The Nugget

August 5, 2011 
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Mobile Commerce:
A Boon to E-Commerce in Emerging Markets?

South African book retailer recently launched a mobile version of its website, exemplifying the bet that many retailers are placing on mobile commerce (m-commerce), a market that is projected to reach $119 billion globally by 2015.  Wal-Mart has stated its intent to boost investment in m-commerce, including in emerging markets, and recently demonstrated it by investing in Yihaodian, an e-commerce company in China. British grocery and merchandise retailer Tesco, which has operations in several emerging markets, recently added an Android application to its mobile application offerings that allows consumers to scan and order products for home delivery.  Meanwhile e-tailers such as Latin America's Mercado Libre have also launched mobile applications, and China's Taobao is aiming to have 120 million mobile users by the end of this year.

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However, significant challenges remain before m-commerce can gain widespread acceptance in the developing world.  Smartphone penetration is still less than 10% in nearly all emerging markets, and most users of Internet-enabled feature phones do not have data plans. Also, a majority of consumers lack experience with e-commerce due to low PC and Internet penetration, driving a need for retailers to educate consumers and build their trust in online shopping.  Finally, 72% of emerging-market consumers lack access to banking services, including credit cards, to effectively pay for goods and services over the mobile phone.  

Despite these challenges, retailers can reap benefits by developing a long-term m-commerce strategy. Multinational retailers would do well to consider local payment and handset capabilities when designing mobile applications and target m-commerce initiatives where low-cost smartphones, mobile broadband, mobile money and e-commerce systems are gaining traction. Implementing technologies such as Near Field Communication - which allows for transactions with the touch of a NFC-enabled device - and linking with mobile money payment models could accelerate m-commerce acceptance. Partnerships with banks and mobile payment firms can also be employed to help increase familiarity and confidence with mobile commerce alongside mobile payments. Finally, utilizing social networks to promote m-commerce and e-commerce more broadly can help introduce these systems to early adopters.

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