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The M-Commerce Paradox: If You Succeed, You’ll Fail

Written by Frank Hayes and Evan Schuman
June 10th, 2010

After we ran a story in the last issue about some Mobile-Commerce experiments at Macy’s and Best Buy, one retail exec at a very large chain who has worked extensively with mobile expressed skepticism that some of these projects would ever work at full scale.

“I wonder when people will realize that mobile devices communicate via, ummm, radio?” asked the IT exec. “And that microwave radio signals (which GPS, mobile phones and microwave ovens all use) don’t transit solid surfaces, especially conductive ones like metal mall roofs, all that well? And that carriers make no promises relative to in-building coverage (and virtually no promises relative to out-of-building coverage)? And the U.S. government makes no promises at all relative to GPS signal penetration or even availability?”

His comments were particularly based on retail efforts to use GPS to identify customer locations. Prodded by our reader (nobody—and we mean nobody–can be more cynical and snide than us and get away with it), we ventured into some area malls with an older GPS unit. And, as predicted, the mall’s roof trumped the military satellite.

But the M-Commerce paradox isn’t limited to GPS and malls. What if a major retailer in, let’s say, New York City, decides to do a mobile payment trial? To give it a meaningful chance, the retailer throws every marketing tool at it and offers steep discounts to anyone who uses the new mobile app on a particular day.

If the marketing campaign is successful, thousands of consumers will flood into the store that day to try the app and get the discount. What’s likely to happen then? A huge amount of nothing, courtesy of bandwidth unable to handle that traffic in such a compressed time period.

Actually, it’s not fair to say nothing will happen. More brand damage will be done to that app than its owners could have envisioned in their worst nightmares.

Consumers will try the app and it simply won’t work. They won’t try and diagnose the reason why. They’ll stop trying and they’ll be stunningly hesitant to ever try again, at least with that store and that app. They’ll be angry at the store, angry at the app and furious that they didn’t get their discount. And they’ll tell all their friends on Facebook and Twitter and, perhaps, even those in the physical world.

In other words, if the mobile app campaign succeeds, it’s likely to then fail. It’s truly the Catch-22 of M-Commerce.

Yet another problem for M-Commerce efforts is the technology’s relative immaturity. If a consumer in June 2010 walks into a department store, tries to buy a shirt and the POS crashes, the consumer will be unhappy. He will grumble, but quickly get over it. The consumer is unlikely to stop going to that store, nor will he conclude that POS doesn’t work for payments. Why? Because of a generation of generally positive experiences with POS.

M-Commerce has earned neither such loyalty nor such trust yet. That’s why mobile experiments are so risky today. One blowup, and consumers are quite likely to abandon mobile and dismiss it as unusable.

Think this is all hypothetical? Not anymore.


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2 Comments | Read The M-Commerce Paradox: If You Succeed, You’ll Fail

  1. Tony Rosati Says:

    Very good discussion relating to RF penetration issues inside big box retailers and malls.

    One option that seems interesting is to use ‘geofencing’ capabilities of GPS. This would allow downloading of M-Commerce e-coupons when people who have “opted in” are within a certain distance (like half a mile) of the store while still outside of the building.

  2. Jim Says:

    Where does bluetooth fall in with this? Is that a viable option?

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