What is m-commerce? How big is it really? And why any company who sells anything needs it, now

The stats tell us that mobile commerce (m-commerce) is big and growing fast. It all sounds very impressive when included in conference slides or presentations to clients/bosses. But closer analysis shows that analyst estimates vary massively and m-commerce is actually still only a small proportion of commerce generally, though is a fast-growing proportion of e-commerce. It isn’t the consumers that are the issue – research shows that they are keen to shop using their mobile device. The problem is that the Websites, apps, in-store, loyalty and ticketing systems of many companies (including big retailers), are simply too primitive to allow m-commerce. This has created a huge opportunity for those companies that make m-commerce easy.

What is m-commerce?

There is no set definition for what m-commerce actually is. mobiThinking defines m-commerce as “the buying and selling of goods and services via mobile/wireless technologies and devices”. This includes purchases on Websites or apps, in-store or from vending machines; paying for travel, events or bills; or redeeming a coupon… any type of commerce that is conducted using a mobile device. But there are much broader definitions of m-commerce that include all types of mobile transactions, such as mobile banking (m-banking) and money transfers (m-money) – which mobiThinking argues should be categorized separately as mobile financial services (MFS). For an explanation see Definition of m-commerce below.

This lack of definition creates a problem when interpreting analyst stats. As the MFS (m-banking and m-money) sector is huge, m-commerce statistics that include it will be twice the size of those that take a narrower definition of m-commerce. This makes it tricky to compare stats for different geographical regions or between e-commerce and m-commerce, unless stats are sourced from the same analyst. Merging MFS with m-commerce also makes stats indistinguishable from what other analysts call m-payments (hence the inclusion of Gartner’s m-payment stats below), which all adds to the confusion.

Here are some recent eye-catching stats:

• “m-Commerce growth to exceed $500 billion sales by 2017 driven by Asia, America and Europe (almost half in Asia)” – Digi-Capital (July 2014).

• “The value of mobile commerce transactions conducted via mobile handsets and tablets will exceed $3.2 trillion by 2017, up from $1.5 trillion this year” – Juniper (June 2013).

• “We estimate that by 2016, the m-commerce market is expected to reach US $800 billion worldwide” – Ericsson (July 2014).

• “We expect global mobile [payment] transaction volume and value to average 35 percent annual growth between 2012 and 2017, and we are forecasting a market worth $721 billion with more than 450 million users by 2017” – Gartner (June 2013).

As you can see there is considerable variation, which is what prompted mobiThinking to investigate what is included in analysts’ m-commerce stats. It’s not always clear – or not from the freely available information – how analysts calculate their stats (as is the case with Digi-Capital). But you can see from the contents of Juniper’s report (June 2013) and Ericsson’s m-commerce press backgrounder (June 2014) that both firms cast the net widely. Juniper m-commerce includes: a) remote mobile payments for digital and physical goods b) m-ticketing; c) m-coupons; d) NFC m-payments; e) m-money transfer; f) m-banking; g) m-gambling. Ericsson’s definition appears to be broadly similar.

Putting m-commerce into perspective:

Let’s get one thing clear: when it comes to mobile Internet revenues, m-commerce is where the money is at. And, according to Digi-Capital (a consultancy that helps digital companies raise finance), that is the way it is going to stay. As nicely illustrated by this Digi-Capital graphic, in 2013 m-commerce was $133 billion, which is more than twice the amount of everything else – consumer apps ($22 billion), enterprise mobility ($26 billion), mobile ads ($12 billion) and wearables at ($3 billion) – all put together.

Figure 1: Digi-Capital: m-commerce, consumer apps, enterprise mobility, mobile ads and wearables expenditure 2013-2017.

But to put m-commerce into perspective, you need to know what proportion mobile contributes 1) to e-commerce and 2) (more importantly) to commerce as a whole.

1) Mobile’s share of e-commerce. N.B. e-commerce is not desktop or online commerce – it is all digital/electronic/Internet commerce via any device or connection. This means m-commerce is part of e-commerce and its proportion of e-commerce sales is growing fast. Goldman Sachs (March 2014) predicts that mobile will be approaching half of global e-commerce (46.6 percent), by 2018, up from 27.2 percent in 2014.

