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Smartphones are transforming the mobile web, making m-commerce more viable. And more retailers are proving it.

Internet Retailer
By BIll Siwicki

Put simply, mobile commerce gives retailers a competitive advantage.

A shopper looking at HDTVs in a Best Buy store can access Sears2Go.com to compare prices at Sears, or vice versa with m.BestBuy.com when at a Sears store. Once he decides, he can make a purchase on the phone or head to the other store to get a better deal. A forgetful husband on the train to work can send chocolate overnight to his wife by using the Godiva mobile app on his iPhone. A film buff out with friends who’s told of a great new flick can order the DVD on the spot from Amazon.com via text message.

Pioneering retailers say they are gaining customers and building loyalty by putting their storefronts in consumers’ pockets and purses.

“We would be missing a golden opportunity if we did not offer customers mobile access to Newegg,” says Bernard Luthi, vice president of marketing at Newegg.com, which last year launched an m-commerce site. Luthi is marketing mobile to customers, encouraging them to comparison shop in competitors’ stores, then buy then and there via m.Newegg.com. “M-commerce is a powerful tool.”

Retailers have heard that before—but this time there’s a difference, and it’s called the smartphone. These phones, including Apple Inc.’s iPhone and its imitators, have significant computing power and make accessing the Internet from a mobile phone far easier than with conventional phones. Just as broadband made shopping online far more attractive, so, too, do these powerful smartphones change the game for m-commerce. Now retailers must learn the rules of the game, and quite a few are getting started.

A key to the growth of m-commerce, many retailers and analysts agree, is consumer adoption of the smartphone. Last year, North American consumers purchased 25.8 million smartphones, according to Yankee Group Research. The firm predicts consumers will buy 32.5 million smartphones this year, 41.9 million in 2010, 54.9 million in 2011 and 67.3 million in 2012.

Traffic statistics underscore the tie between mobile commerce and smartphones. 95% of traffic to m-commerce sites created by Usablenet comes from smartphones. The company’s retailer clients include 1-800-Flowers.com, Dell, GameFly, Ralph Lauren, Rugby, Sears, Strand Bookstore, Tickets.com and Victoria’s Secret.

“In the past, a lot of retailers that invested resources and effort in mobile were disappointed in results, which came from consumers having poor experiences on conventional phones,” says Dan Shust, director of emerging media at research and consulting firm Resource Interactive. “But the latest smartphones with their great visual experiences and added functionality like GPS location awareness change everything. Greater adoption of smartphones will lead to greater adoption of m-commerce.”

Here and now

Some retailers are jumping in. At least 40 online retailers, including 19 of the top 100, now have web sites optimized for mobile phones or offer shopping applications that can be downloaded to select smartphones.

Some of these retailers—including 1-800-Flowers.com, Amazon.com, Godiva Chocolatier, Newegg.com and Skymall—are reporting they are pleasantly surprised with sales coming in via m-commerce.

And several have more than a few months of experience to draw on. M-commerce actually began some time ago, in 2001, when Amazon.com launched its Amazon Anywhere site (consumers punch in Amazon.com on a mobile phone, which auto-redirects to a mobile-optimized version). In 2004, Moosejaw Mountaineering (which operates m-commerce site m.Moosejaw.com) sent its first marketing text message.

But it wasn’t until 2007 that m-commerce really began to grow, helped in large part by significant growth in the adoption of smartphones, led by the iPhone. In the last two years, a flurry of retailers have created text message marketing programs, m-commerce sites and downloadable mobile applications to reach out to consumers who keep wanting to do more with their phones.

In response, more vendors began offering m-commerce technology. These include mobile-focused companies like Digby, mPoria Inc. and Usablenet Inc., as well as e-commerce vendors that have added mobile functionality, such as CardinalCommerce Corp. and Escalate Retail. Industry analysts expect their number to grow as retailers in m-commerce today—most of whom rely on vendors for mobile offerings—achieve success, creating a wider market for mobile technology.

Messaging via text

For many retailers, text messaging has been the entry point for mobile commerce. American Eagle Outfitters, CVS, Drs. Foster and Smith, Fragrancenet.com, Gaiam, Ice.com, Karmaloop.com, Meijer, Moosejaw Mountain­eering, Vans and Walgreen are but a few of the growing number of retailers using text messages in marketing because the short messages engender immediacy (consumers tend to text messages much more quickly than they do e-mail) and intimacy (consumers virtually always carry their phones, much more personal devices than personal computers).

And text messaging offers something that m-commerce sites, mobile apps and even e-commerce sites and e-mail cannot offer: access to consumers sans the Internet. Text messages travel over the same wireless networks as mobile phone calls, and require no Internet access.

