October 1, 2012, 12:00 AM

Retail's Rogue Wave

A handful of retailers are riding high on the mobile commerce wave. What's keeping others out of the water?

Lead Photo

On a Friday night a couple of months ago, Doug Mack, CEO of furniture and home décor flash sale retailer One Kings Lane, was sitting at home and decided to take a look at his company's web analytics. He immediately noticed a big spike in sales for a Friday night. A little digging showed that someone had purchased a vintage Hermès wallet for $17,000. And they had bought the wallet through the One Kings Lane iPhone app.

That mobile purchase was no fluke. The retailer also has sold through mobile commerce a freestanding oval bathtub for $7,999, a vintage turban ring for $7,499, a pair of Napoleon III blue linen bergère chairs for $7,249, a Lexicon dressing cabinet for $6,999, and a Darla rug for $6,998.

"Apple taught people to buy songs and apps on their phones. It got people used to buying small things," Mack says. "Today there is no ceiling on mobile in terms of what people are willing to buy."

Mack projects One Kings Lane will reach $44 million in mobile commerce sales this year, up 193% from an Internet Retailer-estimated $15 million in 2011. "25% of our web sales are mobile, and they will eventually be more mobile than web," he says. "It's inevitable."

Conducive to mobile

But for most retailers mobile is not nearly as big a part of their business or budgets. In fact, One Kings Lane is among a handful of web-only, flash sale and TV/web retailers that together account for more than half of all mobile commerce sales. That seems out of sync with the behavior of consumers, who are not only buying smartphones and tablet computers in big numbers, but using them with growing frequency to research products and buy. The disparity between what consumers and retailers are doing raises questions about why many retailers are slow to invest in mobile commerce, and whether they risk getting swamped as more shopping moves to mobile phones and tablets.

That consumers have enthusiastically embraced mobile devices is easy to see. Half of all mobile phones in use today in the United States are smartphones. Manufacturers sold 26.6 million tablets in the United States in 2011—the first full year after Apple Inc. essentially invented the category with the April 2010 release of the iPad—that number will increase to 37.9 million this year and 57.1 million in 2015, Forrester Research Inc. predicts.

The retailers, travel companies and ticket sellers seeking to reach these mobile-happy consumers by investing in mobile commerce are collectively generating billions of dollars in mobile sales, and mobile devices represent a steadily growing share of their online traffic.

The top 400 retailers, travel companies and ticket sellers involved in mobile commerce worldwide illustrate the potential: They will grow their mobile sales to $12.14 billion in 2012, up 101.4% from $6.03 billion in 2011, according to the new 2013 Internet Retailer Mobile 400. The guide is a compendium of mobile commerce research, articles, charts and more that ranks the top 400 players by projected 2012 m-commerce sales.

A separate study by Forrester Research is almost as bullish in terms of growth. Forrester projects $10 billion in U.S. mobile commerce sales in 2012, up 66.7% from $6 billion in 2011. Forrester only includes sales of merchandise. The research firm does not include the mobile travel and ticket sales that make up 27.5%, or $3.34 billion, of 2012 Mobile Commerce Top 400 sales. Excluding travel and ticketing, the Mobile 400 projects retail merchandise sales of $8.80 billion, a bit lower than Forrester's prediction for all retailers, not just the top 400.

Add eBay Inc. into the mix and the mobile commerce pot gets much larger. EBay, which is not included in either the Mobile 400 or Forrester figures because it is a marketplace not a retailer that sells merchandise on its own behalf, projects $10 billion in m-commerce sales this year, double the $5 billion from 2011. The Mobile 400 and eBay combined rack up $22.14 billion in 2012 m-commerce sales.

The leaders

While a doubling of sales suggests a rapidly growing market, a closer look at the Mobile 400 data shows that sales are highly concentrated. Amazon.com Inc. will reach $4.00 billion in mobile sales in 2012, Internet Retailer estimates, and Apple Inc. will hit $1.17 billion in web-only sales of apps, music, video and e-books. Seven other web-only merchants bring plenty to the table, and three of them are flash-sale retailers: Gilt Groupe, at $129.6 million; RueLaLa.com, $67.5 million; and One Kings Lane, $44.0 million. The other four e-retailers are Overstock.com, $63.1 million; Buy.com, $57.5 million; Newegg, $31.2 million; and Yoox Group, $29.7 million. Then there are the TV/web retailers that have been m-commerce pioneers: QVC, $350.0 million; HSN Inc., $110.0 million; and ShopNBC, $60.0 million.

That adds up to $6.11 billion, meaning these nine web-only retailers and three TV/web retailers control 50.3% of the Mobile 400's $12.14 billion in total 2012 sales, not counting eBay. Exclude sales from travel firms and ticket sellers and those 12 merchants account for 69.4% of total mobile retail sales of $8.80 billion.

Why are these dozen companies so successful in mobile while others are holding back? "The mobile story is being driven by a handful of pure-play retailers with unique aspects to their products or business models that carry over well to mobile," says Sucharita Mulpuru-Kodali, vice president and principal analyst at Forrester Research. By "pure-play" she means they don't operate bricks-and-mortar stores.

Mulpuru-Kodali says Amazon.com rules by being the de facto shopping search engine in mobile commerce and by offering one-touch buying, a process consumers with Amazon accounts can use to speedily buy products. Gilt Groupe, One Kings Lane and RueLaLa use the flash-sale business model that lends itself to mobile, as deal hunters away from their desktop PCs can nab items before the sales or inventory run out.

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