E-commerce is changing, with smartphones and social network sites coming to the fore. Don’t let your business get left behind
Originally e-commerce was just about establishing a website and subsequently driving traffic to it. However, the circumstances are changing again. This time, the disruptive forces are mobile devices and social networks. Spending via mobile phones is expected to top £275m in the next few years, while selling via the likes of Facebook could reach $30 billion by 2015.
The smartphone opportunity
As the number of consumers owning smartphones grows, so does the demand for accessing services such as online shopping through handsets. In 2010, UK mobile sites experienced an average increase in traffic of 300% over the Christmas weekend alone. Businesses looking to exploit this new avenue have three different options to consider when it comes to mobile commerce:
- Optimising your existing website for viewing on a mobile device. This approach costs the least and gives customers access to the entire retail site.
- In addition, apps can be used to drive sales. For the most part, this means ‘footfall driver’ apps, which are more for browsing and encourage traffic to be driven either to the e-commerce site or the physical store. This has been developed well by H&M in an app which gives the user offers and discounts when the handset is shaken. However some retailers such as Oasis have developed an offering which allows for payment via the app.
- Lastly, location-based marketing has been used by some brands, such as Starbucks, via an app. This means companies can locate users via their smartphone, offering discounts and also a means to pay.
Apps are not the be all and end all, in most cases they are better placed to push information on products and to encourage spending via another channel – either in the physical store or via the e-commerce website. For many retailers looking to drive ‘passing trade’ through the mobile channel, a mobile optimised site with a ‘one click’ pre-registration system for customers may be the most cost-effective way forward.
Apps and mobile commerce sites can be expensive to develop, so businesses need to ensure the demand is there before making any investment. In the app-rich future, to be a success a retail app will have to be as easy and intuitive to use as existing channels, such as shopping on an online site through a computer.
Risks
Retailers also need to consider the risk factors associated with mobile commerce. Mobile fraud is as yet poorly understood, and risk management is more complex than conventional e-commerce, with tools such as IP tracking and IP geolocation less accurate or meaningful.
Retailers with mobile offerings need to prepare themselves to field considerably more fraud chargeback requests than they may be used to. Additional security controls like 3DSecure are not properly tailored for the mobile payment experience, and merchants may therefore choose not to use them. Indeed, Gartner research has described adequate mobile fraud management strategies as ‘imperative’ for any retailers making serious in-roads into mCommerce.
The social network opportunity
Social networking sites offer a different type of opportunity – the ability to build conversations with customers, and develop these into lucrative relationships. The average time spent on Facebook now stands at 55 minutes a day, representing a huge opportunity for businesses.
Facebook itself is responding, having launched its own system of credits for consumers, a virtual currency that enables people to purchase items via the Facebook Platform. “fCommerce” seems to be the next logical step. While the majority of Facebook shops exist only in the US, the phenomenon is crossing the pond, with fashion brands taking the lead and trading via this platform. Recently, ASOS and French Connection announced their intentions to set up some of the first Facebook shops in the UK.
Mobile billing
It is a reasonable assumption that, as social media and retail become more aligned and consumers want to access these services through mobile devices, payments via mobile billing could become a natural step. It is at this point that mobile phone operators will have the opportunity to become more involved in the payments process, potentially limiting payment methods and charging higher commissions. This could become costly for retailers and these types of payments create more siloes of money coming into the business, making it essential for firms to have a real-time view of the payments coming in or out of their business.
It is unlikely mCommerce and fCommerce will be widely used until both customers and retailers feel comfortable with the security behind them. In fact research found that 73% of people wouldn’t buy physical items through social media sites because of concerns about security and privacy. For this reason, paying in cash for goods purchased online could become increasingly popular. While retailers must opt-in to such schemes, they bring with them zero risk of fraud or repudiation.
Whichever options businesses decide to offer in terms of payment, the one thing they need to keep an eye on is where the money is coming in. It is clear that the growth of online shopping is showing no signs of slowing down and brands need to keep up.
Consumers now expect to be able to interact with a brand via different channels and to be offered a route straight to payment. However, brands need to balance the return on investment with mCommerce and fCommerce while minimising the risks to be successful. Get the balance right, and you have every chance of being a success with the 2010s consumer.
Michael Norton is managing director of PayPoint.net