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M -Commerce I TODAY & TOMORROW

M -Commerce I TODAY & TOMORROW

This year, retail sales generated by mobile devices are projected to account for

15% of total retail e-commerce sales in the US, representing 38.4 billion dollars

in consumer spending – a 55.7% increase over just last year. By 2016, m-

commerce spend will reach $86.9 billion,1 creating a mushrooming opportunity

for retailers. Much of this growth can be attributed to rising numbers of

smartphone and tablet owners , in addition to a rapidly growing appreciation of

the immediacy of shopping via mobile .

But retailers must look at this growth in context. Today, all e-commerce

comprises just 7% of total retail sales, and revenues from m-commerce, which

include sales from smartphones and tablets, represent less than 1% of this

total.1 Still, mobile presents retailers with a much larger opportunity than just

sales. The mobile influence is an underestimated power that can be used to

create strong connections and unparalleled engagement between consumers

and brands.

Mo

bile

To

da

y Nearly 70% of moms shop on their mobile

devices2

Almost 25% of site visits originate from a mobile or tablet device3

75% of non-daily deal retail mobile transactions are come from the media and consumer electronics categories alone4

Mo

bile

To

mo

rro

w

50% of all sales traced to a non-PC device will occur on a tablet by 20155

M-commerce will grow at a compounded annual rate of 39% through 20164

U.S. mobile users will surpass PC users by 20151

Source: eMarketer 1 1

M -Commerce I TODAY & TOMORROW

Over the past two years, mobile traffic has quadrupled.2 But the $8 million in

retail sales generated from smartphones accounted represents just 3% of total

e-commerce sales in 2012.4 The gap between this low percentage and the 15%

share claimed by all m-commerce sales last year was made up mostly by

tablets, which not only drove more traffic to online retailers than did

smartphones, but more completed purchases as well. (Note: A small portion of

m-commerce sales are also attributed to e-readers and other mobile devices.)

M-commerce will continue escalating at an aggressive pace, with the largest

part of that growth expected to come from tablet users. Consumers in the US

are projected to shop to the tune of $24 billion on their tablets in 2013, and this

number will almost double by 2015. Retail sales on smartphones will rise at a

slightly slower pace, generating over $13 billion this year to over $20 billion in

20151. The average affluence of tablet owners is higher than that of tablet

owners, and tablet consumers spend even more than PC-based shoppers5.

So Do Tablets Trump Smartphones?

Not necessarily. While it’s true that retail conversions on tablets were almost

three times higher than on smartphones in 2012 6, consumers use tablets and

smartphones differently, and both play unique roles in the buying cycle.

Research from Nielsen revealed that consumers turn to tablets more frequently

for browsing, video viewing, and long-form content, as well as usage during

evenings. But the mobility of smartphones offers advantages of its own. Users

check e-mails more frequently from smartphones, providing ripe opportunities

for e-mail and SMS promotions. Smartphones are also better suited for popular

emerging technologies such as location-based targeting, QR code scanning,

and in-store usage of mobile devices, which is becoming increasingly popular

for activities like comparison shopping and accessing product reviews. Perhaps

most compelling is this: For consumers who own both a smartphone and tablet,

the primary device is the smartphone (88%).7

Read more: Read more at

72% of

consumers aged

20-40 in the US

and the UK use

mobile devices

while in-store to

compare prices8

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

180.0%

$-

$20.00

$40.00

$60.00

$80.00

$100.00

2011 2012 2013 2014 2015 2016

US Retail M-Commerce Sales, by Device, 2011-2016 (in billions)

Tablet Smartphone Other Mobile Devices Total % change

Location services are on

the rise and are being

driven by consumer

incentives to check in.

