Mobile commerce services are almost universally expected to become huge revenue generators for carriers in the future. Analysts predict a market potential of more than $200 billion by 2005.
As such, a slew of start-up companies have sprung up offering various types of m-commerce applications and technologies, hoping to cash in on the trend. Few, however, are expected to be around this time next year.
Analysts say the m-commerce market is so wide open that there’s room for everyone to enter with their own idea of a successful application. Today we are seeing all sorts of players running through that open door, each with their own flavor of m-commerce services. During the course of the next year though, the market will start to close that door, sorting out the winners from the losers. The criteria is simple-the winners will be the companies that spark consumer demand.
“With all these companies popping up, one has as good a chance as any to make it. All should be evaluated,” said Jon Dorfman, analyst with The Strategis Group.
Notably absent from the m-commerce rush is the wireless carrier. Operators are hesitant to offer m-commerce services until they perceive a demand for them by the consumer.
“It’s debatable whether ordinary consumers are actually demanding mobile e-commerce services right now,” said Duncan Brown, senior analyst at the Ovum consulting group and co-author of a recent report on mobile e-commerce. “Potential mobile e-commerce players have to realize that at this point in time, good substitutes for their services already exist-it’s only the delivery method that has changed. Old habits die hard.”
In response, m-commerce newcomers are instead targeting the merchant. Few deny retailers and other merchants stand to benefit most from m-commerce services. As such, the current tactic among m-commerce firms is to get merchants to adopt their services, and then let the merchant push them to consumers, thereby creating demand and in turn increasing the interest among carriers.
“When people move away from things they know, they still look for what’s the same,” said Dorfman. “It’s easier for the GAP to get them to use it than some new wireless site not related to a brick-and-mortar company.”
One company embracing this tactic is GeePS.com Inc., pronounced “jeeps.” The company aims to use wireless technology as a means of getting the customer to a store, not necessarily forcing the transaction to be done wirelessly.
“We’re marrying brick-and-mortar stores with the Internet, ” said Andy Goren, chief executive officer of GeePS. “People are social animals. They want to touch and feel goods.”
Users access the GeePS Web site using a wireless Internet-enabled device. Once there, the user must enter his or her current location via zip code to receive a list of merchants in a 1-mile radius.
“What defines you is not that you have a phone, but your location-where you are and when,” Goren said.
To be listed, the merchant must pay GeePS for a spot on the site. Users have the opportunity to choose which merchants they wish to be listed.
The GeePS service allows retailers to offer consumers location-based announcements on deals, coupons, rebates and price comparisons to draw users into their stores, as well as directions to their location.
Should the merchant offer a special on a particular product which is out of stock at the physical location, GeePS allows users to order the product from the wireless device. In addition, GeePS offers the user accessory information on the product being purchased to promote further sales.
“Our strategy is to be a complete, end-to-end customer acquisition solution for merchants,” Goren said.
GeePS initiated a beta trial of its service last week in New York and San Francisco. It hopes to go commercial by the end of the year.
Another firm using wireless technology to get customers into stores is NetCommerce L.L.C., which is testing its Wireless Blvd service in Seattle. The application allows users to buy a product in advance from their wireless phone, and then pick it up from the store, where it already has been paid for through an e-commerce account. NetCommerce is touting the service as a way to skip lines.
Customers may choose from a personalized list of merchants and menu categories and place an order from the phone. At the merchant site, a wireless point of sale terminal receives the order and payment authorization.
What remains the largest obstacle to the success of these services, though, is consumer awareness. The m-commerce provider must rely on the merchant to advertise the service to its customer base, and explain how it benefits them.
“They absolutely have to be educated,” said Strategis’ Dorfman of consumers. “The goal is getting people to use the wireless Internet as much as possible … It’s all about creating incentives to create momentum.”
Taking a somewhat different approach to create this momentum is eMobee Inc., which expects to launch wireless m-commerce services soon as well, but intends to familiarize consumers with the wireless Internet first through personal productivity applications. The company launched its 2301.com Web site last week at Internet World in Los Angeles.
“We want to showcase to users the things you can do in a small amount of time using a browser-enabled phone,” said company founder David Liu. “The goal is to get users to keep clicking on their phones.”
eMobee recently became a member of the Phone.com Inc. Developers Alliance program, focusing specifically on m-commerce applications.
“We want you to view the wireless phone as a ubiquitous point-of-sale device.”
Aside from customer awareness, another hurdle for m-commerce services is the lack of a widespread location-aware technology. The killer app for m-commerce services is location-based services. Currently, users must enter in a zip code for the application to know the user’s location.
“I think location technology is integral, especially if there’s any kind of transaction over a handset,” Dorfman said. “You want to limit the amount of input and navigation needed. Location technology customizes on the fly, without the user even knowing its being customized.”
With widespread location technology at least a year away, Dorfman said m-commerce firms are forced to deal creatively with the location issue. Whatever the solution, the key is to offer something compelling to drive mass-market adoption.
“Something has to get a lot of people using it before anything happens,” he said. “There’s lots of portals out there, but no one’s using them.”
