Is Mobile Commerce Taking Over Ecommerce?

A chart based on US Census Bureau and Comscore data was published by Business Insider. It shows Mobile Commerce growing three times faster than Ecommerce overall.

Is Mobile Commerce taking on "classic" Ecommerce?
Is Mobile Commerce taking on “classic” Ecommerce? Source.

The numbers behind it are very interesting:

  1. mobile commerce is on the rise and has registered a 48% YoY growth, in the second quarter. It now accounts for $8 billion in online spending.
  2. overall ecommerce (including mobile commerce) grew “only” 15.9% year over year in the second quarter and totals $70.1 billion in online sales.

However…

Stop betting on (just) mobile. We’re not there yet.

Smartphones and tablets have brought forth a revolution in computing and social interaction. Unfortunately for overenthusiastic mobile-only fans, mcommerce usage is lagging behind mobile device adoption.

If you look at the chart above you’ll see there’s a  linear growth in mobile commerce. Not a hockey puck growth. Not even an accelerated growth.

Even more – ecommerce accounts for only 5.9% of all retail. Mobile commerce itself is just 11.4% of ecommerce. This means mobile commerce, however ambitious is pretty much insignifiant. It accounts for just 0.67% of total US retail.

Smartphones and tablets are extremely popular. Mobile commerce – not so much.

And hey – it’s not the fact that people don’t like smartphones. Oh no. People love smartphones:

Growth in smartphone penetration in the US.
Growth in smartphone penetration in the US. Source.

 

 

They also love tablets. Almost 42% of all US adults own at least a tablet. Remember – this is a product that went on sale only 4 years ago, when Apple introduced the iPad. In just 4 short years, the tablet has become a virtually ubiquitous computing item for US adults.

Tablet penetration among US adults. Source.
Tablet penetration among US adults. Source.

So – people are buying mobile devices like crazy. PC sales are dropping yet the mobile commerce is just 0.67% .Why?

The short answer – there is no mobile commerce. 

Mobile is the bridge. It helps connect the physical world to the virtual world. The act of purchasing happens on multiple channels. Mobile is not “the future”. It is the present yet the present comes in a form we have not met before – a bridge across channels.

If we take the time to see matters from the consumer’s point of view things are not as black and white as we expect them to be. Few if any consumers think in terms of mobile OR desktop OR brick and mortar. The consumer will spend time in a B&M store, browse the web to search for the right products, do a little showrooming to find the be best pricing. In the end, the whole purchasing experience stretches across channels and some are more popular than others.

But the customer has only one perspective where channels blend in. The omnichannel perspective. To provide the ecosystem for this perspective, the new retailers will try to understand and implement omnichannel retail because mobile, however massive, is just a piece of the puzzle.

Mobile gaming trends

Smartphones are taking the world by storm. They appear to be the fastest growing technology we have ever seen. They slowly grew to a 10% adoption rate and then something changed everything: Apple launched the iPhone. 2 years later the adoption rate reached 40% in the US. Right now nearly half the adults in the US own a smartphone.

Tablets are not doing too bad either: 1 in 4 smartphone owners owns a tablet. The tablet market is expected to reach a 40% adoption rate in the US by 2016.

Mobile app stores

Apple pioneered a new way  of looking at software distribution that has deep roots in Steve Jobs’ vision of “connected consumer”. With the launch of the App Store, Apple triggered a behavior based on instant software delivery and micro payments. The great thing about the system is the seamless integration between the devices and the central market. Payments are easy to make, software installation does not require any advanced IT skills and the iOS makes it easy to operate apps.

revenue from app stores
Apple leads the way. Amazon follows closely.

Apple app store market was a huge success. It now features more than 500 000 apps, 66% of which are paid. This apps generated over $3.4 billion revenues Apple paid to its developers. Google Play, the Android app store, paid “only” $240 million.

Google Play is actually not the biggest retailer of Android applications. The main challenger to Apple’s reign seems to be the Amazon App Store. According to mobile analytics company Flurry, Amazon generates 89% of iTunes App Store’s revenue.

