5The sector

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The rise of m-commerce

M-commerce shopping set to take off as smart phone usage booms

While m-commerce remains a small channel in terms of overall online spend accounting for just an estimated 0.6% of total online sales in 2009, it was the fastest growing channel over the last decade and is set to continue to grow rapidly over the next few years as smart phone usage by the general public starts to become mainstream.

As the smart phone population grows and new technology developments such as 4G and NFC (Near Field Communication) improve the speed and convenience of using m-commerce as a shopping medium, the amount of people using mobiles to actually make purchases will increase. By 2014 we estimate that the amount of people in the UK actively using mobiles to purchase products will reach 3.2 million, almost three times the number in 2009.

However despite the projected growth of m-commerce over the next few years, it will continue to remain only a small part of online sales. M-commerce’s real value will come from the smart phone acting as a marketing tool and multichannel integrator, allowing retailer’s to interact with customers more and connect with other channels, providing a substantial boost to online and store sales.

+51.2%

M-commerce

+19.8%

TV shopping

Physical stores

+2.5%

Mail order

0.0%

+37.2%

Online

2000-2009 average annual retail growth across various shopping methods

Note: M-commerce rate based on five year average 2005-2009

1.69

2.25

2.76

2.993.17

1.08

2009 2010 2011 2012 2013 2014

UK m-commerce shopping population (millions)

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A growing part of the purchasing process

Although consumers remain slow to adapt to buying products using m-commerce, we expect the channel’s uptake across all parts of the purchasing process to increase rapidly over the next 5 years

The population using mobile phones at any stage of the purchasing process increased 85% from 2009 to 2010. Growth was driven by the rise in popularity and number of smart phones available, retailers releasing dedicated mobile applications and growing confidence in using the channel.

In 2010, mobiles were used by 16% of the population to research product, prices, retailers and locations before embarking on a shopping trip, up from 12% in 2009. Researching whilst shopping, using services such as comparison sites is a fast growing trend, as is reserving product and collecting from a store. By 2014 we expect that 79.3% of UK consumers will use m-commerce at any stage of the buying process, a 181% increase from 2009.

As confidence of using mobiles for online purchases grows so does the number of consumers who will actually buy using this channel, which we expect to rise 161% from 2009-2014.

52.0

62.9

71.877.3 79.3

28.2

2009 2010 2011 2012 2013 2014

% of UK population that uses m-commerce (at any stage of purchasing process)

3.8%

9.8%

% of UK shopping population that shop online via mobile phone

2009 2014

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M-commerce fuels multichannel shopping

Although m-commerce adoption rates are increasing rapidly, the volume of direct mobile transactions is expected to be small. However, the opportunities for m-commerce to benefit and enhance the multi-channel customer experience are endless. As retailers develop m-commerce sites as extensions of their websites, access and product information becomes more readily available to the consumer. The chart below shows the type of things the consumer can now do ‘on the go’.

Mobiles enable and encourage consumers to shop using multiple channels.

Mobiles increase the probability of multichannel shopping by allowing for instant access to a retailer, providing information immediately and improved convenience

The convenience of using mobile on the go will inevitably drive up multichannel transactions. By 2014, we estimate that 35% of retail sales will be made using more than one channel up from just over 23% in 2010. Significantly, this means consumers will put much more consideration into their buying, something retailers will need to take account of.

11.3%

23.4%

35.1%

4.5%

2000 2010 20142005Compare

Research

Click & collect

Social/OpinionPurchase

Price check

Availability

Locate

Proportion of total retail sales going through multichannel 2000-2014

Multichannel shopping within the sectors

As more consumers use multiple channels for their shopping it is vital that retailers understand what role each channel plays in the overall decision making process. This will vary from retailer to retailer and from sector to sector.

In broad terms, in sectors such as music and video where relatively intangible products are sold, stores will become far, far less important as the place of purchase and are already being rapidly replaced with online downloading or ordering. In electricals the picture is different: here the internet is used extensively for checking but stores come into their own for ideas and inspiration and for making actual purchases. Clothing is different again and in this sector we believe that both stores and online will be equal in terms of the role they play in the decision making process.

Today multichannel shopping is most evident in Electricals, however in the future we expect a higher usage of multiple channels to support the purchasing process across many sectors

The influence multichannel shopping has on sectors

Lowimpact

Highimpact

Music & video

ClothingDIY Food & grocery

Electricals

THE FUTURE

We expect multichannel shopping will become more influential on more considered products, often with a larger ticket value.

In the future, we expect multichannel shopping to become more influential, especially in Food & Grocery, Clothing and DIY. As consumers remain cautious about spending, more researching and comparisons will be done before a decision is made. Also as information becomes more readily available online and researching on mobiles more sophisticated, the consumer will, quite organically, think about purchases more.

26

DIY Clothing

x x x x x x x

Phys

ical

Phys

ical

Phys

ical

Phys

ical

Phys

ical

Onl

ine

Onl

ine

Onl

ine

Onl

ine

Onl

ine

Electricals DIY Clothing Food & Grocery

Music & Video

x x x x x x x

x x x x x x x x

Ideas & Inspiration

Check

Purchase

The most preferred shopping source by sector