But text messaging is primarily a marketing vehicle. When it comes to making purchases, the action is in mobile web sites. Fully transactional m-commerce sites enable consumers to shop more or less like they would on an e-commerce site, except on a pared-down version. Still, m-commerce sites can provide shoppers access to the same number of products as e-commerce sites.

Such is the case with Skymall. Many of its potential customers are browsing its catalog while sitting in an airplane waiting to take off or stuck on the tarmac. The question becomes: What do they do when they find a product they want? Skymall answered that question with an m-commerce site, Mobile.Skymall.com.

“It’s a great opportunity for us for mobile selling—customers can complete transactions sitting on the plane,” says Jay Scannell, vice president of information technology at Skymall, which launched its m-commerce site, as well as a text messaging program, in July 2007 with the aid of CardinalCommerce. Later this year it will introduce a BlackBerry mobile app built with CardinalCommerce and Digby.

Skymall is ahead of the game when it comes to mobile applications, commonly called apps. Retail mobile apps are where m-commerce sites were three years ago—on the cusp of growth. But there’s no doubt mobile apps in general are popular: Apple’s App Store stocks 15,000 apps (including a handful for m-commerce, all free), with 500 million downloads since it opened in July. And Microsoft (Windows Mobile), Palm and Research in Motion (BlackBerry) are creating app stores for their devices.

Mobile apps offer a richer, quicker experience because they reside on the smartphone and can take advantage of its computing power and slick user interface. Much of the process of buying through an app can be completed on the phone itself, and needed data can be drawn directly from a retailer’s web server.

For instance, a music retailer’s app can be programmed to present music from a wide variety of artists, and the app accesses the retailer’s server when the customer chooses to buy. And the app is connecting directly to the server, not going through the slower interface of a web site.

Blazing apps

Retailers with mobile apps today definitely qualify as trailblazers. Indigo Books & Music Inc., for example, last month unveiled Shortcovers, a new division of the company that offers a mobile app for the iPhone with versions for BlackBerry, Android and Symbian mobile operating systems on the way. Shortcovers sells e-books and other publications in a variety of formats. It’s designed to compete with the likes of Amazon’s Kindle and Sony’s Reader, and Indigo says it has an edge over these book-sized devices.

“Shortcovers is a service for anyone who wants instant access to content with the convenience of having that access from the device they already own,” says Michael Serbinis, executive vice president and chief information officer at Indigo. “Ultimately, a device like the Kindle is not something you will have with you all the time; your phone is.”

1-800-Flowers.com recently debuted its Mobile Gift Center app, which recreates the retailer’s e-commerce experience in a format optimized for the iPhone. Drs. Foster and Smith soon will launch an iPhone app that displays its entire catalog of products, with links to its e-commerce site for transactions. Godiva has an app that recreates its e-commerce site. And Delight.com offers a mobile app that highlights its deal of the day; it plans to launch a fully transactional app later this year.

Some retailers see mobile apps as an m-commerce game-changer, citing the richer experience and close connection—apps reside on mobile desktops—to customers. But most believe apps ultimately will complement m-commerce sites, not compete with them.

“In the next five years, apps and sites will be working together to fulfill different needs,” says Lynda Keeler, president and co-founder of Delight Networks, which operates Delight.com. “A perfect example is the New York Times. Its app gives me a very distilled, easy to use and navigate experience. Its mobile site offers access to a lot more content but it’s not always as easy to read or navigate. So the two work together to give readers what they want, the way they want it.”

Overall, some retailers are convinced m-commerce is on the way to joining stores, catalogs and web sites as a mainstream retailing channel.

“M-commerce absolutely is becoming the fourth sales channel,” says Kevin Ranford, director of web merchandising at 1-800-Flowers.com, which operates the mobile app, m-commerce site 1800Flowers.mobi and a text message marketing program. “It’s still emerging, and today we spend about 5% of our time and resources on it.”

As younger consumers so inextricably connected to their mobile phones age and their incomes grow, they’ll expect retailers to sell via phones—and m-commerce will be a full-fledged channel, says Scannell of Skymall.

“Mobile sales will be slow for a couple more years, but then a big bubble will come through the pipe and that will be a major wake-up call, showing everyone just how important this channel is,” he says.

Other retailers consider m-commerce important, but as a part of e-commerce, and have set up their m-commerce programs accordingly.

“Mobile is very tightly linked to our Internet business, and it will always be linked to e-commerce,” says Kimberly Land, vice president of Godiva Direct at Godiva Chocolatier. The gifts retailer sports mobile applications for the BlackBerry and iPhone and an m-commerce site (an auto-redirect, except for iPhones, from Godiva.com). “At the end of the day, you’re bringing someone to a site where they are inputting information and you’re fulfilling orders in the same way.”

Whether as its own channel or as a complement to e-commerce, m-commerce appears likely to play a big role in retailing in the decade ahead.

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