Retailers need to focus on mobile for future growth according to Citigroup

Posted on October 4, 2010

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(Media Post) Mobile is becoming an increasingly key focus for retailers, with tablet computers generating particular interest, according to a research note released by Citigroup analyst Mark Mahaney in connection with the annual Shop.org Summit in Dallas this week.

Much of the mobile buzz centered on the iPad, which retailers including eBay and Wine.com indicated was demonstrating shopping conversion rates equal to or higher than on PCs and materially higher than on smartphones.

The user base of iPads is still small, with Apple most recently saying some 3 million had been sold in less than three months on the market. But the Android-based Galaxy Tab from Samsung will come out this month and a half dozen models from other manufacturers including BlackBerry-maker Research in Motion are due out in the first quarter of next year.

Forrester has predicted that tablets overall will outsell netbooks by 2012.
The Citigroup report also noted a shift away from apps toward mobile sites. “Another key point was that retailers seem much more focused on optimizing their Web sites for mobile rather than on generating mobile apps,” it stated.

While the number of Web retailers with mobile-specific sites has tripled in the last year, a study in June by digital strategy firm Acquity Group found that only 12% of the top 500 Internet retailers had sites optimized for mobile phones.

Retailers may also benefit indirectly from a recent initiative aimed at increasing mobile commerce. Verizon Wireless, AT&T and T-Mobile, for instance, are testing technology that allows mobile users to pay for products by swiping their handsets at checkout rather than credit cards. And PayPal has just introduced a service that allows users to cash paper checks in their accounts simply by taking a photo of a check with their mobile phones.

The report also cited growing enthusiasm around social commerce as a means to sell products and services. Glen Senk, the CEO of UrbanOutfitters, called social media “word-of-mouth on steroids” and Facebook said it’s already working with hundreds of retailers. “One of the big questions for us is if/when Facebook begins to directly monetize the physical retail transactions it is enabling,” stated the report.

Shop.org’s annual State Of Retailing Online report, released jointly with Forrester, found that Web retailers have continued to grow their business despite a sputtering economy, with 80% reporting profitability in 2009.

In the second quarter of 2010, online retailers saw a 15% gain in sales compared to a year ago, up from the 12% increase reported in the first quarter. Growth trends for the third quarter are expected to be in line with the prior quarter. The study attributed steady growth in the sector to convenience, selection and value offered by e-tailers.
But it also highlighted international expansion as an area where online retailers could improve operations. In particular, only 17% of Web retailers surveyed had foreign warehouses and 74% of those that ship internationally offer an English-only site, and 69% provide English-only customer service.

“If executed successfully, selling globally can generate a healthy double-digit percent of sales,” said Sucharita Mulpulru, a principal analyst at Forrester. “The global online population stands at 1.6 billion today, and the purchasing power of that group represents a significant opportunity for Web-enabled businesses.”

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