specialty apparel manufacturer Tory Burch LLC (No. 70).

These retailers and brands are seeking to reach the rapidly growing number of consumers who are accessing the webÑand increasingly buyingÑvia smartphones and tablets. With a few years of m-commerce experience under their belts, many retailers are adding compelling features, while at the same time keeping mobile sites and apps simple enough to navigate easily on mobile devices' small screens. A growing number are turning to responsive web design so they need only maintain a single e-commerce site that adapts to the screen size a consumer is using. And while many prioritize mobile, a handful are taking a mobile-first approach to Internet retailing, looking ahead to a day in the not-too-distant future when their mobile sales eclipse desktop sales.

"The retailers that are growing the fastest in mobile commerce see mobile as a cornerstone of their e-commerce program," says David Eads, CEO of consulting firm Mobile Strategy Partners LLC. "It's the same in e-commerce markets the world over. If merchants aren't serious about strategies to connect with the anywhere/anytime shopper through mobile commerce, they are missing out on a big part of the future of online retailing."

Mobile commerce's growth is an international phenomenon, and it's leading to mobile sales representing an ever-larger share of online retailing. In 2013, mobile retail commerce in the United States is projected to grow 63% to around $34.17 billion from $20.95 billion in 2012. That includes the combined sales of $25.4 billion of U.S. merchants ranked in the Mobile 500. It also includes an estimated $8.8 billion in U.S. merchandise sales on eBay, which is not itself ranked in the Mobile 500 because it does not sell merchandise on its own, but is an important facilitator of mobile retail sales. Mobile retail will account for nearly 13% of all U.S. e-commerce sales, up from just more than 9% in 2012, according to the Mobile 500.

Another indication of how important a mobile commerce strategy is for retailers comes from web measurement company comScore Inc., which says in March 2013 that 48% of the time U.S. consumers spent on online retail sites occurred on mobile devicesÑ34% of that time on smartphones and 14% on tablets.

M-commerce also is growing worldwide. For instance, 107 European merchants ranked in the Mobile 500 will grow their combined mobile sales 102.8% in 2013 to $4.44 billion. And the combined 2013 sales of the 19 Asian merchants ranked in the Mobile 500 will grow 84.8% to about $527.5 million.

Innovation and a keen eye to making mobile purchasing easy are the hallmarks of the leaders in mobile commerce.

A prime example is Apple Inc., the leading Mobile 500 merchant. Apple upgraded its App Store this year with enhanced search capabilities and a new wish list feature, and updated iTunes by adding the ability to redeem Apple gift cards by snapping a picture of a card with an iPhone's camera. One of Apple's keys to mobile success is its extremely quick checkout. A consumer making a mobile purchase in iTunes, iBooks or the App Store only needs to enter her iTunes password; Apple then uses the billing and payment information stored in the consumer's iTunes account.

Consumer-friendly touches like these will help Apple grow its m-commerce sales by nearly 25% to $8.4 billion this year, Internet Retailer estimates. That includes $2.0 billion from consumers buying music and video content from iTunes, $4.0 billion in App Store sales, and $1.0 billion in iBookstore sales. Remaining mobile sales come from Apple software and the merchant's iAd program.

Right behind Apple is Amazon.com (No. 2), whose mobile commerce sales will increase 100% to $8.0 billion in 2013. Continuous innovation is the key to Amazon's success. For example, earlier this year Amazon launched Mobile Associates API, or application programming interface, which enables mobile app developers to sell physical goods within their apps via Amazon; developers get up to a 6% cut of sales.

Amazon also can offer consumers a much broader mobile shopping experience than most other retailers because of its big inventory, competitive prices, free or low-cost shipping, one-touch mobile checkout, and an app that enables consumers to scan product bar codes in competitors' bricks-and-mortar stores to easily check Amazon for a better price, says longtime Amazon observer and ChannelAdvisor Corp. CEO Scot Wingo.