Younger demographics

are more likely to check in

(35%) versus senior at

18%7

Ownership is equally

distributed between

males and females

across mobile

platforms (Android

versus Apple)7

2

M -Commerce I TODAY & TOMORROW

Mobile Apps Today

Today’s mobile experience has become almost synonymous with the usage of

apps. App usage dominates total consumer time spent on both tablets and

smartphones, and more than doubled between 2011 and 2012, as available

apps and smartphone owners have both skyrocketed1. But the rampant growth

of app usage also presents retailers with technical and strategic challenges.

Creating loyal app users isn’t easy; once downloaded, 69% of mobile users

open an app10 or fewer times, and more than a quarter of them open the app

just once.9 Another big barrier to app development is cost. While it’s

challenging enough to create a popular app for a single device, developing

them for multiple devices is abundantly harder. With market share and demand

for various mobile devices constantly shifting, how can retailers prioritize which

one to develop an app for?

Mobile Apps Tomorrow

Over the next 5 years, increasing numbers of buyers will become multiple

mobile device owners, using both tablets and one or more smartphones. But as

Google, Apple, and others continue producing new operating systems and

devices, developing native apps for all of them is a costly ambition. Retail

executives have voiced concerns about unclear ROI on retail apps, and are

confounded by which devices to target for app development.4 A promising

alternative is investing in web apps, which use the emerging HTML5

technology. Cheaper and faster to develop, a single web app will function on all

devices (mobile and PC), and can be maintained and updated more easily than

their native counterparts. Although web app capabilities are not quite on par

with native apps yet, the technology is quickly advancing, and there is a real

possibility that they may completely replace native app development in the

foreseeable future.

Shopping Apps

Shopping activities are gaining

momentum on mobile devices, and

time spent on shopping apps

increased six-fold between December

2011 and December 2012. Among the

various types of shopping related

apps, retailer apps saw the highest lift.

eBay, Amazon, Target, and Walgreens

were among the top 10 shopping apps

in 201210, however, not a single retail

app made the total top 10 list of apps

downloaded on any device.11

525%

247%

228%

178%

126%

274%

132%

Retailer Apps

Price Comparison

Purchase Assistant

Online Marketplace

Daily Deals

All Shopping Apps

All Apps

Growth in Time Spent per Shopping App Category

Source: Flurry — The Rise of the App & Mortar Economy

Source: Adobe Systems – Adobe 2012 Mobile Survey Results

Device Popularity Varies by Segment, Currently Led by Android and Apple

3

M -Commerce I TODAY & TOMORROW

QR Codes

While QR codes have been accused of being

“overhyped”, they continue to gain traction

with mobile users, and these early adopters

represent a valuable customer segment.

38% of young and 40% of middle age groups

report scanning QR codes in the last three

months. Of these, 31% spent over $500 over

the past year on consumer products using

mobile devices, compared with only 16.5% of

those that hadn’t used QR codes.7

With the ability to be used just about

anywhere—from TV commercials to in-store

displays to magazine ads, QR codes offer

retailers the opportunity to explore innovative

new ways of engaging consumers pre and

post sales.

Location based personalization:

This emerging technology offers retailers a

big opportunity to engage with a younger

demographic. With the rise in consumer

“check-ins” through services including

Facebook, Foursquare and Yelp, retailers

have the ability to target customers precisely

when and where a purchase transaction is

most probable to take place. Retailers can

then deliver personalized mobile interactions

in real time, including promotions, discounts,

and personalized product recommendations.

Second Screen Engagement

With consumer multi-tasking on the rise,

second (and third!) screen usage is

becoming increasingly common. While

watching television, shopping is the fourth

most popular second screen activity, (behind

checking e-mail, surfing the web, and using

an app), and more than doubled between

2011 and 2012. This is a key opportunity for

retailers to integrate expensive television

advertising with much more cost-effective

mobile initiatives. According to Nielsen

Media, 26% of surveyed viewers used their

second mobile screen to look up product

information about an ad they saw on TV, and

22% used it to look up deals and coupons

related to a TV ad.12

The earliest adopters of emerging mobile technologies are often the biggest online spenders.7

Retailers can capture these valuable customers by innovating with emerging mobile

technologies.

