M-commerce moves into the mainstream
With mobile commerce now part of the everyday retail experience, according to research seen exclusively by Marketing Week, the next growth area that brands need to focus on is contactless payment.
The rise in smartphone and tablet computer ownership may be responsible for a 65% rise in people shopping via their mobile phones in the past 12 months, but research seen exclusively by Marketing Week reveals that consumers still have doubts about the security of shopping on their mobiles.
The report on the evolution of m-commerce, conducted by research firm Simpson Carpenter, also reveals that purchases of digital media, such as iTunes tracks and film downloads have risen by 60%, accounting for the vast majority of the overall growth in m-commerce since a similar survey was carried out last year. By April 2012, smartphone ownership reached 45% of UK consumers, while 9% now own a tablet computer, according to estimates made from media regulator Ofcom’s data.
The growth in mobile commerce is now coming from mainstream consumers, according to Simpson Carpenter’s analysis. It is no longer restricted to early adopters of mobile technologies.
Among six segments of shoppers identified in the research, the greatest increase in mobile purchasing since 2011 has come from those categorised as ‘leisure lovers’ - older consumers with time on their hands, who shop online occasionally but also like to be able to see and touch some of the things they buy (see ‘Six types of shopper, page 24).
This group shows the third-highest use of m-commerce out of the six segments identified in the study, and has seen a 162% increase in shopping via mobile in the past year. In fact, there has been substantial growth for all consumers except ‘online addicts’, who were already exhibiting a high level of involvement in m-commerce in last year’s study.
Even among so-called ‘tactile traditionalists’ - those who prefer shopping on the high street and who shy away from digital media - there has been a 68% increase in the use of mobiles to make purchases.
M-commerce has become democratised, according to Simpson Carpenter commercial director Paul Griffiths. “A far broader spectrum of people is now using m-commerce. There is a certain amount of ubiquity about it.”
Despite the widespread take-up of m-commerce, consumers say a number of concerns discourage them from doing more shopping on their mobiles. The most significant of these is security, with 42% of smartphone owners saying they need greater reassurance. Concerns about the reliability and speed of mobile internet connections, and about the practicality of making purchases on a small mobile screen, are each cited by about one-third of consumers.
Security worries are not prompted by brands’ actual failings, but rather by irrational fear, suggests Alan Ellerton, Simpson Carpenter account director. He argues that these will fade over time and that brands should not be in a rush to run awareness campaigns to highlight mobile security, in case it serves the opposite purpose of exaggerating the problem.
“If you go too public and too loud, you start to make people worry that there is a problem when there isn’t one. The use of one-click payment services from Amazon or PayPal is helping people feel more comfortable. Those retailers not using these kinds of services could look at how they offer that reassurance.”
Consumers’ worries about reliable internet connections and ease of use also appear to be holding the industry back, particularly when it comes to researching and making purchases on the move.
M-commerce is not, in fact, all that mobile, with only 26% of the activity happening while out and about. Most happens at home (47%), and the rest at work or at other people’s homes. This suggests it is often a replacement for a laptop purchase.
But the finding that 71% of smartphone owners now use their mobiles when out shopping suggests that retailers should be thinking about ways of integrating mobile sites and apps into the customer journey beyond simply making purchases. Most importantly, high street shops need to make use of location technology such as Google Maps, since 41% of smartphone owners use their mobiles to pinpoint the location of a shop they want to visit. Taking photos of products, consulting reviews, comparing prices and checking stock are also common uses for mobiles while shopping, each named by close to 30% of smartphone owners.
Once in vogue among marketers, QR code scanning doesn’t appear likely to join this list. It is not low awareness that is impeding the technology - 70% of smartphone owners know about QR codes, but only 8% use them. Griffiths is scathing about QR codes, and calls them a “gimmick” that should be consigned to history.
“It is one of those things where people thought they had to have one because everyone else had one. No one has given a thought to how they are to the consumer’s benefit.”
Contactless mobile payment is another technology that has not yet enjoyed high adoption despite high awareness. Three-quarters of smartphone owners know of its existence, but only 4% have used their mobile to pay for something at a checkout, compared with 9% who have used a contactless card, which includes the Oyster Card to pay for public transport in London, or another form of technology that performs the same function. Unlike QR codes, however, Griffiths believes that the future of contactless payments is brighter, and that mobile phones will eventually replace credit and debit cards.