"A consumer can visit any other mobile site and, even if they've registered there before, the experience won't be as frictionless as it is on Amazon," Wingo says. "Amazon really does set a very high bar on these things."

With their combined $16.4 billion in mobile sales, Apple and Amazon account for around 50% of U.S. mobile commerce sales, the Mobile 500 finds. But the m-commerce market is far from mature, meaning there's still plenty of room for growth and new players, particularly as more consumers shop online using their smartphones, tablets and other devices connected to the mobile web, says Stephen Burke, vice president of mobile for digital marketing firm Resource LLC.

"Nearly one-third of all adults in the U.S. now own tablets and nearly two-thirds have a smartphone," Burke says. "There's a lot more shopping that's going to happen on a mobile device."

In 2013, 290 U.S. merchants will meet or exceed the 67% average growth rate for the 331 U.S. merchants ranked in the Internet Retailer Mobile 500 with at least two years of mobile sales data, including Market America (No. 250), the fastest-growing merchant with mobile commerce revenue that will grow nearly 600% to $7.4 million in 2013. Market America attributes its mobile growth to a vastly expanded product inventory and updated versions of its mobile app, which the company says accounts for about 20% of its mobile commerce sales.

For some Mobile 500 merchants, mobile commerce isn't just the fastest-growing portion of their e-commerce program, it's also becoming the biggest. Already mobile commerce accounts for 40%, about $260 million, of sales at web-only flash-sale merchant RueLaLa. Mobile could account for as much as 60% of sales as soon as next year, the retailer says. Flash-sale retailers do particularly well in mobile commerce because they offer goods for a limited time, making it particularly convenient for a shopper to make her purchase on a mobile phone before the sale ends.

With a lot of its future growth hinging on mobile commerce, RueLaLa is becoming a "mobile-first" company, says vice president of mobile Michael Putnam. Retailers that adopt the mobile-first philosophy typically first consider how a change will affect smartphone and tablet shoppers, and let mobile changes guide revisions to their desktop sites. "Our customers are going more mobile all the time and we are going where they are," Putnam says. "We have made mobile commerce a strategic priority; it's been a huge change for the business."

RueLaLa first introduced a mobile commerce site and app four years ago. Aiming to reach even more mobile shoppers, RueLaLa.com in the past year updated its mobile app with new features that let shoppers quickly determine the availability of desired sizes and colors of apparel and introduced a "Right Now" page that shows shoppers which items have sold out or are close to selling out.

RueLaLa in May also added Google Wallet as a payment option. Google Wallet allows consumers to store their credit and debit card numbers and billing information in one place so they can check out in two steps from any Android device. "Our No. 1 focus with mobile commerce is to keep making it easier for the customer to use," Putnam says.

Keeping mobile commerce simple and focusing on younger consumers who use their mobile devices throughout the day are chief reasons mobile sales will grow around 360% in 2013 to around $37 million at web-only apparel merchant JackThreads, says founder and CEO Jason Ross. At JackThreads, 50% of sales stem from mobile devices; 62% of its online traffic comes from smartphones and 6% from tablets, Ross says.

The biggest driver of mobile commerce growth is the merchant's iPhone, iPad and Android apps that account for about 90% of mobile sales, and JackThreads makes sure those apps are easy to use. "The biggest factor behind our growth is that the mobile experience we're providing our customers is just really damn good," Ross says. "Our app has a really simple design and provides a great user experience. Many other brands try to cram all the features of their web site into their app experienceÑwe only introduce features and functionality that are essential to signing up and making a purchase."

For example, the home screen of the app offers three options: Sign Up, Log In or Look Around. Tapping the Look Around option brings the shopper to a screen that shows two product photos and provides three more options: Today's Sales, Seasonal Shops and Shop By Style. "Users don't need bells and whistles in mobile," Ross says. "They just need a clean, easy way to buy with just a few taps."

Getting mobile right is particularly important for an e-retailer like JackThreads that targets consumers in their 20s and 30s, Ross says.

