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Consumers are increasingly engaging in reading reviews, browsing products, locating stores, using or requesting coupons, checking prices, and comparison shopping online to get the best deals (including by mobile). Twenty-nine percent of smartphone owners use their devices for shopping-related activities. This is not limited to the U.S., as global online shopping (food and beverage, hardware, apparel/shoes) has grown as well. According to Deloitte, smartphones account for 5.1% ($159 billion) of total retail sales at present in the U.S., and the figure is projected to grow to $628-$752 billion by 2016.

Smartphone penetration has been growing sharply in the U.S. for people of all ages, especially for people in the 18-44 age bracket. In June 2012, smartphone penetration was 55.5% of all U.S. subscribers for mobile, according to Nielsen. In December 2011, this was 47.8%. Among people aged 18-34, 80% of those who bought a phone in the first quarter of this year opted for a smartphone. The largest increase in smartphone ownership was seen among people aged 25-34 -- rising to 74%from 59% in July 2011 -- which means that most e-commerce gains can be realized by retailers who target young adults.

Further proof of the importance of mobile shopping (tablets and smart phones) comes in the form of estimates from Internet Retailer, which says that total m-commerce sales in the U.S. would be $20.3 billion this year, almost double the level in 2011. Shopping anytime and at any place is an attractive proposition for retail customers. According to the National Retail Federation, mobile usage for buying decisions is going to continue to play an important role in the holiday season shopping.

According to a Neilsen survey in March, retail websites are more popular at present than apps. In a survey of 5,000 people, Nielsen analyzed that top retailers' (Amazon (NASDAQ:AMZN), Best Buy (NYSE:BBY), Target (NYSE:TGT), Wal-Mart (NYSE:WMT) and eBay (NASDAQ:EBAY) apps and websites reached 60% of smartphone owners during the holiday season. According to a Neilsen survey, the majority of consumers termed online shopping their "overall favorite," "easiest" and "most convenient," while brick and mortar stores were termed "safest" and "most reliable." Mobile shopping came in second after online shopping for "most convenient" and "easiest," which shows that the acceptance for mobile commerce has just started, and will boom in the future. Retailers and marketers who quickly adapt to this growing trend will have a clear edge.

Moreover, according to Nielsen, more than half of smartphone owners in the U.S. used mobile commerce/shopping apps in June 2012 (17 times, on average). eBay's app got 13 million unique visitors in June, while Amazon's got 12 million. They are at the top of the Neilsen list for popular shopping apps. Target, a discount retailer, has been getting attention online as well as offline as shoppers look for the best deals available. It had more than 2 million unique visitors for its apps, and was the seventh on the list compiled by Nielsen. Daily exclusive deal sites like LivingSocial received significant visits as well, along with Shopkick and Out of Milk.

Owing to the impressive e-commerce sales of online companies like Amazon, brick and mortar retailers of apparel, shoes, electronics and other items are all stepping up efforts to include online operations in their current business model. Choices are being added for delivery and pick up of items that are ordered. Online sales can also be helpful for entering new markets where it is either expensive to have physical stores, or where retailers are unsure of the profitability and demand. Macy's (NYSE:M) and Neiman Marcus have web partnerships for sales in China instead of stores. According to Nielsen, consumers prefer mobile websites of retailers over apps, and mobile shopping has reached "scale," and will grow with increased smartphone penetration.

Investing Recommendations:

Target remains a good buy, even though it is trading near its 52-week high. It has a dividend yield of 2.2% and is in favor because of economic worries. The company offers a mobile version of its website in addition to mobile apps. Its offline business is fully integrated with its online presence, as customers can buy items online as well as locate them in one of many Target stores. The merchandise offered online and offline is almost the same, excluding food and some household items. The comparable store sales, which include online sales, were up 4.2% in the first months of 2012, as compared to 2.9% last year. For more details about our bullish stance on Target, read our article.

Macy's, a department store, operates macys.com and bloomingdales.com websites as a part of its business model. Comparable store sales have been beating analyst estimates by larger margins than other retailers in the last couple of months. In August, same store sales came in at 5.1% (analysts expected 3.3%). Much of this was attributable to online sales. While overall sales increased by 5.7% in August, online sales were up 37.4%. YTD, the increase in online sales is 35.2% over last year. The company has announced that it will use its physical stores as fulfillment centers for online orders too, to increase efficiency. Some 292 stores were to be used for this purpose by expanding store room space and using new technology that keeps tabs on the availability of an item in stock. For more details on our buy recommendation for Macy's, read our article.

Investing in Amazon, the largest e-commerce company whose top line growth is around 29% (quarterly), is not advisable at the moment, since it is trading at very high valuations. Investors should look for a better entry point in Amazon.

Best Buy is an example of a retailer that has not been able to capitalize on its online presence that much. It is facing tough competition from Amazon based on prices and customer service. It had to cancel some online orders at the last minute before Christmas last year, though online sales were up 15% in the all-important holiday season, while total sales were up a mere 2.5%. Incidents like these force customers to look elsewhere for better shopping experiences, and undoubtedly benefit Amazon and Apple (NASDAQ:AAPL). For more details on Best Buy, read our article.

Source: 2 Stocks To Buy As Mobile Shopping Overtakes Brick And Mortar Only Retailers