4

M -Commerce I TODAY & TOMORROW

The mobile market has unlocked a vast new

advertising channel for retailers. Worldwide ad spend

for mobile search and display ads is anticipated to see

a compound annual growth rate of over 50% from

2010 to 2015, representing display and search ads

alone14. From SMS promotions to display ads to

advertising built into apps, mobile advertising presents

retailers with unprecedented opportunities for

customer targeting, and personalization. But retailers

must engage customers without being disruptive or

too invasive.

Mobile ads have shown the highest click through rates

of any digital channel. A large percentage of

consumers report clicking mobile ads presented in

both mobile websites and apps, with 42% click

through ads on mobile websites, and 37% on mobile

apps8. On the other hand, mobile ads garner the

lowest consumer trust ratings compared with other

forms of advertising. Just 27% claim to trust mobile

display ads, compared to figures close to 50%

television, magazine, and newspaper advertising12.

One explanation for this is that users often click on

mobile ads unintentionally, due to smaller screens and

touchscreen features. This makes sense, given that

the percentage of users that has actually made a

purchase using a mobile device remains quite low6.

33% of smartphone owners and 20% of

tablet owners think advertising is

acceptable on their mobile device12

Almost 70% of women redeem grocery

and consumer retail goods based

coupons1

Mobile users are more than 2x as likely to

click on an interactive ad than a static

one16

20% of mobile ad spending now goes to

Facebook ads15

42% of men and 32% of women are likely

to click through on mobile ads presented

within mobile apps8

Source: Nielsen Media Research — Courting Today’s Mobile Customer

Consumer Trust for Mobile Ads is Low

5

M -Commerce I TODAY & TOMORROW

Despite flourishing projections for the mobile channel,

retailers remain highly conservative with their investments

as they grapple with questions about ROI. According to

Forrester Research, key concerns cited by retail

executives were low direct conversion rates on mobile

sites, single-digit percentages of overall sales, and that

“consumers actually prefer experiences that are similar to

those they experienced on desktop devices”.4

The problem with this view is that it approaches mobile as

a direct sales channel rather than a robust marketing tool,

and using traditional metrics doesn’t tell the whole

picture. For example, smartphone users are 14% more

likely to convert in-store than non-smartphone

shoppers.17 In a another survey conducted by Accenture

Interactive, 60% of respondents reported using mobile

devices to research online prices and were enticed into

stores, but, 48% still went home to purchase the products

from that retailer via PC.8 A conventional approach to

ROI measurement would fail to account for these results,

which do have a significant impact on overall sales.

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Mobile-Influenced store sales vs. mCommerce and eCommerce sales

M -Commerce I TODAY & TOMORROW

The key to maximizing returns on m-

commerce isn’t about identifying and isolating

the most effective mobile activities – it’s about

using them together. Even for brands with the

most successful retail apps, the mobile web

remains a more effective channel to reach

device owners. According to a new study from

Nielsen, the mobile websites of Amazon,

Best Buy, eBay, Target, and Wal-Mart

consistently had nearly double the reach as

their apps. But the combined reach of both

was always highest, underscoring the

importance of an integrated approach. 21

Mobile campaigns should be mapped against

each phase of the customer lifecycle,

deploying mobile initiatives where they most

intuitively fit buyer needs. The focus in this

consumer-centric approach is increasing the

lifetime value of customers via an end-to-end

mobile experience, not just POS conversions.

Awareness Knowledge & Consideration

Selection Satisfaction Loyalty &

Engagement Advocacy

Mobile SEO

Mobile Ads

Social Media

Geo-targeting

QR codes

Product info &

reviews

Social Media

Shopping apps

Landing pages

QR codes

Second screen

strategies

Mobile

catalogue

SMS promos

Couponing

Mobile Wallet

Data Security

Showrooming

Mobile support

Apps

Feedback

Loyalty program

Couponing

Personalized

Content

Gaming

Social Media

Texting/Sharing

Mobile gives retailers the opportunity to influence consumers throughout their buying journey.