Mobile Gaming is on the rise

Angry birds space
A sequel to the popular Angry Birds is expected this year

“All work and no play makes Jack a dull boy”. Jack decided he would play a game on his smartphone and now the mobile gaming industry is expected to generate $7.5 billion dollars in revenues by 2015.

Established game developers such as EA, Gameloft, Ubisoft, talented new comers such as Zynga and Konami and independent game studios jumped the wagon. They had to learn the new rules and understand the mobile users behavior as the mobile gaming industry is a new breed, where concepts such as social gaming, micro payments and in-app purchase matter. The fast growing user base expects new releases, awesome graphics, multiplayer support and the gaming companies serve them well after a few past flops.

Freemium games

The top grossing games share a common feature. They’re freemium. That means they’re free to install and play and generate revenue from in-app purchases. I have discussed the model in the “Social Gaming Architecture” article but let’s go over the basics again:

  • users are free to install and play the game
  • they get incentives to help them understand and start playing the game on a daily basis
  • as the time passes the games are harder to play and game gratification is harder to obtain
  • by buying in-game upgrades the users can get upgrades, virtual coins etc.

The future of mobile gaming

We should expect mobile gaming to become mainstream. With better connectivity between tablets, smartphones and TV’s we will probably see a decline in gaming consoles popularity and sales.

Because the cost of entry in such a market is rather low for now the market will see new challengers to established gaming companies. Rovio was acquired by EA after the highly popular Angry Birds game went mainstream but Rovio is just one of the many studios just trying to get into the market. I expect mobile gaming, just like social gaming was, to have a disruptive effect on the overall gaming industry.

Mobile internet trends

It seems like everything goes mobile these days. Mobile phones get smarter, tablets get more and more popular and people use their mobile phones for much more than voice. Mobile internet usage includes news, entertainment, shopping, social networking and much more.

The Facts on mobile internet

First of all – what is mobile internet? It is the usage of internet on mobile devices such as handhelds, tablets, personal assistants, netbooks or laptops. It has become quite popular in the past 3 years growing growing from under 1% of total internet traffic in 2009 to more than 10% in 2012.

The mobile internet is expected to surpass desktop internet by 2014, as shown in the attached graph (source). Such a fast adoption rate is caused by:

  1. Decrease in PC sales (HP sales in the US decreased 12 percent in the second quarter of 2012 and Dell’s PC sales decreased by 9%).
  2. Increase in tablet and smartphones adoption (Apple alone has shipped over 60 million tablets in just 2 years from launch and more than 20 million iphones)
  3. Decrease in 3G connectivity costs (Idea Cellular decreased the costs for 3G connectivity in India by 70% )
  4. Mobile penetration is disproportionately larger than internet penetration. The global mobile adoption rate is now 86.7% . The global internet adoption rate is 32.7%. Mobile operators will grab out and reach the treasure that is mobile data traffic. They have the infrastructure, the clients and the distribution.
  5. Voice has been steadily declining compared to data traffic in developed countries.

Mobile internet plans are decreasing and adoption rate is increasing – what now?

With mobile internet plans decreasing we will see a clear increase in adoption rate. There is still a long way to go as mobile traffic accounts for only 10% of all internet traffic. Taking into account the fact that Internet has just 32.7% penetration we see that there is a huge opportunity there: mobile internet traffic is due to increase by at least 1000% in the next five years.

How can we benefit from mobile traffic growth?

Using this date one might think of this potential opportunities:

  1. Increase in cheap smartphones sales. As you can see in a previous article almost 75% of all mobile phones are owned by consumers in developing countries. This consumers need low-cost, decent performance, mobile internet ready devices.
  2. Increase in mobile operators revenue. The untapped potential of data traffic is even bigger than the one voice plans had. Mobile operators already have the client base, the mobile infrastructure and the distribution network to reach this potential market.
  3. Increase in mobile commerce: whether retail or paid apps distribution the mobile sales will increase in the future, even at a faster rate.
  4. Premium mobile entertainment: just like apps, paid entertainment will develop at an exponential rate in the future.
  5. Decreased market for desktop based software companies: Microsoft has already began to feel the surge in desktop sales as desktop based software such as Microsoft Windows, Microsoft Office will either adapt or fade away.