The future is M-commerce

With 2011 in full view I cannot help but anticipate the imminent and inevitable impact that M-commerce will have on business. By M-commerce, I mean nothing more than commerce or payment via smart phone. Before I go any further, and for the benefit of those who perhaps don’t know, allow me to explain who the key players are (and their global market share) in this game changing industry of smart phones: Symbian (Nokia) (37 per cent), Andriod (Google) (25 per cent), Apple (17 per cent) and Research in Motion (Blackberry) (15 per cent).

Business Research reveals: M-commerce in developed market economies is currently growing at a rate of 100 per cent+ per annum. M-commerce will certainly have a profound impact on payment systems (i.e. consumers’ preferred method of payment for goods and services), on marketing (especially with the decline of traditional ‘paid media’ and the rise of ‘owned media’ as well as ‘earned media’), and it will radically change the seller-buyer relationship. For instance, eBay’s recently released numbers on M-commerce sales in the USA show a 134 per cent year-on-year growth valued at circa $100 million in gross merchandise value.

Globally, the increase is even more impressive: 166 per cent year-on-year. Moreover, eBay apps have been downloaded on smart phones 30 million times; with eBay’s iPhone app alone accounting for 13 million downloads. According to New York based ABI Research, M-commerce sales in 2010 should approach €3.8bn in the USA alone. Smart phone generated marketing and advertising revenue will amount to nearly $1.5 billion by 2016. Whereas another study from research firm Berg Insight (Gothenburg) estimates that mobile ad revenues could climb by 41 per cent annually, going from €1.7 billion in 2009 to an impressive €13.5 billion in 2015.

If you are an entrepreneur, a marketer or even a manager of a business, these figures should make you sit up. The way we sell products and services is about to change very dramatically and I suspect quickly. A 2010 Consumer Technology Barometer survey, again conducted by ABI Research, showed that approximately one-third of smart phone owners polled had clicked on at least one mobile advertisement. And a recent Booz & Co study shows that between 15 - 20 per cent of consumers currently use their smart phones for price discovery and product comparison and one-quarter of people expect to do so in the near future.

The Booz & Co study goes on to state that for products worth less than $200 the conversion rate (i.e. the process of converting browsing into sales) increases by as much as 240 per cent. Also 10-15 per cent of the revenues from retail are expected to be influenced by mobile applications this year, and as much as $340 billion in total retail sales across the USA and the EU3 (UK, Germany and France). Lastly, it is forecast that by 2014 one in two persons in the same countries just quoted will own a smart phone (namely an iPhone, Andriod, Blackberry or Nokia). I don’t know what the comparable figures are for Malta but I am sure that the penetration rate of smart phones follows a similar trend.

What does all this mean to business? To my mind it means that businesses had better stop making the distinction between traditional bricks-and-mortar (the shop) and their online presence (the web site); if you want to stay in the game, you must make the internet the primary sales engine and be aware that payment systems are about to change very radically too. So if you have a website, upgrade it and enhance it; make sure it is fully optimised and smart phone friendly. Customers will soon start to identify store locations and product availability with their smart phone, leverage social networking web sites to build or destroy your brand / products, take a picture or scan your product’s bar code to compare prices or read product reviews online and pay for the product all with their smart phone.

So if your website isn’t up to scratch; invest in it and re-direct your marketing spend to smart phone and internet advertising. Because if you don’t give customers the opportunity to get the purchasing insight from your ‘smart-phone-friendly’ website, you will only drive them to someplace else! The truth is that the most innovative uses of M-commerce are yet to be invented. What I have described so far is just the beginning!

I look at this tectonic change to the market place from a strategic perspective and how it will impact business: I am not exaggerating when I say that M-commerce is going to literally revolutionise the very concept of money, the marketing process and the role of the internet in every company’s business model. The M-commerce phenomenon will revolutionise how we choose what to buy and how to pay for it and the adoption rate will be excruciatingly fast.

I dare say that by the end of 2012-13 probably more than 75 per cent of Maltese mobile users will have a smart phone and the opportunity for this ubiquitous payment tool to replace credit cards / debit cards. Also, marketing spend will need to be invested in the ‘evaluate’ and ‘advocate’ stage of the consumer decision journey and not just the ‘consider’ and ‘buy’ stages as companies have done in the past. M-commerce will therefore make consumers more promiscuous and businesses need to adapt to this changing consumer behaviour.

So marketers and businessmen alike watch out: M-Commerce is the future! Understand it, adapt to it and invest in it.

www.fenci.eu

Mr Fenech is managing director of Fenci Consulting Ltd.