To realize the full value of mobile, retailers must evolve from focusing only on sales

conversions to providing value through mobile throughout the customer lifecycle.

Mobile site optimization

Engaging Mobile Consumers Across the Buying Journey

7

M -Commerce I TODAY & TOMORROW

Sephora generates a third of its e-commerce traffic

from mobile devices. With more than half of its

emails being opened on smartphones and tablets,

Sephora improved its mobile offerings to generate

a 167% increase in mobile orders between

December 2011 and December 2012. Sephora’s

mobile strategy includes smartphone and tablet

apps, Passbook integration with its loyalty program

and gift cards, and an interactive mobile site with

easy navigation and checkout.18

With more than four million downloads and

counting, Gilt Groupe has applications for iPhone,

iPad, and Blackberry devices. The luxury retailer is

known for offering mobile-only deals such as flash

sales access to pre-sale events. According to Hilt,

roughly 30% of its revenues now come from

mobile, and allows the company to “witness

engagement metrics over and above our

website”. 20

Debuting its m-commerce presence just this year,

Benefit Cosmetics is a shining glimpse into the

future of web apps. It’s mobile website functions

like a native app, where users can swipe through

products, navigate through an expandable sidebar,

and watch videos and makeup tutorials.19

Sephora, Benefit Cosmetics and Gilt Groupe are three mobile retailers that represent how

inventive mobile strategies can transform the consumer’s brand experience and power real

business impact.

8

M -Commerce I TODAY & TOMORROW

Some of the roadblocks in today’s mobile user experience, such as

speed and performance, transaction processes, and ability to load

websites will clear as technology races forward. Others, such as user

tracking and consumer privacy, device-specific optimization, and

consumer trust, will require careful consideration on the part of retailers

as they interlock with these advancing technologies. But the biggest

mobile challenges—and opportunities—faced by today’s retailers may

actually lie within themselves.

According to Forrester Research’s 2012 report on the State of Retailing

Online,4 executives are struggling with a “rapidly evolving mobile

landscape that is challenging in terms of knowing which platforms and

mobile offerings to invest in — and in what order of priority”, The report

found lack of clear ownership, concerns about security, and insufficient

collaboration between internal teams and third party agencies as key

contributors to this confusion, As consumers become increasingly irate

with irrelevant, disruptive ads and inoperative mobile sites, brand

perceptions are heavily impacted by mobile experience. Thus, retailers

must have a sense of urgency about tackling organizational issues and

defining an internal vision are prerequisites for mobile success. Today’s

leading m-commerce retailers, including Amazon, Groupon, eBay and

the Gilt Groupe, have all made mobile a core part of their overall

business strategies.

Business objectives for mobile initiatives are

unclear

Lack of experience in other areas, e.g., design for a smartphone versus

a tablet format

Staying up to date on market/customer needs

and uses for mobile

Working with third parties on mobile initiatives is

difficult

Obtaining adequate budget for mobile

initiatives, including staff,

Staying up to date on mobile development

innovations

9

M -Commerce I TODAY & TOMORROW

Mobile Success Comes From the Inside Out.

Mobile commerce may be an emerging technology, but

its success still relies on a familiar mantra: the 360° view

of the customer. With an ever-growing base of

connected consumers using multiple devices—often at

the same time—creating a seamless experience across

customer touchpoints has become more important than

ever. Mobile campaigns should always be part of an

integrated , customer-focused multi-channel strategy.

Retail executives must learn to redefine the way they

evaluate mobile success, attack the organizational

hurdles that are keeping them chained to outmoded

technologies marketing tactics, and innovate with

emerging technologies to capture high-spending early

adopters.

Start with Site Optimization

Optimizing websites mobile devices must be every

retailer’s topmost mobile priority. It may seem like a no-

brainer, but several companies have launched mobile

ads or SMS promos, only to lead the user back to a site

that isn’t mobile-optimized. Big mistake. Mobile web is

the most effective way to reach mobile shoppers.

