Mobile Commerce Opportunity In Emerging Markets

The Unites States has long been the pioneer of eCommerce. When retailers first became aware of the internet’s potential for shopping anywhere, at anytime, America was the quickest to adapt to a new business model for the 21st Century. Now, as the U.S. stands as the largest online shopping market in the world, a new eCommerce revolution is already underway. According to research house IDC, 472 million smartphones made their way to shop shelves during 2011. Mobile shopping is the next frontier for online merchants – and emerging markets have been quick to adopt it, but the burning question is whether U.S. merchants can successfully tap into this market.

WorldPay’s recently launched Global Online Shopper Report, a study of 19,000 consumers across the globe to identify the shopping habits of consumers online, highlighted mobile use in the U.S. as being well below the global average. Only 27% of American respondents intend to use a smartphone or tablet for buying goods over the next 12 months, stating a lack of need as the top reason. These results reflect the characteristics of a mature online shopper market where most consumers are used to accessing the internet by computers and laptops. Moreover, growth in the online shopping market is estimated to be below 10% over the next 3 years (Forrester). While the U.S. market is certainly not a dead end for merchants, there is undoubtedly more fertile ground and opportunities to be explored in emerging markets, particularly when it comes to mobile.

Looking on a global scale, there are plenty of mCommerce opportunities for U.S. merchants to sell to the rapid-growth economies of India, Brazil and China where merchants are presented with a new generation of enthusiastic mobile shoppers. In the U.S., just under a quarter of disposable income is spent online, with users spending an average of 23% via the web. That figure rises dramatically for consumers in emerging markets, who are spending almost a third of their outgoings online. The importance of mobile in developing markets cannot be overstated. For many, a lack of infrastructure makes access to desktop computers impossible, and the mobile phone is quite simply the only way of accessing the internet. 65% of Brazilians are mobile only internet users, demonstrating the importance of a successful mobile strategy[1] (OnDevice).

Major variations in mobile ownership and use are having a big impact on shopping behaviours, with high smartphone penetration amongst AsiaPac shoppers giving them more opportunity to shop online. The level of smartphone ownership in China (75%) is almost double that of the U.S. (41%).

In fast-growth economies like China and India, we don’t jU.S.t see a higher number of current heavy spenders, but a much higher percentage of shoppers willing to spend a large portion of their income online in the future. Only 9% of Indian and Chinese respondents say they would ‘never’ spend more than 50% of their disposable income online – compared to a huge 49% of Americans who say they would not. It’s not jU.S.t that the developing economies are already spending more of their disposable income online – there is a much greater willingness to spend even more, if retailers meet their needs.

However, there are certainly barriers that merchants need to overcome if U.S. merchants are likely to succeed in these growing economies. 79% of Indian consumers are apprehensive about shopping online because of concerns over security, and a huge 54% of Chinese stated they have concerns about fraud and identity protection. Traditional industry security methods (such as VerifiedByVisa and MasterCard SecureCode) are very difficult to render on most mobile devices. Merchants are understandably keen to provide consumers with a seamless transaction; therefore careful consideration is needed of their fraud and security strategy. Risk screening tools can help bridge the gap by using environmental factors to screen transactions. Additionally, companies such as CellPoint and MoBank can offer solutions to enable authentication tools for mCommerce. It is clear that shoppers in developing markets have an appetite for mobile shopping, but it is important they are not held back by security concerns.

As mCommerce takes hold and our mobile devices become ever more sophisticated, it is logical to assume that this way of shopping will only continue to gather pace in these developing markets. However, the success of an mCommerce strategy is highly susceptible to local norms, rules and regulations. The cross-border opportunity is an attractive one and large global corporations may look to roll out their existing platforms to emerging markets, this however should be done with caution. Consumer preferences differ greatly by region and merchants need to understand these cultural nuances. Merchants should ensure they are providing AsiaPac shoppers bespoke mobile pages where they can browse and pay for products in their own regional language using locally recognised ways to pay.

By anticipating the needs and expectations of the emerging market mobile shopper, U.S. merchants will be able to tap into this considerable revenue opportunity.

Phil McGriskin is Chief Product Office for WorldPay, a global provider of electronic payment processing solutions. McGriskin was the founder of Envoy, which he sold to WorldPay in 2011 for approximately £70 million.