The idea sounds compelling. With Web-enabled cellular telephones, users can dial up their favorite merchants to make automated purchases. It’s called mobile commerce, but for skeptics like Lawrence Steinert, it’s more a promise than reality.
When it comes to new technologies, Steinert is no shrinking violet. He is president and chief executive officer of Chicago’s 4 MFG Inc., an e-commerce marketplace selling everything from pallets to forklifts for manufacturers.
But using his cell phone for more than conversation frustrates him. “For now, wireless Internet connections are way too slow, and the text display on my phone shows me just a few lines at a time,” Steinert says.
“M-commerce isn’t worthwhile. I’d rather wait until I get back to my office and use my desktop computer to order something.”
So far, many other consumers have made the same decision. Nevertheless, Boston-based consulting firm Yankee Group predicts that Americans will make $50 billion in annual wireless purchases by 2005.
But some experts warn that expectations are too high. Another Massachusetts firm, Boston Consulting Group, found in a recent survey that one in four cell-phone owners abandoned m-commerce after the first few attempts.
“With the current technology, it is inconvenient to buy things on a mobile phone that can be purchased some other way,” says Daniel Aronson, manager of the U.S. national wireless strategy team at Chicago-based Arthur Andersen L.L.P.
“Mobile commerce right now is where e-commerce on the Internet was in 1997. Usage is pretty low.”
Indeed, bullish telecom carriers and Web merchants don’t like to admit it, but so far, m-commerce is more hype than reality. Nationwide, m-commerce revenues last year came to less than $100 million, equal to the sales at a couple of Home Depot stores. A recent poll by Arthur Andersen found that 57 percent of consumers were either neutral or negative about m-commerce.
Perceptions aren’t likely to improve much until next year, when wider bandwidth and phones with larger text displays arrive.
“I’d love to be able to do wireless transactions, but so far, it seems more like a dream than anything else,” says Rhonda Sanderson, president of public-relations firm Sanderson & Associates Ltd. in Highland Park, Ill., who carries three cell phones when she travels on business.
“I can’t see enough text to make an intelligent decision on buying anything on the Internet. I have friends who try to do it, but I don’t think they are enjoying themselves. It’s a real pain.”
Even wireless carrier executives concede that converting skeptics like Sanderson will be a challenge. Stephen Krom, vice president of marketing for data services at Atlanta-based Cingular Wireless, believes most subscribers are using their phones to access Internet information such as weather forecasts and stock quotes rather than to do business.
“The user interfaces probably have to become more mature before m-commerce really takes off,” Krom says.
Speed also will have to improve. Most text messaging runs at roughly one-fourth the speed of a modem sending information over ordinary copper wires. Within two years, transmission will be at least 10 times faster because of a new broadband wireless spectrum.
Security has been a big concern for many customers. But AT&T Wireless Services, Cingular and other carriers are devising “e-wallets” with customers’ shipping addresses and credit-card numbers so that customers don’t have to provide that information with each purchase. Some will add purchases to customers’ cell-phone bills.
“It’s easier to tap a wired phone at home than break into a wireless transmission and steal numbers and addresses from a text message,” says Doug Stovall, director of mobile solutions at consultant Xpedior Inc. in Chicago. “You run a far greater security risk purchasing something at the Gap and having your credit-card number reside in a store computer for the rest of the day.”
Merchants are gearing up their m-commerce strategies, though some have stumbled initially. FTD.com Inc. in Downers Grove put its entire inventory of 700 products on its m-commerce site, which launched 10 months ago. Customers complained that it took forever to scroll through everything using their phones.
The company recently retooled the site, offering just 60 best sellers. “There is a lot of learning to be done in this medium to find out what works best,” says Michael J. Soenen, president and CEO of FTD.com. He and others predict that most big-ticket products-like autos and appliances -are not likely to attract a following on m-commerce sites. But flowers are ideal.
“Something that is often purchased on the spur of the moment or at the last minute is going to do well in m-commerce. We can have flowers delivered to 98 percent of the country within four hours,” Soenen says.
The Arthur Andersen survey found that 48 percent of respondents would be likely to make travel reservations with a wireless device. Galileo International Inc., a reservations service in Rosemont, debuted a Web-enabled phone in March 1999 at a meeting of travel agents. “We were an early believer in m-commerce,” says John Hach, vice-president of corporate and consumer sales and marketing. “Travel is a perfect application for a mobile device because travel is a mobile experience.”
Galileo customers receive text messages two hours before flight departures alerting them to gate assignments and possible delays. Hach was in a long check-in line at a departure gate in Denver recently when his phone beeped a gate change message to him. The airline agents themselves didn’t know about the change yet. When word came through to them, Hach was already in line at the new gate.
But even Hach concedes that m-commerce has its limitations. A complicated itinerary with multiple stops involving hotels and rental cars is theoretically possible but beyond the capability of m-commerce users.
Early m-commerce adopters are often impulsive shoppers. When Charles Barnett, a Chicago-based banking consultant, reads a book review in a newspaper during his bus ride to work, he often decides to buy the book. Out comes his cell phone, and he taps an order to Amazon.com. “With a wireless phone, I don’t have to remember anything that I’m supposed to do later,” says Barnett, president of Barnett & Associates Inc. Despite Barnett’s enthusiasm, he won’t be part of any mainstream m-commerce for another two or three years. “There is a lot of hype out there that makes it seem that m-commerce is moving ahead faster than it is,” says Tim Scannell, a senior analyst with Mobile Insights Inc., a Boston consulting firm. “For most people, wireless communication is still excruciatingly slow and inconvenient.
“We have to build out a real infrastructure to make it work,” he adds.
When that happens, Scannell envisions dazzling opportunities for marketers. By October, the Federal Communications Commission will require cellular carriers to use technology that can locate a 911 caller within 100 yards.
Such precise global positioning could allow a retailer like Barnes & Noble to notify a customer approaching a store about the arrival of a new book by a favorite author.
“By early 2002, companies may be beaming messages at you,” Scannell says. “Eventually, we’ll have full-motion video and real-time games played on wireless phones, though much of that isn’t likely to come for a long time.”
For now, nobody knows exactly how well wireless is going to be accepted by shoppers, he says. “It might be big, but who knows how big? For now, everybody is just taking baby steps.”
Lee H. Murray is a reporter with RCR Wireless News’ sister publication Crain’s Chicago Business.
