THE RISE OF MOBILE COMMERCE

Photo by Rodion Kutsaev on Unsplash

THESIS

For today’s consumers, smartphones are rarely out of arm’s reach. They are our alarms when we wake up, the notifications we check before we brush our teeth, the trackers of our daily habits, our connection to our social circles, and the universe of the internet in the palm of our hands.

Mobile Commerce is a natural progression of e-commerce. COVID-19 has led the world to take a massive leap forward in e-commerce. Consumers indicate that many of the changes will stick.

In developing nations, users are jumping straight to mobile commerce adoption rather than first adopting laptops or tablets. Their affordability and availability make mobile devices attractive to a larger customer base and therefore mobile marketplaces are where the consumers are.

As a result, mobile commerce trends are rapidly evolving and are ripe for investment.

WHAT IS M-COMMERCE?

M-commerce, or mobile commerce, is the use of wireless handheld devices, such as cellphones and laptops, to conduct commercial transactions online. It is an advancement of e-commerce, enabling people to buy and sell goods or services from almost anywhere, simply using a mobile phone or tablet device.

THE MARKET FAILURE

In the U.S., the mobile e-commerce market has been neglected in comparison to the market in other nations globally.

Current norms lead to market inefficiencies:

• 97% shopping cart abandonment on mobile sites & 68% shopping cart abandonment on desktop sites
• Only 20% shopping cart abandonment in mobile apps
• Customers tend to spend 3 to 54 times longer on mobile apps than on desktops
• The average order value on mobile apps is 140% higher than on mobile sites and 130% higher than on desktops
• Customers spend twice as much on mobile apps than on desktops or mobile sites

Despite lower investment in the U.S., the m-commerce sector is expected to continue to grow and transform the already accelerating e-commerce space.

Mobile commerce is a steadily, and rapidly growing market- aided by continued smartphone adoption globally.

While North America is currently ahead in smartphone adoption, the rate of growth is even stronger in other global markets.

As smartphone devices continue to permeate the market, mobile e-commerce sales are simultaneously growing in market share. Mobile e-commerce sales growth is expected to continue to accelerate.

Trends point toward increased mobile commerce market share — leading to new e-commerce opportunities and points of sale.

• Mobile commerce is on pace to control 73% of the global e-commerce market share by 2021, up from 59% in 2020
• Over the last six months, 79% of mobile users made an online purchase using their mobile devices
• One-Click ordering is on the rise — it virtually eliminates the checkout process as consumers no longer need to enter in as much of their payment and shipping information
• Brands using Instagram shopping have benefitted from a 1,416% traffic boost and a 20% increase in revenue
• Voice shopping is expected to reach $40 billion by 2022, up from $2 billion in 2018 — a 1,900% increase in 4 years.
• Social commerce is growing — Facebook and Instagram are increasingly shippable
• Businesses can tag products in posts as they would a person thereby streamlining the process of conversion from inspiration to purchase
• Users are already using social media daily

M-commerce channels lead without question in purchase conversion compared to mobile websites.

• 85% of consumers prefer mobile apps to mobile websites
• The conversion rate to purchase on a mobile app compared to a mobile web browser is 157% higher — underscoring the importance of a strong mobile commerce experience

WHY INVEST NOW?

The challenge is the opportunity. In the inevitable shift to m-commerce, many merchants, especially small and medium businesses with less capital, will struggle to keep up with rapidly evolving market demands and face the potential to be left behind. Startups that focus on aiding in the transition are well-positioned to grow rapidly as the m-commerce need accelerates.

Trends show that m-commerce is approaching parity with e-commerce market share and will continue to grow.

m-commerce volume is steadily and rapidly increasing alongside the rapid increase in smartphone sales in the U.S. Smartphone sales are continuing to significantly outperform tablet sales.

Mobile commerce is positioned to better leverage other future-oriented market and technology areas.

Payments are continuing to grow as an opportunity area in m-commerce as well. Premium SMS in particular is being popularized globally. Other mobile-relevant sales are expected to grow significantly between now and 2027.

Mobile Commerce is positioned to better leverage other growing markets such as voice technology. Particularly sticky consumer challenges such as researching products are of particular focus, highlighting a potential future opportunity.

