The mobile telecommunications market reached critical mass in certain areas and is growing rapidly in others. To study the phenomenal growth, we examine the mobile market penetration rate in three areas: Japan, Europe, and the United States. In Japan, the number of mobile phone Internet users has reached 35 million. This implies that one in four people can connect to the Internet by mobile phones. In Europe, most of the countries experienced a two-digit growth rate from 1999–2001. In the United States, there is no dominant technology for mobile devices. The possession rate of mobile phones is around 30%. And, less than 3% of users access the Internet via handheld devices.
E-commerce is characterized by online bargain buying, whereas m-commerce is personalized and ideal for access to location-based services. Many new business models were established around the use of mobile devices. Mobile devices have the characteristics of portability, low cost, more personalization, Global Positioning System (GPS), voice, and so on. The new business models include micropayment and mobile payment, content distribution services, and business services. Illustrated in Figure 6 are m-commerce applications. Because of their existing customer base, technical expertise, and familiarity with billing, mobile telephone operators are the natural candidates for the provision of mobile and micropayment services. Micropayment involves small purchases, such as vending and other items. A mobile device can communicate with a vending machine using a local wireless network to purchase desired items. In other words, the mobile phone is used as an ATM card or debit card. It is on trial in Japan by NTT DoCoMo with Coca-Cola and Itochu. The mobile operator NTT DoCoMo has 30 million users. Mobile users will be able to make purchases from Coke vending machines on their mobile phones. Later this year in Europe, Vodafone, the largest operator in Europe with 100 million users, will also roll out its payment platform—allowing customers to make purchases with their mobile devices seamlessly across most of Europe. Trial customers will be able to purchase goods over the Internet and in retail shops using their mobile devices. Eventually, Vodafone will extend the service to automatic purchase points, such as vending machines. This can be done for small purchases, however, for large transactions, banks must be involved. In France, Mastercard, together with Oberthur Smart Cards, France Telecom, Europay, and Motorola, is to run a pilot scheme to conduct wireless payments by inserting smart cards, which will be issued by Credit Mutuel, into dual-slot handsets.
Figure 6: M-Commerce Applications
Content distribution services are concerned with real-time information, notification, and a positioning system for personalized information delivery related to location. Real-time information, such as news, traffic reports, stock prices, and weather forecasts, can be distributed to mobile phones via the Internet. The information is personalized to the user's interests. As everyone is interested in his or her own wealth, stock quotes have the highest usage, with e-mail being second in usage (Chae et al., 2000). Notification can also be sent to the mobile device. For instance, a dot.com's chief executive is provided with the current reading of how many hits his or her site had. By using a positioning system, you can retrieve local information, such as restaurants, traffic, and shopping information. Mobile devices offer advertisers a high rate of response, as advertisements are personal. SMS is a good advertising tool. After piloting two SMS marketing campaigns in different countries, Pepsi found that SMS marketing is an effective advertising medium, especially for target customers (Mobileinfo, 2002). Entertainment and games are also important markets for m-commerce. The content distribution services with a greater degree of personalization and localization can be effectively provided through a mobile portal. Localization means to supply information relevant to the current location of the user. Users' profiles, such as past behaviours, situations, and locations, should be taken into account for personalization and localized service provision. MNOs have a number of advantages over the other portal players (Tsalgatidou & Veijalainen, 2000). First, they have an existing customer relationship and can identify the location of the subscriber. Second, they have a billing relationship with the customers, while the traditional portal does not. MNOs can act as a trusted third party and play a dominant role in m-commerce applications.
Businesses also need to think across traditional boundaries in m-commerce. Interaction among businesses, consumers, and smart appliances creates a lot of new opportunities. First, appliance-to-appliance, that is, appliances interact with an automatic service scheduler. Second, appliance-to-business, which can deliver smart appliance repair alerts. Third, business-to-appliance can deliver remote activation of smart appliances. For instance, the built-in sensors in a car will inform the repair service as to what part is broken. Many automotive makers are planning to implement Telematics providing two-way communication between car and a service center via the mobile phone networks and the Internet. In the near future, in the case of car breakdown, the command center staff will communicate with the car's engine management system and repair the vehicle remotely. The key is to develop services that are sufficiently critical that people will be willing to pay for them. It is important to cooperate with other partners in rolling out m-commerce solutions.
M-commerce also has a great impact on business applications, especially for companies with remote staff. Extending the existing Enterprise Resource Planning (ERP) systems with mobile functionality will provide remote staff, such as sales personnel, with real-time corporate and management data. Time and location constraints are reduced, and the ability of mobile employees is enhanced. For instance, businesses such as utility services can send service calls to engineers in the field. On the other hand, the engineers can send back service reports and access back-office systems to order parts, download electronic manuals for fixing appliances, and so on. Sales representatives can place an order and check stock levels with PDAs, too. As a result, real-time data is available for planning daily operations. The logistic-related business also benefits from the use of mobile inventory management applications. One interesting application is "rolling inventory" (Varshney & Vetter, 2002). For this scenario, multiple trucks carry a large amount of inventory while on the move. Whenever a store needs certain items/goods, a nearby truck can be located, and just-in-time delivery of goods can be performed. M-commerce offers tremendous potential for businesses to respond quickly in supply chains.
Shopping is a part of everyday life. E-commerce, which is characterized by bargain buying, can reach out to a global market, i.e., a macromarket level, with a critical mass, instantly. On the other hand, m-commerce is characterized by location and personal preference and is affected by the culture and environment of the target users. M-commerce can focus on a micromarket level. The application of mobile and micropayment will be successful in those areas where electronic payment is prevalent, and people are used to electronic money rather than real money. In Hong Kong, smart card payment is being used in different kinds of transportation systems, such as bus, underground, and ferry. The smart card can be topped up in any 24-hour convenience shop. This payment culture is compatible with micropayment technology. Because the penetration rate of mobile phones is around 90%, users will welcome micropayment technology. In the United Kingdom, because transport is still partly paid for using real money, the implementation of it will need a change in the behavior of people. Concerted coordination is required among the participating parties.
In m-commerce, most of the content is charged for. Because it is a paid-for service, cost will play a critical factor in its success. For instance, mobile phone users are charged only US$0.8 a month to have news delivered in Japan. This attracted millions of users. Besides bargain shopping, the Internet is amassing information about health care, government services, and potential purchases. Existing Web portals will naturally become the content distributors. The Web portals now have the problem of declining revenue from advertising, their main income. Distributing personal content to mobile users provides them with an opportunity to diversify their sources of revenue. The success of content distribution will not only depend on the cost but also on the kinds of information that appeal to individual users.
Security is the main concern of business to adapt m-commerce for their intranet and extranet applications. If m-commerce has the same security level as wired e-commerce, business will use it to speed up the business process. In addition, the high cost of handheld devices and the lack of standards in software and hardware deter its adoption by business. The integration of m-commerce with e-commerce will certainly increase a firm's competitive advantage by providing quick response to customers—both external and internal. Business has to carefully examine the potential offered by m-commerce.