Mobile shopping has experienced dramatic growth in the past few years: U.S. mobile e-commerce--defined as purchases made on mobile phones and tablet devices--is now a $40 billion market, poised to hit $50 billion in 2014, according to The Custora E-Commerce Pulse Mobile Report.
Those figures are up from only $2 billion in 2010.
Despite these promising indicators, is the situation truly all rosy in mobile e-commerce land? A few data points might indicate the contrary--at least at first glance. While traffic to online stores from mobile devices has been rapidly increasing--in Q1 2014, mobile visits comprised 37 percent of all e-commerce site traffic--mobile orders and revenue have not been keeping pace, accounting for only 23 percent and 18 percent of total e-commerce activity, respectively.
Why is mobile’s share of orders and revenue lower compared to its share of traffic? Three reasons:
• Mobile conversion rates are lower: In the time period of January 2013 to March 2014, the average desktop conversion rate was 4.3 percent, while conversion rate on tablets was 2.8 percent and on mobile phones a meager 1.4 percent.
• Mobile average order value (AOV) is lower: In the same time period, the AOV for orders made on tablets was slightly lower (-0.2 percent) than desktop AOV, but AOV for purchases made on mobile phones was 20 percent lower than desktop AOV.
• Mobile shoppers are less valuable: As a result of the previous two factors (low conversion and low AOV), the value of shoppers who buy exclusively on mobile phones, as measured by customer life time value (CLV), is 22 percent less than that of the average shopper.
What Does This Mean For Marketers?
We asked a few retail marketing leaders in the know about m-commerce to shed light on some of the reasons behind mobile’s seemingly subpar performance, and why it might not actually be as bad as it looks. Here is what they told us. (Disclaimer: The executives are all from companies that are Custora customers.)
• Mobile phone shopping behavior is inherently different: “Mobile conversions just keep getting better over time,” said Feng Chang, director of business strategy and analytics at Karmaloop. “However, we also expect conversion rates to be lower compared to desktop. We get more visits per each unique visitor, so the pie [of visits] is bigger for a mobile user. Plus, the mobile app is so much easier for people to take a browse on--waiting for the bus, between classes. It’s a much quicker fix--people can snack on it.”
Anthony Marino, CMO of thredUP, agreed: “Browsing on mobile versus Web isn’t an apples-to-apples comparison. Different intent and context drives mobile behavior. People come back early and often for a quick browse; then it’s search and destroy. We don’t view our conversion rates as somehow worse just because it’s mobile. It’s just a very different context.”
• Measuring and optimizing the right metrics and KPIs is key: Conversion rate and AOV are important metrics to track, but they do not reveal the full picture.
"We definitely measure metrics like CLV, along with visits, average order sizes, app downloads, engagement metrics, and how those metrics change over time," thredUP’s Marino said.
Karmaloop’s Chang said sales and ROI are his company’s primary metrics. Meanwhile, Vishal Agarwal, EVP and CMO of Nomorerack, had a different point of view: “Conversion is all that we judge. We just look at dollars we spend on a channel--in this case, mobile--versus dollars customers spend on that channel.”
• Cross-device shoppers are a small but highly valuable customer segment: It is true that mobile-only shoppers have lower life time value, but the flip side of that is cross-device shoppers--those who buy on multiple devices (e.g., phone and desktop, phone and tablet). This segment grew from only 4 percent of all customers in 2012 to 12 percent as of Q1 2014, and it’s 19 percent more valuable in terms of CLV than the average shopper.
"A customer will shop on multiple channels if they’re comfortable on the site, [though] the chances of someone coming in from mobile and immediately purchasing is pretty small,” Nomorerack’s Agarwal said. “If someone has bought on desktop, they’re much more likely to convert from mobile in the future. Then when you receive an email on desktop or tablet or mobile, you’re much more likely to buy."
While mobile e-commerce is well on its way to eclipse desktop commerce, it is important to remember that desktop, phone, and tablet shoppers represent unique customer segments who expect a different customer experience. Smart e-commerce marketers will continue to focus on optimizing the mobile experience, tracking the right metrics, and growing the cross-device customer segment.