One in four owners of mobile devices stops using m-commerce applications after the first few attempts, according to a report by The Boston Consulting Group (BCG), but despite this high level of consumer frustration, most current and potential users believe that within the next few years, mobile devices that offer these services will play an important role in their daily lives.
“There is a big gap between what the technology can do today and what the consumer has been led to expect,” said David Dean, BCG Vice President and Leader of the firm’s Technology and Communications Practice. “The good news is that these sources of consumer frustration — slow transmission speeds, difficult user interfaces and high costs — are being addressed by operators and equipment manufacturers. M-commerce players will need to move fast to improve the user interface and offer innovative pricing structures.”
The BCG report, “Mobile Commerce: Winning the On-Air Consumer,” contains the results of the first-ever global survey of current and potential users of mobile commerce applications. Its findings show that m-commerce users often compare the speed and functionality of accessing the Internet via a personal computer against the relatively slower and more cumbersome “on-air” experience. They cite high costs, slow speeds, cumbersome navigation, the difficulty of typing in text using a phone keypad, and unreliable service as their top five dissatisfactions.
Despite the initial frustrations of early users, consumers still envision that once the glitches are worked out, mobile applications will become an integral part of their daily lives. Eighty-two percent of current and potential users think that the mobile device will become their personal travel assistant within the next three years. Eighty-one percent also foresee using these devices as part of their daily routine — for sending emails, getting news and information, and shopping. More than half (61 percent) expect these devices to become universal payment tools.
Given this high level of consumer acceptance, BCG predicts that by 2003 m-commerce will be where the Internet was in 1998 in terms of transaction value. In the business-to-consumer space, total revenues generated by m-commerce will reach approximately $100 billion, half of which will come from data transmission charges, email subscription fees, and advertising; the other half will come from the value of transactions and related activities via mobile devices.
Jupiter Research has predicted great things for m-commerce. Jupiter forecasts that mobile commerce revenues in 2003 will reach $600 million in the US, $1.7 billion in Europe, and $3.5 billion in Japan. Forrester Research, on the other hand, projects that even in Europe where wireless access is more prevalent, mobile phones will account for only 3 percent of total online retail sales by 2005, totaling 5.2 billion Euros. Mobile phones, according to Forrester, favor transactions that are timely, simple, and location-based — low-cost items like flowers and cinema tickets.
|Mobile Commerce Revenues
(in $ billions)
|Source: Jupiter Research|
There is something that firms in the m-commerce space can do in the short term about dissatisfaction among current wireless users.
“Companies operating in the m-commerce space can take immediate steps to increase levels of user satisfaction,” said Hal Sirkin, Senior Vice President and Leader of BCG’s E-Commerce Practice. “First, they can lower consumer expectations to a more realistic point by marketing what these services can do today as opposed to what they might offering a year or two. And second, they must do a much better job of providing consistent interfaces that allow users to move seamlessly between mobile applications, the fixed-line Internet and traditional bricks and mortar offerings. There are also great strides to be made in encouraging greater m-commerce adoption. Less than a half of consumers who own WAP-enabled mobile devices actually use m-commerce applications.”
Wireless consumers have quite different usage patterns than their online counterparts, according to BCG. The majority spend less than five minutes using m-commerce applications at a time, and only 8 percent use m-commerce services for more than one hour each week. By contrast, the average US consumer will surf the Internet for 31 minutes per session on a fixed line connection.
In an analysis of m-commerce usage patterns around the world, the BCG report found the following distinctions that largely stem from historical differences in technological development:
- The familiarity of US users with the Internet makes them less satisfied with handset keypads than users elsewhere, yet it enables them to use transactional services more often than consumers in other countries.
- Japanese users are much more focused on communication and entertainment applications and significantly less frustrated than users elsewhere. They are less mindful of the Internet as a point of comparison and i-mode offers a more satisfying user experience than WAP.
- German users list an online bank as one of that country’s leading brands, reflecting the broad in-roads wireless banking has made in Germany.
- French users seem especially skeptical about WAP services. Penetration rates are lower and dissatisfaction rates are very high. These attitudes may be a result of the positive experience the French have had with Minitel, which has also taken the blame for slow adoption of the wired Internet in France.
- Swedish users, who are more technologically adept with their handsets than users in other countries, are more likely to change their pre-set portals.
- Since WAP-enabled phones in Australia are much more expensive than other phones, most Australian subscribers are affluent professional users. Australians eagerly anticipate new services that will allow them to save time and manage their communications needs when they are traveling.
“The challenge for players in the m-commerce market will be to find revenue models that will recoup the huge outlays being made in technology upgrades and license fees,” Dean said. “Our research shows that m-commerce users believe that general content such as news, weather, and sports should be low-cost or free. They are also not willing to pay high subscriber fees or accept untargeted push advertising. M-commerce application providers will need to focus on user-specific content and applications and rely on innovative revenue sources — such as targeted advertising and transaction commissions.”
The BCG report is based on surveys of 1,633 early and potential m-commerce users in the United States, Japan, Germany, France and Sweden, as well as results for a similar BCG survey of 217 consumers in Australia. The surveys were conducted in the third quarter of 2000.
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