“If you look at the amount of money that is being spent by the big mobile phone companies and credit card brands, I think it is an inevitability. I think it will take a while, but Visa is spending a fortune on developing an e-wallet and so is MasterCard. If they are getting rid of the idea of cards, it makes sense to load the money onto something that is pretty much ubiquitous, and phones are ubiquitous.”
O2 has launched its mobile payment O2 Wallet in an attempt to compete with financial companies with an app that acts as a shopping comparison tool as well as a transfer app.
The slow take-up of the technology is less to do with how promising it is than with retailers’ reluctance to put contactless terminals in their stores before the majority of consumers are ready and able to use them. Restrictions on the value of transactions for which contactless payment can be used also mean consumers are not yet accustomed to paying in this way, Ellerton says.
A lot of investment by retailers, phone manufacturers and payment providers will be necessary before paying with a mobile becomes an everyday occurrence. But as with m-commerce in general, it is a market with enormous growth ahead of it.
Product development director
Our customers make an average of three visits to the desktop website before they buy. On mobile, our target is someone who is already on the way to the train station. What has surprised us on mobile has been the number of people who use it for the classic model of booking travel tickets three or four days in advance. There will be people who are booking their train tickets for next week in the living room because it is easier to do it on the mobile than going upstairs to the computer.
In mobile, payments are one of the big hurdles. We see a lot higher abandonment rates on mobile than on the websites. We are working on the ability to store credit card information to use on the mobile phone, so customers don’t have to enter it on the mobile.
We are very interested in contactless tickets. We think contactless payment will be the driver for it. It is difficult to believe that mobile operators would subsidise investment in developing this technology unless there was a mass-market appeal for it.
In three to four years time, it would be great to think that you could go to a mobile app, buy your train ticket and tap your phone on the barrier at the station.
Marketing and PR director
Half of the visits to our mobile website are from iPhones and 40% from iPads. We see spikes in our traffic, with a higher number of transactions much earlier and much later in the day than on the desktop site. People are browsing and purchasing in the mornings and the evenings - probably on their iPhones on the way to work and sat on the sofa at night on their iPads.
Of the traffic, 30% are new visitors to Brand Alley and about 70% are return visits. The demographics seem to be city centre, working people, half of whom have families. They are quite affluent and convenience is everything for them.
This last quarter we have seen mobile use increase substantially. We see ourselves as a kind of online multichannel retailer, and mobile will play a big part in our development.
Head of global insight
Mobile will be a big activator of new consumer activity. There remains a whole swathe of the country not ordering online because they are still a little bit distrusting of security online. As we move out beyond towns we are already mature in, we will also open up new types of consumer. Mobile will accelerate that.
In a downmarket household, the mobile might be the only way of them accessing us. Up to now, the barrier for some of those individuals has been the cost of smartphones. Tariffs have been expensive, and good smartphones have only been available with contracts. The growth of mobile traffic for us is exponential, and is also in those types of demographics.
The early adopters - the iPhone and iPad users - swapped over to our mobile ordering service very early on. With those households, it is about what is the device of choice wherever they are. If they are on the train it’s the mobile, if they’re in the kitchen it might be the iPad, if they’re at work it’s the laptop.
Head of ecommerce
We are seeing a 300% year-on-year improvement in mobile sales. Our sales conversion rates are typically 1%, but higher on tablets. The spend is typically higher on tablets. Sales from our mobile-optimised site are running at 10 to 12 times more than sales from our app.
We think the growth is incremental, but there must be a degree of cannibalisation. We can see that our mobile customers are three times more likely to search for their local store, and they are twice as likely to pick services that allow them to fulfil their order at a store, like ‘check and reserve’ or ‘buy and collect’.
We have been pleasantly surprised by the extent to which mobile is operating as a standalone sales channel. It isn’t just a research tool benefiting our stores.
But there is a clear demonstration that many mobile customers are on the move, so we make sure that services we put together are relevant for the customer who is not in their house.