The mobile commerce revolution will be messy

Chances are you’re doing mobile commerce today, even if you don’t realize it. If you pay for your Starbucks via your smartphone with an app like Square, you’re doing m-commerce. That’s fairly obvious. But if a roving clerk at a store handles your checkout, that’s m-commerce, too — retailers such as at Nordstrom Rack are getting rid of cash registers and using iPod Touch- or iPhone-based systems instead. They may also be using handheld point-of-sales terminals from old-line providers like NCR and Motorola Solutions. If you do price checks or product research from your smartphone before you go to a store or while you’re in one, that’s m-commerce too. According to market researcher Parks Associates, one in eight Americans already buy physical goods from mobile devices.

M-commerce is rapidly appearing on all sorts of fronts. But don’t expect m-commerce to become commonplace or predictable any time soon. We’re in the early days of experimentation and vendor jockeying, and buyers, developers, and providers are in for a messy time.

[ Apple’s iPod Touch is fast becoming the new cash register. | Galen Gruman says, “Think mobile wallets, not mobile payments.” | Subscribe to InfoWorld’s Consumerization of IT newsletter today. ]

More payments system than you can shake a stick at M-commerce is becoming — within the industry, at least — a hot topic. Dozens of startups are trying to bring mobile payments to the masses, though only Square has gained any real traction. Google’s been trying to do the same with its Google Wallet, which so far has also fallen flat. Apple’s Passbook service seems to be slowly moving into the payments direction. PayPal is in the mobile game, too. The credit card companies, fearful of losing business, have a weak effort called Isis in limited trials. The cellular carriers have been exploring the idea for more than a decade, but so far have not made a serious on m-commerce outside of Africa. And a group of retailers, including powerhouse Wal-Mart, have launched their own effort called the Mobile Commerce Exchange to create a mobile payments platform for use in their stores.

It’s a Wild West as startups, nontraditional providers such as Google, traditional providers, and the credit card companies vie for the transaction fees that come with being a payment system. Chances are we’ll have multiple payment apps for the next several years as merchants try out different systems until a handful dominate, as the four major credit card companies do today for “traditional” payments.

Payments will consolidate, at least in the behind-the-scenes processing. Where it should be more interesting to users and developers alike is on the front end: shopping sites and apps. If you’ve used the Amazon Mobile app, you have an idea of how powerful a good mobile shopping experience can be. It should also be obvious, but isn’t always, that m-commerce and e-commerce are kissing cousins, not separate efforts or independent experiences.

The show-rooming challenge Apps like Amazon Mobile and the bar-code-scanning apps that check prices, like Red Laser, scare the bejesus out of traditional retailers, who see customers walk into their stores to check out goods in person, research features and prices from their smartphones (especially at stores like Best Buy where you can never really trust what the salesperson is saying), then buy online. It’s called show-rooming, and it puts the fear in traditional retailers. Wal-Mart Stores is the exception; it welcomes show-rooming because its massive scale — it accounts for 8 percent of U.S. retail sales — means it can undercut almost anyone and has almost nothing to lose from the trend.

In fact, Wal-Mart has much to gain: It can use mobile apps to steer buyers to more self-service, said the retailer’s vice president for mobile and digital strategy, Wendy Bergh, at the M-Commerce World conference this week.

For example, Wal-Mart has apps that let customers create shopping lists. That’s a common feature in retailers’ mobile apps, but Wal-Mart goes further, calculating the costs as people add and delete items both before shopping (26 percent of Wal-Mart customers use the mobile app or website before entering the store to begin their shopping) and while shopping, so they can stick to their budgets. The app also shows where the desired items are located, so fewer clerks are needed to direct patrons.

The chain is also testing mobile self-checkout, where shoppers scan their purchases as they shop and transmit the list to Wal-Mart; shoppers then go to a cash register on the way out where their carts’ contents are quickly compared to the mobile-generated list, and payment is handled automatically — similar to buying music from the Apple iTunes Store or a product from Amazon.com.

If you’re not Wal-Mart or Amazon, though, what do you do about show-rooming? It’s illegal to block cellular signals, after all.