Is m-commerce in the US on track or behind the rest of the world? eMarketer (December 2014) believes that mobile’s proportion of e-commerce is growing faster in other markets, such as the UK. In 2014, mobile will account for an estimated 24 percent of retail e-commerce sales in 2014, rising to 35 percent in 2017. This compares with 19 percent in 2014 and 26 percent in 2017 in the US.

2. Mobile’s share of global commerce. Unfortunately global commerce stats are unavailable, but eMarketer (April 2014) provides a good insight into the contribution of mobile to both e-commerce and total retail sales in the US. For 2013, eMarketer estimates that retail m-commerce in the US was $42.1 billion. (Note the use of the term: “retail m-commerce”, this confirms the absence of MFS, but is ticketing and paying for services also excluded?). By comparison e-commerce was $263.3 billion and total retail expenditure was $4,533 billion (4.5 trillion). That means that in 2013 mobile was less than 1 percent of total US retail and 16 percent of e-commerce. In 2014, m-commerce is expected to grow to 1.2 percent of total US retail and 19.0 percent of e-commerce.

US m-commerce forecasts from Forrester (May 2014) make eMarketer’s look conservative. Forrester predicts that mobile will be 54 percent (i.e. more than half) of US e-commerce sales by 2018 at $293 billion (Tablet commerce is expected to be $219 billion and smartphone $74 billion), up from $114 billion in 2014.

m-commerce does not match consumer behavior (yet):

Considering that mobile phones heavily outnumber PCs worldwide and that people now spend more time using mobile phones than using PCs (eMarketer, April 2014), it is surprising that m-commerce remains small change compared with e-commerce and retail as a whole.

Surveys frequently inform us that consumer visits to mobile sites, particularly retail sites, is on the rise. According to Custora (July 2014), which assimilates data from 100 top retailers, 36.9 percent of visits to online stores came from mobile devices at the end of Q1 2014. The graph below shows clearly how mobile is steadily eating into e-commerce traffic.

On the US biggest shopping day, Black Friday (the day after Thanksgiving, November 2013), mobile was 39.7 percent of all online traffic, according to IBM data analytics. Mobile sales were also strong (but considerably less than traffic) at 21.8 percent of total online sales. Smartphones accounted for 24.9 percent and tablets accounted for 14.2 percent of all Black Friday traffic, but tablets drove 14.4 percent of all sales, double that of smartphones at 7.2 percent. The average spend of mobile users was an impressive $132.75 on tablet and $115.63 on smartphones.

The observation that smartphone users browse more and tablet purchase more is shared by other analysts (e.g. Forrester, May 2014, and Juniper, April 2014). This trend may be influenced by the tablet’s larger format and at-home context – leading to the emergence of “couch commerce”; while users turn to smartphones for on-the-go research. But it could also be explained by the shortage of mobile-friendly, m-commerce-enabled sites, because surfing and purchasing from a PC e-commerce site is easier on a tablet than a mobile phone.

Figure 2: Custora (July 2014): Proportion of visits to online stores came from mobile devices 2010-2014.

Why isn’t m-commerce larger? Blame the retailers

So why aren’t people buying more with their mobiles – is it because they won’t or because they can’t. There appears to be a consensus among the analysts that the fault lies squarely with the retailers.

• “Worldwide, people are not purchasing as much because the buying experience on mobile devices has yet to be optimized. People are spending less via mobile devices than via online e-commerce services and at retail outlets.” – Sandy Shen, research director, Gartner (June 2013).

• “A significant minority of retailers have yet to optimize their sites for mobile. Unless retailers ensure a seamless, user-friendly mobile shopping experience, they will fall behind competitors who are already using mobile channels to enhance customer relationships.” – Dr Windsor Holden Juniper Research (June 2013).

These opinions are backed up by research:

An IAB report (June 2013) criticized UK retailers for lack of mobile readiness, finding that 26 percent of the UK top 50 had no mobile-optimized site and 92 percent did not have a tablet-optimized site. Unfortunately, we aren’t told how many retailers’ sites allow mobile customers to make a purchase, which is the key measure here.

