Those Born to Shop Can Now Use Cellphones - New York Times

Those Born to Shop Can Now Use Cellphones - New York TimesJanuary 2, 2006
E-Commerce Report
Those Born to Shop Can Now Use Cellphones
By BOB TEDESCHI

Calling all retailers: 2006 may finally be the year that consumers start buying goods with their cellphones.

With people already spending billions on ring tones, wallpaper and games for their phones, analysts and retail executives say they believe it will not be much of a leap to get them to use their phones to buy shoes, books and laptops.

"This will start to show up on the radar screen in 2006," said Roger Entner, an analyst with Ovum, a technology consulting firm in London. "The more different pieces we add to these Swiss Army phones, the easier it is to get user acceptance for the next application. And especially around next Christmas, the convenience of shopping on a computer or a cellphone will beat the mall hands down."

Back in 1999, electronic retailers like Amazon.com created miniature Web sites that could be browsed on cellphone handsets, but these companies overlooked something critical: few consumers owned phones that could render images similar to those displayed on a personal computer. Now, Mr. Entner said, 190 million people in the United States have a cellphone, and at least 150 million of those have a color screen.

Back then, consumers cared little about using their cellphones for anything other than chatting. Now they are quickly accepting phones as multipurpose devices. This year, consumers will spend more than $3 billion on ring tones, video clips, games and other services - to say nothing of the money they are paying phone companies for the extra air time required to use those services.

EBay, which like Amazon.com offered users years ago a way to shop its site on cellphones, plans to introduce to Verizon users this month a new version of mobile phone technology that will allow subscribers, for $4 a month, to browse the site, bid on items and receive alerts whenever they have been outbid. The service, which is already available to users of Cingular and Sprint, is a premium version of a stripped-down program that is available free on any phone with a Web browser. EBay introduced the free version in June.

"These kinds of services are still pretty new in the U.S.," said Chris Donlay, an eBay spokesman, "so I think it'll take a while to get some critical mass, but people are using our service, and they seem to like it."

The initiative costs eBay little. The company commissioned Bonfire Media, a technology company based in Los Altos, Calif., to build the free site, and Bonfire built the premium application on its own. EBay, Bonfire and the cellphone companies share the revenue for the premium version, which has attracted tens of thousands of users, according to Bonfire. The company said hundreds of thousands of people had used the free version.

One of eBay's challengers, Overstock.com, which sells travel services and products for fixed prices and at auction, also recently forayed deeper into the wireless realm. In November it started Mobile O, where cellphone users can use their phones to browse and buy anything on Overstock's Web site.

The service was initially intended for customers of Verizon Wireless, who pay $5 to activate it. Jeanne De Sanctis, chief executive of mRocket, which developed the Mobile O application for Overstock and markets similar services to other companies, said Mobile O would be available on Sprint this week .

Patrick M. Byrne, Overstock's chief executive, has personally helped develop the company's mobile efforts, investing more than $200,000 of his own money in mRocket, and lending Overstock engineers to the project. Should mRocket's service gain widespread commercial success, Mr. Byrne's stake in the company would transfer to Overstock. "We do see the number of orders on Mobile O gradually picking up, but it's still a tiny percentage of our business," Mr. Byrne said. "My hunch is that this is going to start really happening more in '07."

Overstock has begun mentioning the service in its advertising campaigns and featuring it more prominently on its Web site. "I view this as a lottery ticket we're paying maybe $300,000 a year to buy," including staff costs, Mr. Byrne said. "Maybe that's all lost money, but if American consumers ever adopt this, we're first in the game."

Security has been a concern for both retailers and cellphone companies; neither wants to be held responsible by consumers if their credit card information is pilfered as it is entered into their handsets.

EBay avoids that problem by not giving users the option of paying by phone. They can win auctions or even secure most "Buy It Now" purchases using their cellphones, but they must pay for the purchases through their PC's. Overstock allows users to tap in credit card or login information securely, using data encryption methods.

Mr. Byrne said he expected many early Mobile O subscribers to use it to compare prices while they were shopping. Alex Poon, chief executive of Bonfire Media, said he had witnessed such behavior from many users of eBay's mobile service.

Consumer Reports magazine added to the cellphone shopping trend with last month's introduction of ShopSmart. For $4 a month, Verizon Wireless and Sprint customers can use their phones to check prices and read product reviews, among other things, on thousands of items.

Of course, the biggest beneficiaries of these services could be cellphone companies. Chris Matherly, associate director of entertainment products and services for Verizon Wireless, said the company had "seen this migration coming for quite some time."

"Data products and services are growing, and as that happens these early adopters from three years ago want to do more than just download videos and games," Mr. Matherly said.

But even though big names like Consumer Reports, eBay and Overstock have recently given the mobile commerce trend some momentum, Mr. Matherly said Verizon was not ready to put its full marketing muscle behind the idea.

"We're not to the point where you'll see a national campaign for Overstock.com that's Verizon-sponsored," Mr. Matherly said. "We're not quite there yet."