Invest in Web Apps

While device market share will continue to change at

unpredictable rates, investing in quality web apps will

circumvent this challenge, yield time and cost

effectiveness, and fit into the app landscape of the

future.

Consider Emerging Markets

As of this year, China has overtaken the U.S. as the

world’s top country for active Android and iOS

smartphones and tablets. Mozilla has inked deals with

multiple mobile carriers and plans to release the first

mobile OS built entirely with HTML5 technology later this

year. The new smartphones will cost roughly a fifth of the

iPhone, and will be target customers in Brazil, India,

China, and southeast Asia. Apple has also hinted at

creating a lower cost iPhone to expand its global reach.

Smartphone penetration in these massive, unsaturated

markets presents a huge opportunity for international m-

commerce.

Be Disruptive

Leading retailers in the mobile space , like Sephora,

Benefit Cosmetics, and the Gilt Groupe, have paved

their paths to success by melding technology with a

deep understanding of customer needs. But a common

thread to all of their success stories has been

willingness to experiment, finding fresh new ways to

reach their customers and keep them engaged.

Mobile offers retailers the unprecedented opportunity to reach consumers during every step of

the buying cycle – and even engage them afterward to create loyalty and advocacy. As the

channel continues to skyrocket, the key to retailer success is making mobile part of a holistic

cross-channel strategy that recognizes and responds to buyer needs.

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M -Commerce I TODAY & TOMORROW

1. “Record Retail Sales on Smartphones, Tablets Take Great Ecommerce Share,” eMarketer, January 20,

2013.

2. “Mobile Traffic Has Quadrupled in Last Two Years,” Heather Leonard, Business Insider, January 10, 2013.

3. RKG, Digital Marketing Report: Q4 2012, Rimm-Kaufman Group, January 2013.

4. Mobile Commerce Forecast: 2011 to 2016, Forrester Research. June 17, 2011.

5. “BI Report: Why Mobile Commerce is Set to Explode,” January 30, 2013.

6. How Tablets are Catalyzing Brand and Website Engagement, Adobe Systems, 2012.

7. Adobe 2012 Mobile Consumer Survey Results. Adobe Systems, 2012.

8. Today’s Shopper Preferences: Channels, Social Media, Privacy and the Personalized Experience,

Accenture Interactive, November 2012.

9. “A Look at How People Use Mobile Apps,” Joseph Walker, Wall Street Journal, June 26, 2013.

10. “Which Smartphone Apps do Savvy Shoppers Use Most,” Nielsenwire, August 6, 2012.

11. “Nielsen Tops of Digital: 2012,”Neilsenwire, December 20, 2012.

12. Courting Today’s Mobile Customer, Dan Lee, Nielsen Media Research. July 18, 2012.

13. “Improving the Business of Mobile Coupons,” Josh Constine, TechCrunch, May 11, 2012.

14. “Worldwide, More Money Goes Mobile,” eMarketer, January 4, 2013.

15. “Study: 20% Of Ad Spend On Facebook Now Goes To Mobile Ads,” Josh Constine, TechCrunch, January 7,

2013.

16. Acquity Group: Enriching the Mobile Customer Experience. Peppers and Rogers Group. 2013.

17. The Dawn of Mobile Influence: Discovering the value of mobile in retail, Deloitte Digital, 2013.

18. “Sephora Sees 167% Boost In Mobile Orders During 2012,” Alicia Fiorletta, Retail Touchpoints, January 25,

2013.

19. “Gilt Groupe Reveals its Success with Mobile and Social,” Brandon Gutman, Forbes, May 27, 2011.

20. Mobile 2013 Intelligence Report, L2, Scott Galloway, February 2013.

21. “A Store in Your Pocket: Retailer Mobile Websites Beat Apps among US Smartphone

Owners,” Nielsenwire, March 12, 2012.