"We attribute a great deal of our success to the fact that our demographic aligns perfectly with the mobile-first mentality of Millennials," he says. The Millennial Generation includes people born from the early 1980s through the early 2000s. "The data tells us that users who buy on multiple screens have a 60% higher lifetime value than their single-screen counterparts. As a result, getting the app into the hands of as many existing users as possible has been a big priority."

JackThreads encourages consumers to download its apps on its web site and in e-mails, as well as through ads in JackThreads customers' Facebook news feeds. "We are finding an incremental audience with the app, people that never discovered us on the web," Ross says. "Mobile has also been the primary device our international users have adopted; we are currently shipping to Canada, Australia and the U.K."

Reaching out to core shoppers, especially younger consumers, is what's driving mobile commerce efforts at Shop Direct, the U.K. direct retailer. Prior to the launch of m-commerce and with only a rudimentary e-commerce program, Shop Direct's core shopper was primarily a woman who liked shopping print catalogs and submitting orders by phone and through the mail. But today with new e-commerce sites, such as Very.co.uk, which Shop Direct launched in 2009 as a digital department store featuring designer brands from well-known British celebrities, the company is using mobile to reach an entire new generation of younger shoppers while also appealing to older tablet shoppers. In 2011 Shop Direct launched a mobile-optimized version of Very.co.uk, a move that quickly netted a big jump in traffic. Using its Very brand as a base, Shop Direct has added multiple mobile commerce sites and apps for its other brands such as Isme, which targets mature, fashion-conscious apparel shoppers, and Littlewoods, another women's apparel brand.

Shop Direct's online retailing program today includes an even bigger emphasis on mobile commerce, Wall says. Shop Direct has updated its mobile commerce sites with easier navigation that features more prominent department listings and daily deals. Mobile product pages also feature larger photos and product zoom, customer reviews and videos. Sites optimized for tablets also display new features such as product zoom.

Over time, Shop Direct has developed and launched an internal e-commerce procedure test and web site usability department that each month conducts up to 20 mobile tests such as tracking eye movement to improve tablet navigation, Wall says. "As a former cataloger that has completely transformed our business model, innovation now runs through our veins," Wall says.

Shop Direct and other big mobile commerce merchants say they must evaluate mobile initiatives in a new way because smartphone and tablet shoppers have different mindsets than desktop shoppers. Smartphone shoppers tend to be on the go, react quicker to daily deals and make instant buying decisions, says Brian Klais, CEO of mobile marketing firm Pure Oxygen Labs. Many tablet owners, he says, expect an experience that's more in line with browsing and buying through traditional e-commerce on a personal computer, but in a more relaxed setting. "Tablets are the perfect couch companion for browsing and buying," he says.

While desktop, smartphone and tablet shoppers have different mindsets, a mobile technology called responsive web design allows retailers to design a single site that will adapt to to the size of the screen the consumer is using.

Forty of the retailers in the Internet Retailer Mobile 500 have created responsive sites that automatically adjust to fit the screen size of any device, including desktops, smartphones, tablets and smart TVs. Retailers taking the responsive approach often use the web programming language HTML5, which makes it easier for designers to alter the size of images and other web site elements based on screen size, and designate which elements will appear on which screens. On a smartphone, for example, a retailer might strip out elements like About Us or complex navigation options that work well on PCs but not on smaller screens.

Responsive design and HTML5 enable merchants to take a more universal approach to e-commerce, says Scott Kincaid, vice president of user experience at Usability Sciences Corp.

"These days there's better technology and web design tools and codes that make it much easier for merchants to streamline mobile across all devices," Kincaid says. "There are now ways to tear down the walls that used to exist between the desktop, smartphones and tablets."

Among the retailers tearing going this route is Tory Burch, which debuted a responsive site in 2012. The fashion brand's mobile sales are estimated to increase 171% to about $49 million in 2013.

