New Hurdle For Mobile Commerce: Success?

This column was written by Evan Schuman, the editor of StorefrontBacktalk.com, a site that tracks retail technology, e-commerce and security issues. Retail Realities appears each Friday. Evan can be reached at e-mail and on Twitter.

Consumer media have been filled with reports this month of major problems with iPhone 3G performance, illustrated by dropped calls, extremely slow connections and a generally unpleasant experience, especially in places where-ironically-the iPhone is most popular, such as New York City. (This piece is a great example.)

The culprit: The extreme data demands of customers using the newer iPhone is overwhelming AT&T's network.

If Apple does replace AT&T as its exclusive iPhone carrier-as it's reported to do next year, when it's contract with AT&T ends and it may allow several carriers to support the iPhone-there's another delicious irony likely.

AT&T iPhone customers who have grown furious at AT&T may leave in large numbers when other carriers become available. When that happens, much of the intense demand will be lifted from AT&T's network, causing their network to become much more responsive. In other words, a large exodus of iPhone customers may be the exact prescription for making the iPhone experience of those who remain much more pleasant. Here's more irony: If one other carrier becomes seen as the most desirable package, the additional iPhone customers could easily bring their network to a crawl. How's that for sweet AT&T revenge? The customers who stay will get better performance and those who leave will suffer as they did before.

But what does any of this have to do with M-Commerce? A lot. The cause of the AT&T problem is that consumers are treating these phones as small desktop systems. They are actually trying lots of streaming full-length movies, navigation services, housing all of their E-mail (with huge attachments) along with thousands of audio and video files.

That's exactly how Apple has been pushing the iPhone so they can't really complain that customers took them seriously. Retailers are likely to be in the same boat. If they finally get around all of the technical and logistical hurdles of M-Commerce, they will be trying to get millions of consumers to interact with their sites-via their phones-and see product lists, read reviews, watch multimedia demonstrations, interact with social sites, download PDF instruction manuals and even ask their peers for feedback on their shopping choices before consummating those purchases. That's all great, but-if successful-will it turn the Home Depots, Walmarts and Targets of the world into examples of what may become known as "The AT&T Factor?" The challenge gets even more complex.

The most important segment of the M-Commerce target audience consists of Gen-Y consumers, who are notorious for having little patience. They also put a lot of emphasis on first impressions. Together, that spells trouble. If the first M-Commerce rollouts work well in the labs and limited trials, they will likely be launched chain-wide. But if they're popular, the performance could quickly plummet under the massive bandwidth weight. That will alienate consumers and make it an order of magnitude more difficult to move to the next phase or even maintain momentum.

The nirvana safe approach would be to wait until the infrastructure-in this case, the carrier's networks-are strong enough to handle even an extremely successful launch. But how big is that? The same networks that have to handle all of the traffic from Sears and Macy's also have to handle all of the bandwidth traffic from hundreds of other large retailers. Even worse, smaller retailers-especially specialized chains-might even get into M-Commerce more quickly than their big brothers because they have less overhead and can deploy more quickly, if they want to.

The situation is a little better with M-Commerce than with the AT&T/iPhone mess because there will be more like a half-dozen or more carriers involved, but that could be negated because there will be so many more retailers and consumers interested.

And there is not merely an M-Commerce online problem. All of those in-store mobile efforts-ranging from 2-D barcode, NFC, texting special offers to in-store customers and price comparison to mobile coupons, using phone-as-CRM and true mobile payments-will also make a ton of bandwidth demands.

Technically, those in-store efforts could be partially offset by having in-store customers riding atop the store's network, but that's unlikely for both security and logistical reasons as well as the practical matter of getting a customer to take the time to do it. They'll likely strongly prefer to just use their existing carrier's network. That lack of trust will go both ways.

In other words, there is the not-so-unrealistic possibility of a huge amount of traffic. Forget not that every interactive multimedia communication takes up a heck of a lot more bandwidth than a simple page download. Perhaps AT&T's pleas that there was no way that they could have been expected to anticipate their bandwidth tsunami is not so unreasonable? Perhaps, but now that it's happened, consumers are going to be much less likely to be forgiving a second time. Alas, just what the M-Commerce community needs: yet another reason to indefinitely delay M-Commerce deployment.

By Evan Schuman
Special to CBSNews.com