Potential mobile e-commerce(1) players should plan to provide genuinely unique and compelling services, rather than trying to excite the market with over-hyped messages about "cool new technology". Otherwise they will find it hard to change the habits of an unimpressed buying public. So says a new report, Mobile E-commerce: Market Strategies, by independent research and consulting company Ovum.
"It's debatable whether ordinary consumers are actually demanding mobile e-commerce services right now," said co-author and senior Ovum analyst Duncan Brown. "It's more a case of suppliers sensing an opportunity to make money, and pushing the idea at them. In fact there isn't much, if any, money to be made in the short term. Business users, rather than the mass market, will be the first serious adopters, but even they won't pay a premium for existing services, which are easier and cheaper to access using the phone or a PC. So if suppliers are to survive and prosper in the long term, their early offerings will have to be very targeted, and very compelling."
The current climate has all the frenzy, uncertainty and ill preparedness of a gold rush, according to the Ovum report. To avoid investing in applications, which sound impressive on paper but do not attract user take-up, Brown has this advice to offer. "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. For instance, what's to persuade someone to order a pizza using a mobile application, rather than just picking up the phone? There would have to be significant value-add to change habits: perhaps discounts, an up to date menu on screen - easy selection of pizzas and toppings with a few key presses - and no busy signals or overworked counter staff."
Until the mobile networks are upgraded to allow higher bandwidth applications, Ovum advises potential mobile Internet merchants to concentrate on "killer applications" which play to the strengths of mobile: convenience, location and personalization. For instance, a business traveller on the move looking for a hotel would probably be prepared to pay a premium. Since his mobile would know who and where he was, it could provide a list of suitable hotels in the vicinity, give him information, directions and allow him to book a room.
But if this is to happen, warns Ovum, the industry needs to seriously rethink its priorities. Top of the list must be the industry agreements and co-operation needed before any wireless transactions can take place. The barrage of operator marketing and media coverage hyping technologies such as WAP has left many believing that shopping via a mobile phone will be a reality within the year. "It's far more complicated than that," said Brown. "The industry hasn't even agreed on a framework for trusted and secure payments yet, let alone standardized its technology. It's just not going to happen until these big questions are answered."
In fact, the fledgling mobile e-commerce industry will need a complete transformation to deliver true mobile e-commerce. "We need content, and lots of it; a sound financial infrastructure with guarantees; compelling applications; and a first-rate mobile network," said Brown. "Despite some far-fetched claims, mobile operators can't expect to provide all of that."
So a successful new industry will consist of a web of open partnerships between players from completely different backgrounds, providing a range of competing and complementary services. They include device manufacturers, network operators, financial service providers, content providers and aggregators, systems integrators and infrastructure providers. The report predicts that this will produce short-term disputes as they all try to "own the customer", or stray onto each others' territories. Ovum's advice: operators should partner sooner rather than later, or they may be left standing in an industry that will develop at lightning speed. And to avoid costly and time-wasting disputes later, they must decide early on the most appropriate and feasible business model, as well as where in the value chain their best revenue-earning opportunities lie.
There is no doubt that the market has enormous potential. The number of mobile devices is widely expected to exceed the magic one billion mark by 2003, with a large proportion technically capable of mobile e-commerce. If the market fulfils its' promises, Ovum predicts that the end-user spend on services will rise to more than $200 billion in 2005.
Mobile E-commerce: Market Strategies is authored by Ovum analysts John Davison, Ann Walsh and Duncan Brown. It contains a market overview, discussion of new business models, users and applications and technology architecture; and strategies for potential mobile e-commerce players. It also includes comprehensive market development scenarios and forecasts for 50 countries worldwide. The report is available now, priced at $3695, (pound)2095, (EURO)3355 or A$4995. For further product information call Ovum at (800) 642-OVUM or visit http://www.ovum.com.
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