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E-commerce start-ups facing troubling investment climate

Rebecca | November 27, 2012

E-commerce business losing traction with investors

Black Friday has passed and that has left many retailers preparing for the remainder of the holiday season. While Christmas still looms, Black Friday was the most important day for the retail industry. Now that that day has passed, retailers can enjoy some mild relief before gearing up to engage consumers again in December. Mobile commerce helped make this year’s Black Friday a major success, and the growing popularity surrounding the concept has lead to many start-up e-commerce businesses being formed. Investors have seen the potential of these start-ups and some are suggesting that they are overvalued.

Mobile commerce continues to spark new businesses

Over the past 18 months, mobile commerce has sparked the founding of several e-commerce platforms that had promised to provide innovative service to consumers and niche markets. Many of these platforms received a proverbial tidal wave of investments that helped them reach their target audience. Unfortunately, most of these platforms failed to meet the expectations of investors, thus yielding modest returns at best. The lackluster performance of some platforms has not stopped the formation of new e-commerce businesses, however. Finding investments may soon become difficult for these start-ups.

Failed e-commerce ventures create unease among investors

Though the e-commerce sector shows promising growth, investors have seen a string of failed online retail ventures from groups like Facebook, Zynga, and Groupon. Smaller companies that promised major returns were unable to deliver, thus making many investors leery of e-commerce ventures and those that revolve around mobile commerce. Former eBay executive Dana Stalder, who is now a partner at Matrix Partners, an investment firm focused on software and communications companies, suggests that there is “inflated valuations” concerning e-commerce ventures.

Capital-intensive business may find lack of support

Stalder notes that most e-commerce businesses are complex and require significant capital to operate. Inventory and shipping costs make it difficult for new businesses to reach a large audience. Even with financial backing, these businesses can easily spend more than they make, thus making them less lucrative for investors. Many of these companies have created an uneasy investment climate for the online retail industry, which could make it exceedingly difficult for new e-commerce start-ups to find the backing that they need.

Mobile commerce to play major role in holiday shopping

Rebecca | November 24, 2012

Survey highlights importance of mobile commerce during holiday season

Sybase 365, a mobile services and mobile commerce solutions provider, and the Mobile Marketing Association (MMA) have released the results on a new survey concerning the role mobile devices will play in the U.S. holiday season. Mobile technology has become rampantly popular in the U.S., and many consumers have smart phones and tablets that allow them to participate in mobile commerce. Consumers have been showing a great deal of interest in using their mobile devices to shop, bank, and pay for goods over the past few years, and this may come to a head during the 2012 holiday season.

87% of consumers to use their mobile devices to research products

According to the survey, which focused on 1,000 adult consumers throughout the U.S., approximately 87% of all consumers will be using their mobile devices to make purchase decisions during the holiday season. Many consumers will be relying on their mobile device to find out information on products that they are interested in, with other using their devices to find deals and net themselves significant savings that may only be available online.

50% of consumers to purchase products through their mobile device

The survey also shows that 50% of consumers will be using their mobile devices to make purchases, while another 61% claimed they would be willing to participate in mobile commerce if improvements to security and infrastructure were made. Currently, using a smart phone to make purchases at a physical store is a practice limited to consumers with NFC-enabled devices. These devices are rare, as are the point of sale terminals that are capable of facilitating mobile payments. Security has also been an issue that has put off many consumers.

Mobile commerce could gain momentum through the holiday season

Despite consumer concerns, mobile commerce is growing in the U.S. The holiday season is expected to provide the burgeoning industry with significant momentum, especially as retailers get a better understanding of how mobile commerce can impact their business during the busiest and most important time of year for the retail industry as a whole.