Madison Reed has raised $32.1 million since launching 15 months ago.
Talk about not living up to its hype and you’ve got to mention m-commerce. But a new pizza deal could 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.
Many who dabbled in wireless are now waiting for the interest and technology to hit at the same time. “We’re always committed to providing access however customers want it, but we haven’t received a lot of independent inquiry on mobile commerce,” says Jon Latimer, vice president of business development for Westbury, N.Y.-based 1-800-Flowers. 1-800-Flowers had every intention of trying out mobile commerce. But market pressure and lack of popularity for such a service kept those plans from coming to fruition. On top of that, an early partnership ended with the vendor’s bankruptcy. “We built a functional wireless site that was in beta testing when the vendor had financial difficulties,” Latimer says. It wasn’t a waste of time, however. “It was a way for us to test the functionality,” he says. “It got us more focused on that marketplace.”
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.
The decision moment
The pizza model fits the location-based, immediacy, personalization and use of spare time attributes. Consumers typically spend 80% of their disposable income in their local area, says Gary Leskun, director of business development of Motorola’s Mobile Shopping, Internet Software and Content Group. And Food.com says the off-premise delivery market is the fastest growing area of the restaurant industry because consumers are more pressed for time than ever before. “Today, nobody has time to go out to eat. No one wants to get dressed up and sit down for dinner somewhere,” says Karen Orton Katz, senior vice president of sales and marketing at Food.com. “Ordering pizza is a simple transaction that people do frequently.” And the $30 billion pizza business makes sense for m-commerce because people order the same thing 80% of the time.