Consumers, M-Commerce Fail to Connect

Less than $4 billion in shopping and travel will be transacted on Internet-capable mobile phones in the United States by 2006, according to Jupiter Media Metrix, representing less than 2 percent of all online shopping.

While issues with wireless devices and networks have often been cited as the reason for slow m-commerce adoption, Jupiter’s report, “Mobile Commerce: Profiting Despite Consumer Apathy,” found that purchasing items using a wireless device is simply not a priority among consumers. Only 7 percent of consumers express a desire to transact with a mobile phone. Jupiter analysts predict, however, that shopping-related content on mobile devices will influence transactions online via PCs and offline in brick and mortar stores — sales that will be valued at $39 billion in 2006.

“Limitations of wireless devices and slow networks are being used as unacceptable excuses for the slow growth in U.S. mobile commerce. The actual culprit is consumer apathy,” said Dylan Brooks, Jupiter wireless analyst. “With the number of U.S. consumers conducting wireless transactions not expected to exceed 1 million until late 2002, carriers and merchants must change strategies to focus on simple text messaging and text-enhanced voice services until Americans are more comfortable with using the wireless Internet. Influencing mobile users with timely and location-based research or promotions sent to wireless devices will be key to successful mobile commerce.”

Businesses who think the adoption of m-commerce will follow a pattern similar to e-commerce are largely mistaken. According to Jupiter, mobile commerce will be driven by a desire for instant gratification, not extensive research, which fueled the early adoption of online commerce. Therefore, mobile commerce revenue will be characterized by time-critical purchasing. The top m-commerce categories will be those that benefit from personalization, time and location sensitivity. Jupiter analysts project that U.S. mobile merchant revenues will total only $22 million in 2001 and will be driven largely by occasional sales of entertainment and airline tickets, flowers and other timely gift items.

A Jupiter Consumer Survey conducted in March 2001 found that only 1.4 percent of consumers who own Internet-ready wireless devices (less than 100,000 out of 6.25 million people) had made a purchase using the data capabilities of their handset or PDA in 2000. Because the number of U.S. wireless users conducting transactions will not pass 1 million until late 2002, Jupiter analysts advise m-commerce ventures to focus on bridging the wireless world with online commerce, catalog sales and offline retail efforts. Internet-capable handhelds will play important roles in user identification, promotions and as a way to maintain unified customer contact for transactions both online and off.

Jupiter also examined online shoppers to see why they have not taken to m-commerce. More than one-third (36 percent) avoid shopping via wireless devices chiefly because of concerns over the cost of access. To address shoppers’ concerns over wireless shopping access costs, Jupiter suggests that wireless carriers create free, dedicated shopping channels on their wireless Web portals and merchants offer discounts or promotions to consumers making their first purchases over the wireless Web. The Jupiter Consumer Survey found that 33 percent of portable device owners will not engage in mobile commerce because they feel that their credit card or payment information is not secure.

“Mobile commerce is about influencing purchases, not transactions,” Brooks said. “The greatest area of promise for mobile commerce is to bridge the gap between the touch and feel physical world and the convenient and cost competitive online world. Merchants that understand and act on the ‘mobile bridge’ concept will come out ahead in what is fast becoming an era of cross-platform retailing.”

According to Jupiter, a broad customer base can be established for wireless shopping initiatives if consumers, merchants and carriers work to drive familiarity, not transactions, among early adopters by encouraging browsing for price comparison, product reviews, store locator and item availability. Merchants must also take common sense precautions when it comes to security, including protecting credit card databases and communicating to consumers about the safety of their personal information. In order to process the expected low volume of transactions in the short-term, merchants should focus on voice capabilities of wireless phones, which will ease consumers into using the wireless Web without forcing them to confront their concern over credit card security.

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