Last year we witnessed the launch of Apple Pay in October and saw how significantly mobile commerce matured. Today we expect ongoing growth of m-commerce, as the range of improved devices is proliferating and more and more users are accessing the internet through their mobile devices. However, the best proof of the inevitable growth of mobile commerce is investment activity, which has significantly increased over the last few years. Let’s have a look at precise figures.
Goldman Sachs is forecasting that consumers will spend up to $626 billion via mobile commerce by 2018. It is also estimated that VCs have invested $4.2 billion in m-commerce during 2014. Just to compare: $1.2 billion was invested in 2013 and only $829 million in the preceding two years combined. Of course, the biggest part of this capital was thrown to a few multibillion dollar giants like Pinterest and Uber. But the rest was fully devoted to m-commerce startups.
However, considering the fact that mobile devices only account for 1 percent of the $3.25T U.S. retail spending market, it becomes obvious that m-commerce is still in its beginning stage. Imagine what may happen in the very near future! Here’s a few m-commerce trends that we believe will take place during this year.
M-commerce isn’t something separate and isolated. The typical shopping experience in 2015 is one in which the user is constantly flipping between phone, tablet, desktop, and brick-and-mortar store. Earlier m-commerce may have been considered as an add-on, but today it’s merely the way things should be. It is natural for a customer to research and compare prices on a product online while trying it on in the store, and later order this item on a smartphone. Today we have a lot of opportunities to make a dream of omni-channel shopping come true driven by technological progress. In 2015 we will see that mobile payments and delivery of products across channels will become ubiquitous routines.
Retailers should have mobile-centric strategies in mind with an emphasis on integration between online and offline commerce. It is already not enough to just optimize websites for mobile. To be a game-changer and drive more sales in 2015, retailers should implement mobile “brick meets click” strategies.
“Retailers now recognize the power of barcode scanning in the context of high performance and reliable native mobile applications. We expect the trend of mobile-enabled commerce to continue throughout the 2014 holiday shopping season and into 2015 and beyond”, said Samuel Mueller, Chief Executive Officer at Scandit. Apparently, stores that are excellently equipped to keep online and offline customers engaged and provide on-demand services will succeed in driving sales and increasing customer loyalty.
Last year we met the “Uberification” trend that had been created by Uber itself. At the beginning of 2014 Uber’s brand value increased from a few billion dollars to $17 billion in June and $41 billion in its most recent $1.2 billion round. Then there were a lot of other on-demand services, including many of Uber’s competitors which have failed to repeat Uber’s success. We expect there will be an even more significant shakeout this year as VC investment in on-demand services is slowing down, which makes startups with no determined strategy of revenue-generating go out of business.
It’s no secret that the web is increasingly becoming a visual experience. Some companies have already earned money on this trend by using high-quality images to acquire new users. For example, Pinterest gathered 60-70 million users and has now monetized them with the help of promoted pins. Furthermore, companies like Zulily have also learned that photo content effectively boosts conversion rates.
Talking about small mobile screen sizes, images are even more necessary, and m-commerce apps are increasingly using photos not just to attract users but to monetize them. And just in the same way as Pinterest does on the web, these apps are creating new forms of visual promotion to take advantage of their user traffic.
Last year Instagram released video ads that allowed direct targeting in brands’ feeds. It is expected that the service will offer commercial transaction facilities. Similarly, Snapchat launched its first “snapvertisements” which are sprinkled in users’ feeds and vanished after being viewed, just like all Snapchat messages.
We expect the visual commerce trend will significantly expand in 2015, as Facebook and Twitter are working toward supporting transactions and increasing the number of m-commerce startups that hope to attract and monetize users with the help of high-quality visualization.
Users are becoming more comfortable with in-app purchases. This means that those companies which have their own payment systems are at an advantage now. It seems that Facebook has everything needed to succeed in this trend too. Apparently, more developers may pay attention to Facebook schemes and credits as tools for generating revenue.
This won’t necessarily influence Google Wallet, which will most probably keep its dominance, especially on the Android platform. Companies like Lyft, whose business relies upon the success of their apps, continue to work with third-party mobile-only payment systems like Google Wallet, and we believe that more businesses will follow this example this year.
Other companies, like Starbucks, will build their own m-commerce platforms as extensions to their existing infrastructures, bringing money transactions and loyalty points to mobiles in a simple, straightforward way that both benefits and represents their offline experiences.
During the few last years we have seen the rise of specialty retail in offline commerce. Similarly, in the apps category there is an expansion of startups targeting niche markets today. Most of them have the potential to grow into larger platforms. It has become increasingly obvious that app-based services are more successful when they are aimed to meet one special user’s need rather than trying to meet many needs. You may see this pattern in personal finance mobile apps like ActiveHours and MileIQ, which received remarkable app store rankings despite targeting very niche use cases in payday loans and business mileage tax deductions. The same is true with mobile health apps like Glow and Ovuline, which have gathered highly engaged female users with services focused entirely on individual fertility-tracking and pregnancy support. We expect the trend toward specialization will expand into many other niche app-based services.
We predict this year will be a new benchmark for m-commerce mobile apps. In a constantly changing landscape, the common temptation is to develop an app that will do as much as possible. However, those that plan strategically and concentrate on performing a few functions exceptionally well, will have the most successful business apps and be rewarded with generous investments.February 20, 2015