European retailers’ hopes to sell through mobile phones, interactive TVs, and PDAs will fall short, according to a report by Forrester Research, which found the inherent constraints of these devices will limit their share of online retail to 33 billion Euros in 2005 — only 19 percent of total online retail.
“Pioneering European retailers move beyond the PC to reach their customers, offering WAP sites and iDTV shops. But more than half of projects fail to meet expectations,” said Carsten Schmidt, associate analyst for Forrester Research. “Just because a retail sale is possible on a device doesn’t make it probable — device opportunities lie beyond transactions.”
In the report “Driving Retail With Devices,” Forrester projects that mobile phones will account for only 3 percent of total online retail sales by 2005, totaling 5.2 billion Euros. Mobile phones favor transactions that are timely, simple, and location-based — low-cost items like flowers and cinema tickets. iDTV will account for 16 percent of online retail in Europe by 2005, totaling 28 billion Euros. Limited input, poor resolution, and an entertainment bias lead iDTV viewers toward “lazy interactivity,” not considered shopping trips. As a result, iDTV is better for purchases that are audiovisual, contextual, and entertainment-related. PDAs struggle to connect — the first wireless PDAs will not hit the European market until 2001. Even in 2005, wireless PDAs will be outnumbered more than 150-to-1 by Net-enabled mobile phones and will capture less than 0.1 percent of online retail sales.
“With household penetration approaching 50 percent in 2005, accessing the Internet from a PC at home will become as ubiquitous as toting a mobile phone is today. PCs will capture more than 80 percent of online retail sales,” Schmidt said. “The PC’s rich input and display, wealth of competing sellers, and seasoned population of shoppers will not only capture the majority of retail sales in each category, but claim the biggest share in the biggest categories: For example, more than 97 percent of online grocery sales, the single biggest online category in 2005, will move through PCs. In total, PC-based online retail will form a 141 billion market that year.”
The real value in mobile devices will be in retail sales influenced, but not captured, by non-PC devices. These will outpace device transactions by 10-to-1. iDTV will influence 28 billion Euros in retail spending both on- and offline by 2005, representing 1.1 percent of total retail sales. Mobile devices alone will drive loyalty and influence 229 billion, more than eight times iDTV alone. Finally, the combined impact of both devices in use by 7.6 percent of Europeans will influence another 59 billion Euros.
“Retailers must look beyond transactions. For example, mobile phones reach consumers anywhere. They can cultivate loyalty through personalized alerts, create opportunities for location-based services that advance consumers toward purchases, and build brand awareness through opt-in ads,” Schmidt said.
In the meantime, the “Wireless Gaming” by Datamonitor found that mobile phones will be the next platform to emerge for playing games. By 2005, Datamonitor predicts 200 million people in Western Europe and the US will be playing Internet games via mobile phones — this represents 4 out of 5 mobile users.
By 2003, the revenues generated from wireless gams will have soared to $1.6 billion and Datamonitor predicts that in 2005, the market for wireless games will be worth a whopping $6 billion in the US and Western Europe.
Western Europe will take a strong lead over the US, with the UK and Germany as its largest wireless gaming markets. Five years from now, Datamonitor predicts that Western Europe will continue to lead and account for more than 50 percent of wireless gaming revenues. Due to its fragmented market, the US will experience slow takeoff of wireless games. It will gradually catch up with Western Europe as it unites behind common standards and is driven by its leading software developers. By 2005, wireless gaming revenues in the US will have risen considerably to $2.4 billion.
Card games, quiz games, bingo and other classic games will be the most popular games on mobile phones. Their simplicity and mass appeal will be ideal for the wireless gaming market. Popular PC and console games will also be gradually ported onto mobile phones.
According to Datamonitor, new gaming genres will also appear on mobile phones, taking advantage of the inherent functions of handsets, their mobility and their role as a communication tool. Datamonitor therefore believes that location-specific and multiplayer games based on popular themes such as treasure hunts will start to emerge.
Sponsorships of mobile games will be the most lucrative revenue stream involved in the market. Contests sponsored by third parties or dependent on customers paying a nominal fee could also prove successful with the public. Subscriptions will also find a receptive audience and will prove a winner with customers willing to pay to play. This business model will only take place once GPRS, a faster wireless networking technology to be introduced in 2001, enables the creation of high quality games.
“The advent of WAP and the coming of high-speed wireless networking technologies GPRS and UMTS promise richer content being displayed on consumers’ handsets,” said Datamonitor games consultant Frederic Diot. “Lured by the prospect of a mass-market audience and ever-improving technology, game publishers are ramping up their efforts to penetrate the wireless gaming market. Similarly, mobile phone operators and manufacturers are eager to have a head start in providing their customers with online games, which are considered premium online content.”
For its report, Forrester interviewed 40 executives from European retailers who support at least one of these new interactive devices in addition to the PC. Forrester also used results from the Technographics® Europe May 2000 survey of 23,000 consumers.
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