4 Essential points about m-commerce – lessons from South Korea

m-Commerce is not just about bringing down your website and replacing it with a mobile only app. There is much more to it. Given the new buzz that is surrounding the major players in e-commerce trying to go mobile-only and heavily encouraging users to get their apps by offering great deals and prices, let us try and understand this development. Let us also try and see what the 4 essential points about m-commerce are that both buyers and sellers need to understand.

 

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McKinsey & Co recently did a study about the m-commerce scene in South Korea. The findings of this study could be very useful to understand this phenomenon from the Indian context, as we are all set to go big in this sector. So let us try and understand some background information about South Korea first.

South Korea has the highest smartphone penetration in the world: more than 2/3rd  of the South Korean population owns one, compared to 47% of Americans, 57% of Australians, and 52% of Britons. They are also known for being big users of their smartphones, with sales of goods purchased using mobile devices increasing more than fourfold since 2012 to about 10 trillion won, or $9.8 billion. This is staggering by any standard.

This aggressive trend of adoption has put South Korea  at the forefront of so-called omni-channel commerce, where physical and online shopping are complemented by mobile shopping or m-commerce as it is popularly known. The majority of South Korean users already have experienced m-commerce, and on-the-go shoppers are observed to spend about as much on each mobile transaction as they do in stores. Moreover, consumers who primarily use their phones to shop—“mobile first” consumers—tend to spend more money than shoppers in other channels. South Korea’s rapid m-commerce growth means not only that local companies are taking their knowledge elsewhere—but also that the country’s experience has lessons for players around the world. The Indian players will do well to study them and take the data in to form their strategy here. m-Commerce can either be an enabler or a disaster, planning and execution hold the key here.

Four m-commerce insights
Since 2010, South Korea’s mobile-commerce market has more than doubled in value with every passing year. Today it stands at almost one-third of all web-based sales. Using smartphones to buy products and services has become so common (tablets play a negligible role in South Korea) that nearly two of every three people have done so at least once, up from fewer than half in 2012. By comparison, just one in four US and Australian consumers have had a mobile-shopping experience.

Like we said in the beginning of this discussion, the latest research on the South Korean market indicates that winning the game in m-commerce requires much more than simply a reformatted website or smartphone application. All digital channels share the same backbone infrastructure, such as order management and logistics, but m-commerce requires fundamentally different methods and thought processes to aid in effectively identifying, reaching, and satisfying consumers. Hence we need to understand that there are important distinctions between mobile-shopping behavior and online or in-store behavior, especially among women. Here are four critical areas that companies seeking to tap into the mobile revolution need to consider

Image Copyright: McKinsey & Co
Image Copyright: McKinsey & Co
  1. Reach: Tap into the unique nature of mobile-first consumers

    Mobile-channel buyers have very distinct demographics. In South Korea, women drive 60 percent of transactions. Additionally, most of these women are in their 30s and are likely to have preschool-age kids. They are also likely to be full-time housewives. There was an existing assumption that m-commerce is dominated by busy working moms; but the fact is, working moms spend much more time in front of a PC or a laptop screen, mostly at their jobs, while housewives or moms with young kids are more likely to use their smartphones to shop. It has been noticed that social-commerce players like Coupang aggressively targeted mobile-savvy young moms by offering baby gear such as diapers at low prices.

    Yet mobile shoppers, regardless of their age, gender, or lifestyles, seem united in moving away from stores and online retailing. McKinsey’s research found that among those who shopped on a mobile device, 13% did not shop in stores, and 53% did not shop online. More and more of these consumers can only be reached through their smartphones: They found that offline and in-store marketing motivates only 7% and 2% of mobile purchases respectively. Yet mobile ads or promotions influence three out of four mobile purchases.

  2. Curate: Trigger impulse purchases through well-crafted offers

    Since it’s visually and practically more difficult for a shopper to compare products and study details on a smartphone’s small screen, mobile shoppers think less when making purchasing decisions. The research shows that more than 50% of mobile consumer decision times—from considering products to purchasing—last just a single day, compared with only 36% of online customers. Also, mobile shoppers go to fewer than two sites before making a purchase, versus 2.75 for the online shoppers. Meaning that m-commerce consumers are  much more impulse driven than driven by product features or prices: about 17% of mobile transactions in South Korea are made without prior research, compared with just 6% of online transactions.

    For retailers, this has hugely significant implications. While it has been critical for online retailers to keep a long list of products in order to capture whatever consumers are searching for, mobile shoppers look for quick satisfaction. So their purchasing decisions are often governed by impulsive or emotional factors (in product categories including apparel, fashion accessories, and shoes) or habit (such as buying groceries and kid/baby items). For example, online market 11th Street has reduced its total number of SKUs to only 7,000 and emphasizes “deals of the day.”

  3. Entertain: Make shopping fun and easy, not just cheap

    Very much unlike the bargain-hunting mentality that pervades online, mobile shoppers place the greatest value on easy navigation and convenient shopping experiences. Research shows that more than 60% of South Korea’s mobile shoppers cited convenience as their top priority, compared with 44% of online shoppers. To connect with mobile buyers, many retailers are putting up less information on their mobile sites. Quick delivery of products is very critical for many regular mobile shoppers, particularly those who buy groceries and other staples that are perishable or required fast. To satisfy this consumer demand and expedite the delivery, GS Shop opened a mobile-dedicated warehouse and a mobile-specific call center so shoppers can get specialized assistance with a single click, and players are also adopting new payment solutions such as social-media-based payment systems.

  4. Lock in: Capture the loyalty of mobile shoppers early

    Buyers are known to buy online from less number of retailers than when they shop in brick-and-mortar stores. Similarly, mobile buyers mostly tend to go directly to a retailer’s site or app than to use a search engine, this means that there is a significant opportunity for retailers to lock in customers. Consequently, South Korea’s m-commerce players use multiple tactics to get users to make repeat visits, like offering mileage points or coupons to those who interact at least once each day with their mobile site or application.

    Linking the mobile-shopping experience to the actual physical stores also helps a lot in building a true omni-channel experience and locking in customers. For example,the mobile application for a retailer offers an “in-store mode,” where shoppers get real-time mobile notification of promotions and coupons when they step into one of its department stores and pass a specific brand’s area. Or even a virtual-store application that shows products displayed in the same layout as in its physical stores to provide an easy, consistent shopping experience across all platforms. That makes significant inroads into the customer psyche and comfort level and hence fuels exponential increase in commerce too.

Conclusion

The Indian e-commerce houses that are all set to become m-commerce houses should learn from their South Korean cousins. User demographics, behavioral patterns, product segmentation and targeted campaigning should be the key areas to focus on. The UI/UX will play a key role in pushing the buying impulse. Not to forget the unification of the user experience with an omni-channel approach. Let us hope that they are listening and pulling up their socks to get into the m-commerce race! Tell me what you think in the comments!

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