Late last week Forrester released a “mobile commerce” forecast that argued phone-based ecommerce purchases would reach $6 billion this year, growing to $31 billion by 2016. That’s up from $3 billion last year. Overall ecommerce spending was $227.6 billion in 2010 according to comScore.
The Forrester numbers are generated, I assume, by taking consumer survey data (“have you ever made a purchase on your phone?”) and extrapolating it along with assumptions about the growth of the smartphone market, mobile retailer websites and so on. There are a handful of “X variables” in this equation. (There could also be some actual mobile retail revenue data in here as part of the mix.)
A range of surveys indicate that between 20% and 30% of US smartphone owners have made purchases on their phones. The dominant scenario involves users doing research on smartphones but still buying in stores.
Google-Ipsos survey data released in April (below) help illustrate the various scenarios involving smartphones. Most people will use their phones to conduct research on products (prices, reviews, availability elsewhere) rather than buying. But a small percentage will confirm a product in store and then buy immediately on a smartphone, or buy later on a smartphone.
Part of the impulse to buy something on a smartphone involves convenience (shipping somewhere) or lack of in-store availability or, in some cases, a better price. But whether people buy on smartphones also has a lot to do with whom they’re buying from. For example, people will buy from a familiar brand with a best-of-class mobile site (e.g., Amazon), but not a no-name ecommerce vendor or retailers offering a poor mobile user experience.
According to the same Google-Ipsos survey, median annual spending by US consumers on mobile devices was $300 in 2010. This median number, however, is skewed by some big purchases at the top (by definition). Three hundred is certainly not the m-commerce average today.
It’s very easy to take 36% (smartphone penetration) of a base of 275 million mobile subscribers (less than CTIA but more than comScore’s estimate) and multiply that by a dollar figure and get to a big number quickly. If we assume that the average smartphone user spends about $100 annually through her phone — this figure is probably too large as well — we get to nearly a billion dollars in US m-commerce spending already. Forrester says that number is going to be $6 billion this year. While that $6 billion is theoretically possible, using the types of formulas I’ve laid out, the figure is very aggressive.
It’s safe to assume that over time people will become more comfortable buying things with their phones. And given the growth of smartphones, one can see the logic of the Forrester estimates clearly. As an aside, the whole mobile wallet phenomenon adds another wrinkle to defining and calculating mobile commerce, which I’ll avoid for the time being.
During Internet 1.0 Forrester was famous for its aggressive ecommerce growth projections that mostly failed to materialize. (Forrester claims today that ecommerce is 8% of total US retail, the US government says it’s 4.5%.) And while mobile commerce will certainly grow, at what rate and how quickly? I don’t believe as fast as Forrester asserts.
Somewhat ironically mobile commerce is likely to be boosted by its availability in stores. In other words the ability to confirm my product choice in person (“yes this is the TV I want”) will drive ecommerce through mobile devices “on the spot.” However, IPG Emerging Media found something different, in a study with CBS Interactive. The agency discovered that people doing research on smartphones overwhelmingly bought products in stores once they gained confidence about their choices.
Another wildcard of sorts in this discussion is the inevitable coming of online sales taxes. They exist today but are not uniformly levied or collected. Amazon has been playing hardball with states seeking to impose them; CEO Jeff Bezos claims state taxation of ecommerce is unconstitutional. However many individual states and a bill moving through the US Senate seek to collect revenues from e-commerce companies that have, to date, enjoyed an exemption.
State budget deficits and an emerging perception of unfairness (that etailers have an advantage re sales taxes) will likely result in the end of the ecommerce exemption in the next year. Such a development could adversely affect ecommerce spending and potentially m-commerce as a subset of that category.
Rather than focus on spend projections, what’s more important is that marketers understand the role that smartphones play in the shopping and consumer purchase process. Mobile users and smartphone platforms must be taken very seriously today; marketers shouldn’t wait until 2016 or even next year to build mobile=optimized sites and, if appropriate, create apps.
It’s a big and critical market regardless of how you slide and define it.
Related post: Tablets Preferred over Smartphones for Shopping — Survey