In the lobby of NetPrice Co. in Tokyo, eager salespeople from cosmetic companies to electronics manufacturers emerge daily to peddle their wares in the hope of sealing big sales contracts.
Their briefcases filled with sample products and big smiles on their faces, these salespeople are not visiting their wholesale agent or lubricating their big retail channels. They are pouncing on mobile Internet sales company whose mainstay is selling goods to customers via mobile phones.
As e-commerce in the mobile sphere expands — the market for selling goods in Japan alone was estimated at $1.8 billion (200 billion yen) in 2004, up 45 percent from 2003, according to Mobile Content Forum, an industry body — companies that sell goods over the mobile phone are proving their unique marketing power, and as market specialists say, establishing a new frontier in the art of marketing. Mobile goods sales now account for roughly 10 percent of the entire Internet sales business.
Mobile retailers include companies like NetPrice, Bandai Networks, Index Corp, and Zappallas, who are specialty mobile e-commerce firms, mobile content firms, or other forms of Internet companies eager to tap into the rich vein of the mobile sales business.
NetPrice, for example, has seen sales grow rapidly from about $14 million (1.6 billion yen) in 2002 to $95 million (10.6 billion yen) in 2005 with profits climbing from $2 million (228 million yen) in 2002 to $4.5 million (497 million yen) in 2005 mainly on revenue expansion from mobile commerce. Major Internet players like Yahoo Japan, Index Corp, and Rakuten, the leading online shopping malls are setting up sales sites dedicated to mobile users and catching up fast. Rakuten garnered good mobile sales –around $30.6 million (3.4 billion yen) in last December alone — up 150 percent from the same month the previous year.
As the mobile goods business proliferates, analysts say marketers are discovering advantages unique to the mobile medium. For one thing, mobile buyers respond better to sales pitches on their phones than on PCs not least because mobile is a more personal medium and is less polluted with spam and viruses.
“People on mobile have twice as much response rate as people on the PC,” said the manager of the mobile commerce team at Bandai Networks Co., a mobile content company that began selling goods ranging from clothes to toys in 2003. “On the PC, people just accumulate incoming mail in the mailbox and don’t touch them.”
Many young Japanese keep their phone with them all day long and stare at the sizable, high-resolution screen every 10 to 15 minutes. “Mobile as a medium is influential to consumers because of the long exposure,” said Taku Nishikawa, analyst at Nomura Securities.
Analysts and marketers say that buying is a psychological behavior and mobile marketing has a better chance of capturing moments when consumers are inclined to buy on impulse. The mobile often encourages consumers’ spur buying, and that allows them to market 24 hours a day.
Mobile marketing is developing a new frontier in the field of marketing by converging the real and the virtual. Mobile marketers, for example, make use of QR code — a replacement for bar code that deciphers the content much quicker — which is printed along with advertisements in magazines, posters and on tray mats in fast food restaurants. Most cameras on cell phones today act as QR-code readers and allow the user to jump to the mobile home page the code designates.
Imagine a young consumer lying in his bed reading a magazine. He spots an attractive designer T-shirt for a decent price and vaguely forms the idea of buying it. Conveniently, his cell phone is lying right beside him, as is most often the case with young Japanese. With a quick snap of the shutter on his camera phone, which captures the QR code, he is on to the “buy” screen where just a few more clicks will complete his purchase, all without causing him to move or even change his posture on the bed.
Meanwhile, consider a scenario in which he had to get up, leave his bed, go to his PC and wait until the machine boots up, and today’s finicky and impatient Japanese consumer would have passed on the opportunity to buy the merchandise, until the next time he’s presented with a product to buy impulsively.
Nao Ito, executive officer at NetPrice said that 40 percent of purchases made over mobile phones come via a QR code entry. Using media like magazines and tray mats has been an effective way of marketing goods because they capture consumers during their spare time, he said.
Ito said printing QR codes and the simplified version of URLs made up of several letters has been an effective way of cross-promoting products. His company recently teamed up with Tokyu Railways, which operates major commuter lines in Tokyo, so that NetPrice could print the simplified URL — made up of 4 or 5 letters or numbers — on ads hanging from the ceilings of the train. Mobilers notice the ads and access Web sites by typing in the letters. “Time on the train is a dead space. The question is, how do you turn this dead time into time for shopping?,” Ito asked.
The strength of mobile sales lies in combining the day-to-day, on-the-go situation with the online experience. This happens when people impressed with goods displayed on the screen want to recommend them to friends standing nearby, something people cannot do as easily with their PC. Mobile marketers say that clients, especially women, sometimes buy something via mobile immediately after they see their friends show up with impressive accessories or clothes.
Xavel, Inc., a rapidly growing mobile goods sales firm, has been increasing sales partly by organizing fashion shows and allowing the audience to purchase the items on display that they want immediately.
Just as mobile buyers react sensitively to mobile retailers’ pitches, so do the sellers attune themselves to consumers’ demands. Yasushi Takenaga, manager of business development at NetPrice, said he has traveled all over Japan scouring for products that his mobile clients might want. That includes a trip to Okinawa to procure Awamori, a type of shochu unique to Okinawa, and a cheesecake served only in a small Russian restaurant in the northern prefecture of Iwate. The cheesecake became so popular among traveling customers that one impressed client asked NetPrice to sell it on its mobile site. Such client requests are frequent, NetPrice officials said. “We consider ourselves buy agents for customers,” said Ito.
Marketing experts say that mobile retailing is demonstrating the typical strength of relational marketing. It allows the vendor to develop relationships with clients in a variety of ways, including one-on-one, personalized marketing.
Time sensitivity is also the name of the game in mobile retailing. Two hours after a strong earthquake hit Miyagi prefecture last August, NetPrice had posted “earthquake goods” on its mobile site, such emergency food and flashlights. “The time the clients are thinking about it is the time to sell,” Ito said.