We believe that growth in mobile e-commerce represents a major opportunity for pure online retailers like Amazon and eBay. Around 2% of online sales are generated through mobile phones, according to a recent study by Forrester Research. And mobile e-commerce is expected to generate 8.5% of all e-commerce revenues by 2015, according to Coda Research.
The main factors driving this growth will be sophisticated smartphone features such as mobile shopping apps and barcode scanners, along with increased usage of smartphones compared to PCs. We estimate that mobile e-commerce could create a 10% upside for Amazon’s stock during our forecast period. Our analysis follows below.
Here are the main factors driving growth in mobile e-commerce:
1. Smartphone usage increasing at a faster rate compared to PCs
We expect global smarphone sales to increase by about 376% in coming years, from 170 million units in 2009 to around 640 million units by the end of the Trefis forecast period. By contrast, we expect worldwide PC sales (including notebooks, desktops and netbooks) to grow by 145%, from 310 million in 2009 to around 450 million by 2016. This discrepancy suggests that more users will be using their smartphones for e-commerce transactions.
2. Sophisticated features of smartphones will enable more e-commerce transactions
Amazon and other major retailers are currently developing e-commerce applications for smartphones made by almost all mobile manufacturers. Shopping apps make it easier for users to conduct transactions on their smartphones. Another emerging function: Smartphone cameras will work as barcode scanners for goods. Once the smartphone scans the object to check the price, it can search the internet to find comparable prices at other retailers.
We estimate that 10% of total US electronics and general merchandise (EGM) sales are now online, up from around 6% in 2005. We predict that e-commerce will continue to grow, reaching 15% of total EGM sales in the US by the end of Trefis forecast period.
If mobile e-commerce revenues produce 8.5% of all US e-commerce revenues in 2015, as the Coda Research study suggests, then online transactions could reach 16.3% of total EGM sales in the U.S. by 2015.
Similarly, we expect online transactions to increase as a percentage of total US media sales (books, DVDs, music), international media sales, and international EGM sales.
Increasing the forecast for all these drivers by 8.5%, per the Coda Research estimate for mobile e-commerce growth, yields an upside of 10% to the $119 Trefis price estimate for Amazon’s stock.
Disclosure: No positions