For today’s consumers, smartphones are rarely out of arm’s reach. They are our alarms when we wake up, the notifications we check before we brush our teeth, the trackers of our daily habits, our connection to our social circles, and the universe of the internet in the palm of our hands.

Mobile Commerce is a natural progression of e-commerce. COVID-19 has lead the world to take a massive leap forward in e-commerce. Consumers indicate that many of the changes will stick.

In developing nations, users are jumping straight to mobile commerce adoption rather than first adopting laptops or tablets. Their affordability and availability make mobile devices attractive to a larger customer base and therefore mobile marketplaces are where the consumers are.

As a result, mobile commerce trends are rapidly evolving and are ripe for investment.

We will need to believe the following assertions to adopt this thesis:

• Smartphone access has increased globally
• Costs of creating and scaling m-commerce applications has decreased
• Data allows m-commerce companies to better align their products and services with consumers thereby driving profitability
• M-commerce is better at meeting the needs of a larger group of consumers, skipping the laptop phase in several countries
• Mobile devices are continuing to grow in usage and management of daily activities
• Consumer trust in mobile technologies holding and managing more aspects of their data continues to grow thereby allowing for better tailoring to their needs and ease of purchase (biometrics, payments, etc.)

Therefore, now is the time to invest in early-stage start-ups that are focused on helping companies navigate the increasingly mobile eCommerce ecosystem.

WHERE TO PLAY

Five verticals are key for investment in m-commerce startups:

1. Advertising & Customer Service: Part of the appeal of m-commerce is its accessibility. As m-commerce companies scale rapidly, they will need to have quality customer service in order to maintain customer trust and loyalty. Startups supporting this, especially through AI and chatbots will be well-positioned
2. Supply Chain & Last-Mile Delivery: As in e-commerce, consumers are anchoring to Amazon’s example of two-day or same-day delivery. In order for m-commerce to keep traction, last-mile delivery will become increasingly important in managing consumer expectations.
3. Marketplaces: The future is about streamlining and simplification. As demonstrated by Shopify, marketplaces are uniquely situated due to their ability to expand along the e-commerce/ m-commerce value chain. As the central holder of consumers, there is an opportunity here to bring in new business
4. Payments: Streamlining payments is one of the large appeals of m-commerce. Startups that can make consumers feel comfortable that they are secure and that fight against fraud will be well sought after.
5. Commerce as a Service: There is an open space in helping companies in the transition to m-commerce. Startups that focus on aiding in the m-commerce transition or advising on best practices are well suited to have a strong portfolio of sales opportunities.

GEOGRAPHIC IMPLICATIONS

North America and EMEA are primed to follow APAC’s rapid mobile commerce growth rate. The two regions should look to APAC’s example to understand the power and potential of m-commerce. Africa and South America reflect similar propensities toward mobile-centric commerce and, though rates are slower at present, they are expected to accelerate over time. They are ideal for phase II investment.

EVALUATION CRITERIA

Startups for consideration will be evaluated using the following criteria:

1. Investment thesis and financials

• Does this start-up fit with our investment areas?
• Does their hypothesis align with our analyses of market trends?
• How will our investment capital be used?
• Are the company’s financial projections realistic and interesting?

2. Market opportunity

• Is there a compelling customer problem?
• What is the total addressable market?
• Is the market growing?
• Is there evidence of market traction?
• Is their go-to-market strategy compelling?

3. Product

• Do they have the capabilities to build the product/service?
• How differentiated is this product/service?
• Can this product compete in the market?
• What are the major product milestones?
• What are the potential risks to the business?

4. Founder(s) and Team

• What positive early traction has the company achieved?
• What motivates the founders?
• What makes the team uniquely qualified to solve the problem?
• Do the Founders understand the financials and key metrics of their business?
• Does the team embody the values of our firm?

Successful teams will also meet the following criteria:

• They are data-hungry and analytics-focused
• Their work signals positive momentum leveraging data science insights
• They demonstrate an understanding the unique needs of different regions and cultures and have an eye for tailoring their product accordingly
• They have a demonstrated track record in working in and understanding e-commerce & m-commerce
• They value accessibility across income levels