A good friend of mine works on shopping and inventory systems for a major national department store, and it’s clear the traditional retailers are struggling with m-commerce, just as they typically haven’t really figured out old-fashioned e-commerce either. My friend has a notion that retailers very much divorce the in-store experience from the online experience, and customers feel that and get frustrated. It’s apparent that Wal-Mart understands the need to treat them as part of one experience, even though as Bergh says it’s a major effort to bring all those operations and systems together.

Take an example I experienced recently when shopping for shirts. I like Oxford collars (the ones that button down), despite the fact they are out of fashion and difficult to find much selection for. I found a nice line at this retailer (not my friend’s) and a couple colors in my size that I liked. There was also a color I liked not in my size. I had to track down a sales associate to see if they had any in the backroom, and when he came back and said they did not, that was it. I “bounced” on that purchase, as one would say on the Web to refer to someone who goes to a page, doesn’t see what he or she wants, and goes elsewhere.

If that retailer had a kiosk or a mobile app (for me or the sales associate) that let me order the shirt not in stock locally, it would have made a sale. I would not have bounced. It seems simple, but it’s rare.

Part of the problem is that the retailers’ supply chain management systems are designed for a long-dead past where inventory management was seasonal and deliveries happened every week or every few days. Real time didn’t matter; if you were out, you were out — “come back next week.” If you’ve shopped at Best Buy, Office Depot, Lowes, Home Depot, or the like, you know that their online and mobile sites’ inventories are rarely accurate, so you waste time and gas to get a product that isn’t there. If you buy online instead to be safe, who knows when it will arrive — few retailers have Amazon.com-like awareness of shipping — and returning it can be difficult. (Some stores, like Lowes and Home Depot at least have the returns part down.)

I know retailers like to think show-rooming is only about “unfair” pricing from Amazon.com and Wal-Mart, but in my experience a lot of it is driven by the frustration of going to a retailer, not finding what you want, and being stuck with no option other than to go online.

Will customer abuse go mobile? At the M-Commerce World conference, most of the presentations were by vendors pitching their established worldviews and naked self-interests. It left me convinced that effective m-commerce will come slowly, as companies stay stuck in their ruts and miss the bigger picture to adapt to.

I’ve been covering mobile tech for two decades, and 12 years ago I was executive editor of a magazine called M-Business that was all about mobile’s business opportunities such as m-commerce. Sadly, much of the conversation hasn’t changed in those 12 years: Telcos want a piece of the payments market but are afraid of the liability; plus, their users hate them. Everybody and his brother wants retailers to install some unproven proprietary payments terminal and ask their customers to walk away from the easy, familiar, and trusted credit or debit card.

Worst of all, there’s a continued strong belief that smartphones are perfect for targeting ads at people as they walk and drive through town. Several vendors, for example, sell retailers systems that monitor phone IDs in malls to track where people go. They don’t know who that person is, but they know where that cellphone has been, to build up a profile of likely interests that can then be used to advertise to those people with alerts and the like. If you remember when sales calls were common at dinner time, you know the loathing that such technology will create if deployed the rest of the day on the devices we always have with us.

“The industry is trying to shove down consumers’ throats notions from the 1970s like coupons and promotions, whether you like it or not, because 0.1 percent of you might respond,” said Patrick Gauthier, head of emerging services at PayPal, during a panel at M-Commerce World. That “0.1 percent” comment is key — that’s about the response rate that postal junkmail needs to be cost-effective. Without the printing and delivery of paper, the profitable response rate for mobile spam will be even lower, meaning it’ll be of very high appeal to retailers, banks, and others.

Interest in such ad-spamming possibilities has been greatly heightened this year by all the excitement marketers have over big data analysis and their goal to create rich customer profiles they can then use to manipulate the buying public. It’s a commercial Big Brother in the making.

Gauthier is all for big data analysis, but not for use for advertising, coupons, and other spammy pitches. He says the key is to use big data analytics to improve the experience, personalize it, and gain deep knowledge of customers to make better decisions as to what to sell, when to stock, how to support, what questions and issues can be smoothed away, and so on. If the experience is better, the customer will be more loyal — without bothering everyone else.

There’s a lot to be worked out in m-commerce, and we’ll see good ideas and bad ideas alike both succeed and fail.

This article, “The mobile commerce revolution will be messy,” was originally published at InfoWorld.com. Read more of Galen Gruman’s Smart User blog. For the latest business technology news, follow InfoWorld.com on Twitter.