The frenzy over Apple’s formal launch into the digital wallet space has reached a fever pitch. There is no shortage of speculation around the widely anticipated “iWallet” – and for good reason. Apple has a slew of compelling assets to leverage for its wallet, like an existing consumer base with roughly 800M cards on file, Passbook, iTouch, iBeacon, and more. It also has a unique track-record of entering existing categories with elegantly designed solutions that redefine, then dominate -at least for a time. However, we can’t ignore the fact that the mobile wallet graveyard is littered with elegantly designed solutions that failed to take off. Case in point: Square Wallet..
When it comes to digital wallets “…build it and they will come…” simply does not hold true. The challenges of Google Wallet and Visa’s V.me are two more familiar examples. To be clear - I do expect that over time Apple’s mobile wallet will have greater success than Square Wallet, Google Wallet, or V.me. But an elegant user experience won’t be enough to do it. Merchants will determine whether Apple’s mobile wallet lives or dies.
Digital Wallets Require Scale, And Merchants Control The Levers At Checkout
If I had a dime for every time I heard the question “Isn’t eCommerce taking over retail?”, it wouldn’t make me wealthy, but I’d certainly have a few hundred dollars more than I do now. Nonetheless, it’s a question that is unfortunately misguided and has permeated our zeitgeist. The truth is that yes, eCommerce is growing - but physical retail is far from doomed. Let me take the two parts of that last sentence and address them each separately.
First, the fact that eCommerce is growing. Forrester just released the latest five-year online retail forecast and to no one’s surprise, the numbers are big. We’re projecting $294B in eCommerce sales across 30 retail categories in 2014, expected to grow to $414B by 2018. The web keeps doing what it has always done well: it provides huge assortments of products, at comparable, often lower, prices than physical stores, with 24/7 access and often free shipping. For many categories like media products or electronics, we’ve already observed a heavy shift to the web channel away from physical stores. Add to that the ubiquity of mobile devices and that drives even more shopping in more instances and places. In fact, we’re projecting that $87B of that $294B will happen on phones and tablets in 2014, and that doesn’t even include another $28B in additional mobile transactions on sites and apps like Uber and Domino’s Pizza that aren’t even in that aforementioned mobile commerce number.
But all this growth certainly doesn’t mean that stores are dying. Here’s why:
I had the opportunity to talk to nearly 50 companies working on mHealth and mWellness services and technologies in 2013. With the perspective of 13 years as a mobile analyst behind me and a career in telecom that started in the late 80's, I say with confidence that this category within mobile is more exciting and has the potential to be more game-changing, than anything since the introduction of the iPhone. Most of you reading this blog are not in healthcare - that's why the report offers a WIM (what it means) for industries outside of health and wellness.
I started this research journey with a simple mission: "what mobile engagement tactics can and do change consumer behavior?" Or, in other words, what gets people up off the couch? Is it competition, community, feedback, encouragement or coaching, a poke, or what?
How did MyFitnessPal facilitate more than 100M pounds of weight loss?
How did RunKeeper get their users to move 783 million miles?
How did Strava motivate their users to move 1.4 billion kilometers?
Mobile commerce is hot – In fact for Pizza Hut, it’s so hot that approximately 50% of all digital orders come from mobile and tablet devices. Beyond impulse purchases like pizza and cinema tickets, mobile commerce is now firmly established as a significant source of revenue growth for almost all online retailers. Last year Forrester forecasted that 5% of total online revenues would occur through mobile devices in 2013, but by the close of the year, many online retailers such as HSN are reporting that mobile revenues have in-fact broken the 10% threshold and, furthermore, some retail clients have told us that revenues via mobile devices have already reached 20% of total online sales during peak days.
Firstly, I hope all my American colleagues and friends are enjoying Thanksgiving. Happy holidays everyone!
I especially hope that all the IT professionals who work in the consumer retail markets get some rest because this coming Monday is Cyber Monday, one of the biggest days for online shopping transactions in the business year. Cyber Monday is part of the holiday season, which Forrester defines as November through December, and as our recent retail forecast report for 2013 points out, we expect online sales to top $78 billion in the US alone. Cyber Monday is not just a US event though; even in the UK, spending is forecast by Sage Pay to be more than £500m for this one day alone.