Meanwhile in the US, Applovin (August 2014) calculates finds that 79 percent of the top 100 retailers, but only half of those retailers’ apps allow consumers to make purchases.

mobiThinking would also like to see some research into how many of the top US retailers allow m-commerce on their Website as research (see below) suggests shoppers prefer mobile Web to mobile apps.

Please note: while having an m-commerce site is critical, the disparity between mobile visits and mobile purchases can be explained – and cured – in different ways. Mobile probably contributes to a lot more sales than it is given credit for, as there is an issue with what is called “attribution”. For example, a consumer may research a product with their mobile, check availability, find location, and buys it in-store. The disconnected nature of retailers’ store and e-commerce systems means that this sale will be logged as an in-store purchase and mobile’s role is overlooked. However if the retailer offered a) the option to reserve on the mobile site and collect in-store; b) incentives via m-coupons on the site and through mobile/print ads; c) ran a mobile loyalty scheme/wallet; d) in-store m-payment; – then these sales become wholly, or in part, m-commerce.

Shoppers prefer mobile Web over mobile apps

Don’t flatter yourself that consumers are desperate to download your native application to their phone. Unless you are Amazon, eBay or Apple, the majority of your traffic will be mobile Web. According to ComScore (September 2013) this is even the case for huge multi-channel retailers such as Wal-Mart, Target, Best Buy and Home Depot.

• “The reason for the contrast is simple: mobile users only download so many apps. App “real estate” is a limited commodity, as is a mobile device’s storage capabilities. The result is that most people are only going to download their favorite one to three retail apps and use their Web browser if they ever need to shop online somewhere else. The most preferred retail apps tend to be the pure plays (i.e. retailers who only do business through the Internet) such as Amazon and eBay. These companies have long since built a reputation as the go-to sites to buy products on the Internet. It’s not surprising that when shoppers decide which apps to download, they more often than not choose one or both of those two properties. (Side note: Apple has very high app usage due to the fact that their app is their digital hub where you would search for, buy and engage with digital content, e.g. listen to music, watch a TV show, etc.).” – Kate Dreyer ComScore (September 2013).

ComScore’s findings are no anomaly. Similar sentiments were echoed in a study Siteworx (January 2014) where 55.9 percent of respondents expressed a preference for shopping on a retailer’s mobile Website versus a mobile app. Similarly a survey by ICM Research (May 2014) asked 1,300 UK consumers about their mobile interactions with the top 13 UK retailers. With all retailers, except eBay, consumers chose mobile Web ahead of mobile apps. However sales are more likely via apps (though it is unclear to what extent this was down to user preference rather than poor/absent m-commerce capabilities on retailers sites).

• “The results show that brands shouldn’t just focus on their apps. They’ve got to make sure that their mobile websites are fully optimised for mobile shopping too.” – Jamie Belnikoff, associate director ICM Research (May 2014).

Why m-commerce is different to PC-based e-commerce

Commerce on the mobile Web differs to commerce on the PC Web in numerous ways.
• Limitation of the device: the smaller screen, the touch-based interface (with smartphones), the lack of keyboard, makes filling out those lengthy forms that plague e-commerce sites – registration, delivery address, credit card details etc – a very painful experience.
• Cookies: most PC-commerce sites won’t work without cookies. PC sites place cookies on visitor’s PCs so they can recognize them when they move to the next page or return to the site. Most mobile phones don’t allow cookies.
• Context: Where a PC user is (usually) at home or work on a fixed Internet connection, the mobile user could be out-and-about, on transport, often on a mobile network connection (which aren’t as reliable as a fixed Internet connections) or on a less secure public Wifi or hotspot. This means m-commerce needs to be as fast and efficient (with as few clicks and forms) and secure as possible.
• Payment scenarios: while PCs are usually restricted to remote purchases on the Internet, mobile payments could be Web-based or in person. M-commerce includes paying for goods in-store, paying for transport or event ticketing, or paying for goods from vending machines, perhaps using near-field communications (NFC), mobile barcode-based systems, or SMS-based payment.
• More (and easier) ways to pay: PC Websites commonly only offer one form of payment, by credit card, sometimes also with a payment provider such as PayPal. Entering credit card details on a Website using a mobile phone is tedious, which has led to the emergence of different payment methods. These include mobile wallets (m-wallets), where payments are deducted from a cash balance, topped up from a bank account or taken directly from a credit card account, of which there are numerous providers, many local to each country, such as China’s AliPay, which is believed to be the world’s largest, ahead of Paypal. Payments can also be taken directly from the user’s mobile phone bill.

