Calling All Retailers

Like most mothers and daughters, my 15-year-old daughter and I share many similarities: We love Starbucks’ lattes, exercising together and watching “House.” We also have our differences, none more pronounced than the ways in which we use our cell phones.

For me, it’s a phone, pure and simple. Retrieving voice-mail is the extent of my “expanded” applications, although I am experimenting, unsuccessfully thus far, with using the phone as an alarm clock.

For her, it’s a social lifeline and, among many of her peers, a status symbol or fashion accessory. Fortunately, she’s content with talking and text messaging.

My Gen Y daughter and her friends are also huge plastic patrons—gift cards are always more popular than cash. However, when I asked how she would react to using her cell phone as a wallet—essentially paying for purchases in store or online through her mobile device—she expressed skepticism about whether it would “really work.”

For once, I may be a baby step ahead of my techno-savvy teen. Within the next 12 to 18 months, I predict my daughter will not only accept the concept, she and her Gen Y peers will embrace mobile commerce and make it the next great retailing channel.

In a recent report, “U.S. Mobile Commerce 2007: Low Reception,” Cambridge, Mass.-based Forrester Research acknowledged that, although adoption in U.S. markets is lower than in Asia and Europe, mobile commerce is coming. Forrester offered a simplistic definition of the concept, summarizing it as “using the mobile network and devices to initiate or effect a purchase transaction.”

According to the Forrester report, the idea of using cell phones as wallets is particularly appealing to Gen Y consumers (young teens to age 26), but also a practice that Gen Xers (ages 27-39) and younger baby boomers (ages 40-50) would likely embrace.

Unsurprisingly, the first application to gain prevalent adoption will likely be using mobile devices for product searches and price comparisons, but closely following will be purchasing items directly via the mobile device and completing the transaction by paying over the mobile device. Not unlike the way the Internet rapidly progressed from a communications tool into the world’s largest shopping center, it will outperform the expectations of even the most optimistic bricks-and-mortar retailers who adopted multichannel sales strategies.

The Forrester report concluded that, although cell phones equipped with near-field communications (NFC) or RFID technology can be used for payments in a manner similar to the use of a contactless credit card, the lack of cooperation among mobile operators, manufacturers and financial institutions is a huge barrier to the adoption of mobile commerce.

Similarly, Forrester’s survey of consumers indicated most are not willing to pay higher service charges to have a mobile-payment feature and retailers, already battling interchange fees from credit-card companies, are not likely to absorb the cost unless consumers perceive it to be a value-add competitive option.

Contact resourcecenter@forrester.com for more information or to obtain a copy of the report.