These figures highlight how digital our world has become. There is no need to go out in the cold or the rain as purchases can be made via mobile devices at any time or anywhere. This move to the digital world means that for many consumer retail companies, their websites and increasingly their mobile apps are now key to their success as they are becoming a major revenue and brand image contributor.
Early last year, Forrester published a report profiling digital natives — youth ages 12 to 17. They've grown up in a world of rapidly evolving technology, to the extent that they can’t imagine life away from their devices. While digital natives weren’t yet heavy online buyers in early 2012, they often engaged in dialogue about products and brands and were receptive to advertising. Since then, young online consumers have continued to adopt devices and deepen their roots in the digital world; today, around 45% of this young audience uses a smartphone.
Characterized by their vibrant online presence and shaped by a culture of increasing connectivity, digital natives offer a new window of opportunity for marketers — one that stems not only from the audience’s advertising receptivity but also from their rapid adoption of digital commerce.
Forrester’s Consumer Technographics® data shows that mobile commerce among US online youth has increased over the recent years; today, nearly half of young online smartphone users purchase digital or physical products on their mobile phones:
The rapid growth and ubiquity of smartphones has led many to conclude that a significant portion of Internet activity, including shopping, will migrate to these mobile devices. To help eBusiness professionals in retail get a better sense of the real size and opportunity that exists, Forrester has released its “US Mobile Retail Forecast, 2012 To 2017.” Retailers beware: while mobile commerce is growing and undeniably shifting how some consumers buy, the pertinent facts are that:
Total US mobile retail is still small. Forrester estimates that of the 132 million US mobile Internet users in 2012, only a quarter of those users have ever made purchases via their phones. While we expect the retail mCommerce penetration rate to double by 2017, it’s still a tiny portion of eCommerce — and, consequently, a minuscule share of overall retail.
Significant impediments exist for mobile retail. The main road block to mobile sales is the checkout experience; it’s the single most important feature when it comes to driving conversions on mobile devices. Adding an easy checkout experience, like PayPal Express, will enable users to more easily convert – even with the smaller screen – but how much that moves the needle remains to be seen.
Consumers prefer the mobile Web to apps, despite retailer investment. Consumer awareness of and/or interest in retail apps is low: Only a tiny share of any given retailer’s shoppers appears to download their app. Most shoppers who access a retailer’s mobile presence get there by clicking on links from mobile search engines or from mobile emails.
Forrester recently completed the “State Of Retailing Online 2013: Key Metrics And Initiatives” report in conjunction with our friends at Shop.org. It is available on Shop.org (with a subscription) now.
Some of the reports highlights include the following facts:
Web sales continue to grow (duh!). Retailers we surveyed experienced 28% growth on average in 2012 over 2011. Furthermore, 72% of those retailers are experiencing double digit growth.
Key eCommerce metrics are improving. The retailers we surveyed generally responded that site conversion rates, average order values and the percentage of repeat shopper sales all grew in 2012.
Mobile growth rates are strong. Mobile commerce grew at a triple digit pace last year for the retailers we surveyed, but off a teeny base. Furthermore, the debate remains on whether mobile traffic with its anemic conversion rates, actually hurts “the mother ship.” Retailers were split on that assessment.
2013 initiatives will focus on site optimization. Of the retailers we interviewed, site conversion rate and redesigning the web experience – in other words, optimizing the overall online experience -- topped the list, yes, more than even investing in mobile. Many retailers specifically called out plans to focus on the checkout experience and to adjust their site to accommodate a responsive design framework.
Shop.org members can access the document here and Forrester clients will be able to access the document on January 28, 2013.
The rapid adoption of smartphones and mobile Internet usage is changing the way US consumers shop. Although still nascent, mobile commerce is poised for exponential growth. Mobile retail and travel spending grew by 80% in 2011 and is expected to more than double by the end of this year.
There are various definitions of mobile commerce that include retail, travel, advertising, proximity payments (coming soon), and appdownloads, but Forrester combines retail and travel research with an understanding of mobile consumer habits to build its mobile commerce forecast. Shop.org and Forrester Research administer The State of Retailing Online survey annually to online retailers to understand key metrics in shopping trends; this year's survey focused on mobile commerce and mobile retail execution. Having data from both the consumer and merchant perspectives provides us with a richer understanding of the mobile commerce platform and buying behavior.