Mobile Commerce: is Europe likely to follow Japan's lead?
By stephendavis on Oct 11, 2006
Last year in Japan, the number of people using mobile phones for Internet access exceeded desktop computer users. According to data from the Japanese government, 80 percent of e-commerce by teenagers aged 15-19 was carried out on a mobile phone in 2005. The same report estimated the size of Japan's mobile commerce market more than tripled from 2002 to 2005 to reach 407 billion yen ($3.5 billion). For comparison, the mobile commerce market in the United States and Canada combined is expected to reach only 75 percent of that size by 2009.
Why is mobile commerce or m-commerce in Japan growing so much faster in Japan than other developed markets and is expected to continue to grow in years to come? There are probably two main reasons.
Firstly, the growth of the m-commerce market is supported by a spread of high-speed third-generation phone services. According to U.S. research firm Strategy Analytics, Japan had the highest number of 3G service users in 2005, followed by South Korea. Not only is 3G considerably faster than 2.5G, in most cases, 3G services are built around a flat-fee access charges. Such flat rate 'always-on' charges encourage 3G users to browse content on their phones much in the same way that broadband pricing and access speeds has led to increased data transfers and online usage versus a dial-up connection in the home. 3G leads to greater online surfing which in turn leads to increased impulse purchases.
One of the issues that was thought would limit the expected growth in m-commerce transactions was security fears. Many Japanese consumers still fear entering their credit card numbers online or on mobile phones. More than half of e-commerce sales in Japan were paid with cash (presumably cash on delivery) rather than electronically in 2005, while 13 percent were settled with credit cards, government data shows.
Secondly, the comparatively high amount of time Japanese workers typically spend commuting on public or mass transport systems must be another factor. Fortunately for Japanese, there maybe cultural sensitivities about conducting a conversation on a mobile phone in a crowded train carriage that don't seem to apply elsewhere in the world - not at least on my train out of Cannon Street.
Mobile browsing from the palm of the hand further highlights how the mobile phone is the ultimate one-to-one personalised consumer device.
So will m-commerce catch on to the same extent in Europe? Although, m-commerce is likely to grow rapidly alongside the rollout of 3G services, European consumers are probably less tolerant of viewing content on such a small display area despite the fact that the western alphabet of 26 symbols is clearer to read than some 2,000 Kanji characters. Services directly related to the phone such as music downloads will be the most popular but certain categories are likely to remain store based.
Low interest repeat purchase categories such as groceries may benefit from commuter's winding down time. But as boo.com proved, it is very difficult to convey more considered items such as fashion clothing online - and it will be even more difficult on a mobile handset.