Retailers Are Learning to Love Smartphones

People are using their smartphones for more than just making calls, sending e-mails, or watching YouTube (GOOG) videos. The fastest-growing cell-phone activity is shopping directly from a handset, reports market researcher Gartner (IT). Retailers from Amazon (AMZN) to CVS (CVS) to Sears (SHLD) have recently launched "m-commerce" sites or software applications that allow shoppers to browse and buy books, medicine, or even lawn mowers from their iPhones and BlackBerrys. "It's in-and-out, surgical-style shopping behavior" influenced by the recessionary need to focus on necessities, says Thomas Emmons, head of the mobile innovation group at Sears.

Some of the iPhone apps enable mobile shoppers to do even more. While strolling among the bookcases at a brick-and-mortar Barnes & Noble (BKS) store, people can use the Apple (AAPL) smartphone to snap a photo of the latest Jim Collins management title, for example. Image-recognition software triggers an algorithm to recognize the product in a database. The software then pulls up user reviews from on the handset's screen almost instantly to help shoppers decide whether to buy or pass. "We've seen a huge uplift in reservations of books for purchase in physical stores, as well as buying, from the iPhone app since we launched it," says Douglas Gottlieb, the retail chain's vice-president for digital devices.

In the travel industry, companies are using m-commerce to target businesspeople who need to purchase plane tickets and book hotel rooms while in transit. In the first four months after Marriott International (MAR) launched an m-commerce application for all smartphones, in August 2008, customers used it to spend $2 million even as overall travel expenditures slumped.

Why is m-commerce suddenly capturing the attention of retailers and consumers? "Shoppers now have the ability to buy on their phones easily as retailers are starting to get the design of iPhone and other applications right," says Gartner analyst Hung LeHong. Shop-by-phone consumers can pick up purchases in stores or have them shipped home or to a hotel without logging on to computers or interacting with salespeople.

M-commerce software specialists say business is surging. Jason Taylor, senior vice-president for mobile products at New York's Usablenet, which created m-commerce sites for Sears, Limited Brands (LTD), American Eagle Outfitters (AEO), and CVS, says it has signed three times more contracts in the past quarter than in previous periods. With more people buying smartphones—Gartner's latest worldwide sales data show a 12.7% increase in units sold in the first quarter of 2009 from a year earlier—the m-commerce market is likely to keep growing.

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