Tablet shoppers are a key driver of mobile sales, says chief marketing officer Miki Berardelli. Smartphones still generate about 60% of mobile traffic, but the average ticket on a tablet sale is about $300, about 23% higher than the average smartphone sale ticket. Meanwhile, at 2%, the average conversion rate on tablets is four times better than the 0.5% average rate for smartphones, the company says. About 75% of new mobile traffic comes from tablets, primarily iPads.

"Tablets are a big growth driver for us," Berardelli says. "Tablets let us create a very sophisticated shopping experience we can use both online and in stores."

Tory Burch launched its first tablet app in 2011. With much of its mobile success coming from tablets, Tory Burch is expanding its features and functions for iPad and Android tablets. Tory Burch recently updated its tablet-optimized site and its tablet app with more fashion and lifestyle news and videos, added more limited-edition items and other specialty products, and added a geolocation feature that helps find the nearest store.

To carry the tablet experience into its stores, Tory Burch purchased more than 400 iPads, and trained sales associates in its 91 stores to use the mobile devices to help shoppers find the style, size and color of a garment they're looking for, if they're not in stock in the store. An employee can use the iPad to order an item for a customer, and Tory Burch offers free shipping to the customer's home if the store doesn't have the item she wants. "Mobile commerce is a real bridge between our Internet channel and stores," Berardelli says

Mobile commerce also serves as a bridge between TV and the web for web and TV retailers HSN and QVC. QVC will generate Internet Retailer-estimated global mobile sales of $1 billion in 2013, while in the U.S. QVC says mobile commerce now accounts for about 28% of all e-commerce sales.

The top mobile commerce priority at QVC is tying its TV programming more closely with its mobile-optimized site and apps, says Todd Sprinkle, vice president of mobile and e-commerce operations. In June, QVC released the latest version of its iPad app with such new features as better links to social networks such as Facebook, more video content and a new shopping cart that lets shoppers click on an item and "drag" the product into the shopping basket for quicker checkout.

Other new features include pinch-to-zoom buttons, which let tablet owners use buttons to increase or decrease the size of images and content to better fit their screen. "The new tablet app was built to be highly flexible and allows each customer to discover QVC content built around her unique preferences," Sprinkle says.

HSN's mobile sales, meanwhile, will grow 79.6% in 2013 to $300 million, the Mobile 500 finds. As part of an overall redesign of HSN.com in January 2013, the retailer revamped its mobile sites and apps. New mobile updates include faster navigation and an updated "Buy This Now" feature that enables mobile customers to more quickly make purchases. New social functions on most mobile product pages include photo walls, instant polls, interactive questions and answers, and other features. Retooled mobile product pages also feature less text and bigger images, along with navigational elements designed to get customers more quickly to featured merchandise and clearance items.

Shoppers on smartphones and tablets are having a big effect on HSN, with mobile now accounting for about 10% of revenue and 20% of web sales. "Being increasingly mobile gets closer to our goal of being a retailer without boundaries and merging content and commerce," says HSN operational vice president for digital commerce and emerging platforms Ed Deutscher. "Our mobile customer is our youngest, most affluent and most diverse, and we are spending a lot of time trying to make e-commerce, content and mobile very seamless and universal for her."

Shop Direct has an even more ambitious goal of making mobile commerce account for at least 50% of all web sales in as soon as three years, Wall says. And he recognizes that achieving that goal will require constant innovation to keep up with changing shopper behaviors. "Now more than ever customers are moving faster than retailers and we plan to be the best at keeping up," Wall says.

Keeping up is not easy at a time when mobile technology is changing so fast, prompting unexpected shifts in consumer behavior and preferences. But those Mobile 500 retailers that are investing in staying abreast of the mobile revolution are reaping big returns.

mark@verticalwebmedia.com

bill@verticalwebmedia.com

Topics:

2014 Internet Retailer Mobile 500, Amazon.com, Apple, HSN, Internet Retailer Mobile 500, jackthreads.com, m-commerce, Mobile, Mobile 500, mobile commerce, mobile sales, mobile statistics, October 2013 Magazine, QVC, RueLaLa, top10stories2013, Tory Burch

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