Making the right call

April 17, 2011
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Despite an increased demand from consumers, retailers are not ready for mobile commerce, according to a report commissioned by mobile application provider Kony Solutions.

In a poll of 100 marketing and IT managers at UK retailers, 58% tell research organisation Vanson Bourne they have no strategy in place to deal with the burgeoning mobile market and 28% say they have no plans to implement one any time soon.

It’s not as if they do not know how significant it is. Asked when they think mobile commerce will affect traditional retailers, 42% say it already has, 23% say within one year, and 22% say within two years. A stubborn 8% say, “It will never happen.”

The survey also questions 1,000 consumers about their use of mobile phones when shopping and asked about their expectations for the future. A surprising 60% respond that they use the mobile internet to make decisions in store or while shopping online; 40% say they use mobile phone applications on sites such as Amazon, Tesco Direct and eBay to make choices while shopping; and 37% say they use a combination of mobile internet and phone apps for comparison shopping.

Kony Product Marketing Head David Eads says the message to retailers on mobile commerce is clear even though just 34% of retailers polled claim to have a fully or partially implemented strategy in place. He says, “The genie is out of the box and you can either be a part of the conversation with the customer or they will be standing in your store and looking at your competitor’s prices. Unless you engage with them, they will walk out of your store and into your competitor’s arms, whether online or elsewhere on the high street.

Eads says that contact with the customer requires basic, old-fashioned retailing as part of the present-day shopping experience: “Mobile crosses the chasm from what we have seen in the past, when on-line was a completely separate channel from traditional brick-and-mortar retailing. Mobile pulls the two back together and now it is simply retail again. It is up to retailers to figure out how to harness the enhanced experience that shoppers enjoy.”

It has been many years since Nokia demonstrated the use of a mobile phone to buy a can of cola from a drinks machine and Cue Entertainment first discussed the ExpressPay RFID technology behind this idea in September 2003. Today there are more than 750,000 contactless merchant terminals in the USA. The UK has just 42,500 outlets that accept PayPass and Visa PayWave cards but the network is set to grow. McDonald’s plans to equip its 1,200 branches while Caffé Nero and Little Chef have readied all their locations.

Eads says that, after 10 years work on the contactless concept, it has finally come to fruition: “You are going to see a sea of payment related applications in 2011 in the same way that there has been a steep rise in location-based apps using GPS.”

The mobile phone fest in Barcelona earlier this year heralded the overdue arrival in handsets of the technology known as NFC — Near Field Communications. Contactless cards such as the Oyster Card issued by London Transport, hotel room keys that automatically open the door and debit cards available from many UK banks all use this technology. NFC is a worldwide wireless communication standard that allows enabled devices to transmit and receive data over about four centimetres, compared to the 10-metre range of Bluetooth. In other words, you have to be very close in order to detect the signal but when two devices come together, data is exchanged automatically and almost instantaneously.

A key issue in all this is security, which brings up the question of standards. Most people understand that standards are a good thing, which is why there are so many of them. For mobile phone users already overwhelmed by WiFi, 3G, LTE and other wireless acronyms, however, the obvious question is “Why do we need yet another standard?” The answer lies in the low cost, low power NFC chip, which also offers a level of encryption that makes the technology more secure than most of the alternatives, including a wallet full of credit cards. Despite this, more than one third of consumers in the Kony survey cited “lack of security” as the primary reason they would not use a mobile phone to pay for items in store.

Eads says, “Our previous research showed security concerns at around 43%, so the slight drop to 39% is actually a positive sign. What retailers should read into that number is that security is not an issue – it is just a perception. Address that perception and adoption — and ultimately sales through the mobile channel will go up significantly and quickly.”

NFC is about much more than money although that feature will finance its inclusion in mobile phones. The loyalty cards, membership cards, travel and event tickets and money-off coupons that we currently cram into our wallets and purses will all have their equivalent existence in NFC form.

France is so convinced of the viability of NFC shopping that the French Association for Contactless Mobile (AFSCM) and five of the major operators have committed to deliver one million NFC-enabled handsets this year, 50% of them supplied by Orange. The Cityzi pilot in Nice has run since May 2010 and the government announced in January that it will fund extension of the project into eight more cities — Paris, Bordeaux, Caen, Lille, Marseille, Rennes, Strasbourg and Toulouse. The budget for this initiative is not disclosed.

French consumers have been reluctant so far to join in the mobile commerce party. Although more than 1,000 retailers in Nice installed NFC terminals, just 3,000 people had signed up by the end of last year. A January 2011 survey of attitudes to electronic payment asked 1,025 French consumers if they are interested in paying with their mobile phone. Just 8% said they are strongly in favour of the idea while 19% are strongly opposed and 40% are somewhat opposed to the concept.

When Kony posed a similar question in the UK, 25% said they would use their mobile phone to pay for items in-store in preference to credit cards or cash. To achieve this, a new handset will be required, and Google in partnership with Samsung and others is ready to launch several handsets using the Android operating system. Research In Motion Joint CEO Jim Balsillie says that most BlackBerry devices shipped later this year will support NFC and the embattled Nokia will demonstrate a prototype Windows Phone 7 handset with NFC later this month.

Without handsets, the infrastructure will languish unused. The probability that Apple’s iPhone 5 will launch without NFC has shocked proponents of the scheme since iPhone users are regarded as the most likely to make use of the technology.

For the moment, consumers wishing to pay with NFC in the UK will have to wait. Orange, in the guise of the T-mobile partnership Everything Everywhere, will join with Barclaycard to introduce an NFC-enabled phone by mid-2011, and a joint venture between O2 and Visa will launch a competing service later in the year.

Eads tells Cue Entertainment, “From what the retailers said in the study, we know that mobile commerce is going to be important. Almost unanimously, they agreed that this is strategic to them and that mobile becomes a significant part of online and brick-and-mortar shopping within the next two years. Mobile commerce is the tool that they will use to execute their business strategies and how they will compete. It is the way they will differentiate their organisations and how they will attract customers from their competitors.”

A lot of mobile money rides on his being right.