The new payment option from Samsung gives retailers another way to connect with customers.
The number of retailers selling through mobile will grow rapidly in the next year, an Internet Retailer survey suggests.
The ranks of merchants with a mobile commerce site are thin compared to the multitude of retailers selling online with a conventional e-commerce site. But as mobile commerce ramps up and shoppers with smartphones and other sophisticated wireless devices look to research and purchase even more products online, the number of retailers jumping into the mobile game will quickly escalate, according to Internet Retailer’s latest survey.
The survey of 149 chain retailers, web-only merchants, catalog companies and consumer brand manufacturers finds that today only 8.8% of retail organizations operate a mobile commerce site. But 75.9% of retailers expect to launch a mobile commerce site. Of those, 31.9% expect to be selling through mobile phones in under six months and another 52.6% in less than one year.
Those aggressive plans reflect the high expectations for the mobile channel. Internet research firm Coda Research Consultancy projects mobile commerce could generate U.S. sales of $23.4 billion by 2015, up 875% from an estimated $2.4 billion in 2010. “If online retailers haven’t developed a sense of urgency about mobile commerce yet, they need to because this channel is ramping up fast,” says Mark Beccue, a senior analyst of consumer mobility with Internet technology research company Allied Business Intelligence Inc. “For the smart merchants, their future in mobile commerce begins now.”
Many merchants have put off getting into mobile commerce until they have completed more pressing online retailing projects, found the necessary funding or gained a better understanding of how mobile retailing technology works. The Internet Retailer survey finds that 34.5% of merchants have delayed implementing mobile commerce because of other e-commerce priorities, compared with 30.4% with limited funding, and 23% that lack mobile design, development and programming expertise.
“There are barriers to entry for any new technology, but getting up and running with mobile commerce can be easier to implement than the commitment to the amount of time and money needed to sustain a major e-commerce site,” says Beccue. “The key to successfully launching mobile commerce is to know how mobile shoppers want to interact with a retailer’s brand with their particular device and then creating an excellent user experience.”
Most retailers have clear business reasons for getting into mobile commerce—even though the sales and average orders from most existing mobile retailing sites are nascent. The survey, which Internet Retailer conducted in August with readers of its IRNewsLink e-newsletter and in conjunction with e-mail marketing and survey firm Vovici Corp., reveals that only 5.9% of merchants are generating annual mobile sales of over $10 million. Most merchants—64.7%—have annual mobile retail sales of $250,000 or less, including 50% under $50,000.
Average ticket and conversion rates are also relatively low, below the average ticket of $197 and conversion rate of 3.5% of merchants listed in the Internet Retailer Top 500 Guide, which ranks North American merchants by their online sales. The Internet Retailer survey of 79 web-only merchants, 33 chain retailers, 23 consumer brand manufacturers and 14 catalogers finds that 71% of responding companies had an average ticket of $100 or less, including 29% under $50. Conversion rates on mobile commerce sites also are modest—under 1% for 23.3% of merchants and under 2% for another 53.3%.
Sales may be small today, but retailers have clear mobile commerce goals in mind, the survey notes, such as 39.1% of companies that cite attracting more visitors and shoppers and generating more sales as their main business objectives, followed by 13.5% that want to generate a higher sales conversion, 12.8% out to improve marketing and merchandising, 12.2% that aim to increase multichannel sales, and 10.1% that want to improve customer service.
But to achieve any significant or sustainable level of business, retailers first need to analyze why mobile shoppers want to access their sites, and how, says Sucharita Mulpuru, a vice president and principal retail research analyst with Forrester Research Inc.
“The age of mobile commerce we are in now is akin to the business-to-consumer e-commerce market of 1997,” she says. “These are still the ‘Wild West’ days of mobile commerce and there’s plenty of room for experimentation. Whoever winds up being the next Amazon of mobile retailing will do so because they developed a strategy that’s based on a clear understanding of how their on-the-go mobile phone shoppers want to interact with that brand.”
Most merchants, especially smaller retailers with annual e-commerce sales of $1 million or less, are building—or expect to build—their mobile commerce program on only a modest budget. Only 25.8% of merchants taking part in the Internet Retailer survey have an annual mobile commerce budget that’s greater than $200,000. In comparison, almost two-thirds of merchants—61.3%—spend no more than $50,000.
“Even on a limited budget, there are a lot of things merchants can do to build a mobile commerce site or app that shoppers will want to use,” says Mulpuru. “If the retailer concentrates on developing a site that mirrors how their customers want to shop, ensures that the site operates at peak performance and has engaging content, then that is technology money that will be very well spent.”
Even though they don’t have a lot of money to spend, many merchants are turning to an outside vendor, in some cases their e-commerce systems provider, for help in getting started in mobile commerce. Just over one-half of all participants in the Internet Retailer survey, 51.5%, used an outside vendor first to build and then maintain their mobile commerce sites and 53.1% hired an outside firm to develop their mobile apps.
Compared to the cost of building and developing a conventional e-commerce site, which, depending upon circumstances, can take a typical mid-sized retailer up to six months to launch at a cost that can exceed several hundred thousand dollars, the price tag and time frame for launching a mobile commerce site is shorter and cheaper, says Mark Pierce, CEO of e-commerce platform development company MarketLive Inc. MarketLive has developed mobile commerce sites for consumer brand manufacturers and retail chains such as Perricone MD, Armani Exchange, Big Buddha Inc. and others.