In this interview Fact-Finder.com‘s CEO Carsten Kraus explores the dos, don’ts, and chances of the future m-commerce market after the launch of Apple’s iPad.
IR: mCommerce vs. eCommerce: What’s the difference?
Basically the smartphone is more used for spontaneous buying decisions while a desktop PC or laptop is more suited to more complex buying decisions. On a larger screen you can compare informations better.
The iPad/Slate combines both benefits. From 2013/14 onwards it will probably support the majority of total e-commerce revenue generated in the homes. Smartphones, on the other hand, will probably guide our shopping spree, i.e. will lead us to the goods in stationary shops or show rooms. And it will likely serve as an e-payment console.
Factfinder’s CEO Carsten Kraus
IR: What do customers buy with their iPhone? When do they prefer the PC?
Supermarket articles are not being purchased online via PC. The effort is still too high to provide much convenience. The iPhone on the other hand awakes on a click and the user can purchase the article quickly online. The virtual shopping cart of our iPhone app is persistent, i.e. after switching the device off and on again you can still find the shopping cart status you had before. When you have assembled enough items in your cart you click on “Order”, and only then the purchase and delivery process is started.
For the time being the PC has clearly an advantage when it comes to ordering fashion articles and DVDs – the PC has a better performance in showing videos. On the iPhone Flash videos are still blocked so that videos in an iPhone shop are not possible. My expectation is that Apple will remediate this deficiency. Other smartphones do not have this issue.
Today the order process of only a single item takes much too long. The process for a complete shopping cart would take too long, be it on a PC or on a smartphone. You could just as well drive to the shopping centre, making your buying experience more comfortable and natural.
FACT-Finder tries to accelerate the ordering process. A barcode scanner is certainly useful, but we also try to anticipate which items the customer is likely to buy and propose them on the start page. That would be easy, if the customer usually buys Pampers every two weeks, for example. It’s possible to develop predictive analyses based on statistics, and we integrate that into our Recommendation Engine.
IR: What kind of functionality for the iPhone should a shop provide?
First of all it’s important to present a real app, not some browser on a tiny screen. The owner of an iPhone wants to be able to turn his device sideways, thereby turning the screen image from portrait format to letterbox format, and to zoom the image with his fingers, etc. A browser-based solution does not react as expected because it does not make use of the iPhone’s sensors.
IR: Even if only a few buyers use an iPhone shop app there might still be an advantage?
Yes, and it’s the same factor as back in 1999 with an internet presence: you’re hip, the brand appears more dynamic and gets a positive image. Also, if you earn the experience today you avoid making beginner mistakes when the race starts. When the race is on mistakes count more and might kick you out of business. And thirdly, since there are already numerous users who order using their iPhone, the market has grown significantly over the last months. The big difference to days of yore: In 1999 Web presences cost a fortune and quite a few traders spent millions. In comparison, today iPhone apps are much more affordable.
IR: Barcode scan, EAN, product photo search: Are they only gimmicks or useful?
No gimmicks, but useful stuff, all of it. But not yet mature, however. On the iPhone a barcode scan takes about ten to 15 seconds, that takes pretty long. You’re faster using a search engine to find a product. A cash register scanner engine takes only one or two seconds for its scan. But you shouldn’t underestimate the viral (= word of mouth) effect: Because it’s considered “cool”, users show the barcode scanner to other users who might emulate this. But if the rest of the shop app isn’t up to expectations the coolness effect will rapidly disappear. That’s why I would recommend to shops that they care about a good basis. Visitors must be able to get a satisfying shopping experience.
IR: When is it a good idea to create one’s own app and when should one prefer a mall (a community’s app)?
This question is primarily one of the shop’s size and the buying frequency of its customers. We have decided to enable the FACT-Finder-supported shops both with a mall and a custom app, because both can be appropriate. A customer will only install a custom app by a specialist shop if he hopes for a more convenient shopping experience because he’s a regular customer. The advantage of an app showing only one shop is, of course, a tighter relationship with the customer once the app has been installed. But a community app providing access to a variety of shops is more comfortable for the customer, because he doesn’t have to search for other interesting shops.
IR: What kind of consequences do you expect from the market introduction of Apple’s iPad? What are the advantages & benefits for vendors and end-users?
In the long run there’s no reason to use the classic local PC for shopping any longer. We’ll see that less and less. The advantage of a smartphone and the iPad over a desktop PC lies in its ubiquitous availability (with a smartphone even more so than with the iPad/Slate). You can even take it to places where you wouldn’t dare take a notebook PC to, for instance into the kitchen next to the oven because you want to read a cooking recipe. A mobile device is activated within seconds (though that might change with the classic PC).
This convenience makes mobile devices also convenient for the purchase of small items. Let’s say, you’re running out of coffee pads, and as soon as possible you order a refill – with only a click. Currently we’re in talks with an online retailer enabling the customer to order supermarket articles. That’s already everyday routine in the UK, but virtually non-existent in Germany. Tesco generates annually ca. 2 billion euros on the internet. With the introduction of the iPad there will be a significant increase for this revenue.
IR: In which way will apps change m-commerce?
Customers who have installed the app of a single shop (not a „mall“), will be more loyal to this shop than in browser-based e-commerce. However, this holds only true if the customer need the products of this shop frequently enough. If this is not the case then the customer is likely to “forget” about this app.
IR: Are there any estimates how large this market might grow?
As mentioned, my estimate is that the revenue generated online with iPad/Slate will overtake the revenue generated with PC-based e-commerce in 2013 or 2014.
IR: Free, paid or “Freemium” apps – which model will be most successful?
In m-commerce, shops will offer their app for free in order to attract the greatest number of users. However, if you want to generate revenue with an app, then the freemium model will prevail – a basic app for free, but important additional functions only as a subscription-paid upgrade.
IR: Social Shopping, Augmented Reality, Location Based Services – what’s next? What’s the future of m-commerce?
Social shopping has already arrived and is established. But when it comes to location-based services you encounter the problem of the hen and the egg: Which was there first? Only when you have attracted a sufficient number of users is it profitable to offer services. Many people with considerable wallets own a GPS-enabled smartphone which is the technical prerequisite. But when the race is on things tend to develop very rapidly.
In addition, I can imagine numerous mashup apps, e.g. product recommendations that take into account factors like the current local weather (heavy rains or winds might deter the user from a walk outside) or the distance walked by the user (he or she may already be tired). Furthermore I think it’s likely that smartphones will receive further sensors besides GPS, camera, sound, etc. (HP is developing a sensor for “tasting” chemical and biological substances which will be market-ready in a few years.) In the near future there will probably be an RFID reader as well as an individual RFID chip for contactless identification. This technology will turn the smartphone into a digital wallet, besides numerous other applications, e.g. a digital door key.
Biography:
CEO Carsten Kraus started his first business while still being a pupil at school. Without the help of venture capital, his company now has 80 employees and is the European market leader for search, navigation and merchandising inside large online stores. FACT-Finder was the first such company to launch an iPhone App in Europe.
