June 9, 2014
US mobile commerce market has grown exponentially in the last 3 years (~99%) and roughly represents a tenth of the digital commerce market in 2013. US mobile commerce market is estimated at ~ USD 26.7 billion in 2013. Primary drivers for US mobile commerce growth are growing smart phone penetration, growing tablet ownership, increase in mobile internet penetration, consumer adoption and better apps and browser based solutions.
At present, companies from multiple industries are vying for a pie of the rapidly growing mobile commerce market. We have large Retailer/Merchants such as Starbucks, Wal-Mart on one end of spectrum driving sales through mobile channel. Mobile carriers such as AT&T, T-Mobile are providing mPayments and wallets to end consumers through the mobile channel. On the other hand, technology firms such as PayPal and some startups are improving the scope of their mobile wallets. Banks and FIs are other players in ecosystem providing m-banking and utility bill payment facility through the mobile channel but looking at m-commerce seriously.
In the early phase of m-commerce growth, LTP believes that the retailers/merchants, and end-to-end mobile apps (like Uber) are leading the race. Apple, Starbucks and Amazon stand out as the major success stories for m-commerce in US. Apple drew almost quarter of its sales from mobile channel in 2013. Starbuck processed more than ~USD 1billion of transactions in US using its mobile wallet solution. Amazon’s mobile sales contributed ~ USD $8 billion in 2013.
LTP believes the ownership of the overall consumer buying experience by retailers/merchants is the primary driving factor for their early success, with the mobile channel. Delivering a holistic solution whereby combining mobile based product information/discoverability, payment and loyalty services seems to be the recipe of success. Retailers and players like Uber by virtue of their high level of touch during path to purchase, usage and the buying process seems to be in the best position to drive the mobile channel sales. Though, these are early days and companies across the spectrum need to invest in technology to drive the mobile channel further. Robust technology solutions are available for mobile channel. However, solutions have not matured and scaled fast enough yet.
US retailer and merchants are at forefront of adopting technology to drive mobile commerce in US. Almost 33% of top 100 US retailers have initiated pilots to allow NFC/BLE based mobile payments in US by 2013.
At the same time, multiple retailers are lining up to adopt NFC in 2014 to drive mobile payments further. The driver of this mobile payments adoption is expected to be the MCX mobile wallet solution which is being developed by major retailers themselves. MCX has signed up to 20 top retailers for its mobile payment solution which is expected to be launched in 2014.
iBeacons from Apple, as of now, is focused on location based marketing and doesn’t seem to be serious about payments. In 2013, 4 companies have initiated pilot on BLE technology to deliver location based mobile services. Currently, only Apple has implemented the BLE solution across its US stores among the top 100 retailers.
LTP believes that approximately half of top 100 US retailers would move to mobile payments by 2014. This is expected to be driven by MCX. LTP believes the mobile commerce market is poised to grow on its exponential growth trajectory in the next 5-10 years driven by improvement in technology availability on consumer side and adoption by major retailers/merchants on the supplier side.