• by Mark Walsh  @markfwal, August 12, 2011

With smartphone adoption and mobile shopping gaining ground, retailers are trying to capitalize by launching mobile commerce initiatives. Forrester projects m-commerce in the U.S. will grow at a 39% clip over the next five years to reach $31 billion by 2016. 

Among the leaders in the space, eBay said it expects its mobile transaction volume to double to $4 billion this year.

But in their scramble to set up shop in mobile, Forrester finds many retailers are not necessarily considering the full range of options when it comes to expanding to the third screen. In a new report, the researcher lays out the pros and cons of different approaches retailers are taking to mobile and sorts out some of the m-commerce software suppliers.

The most common strategy to date, adopted by one-third of retailers, has been to use a third-party platform to power m-commerce operations. In the last two years, these platforms have advanced considerably, offering tailored options for developing mobile sites and apps, support for an array of devices, experienced consulting teams and flexible pricing models, according to Forrester.

Going this route can help a retailer launch a mobile commerce offering quickly, but there are drawbacks. In particular, entering a long-term contract on a proprietary technology platform might limit a company's ability to keep up with innovation in the rapidly changing mobile landscape.

Another path is for retailers to simply extend their existing e-commerce systems to the mobile realm. The promise of this approach, taken by one-quarter of businesses, is that it seamlessly integrates mobile with current back-end technology and business processes. The problem is that many e-commerce vendors lack solutions that support multiple consumer "touchpoints" or mobile commerce features.

Other retailers (22%) have chosen to bootstrap, building their own m-commerce platform internally. This is typically an option open only to large retailers with the in-house resources and IT staff to develop their own mobile commerce system. The downside is that creating and retaining an internal mobile organization can be expensive and requires a long-term vision.

A small proportion of retailers (5%) have turned to their interactive agencies for help. "Where unique brand-engaging commerce capabilities are needed -- like the pizza builder in Domino's iPhone app -- agencies can excel in developing a differentiated experience," noted the Forrester report authored by analyst Peter Sheldon.

Some companies have used a hybrid strategy, using agencies to handle the design and branding of their mobile retail site and using an m-commerce solutions provider on the back-end. But the report warns that upfront development and ongoing maintenance costs can be high with an agency, especially when a project extends across multiple devices and mobile platforms.

Looking more closely at vendors, Forrester provides an overview of the services offered by 14 m-commerce software companies, including Digby, Moovweb, Netbiscuits and Unbound Commerce. Among the key considerations in selecting a vendor: whether to use a hosted solution or license on-premise software, letting the provider manage services entirely and whether apps or the mobile Web are more important to m-commerce strategy.

The companies surveyed by Forrester provide a wide range of services, including app development, catalog and search capability, payment and checkout, creative services and integration tools. Of the 10 that supplied pricing information, average set-up costs ranged from $25,000 to $50,000 at the low end to $100,000 to $200,000 at the high end. Average annual costs were typically $100,000 to $200,000.