We will look at the differences between m-commerce and PC-commerce in more detail in a future article, but it should be clear that to be successful with m-commerce, companies need to rethink how they take payments online and in-store, both in order to make it easy for customers to pay and to accommodate the customer’s preferred method of m-payment.

Definition of m-commerce – and why we need a strict definition:

One of the earliest attempts at defining m-commerce was at the inaugural conference of the now-defunct Global Mobile Commerce Forum in London in November 1997: “The delivery of electronic commerce capabilities directly into the consumer’s hand, anywhere, via wireless technology.”

17 years later the mobile business has still failed to come up with a commonly accepted definition of mobile commerce; which is crazy, considering how easy it could be… (the clue is in the name):

Definition of m-commerce = commerce via mobile = the buying and selling of goods and services via mobile/wireless technologies and devices.

How mobiThinking came up with this definition:
Commerce = “The activity of buying and selling, especially on a large scale.” – Oxford English Dictionary.
Origin of commerce = “mid 16th century: from French, or from Latin commercium ‘trade, trading’, from com- ‘together’ + mercium (from merx, merc- ‘merchandise’).” – Oxford English Dictionary.
Mobile = “Relating to mobile phones, handheld computers, and similar technology” – Oxford English Dictionary.

With this strict definition of commerce, you have to question if banking and transfers between accounts are commerce at all, unless they are a payment for goods or services. Thus moving money from one account to another using a PC isn’t e-commerce and doing the same via a mobile device isn’t m-commerce. It is similarly difficult to see placing a bet (whether winning or losing) as commerce as nothing is received in exchange.

Buying a product, physical or digital, from a retailer, paying a bill (e.g. utility bill), buying stocks and shares, buying a ticket to travel or attend an event, or receiving wages, on the other hand, are all clearly commercial transaction as funds have been exchanged for a product, service or financial product is received in return. So doing this using a mobile device is clearly m-commerce.

However, all of these are financial transactions. Whether you are buying or selling goods or services or transfers of cash between personal accounts or making a withdrawal or placing a wager, a financial transaction takes place. Arguably, this makes m-payments a more appropriate catch-all phrase than m-commerce; and thus makes m-commerce a subset of m-commerce and not visa versa.

To conclude, there are four key reasons why MFS (m-banking, m-money etc), should not be included in m-commerce:
1) MFS is huge therefore its inclusion will inflate m-commerce stats massively, and will, as people start to move more money from account to account using their mobile devices could come to eclipse mobile purchases.
2) Including m-money/m-banking in m-commerce also masks the fact that buying and selling products and services online or in-store using a mobile device is actually much smaller than you would expect. Juniper (Jan 2014) estimated that retail payments via mobile in 2013 was $182 billion around 15 percent of eRetail – which is small change compared with Juniper’s $1.5 trillion total m-commerce spend. Similarly Gartner (Jan 2014) estimates that merchandise purchases accounted for 21 percent of total mobile transaction value in 2013.
As noted above, this stunted growth is in part caused by companies’ slowness to embrace m-commerce. This may be down to lack of awareness among retailers, but could also be due to issues with payment systems, regulatory issues or lack of co-operation between operators, banks, hardware manufacturers and so on. As an industry, we portray need to portray a true picture of the progress of m-commerce, both to highlight what needs to be addressed and highlight the opportunities for those companies that get it right.
3) This broad definition also blurs the borderlines between m-commerce and m-payments. Hence the inclusion of Gartner’s m-payment stats, above, with the m-commerce stats. In m-payment, Gartner includes money transfers, merchandise purchases, NFC payments and bill payment – which covers much of the same ground as Juniper’s m-commerce stats.
4) There is a danger of double-counting. A purchase of an item using a mobile device will usually also include the movement of money from one account to another. So there is a chance that if you are calculating retail m-commerce sales on the one side and m-payments and then add the two together, you may counting the same transactions twice.

• For all the latest m-commerce and m-payments stats, see: The big compendium of global mobile stats

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