Analysts see wireless e-tail adoption hurdles

Despite major online companies rushing to embrace wireless technology, the intersection of e-business and wireless services is still largely under construction.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
4 min read
Despite major online companies rushing to embrace wireless technology, the intersection of e-business and wireless services is still largely under construction.

Yahoo, Charles Schwab, Ticketmaster Online-Citysearch and other online companies have all recently announced "everywhere" programs, designed to unleash shoppers from their desktop computers. But analysts warn that early entrants will face problems with such general wireless issues as sluggish Net access, security fears and the few wireless-device owners. Online retailers could face specific problems, like finding out that their products do not display well--if at all--on tiny handheld screens.

"People aren't going to start buying like fiends just because they can do it from the subway," Forrester Research analyst Amanda McCarthy said.

There is also the question of whether people will want to use a cellular phone or pager to buy goods online. "I see the handsets being used to gather information, sending email, getting directions, rather than a primary buying tool," McCarthy said.

Some online retailers will be better positioned to take advantage of wireless access because they sell goods that only require a short amount of text to advertise their product, such as books, tickets or food. But buying most goods without a visual image is unlikely.

"The items that require decision making, like furniture, or refrigerators, aren't likely to be bought with wireless devices," Gomez Advisors analyst Liz Leonard said.

Other winners would be companies that offer services that people want to act on quickly or at unusual hours, when people are not necessarily at their desk. For example, someone bidding on an auction will not want to be tied to a computer when the auction closes in the middle of the night.

Yahoo currently offers wireless bidding, and eBay recently announced that customers in Germany and Britain will be able to place bids over cell phones by July.

Financial services have the same urgency. Last week, Charles Schwab became the latest financial services company to offer wireless trading. Over the past year, Morgan Stanley Dean Witter's Discover Brokerage, Fidelity, DLJ Direct and Ameritrade began offering wireless services. E*Trade, Suretrade and others followed soon with similar services.

But just as cell phones cut out, there are concerns about traders being halfway through a transaction and the signal cutting out.

Small brick-and-mortar companies could cash in on wireless too, by teaming up with larger city guide providers that would list shops and restaurants in a particular area.

"Suddenly we're not tethered, we don't have to go to special rooms to access the Internet," said Seth Goldstein, a partner in venture capital firm Flatiron Partners. "Wireless is like a safety net. You never have to write a note to remind yourself about buying something because you will be able to execute the purchase immediately."

All the indicators see story: Technology tussle underlies wireless Webshow that the wireless boom means that e-businesses must have wireless plans.

In 1998 there were 220 million digital wireless phone subscribers worldwide and 150 million Internet users, according to the Yankee Group, a research firm. Currently, there are about 5 million to 8 million users who own Web-enabled digital phones, according to the Boston-based firm. It predicts that number to double by the end of the year.

In about four years, there will be more than half a billion Internet accounts and roughly 1 billion digital wireless phone subscriptions. Internet-enabled "smart phones" are expected to have 48 million users worldwide by 2002 and 204 million by 2005, the research firm reported.

One group making money from wireless commerce right off the bat is the phone companies that charge e-commerce firms for preferred placement on the cell phones or pagers.

Sprint PCS and other companies have become powerful gatekeepers by determining what companies show up in the few lines of text that appear on the first screen.

"Mobile users are in rush and that space at the top is very valuable," said Adam Zawel, a Yankee Group analyst. "For example, if a phone that displays three lines makes a user wait an extra few seconds to click to the next menu, it could mean no sale for the merchants on that menu.

Despite the current limits on wireless commerce, there is little doubt that both technology will improve and that consumers will increasingly be attracted to the convenience of it.

"Buying over a wireless device is not pretty now," Goldstein acknowledges. "Trying to buy a Bob Marley box set is not easy right now. But this technology is going to grow simpler to use. Once consumers have the convenience, then there is no going back."