European retailers’ hopes to sell through mobile phones, interactive TVs, and PDAs will fall short. The inherent constraints of these devices will limit their share of online retail to [EURO]33 billion in 2005 — only 19% of total online retail. In a recent report, Forrester Research B.V. (Nasdaq: FORR) outlines how retailers must instead use devices to drive sales indirectly — influencing purchases, not conducting them.
“Pioneering European retailers move beyond the PC to reach their customers, offering WAP sites and iDTV shops. But more than half of projects fail to meet expectations,” explained Carsten Schmidt, associate analyst for Forrester Research. “Just because a retail sale is possible on a device doesn’t make it probable — device opportunities lie beyond transactions.”
Forrester projects that mobile phones will account for only a meager 3% of total online retail by 2005, totaling [EURO]5.2 billion. Mobile phones only favor transactions that are timely, simple, and location-based — low-cost items like flowers and cinema tickets. iDTV will account for 16% of online retail by 2005, totaling [EURO]28 billion. Limited input, poor resolution, and an entertainment bias lead iDTV viewers toward “lazy interactivity,” not considered shopping trips. As a result, iDTV is better for purchases that are audiovisual, contextual, and entertainment-related. Finally, PDAs struggle to connect — the first wireless PDAs will not hit the European market until 2001. Even in 2005, wireless PDAs will be outnumbered more than 150-to-1 by Net-enabled mobile phones and will capture less than one-tenth of 1% of online retail sales.
“With household penetration approaching 50% in 2005, accessing the Internet from a PC at home will become as ubiquitous as toting a mobile phone is today. PCs will capture more than 80% of online retail sales,” added Schmidt. “The PC’s rich input and display, wealth of competing sellers, and seasoned population of shoppers will not only capture the majority of retail sales in each category, but claim the biggest share in the biggest categories: For example, more than 97% of online grocery sales, the single biggest online category in 2005, will move through PCs. In total, PC-based online retail will form a [EURO]141 billion market that year.”
Forrester projects that the value of retail sales influenced, but not captured, by non-PC devices will outpace device transactions by 10-to-1. iDTV will influence [EURO]28 billion in retail spending both on- and offline by 2005, representing 1.1% of total retail sales. Mobile devices alone will drive loyalty and influence [EURO]229 billion, more than eight times iDTV alone. Finally, the combined impact of both devices in use by 7.6% of Europeans will influence another [EURO]59 billion.
“Retailers must look beyond transactions. For example, mobile phones reach consumers anywhere. They can cultivate loyalty through personalized alerts, create opportunities for location-based services that advance consumers toward purchases, and build brand awareness through opt-in ads,” added Schmidt.
In the report “Driving Retail With Devices,” Forrester interviewed 40 executives from European retailers who support at least one of these new interactive devices in addition to the PC. Forrester also used results from the Technographics® Europe May 2000 survey of 23,000 consumers. Forrester’s Technographics Europe research program provides continuous quantitative information about consumers’ attitudes toward and adoption of technology.