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June 23, 2000
Web posted at: 11:14 a.m. EDT (1514 GMT)

by Ephraim Schwartz

(IDG) -- The second half of 2000 will witness an unprecedented explosion in mobile e-commerce, or so-called m-commerce, fueled mainly by three industry segments: financial services, travel, and retail.

Although many companies are still grappling with the problems of wired e-commerce, the demands of these three markets are causing companies including electronics retailer BestBuy, shopping mall owner General Growth Properties (GGP), and reservation system Galileo to go further and target the mobile market. According to analysts, this is a necessary step because these companies' target is a workforce of consumers displaying diminishing brand loyalty in order to access their business and personal data wherever they are.

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"These are the industries that are time-and location-sensitive," said Kelly Quinn, senior analyst at Aberdeen Group, in Boston.

For traditional companies, maintaining existing customers rather than attracting new ones appears to be the greatest impetus for deploying a mobile solution. Mark Ebel, director of digital communication services at Minneapolis-based BestBuy, the No. 1 brick-and-mortar retailer in consumer electronics in the United States with annual sales of $12.5 billion, noted that an erosion of electronics purchases from brick-and-mortar stores is under way.

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"More than 500 consumer electronic stores closed in the past year alone," Ebel said.

In response to this, BestBuy in the next 30 days will launch BestBuy.byair.com, a wireless shopping site. BestBuy's intention is to use its wireless site as another method to stay connected to its increasingly mobile customer base.

"In this age of geographic[ally] diverse individuals who travel and want to provide gifts for family and friends, we believe Bestbuy.byair gives them a local feel," Ebel said, adding that "The dot-com [component] is a wonderful marketing tool."

Currently in development for BestBuy are personalized marketing initiatives to alert customers to products and services, and the company also is investigating location-based marketing via global positioning technology soon to be in all cell phones.

Technology and marketing partners include Microsoft, which bought slightly less than 2 percent of BestBuy's equity for $200 million. ASP (application service provider) GWCom will manage the wireless part of BestBuy's e-commerce activities, and Everypath will supply the HTML to WML (Wireless Markup Language) for WAP (Wireless Application Protocol) technology.

And these companies are not the only ones looking to increase the face time with their current customer base. GGP will launch its Mallibu.com site later this month.

Chicago-based GGP has 136 properties in 36 states with 35 million visitors per year (almost 20 percent of the U.S. population), and a market cap of $8 billion. Nevertheless, company officials believe that m-commerce is essential to the company's long-term supremacy, according to Charlie Graves, senior vice president for e-business at GGP.

During the next year, GGP will roll out an increasingly robust site that will include a Web site for every store in its malls. It will incorporate a logistics component that includes an e-commerce drive-through for pickup of online orders.

The wireless component is a key part of the initiative, Graves said.

"Because of the way malls are built with concrete and steel, you cannot get a wireless signal in our properties. With microcells, I can program the messaging in my world, specific to my mall. I can localize it tightly to flash an instant coupon, for example," Graves said.

Graves also sees the benefits of mobile commerce.

"We have shoppers coming to a mall 50 times a year, and I don't even know their names. Now we can market to them exactly what they want when they want it," Graves said.

By 2004 there will be 1 billion cell phones worldwide, according to IDC, and half of them will be Internet-enabled.

In the travel world, Rosemont, Ill.-based Galileo, one of the four major reservation system companies, will be rolling out its mobile service to corporate travel departments and travel agents later this year. Users will be able to make and change flights reservation using their cell phones and book rental cars and hotel rooms.

One industry analyst believes corporate agents will jump on the service as a way to keep track of changes made by its employees.

"Travelers tend to be cowboys who change their trips while they are traveling. The Galileo system updates the corporate agency of any changes the traveler makes and can be used to steer employees to preferred carriers," said Kate Rice, director of information services at Phocus Wright, in Sherman, Conn.

In addition, tracking employee or department travel expenditures is helpful during budget negotiations, Rice said.

But as these established brick-and-mortars stake their m-commerce claim, they will face competition from pure-play Internet companies trying to displace them with their own mobile-commerce initiatives. One of those companies, VirtualBank, is expected to target high-tech companies that have private-label financial services with the first business-to-employee deals signed with Compaq, storage giant EMC, and diversified company Textron.

Meanwhile, some of the largest European banks are working with Compaq spin-off Tantau to deploy its mobile services platform in a partnership with Hewlett-Packard. SE Banken of Sweden expects to have 5 million customers online within three years, and Merita Bank, in Helsinki, Finland, is wrapping up a pilot with Tantau and expects 250,000 wireless banking customers by the end of the year.

"M-commerce will have a profound effect on the financial services industry," said Rory Brown, CEO of VirtualBank, a pure-play start-up with $40 million of backing from General Electric, Nokia, and DaimlerChrysler, plus a private placement of funds from MCIWorldCom senior executives including CEO Bernie Ebbers.

Brown points out that Bank of America supports 10,000 physical locations and Charles Schwab, with an increasingly productive e-commerce site, has only 400.

"If you look at the cost of a bank, a brick-and-mortar facility is holding on to a commodity which they earn no money on. Half of it is handed out to people, and the cash on hand is earning no money," Brown said.

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