Mobile Phone Sales Not Insulated from Consumer Downturn

The NPD Group released data today revealing a 13% year over year drop in unit sales of mobile phones in the United States. 28 million units were shipped, though sales were down just 2% to $2.8 billion.

NPD's numbers confirm the data discussed here that there is a rotation towards SmartPhones. 28% of the phones sold in the second quarter had a QWERTY keyboard, vs. just 12% in the same quarter of 2007. Smartphones comprised 19% of all total phones sold in the quarter, up 9% from the same quarter a year ago.

The average selling price of handsets was up year over year, but down $3 from Q1 2008 to $84.

Two hypotheses for this change are as follows:

- Consumers are squeezing more out of their phone the same way they are with other parts of their wallets
- Phones are getting more sophisticated and durable

The move to SmartPhones continues to benefit Mpayy, as Mpayy's secure payment accounts can be accessed from Mpayy's website, Mobile website, or social networks like Facebook and MySpace.

Reconciling Consumer Crosswinds

Frequently, in his space, we discuss both the online and offline retail spaces as Mpayy's secure online shopping system relies first and foremost on the consumers' willingness to go shopping. However, beyond transactional data released by the Commerce Department and Comscore, there are other tea leaves that we can read to get a view into the consumer's plight.

Today we look at real estate and credit card transactions.

Underwater Real Estate

Zillow.com is an innovative online real estate research and data website that provides holistic views into cities and neighborhoods for consumers. Home-shoppers use the site to look at purchase data of homes near the addresses the potential buyer is considering. To do so, Zillow has to track publicly available purchase data nationwide.

Zillow released its Real Estate Market Report yesterday. According to Dr. Stan Humphries, Zillow's vice president of data and analytics, ""The second quarter is the sixth consecutive quarter of home value declines and we see little promise of turnaround in the short-term as the rates of decline have yet to slow and, in fact, actually accelerated in many markets. The high rates of negative equity are having a direct effect on home sales figures as we've seen considerable growth in foreclosure transactions and homes selling for a loss." His prognosis is not rosy, predicting that "most markets are likely to remain in negative territory for the next few quarters given the magnitude of current year-over-year declines."



Zillow's press release mentions, "For example, 32.7 percent of homes sold in the second quarter were sold for a loss and 18.6 percent were foreclosure sales compared to the year-ago quarter when the rates were 12.2 percent and 7 percent respectively."

In other words, the investment with the best track record of creating wealth, and most home-owners' largest investment is now a massive liability with exit scenarios that force a loss. Most home-owners save up for a substantial period of time before purchasing a home, and it will take time after those losses are booked before those folks are back in an equally financially healthy position they were before the purchase. This will have material consequences for discretionary spending for the foreseeable future.

Growth in Expenditures Benefits Payment Processors

Amidst the consumer damage resulting from the bursting of the real estate balloon, billions have been written off the balance sheets of banks related to illiquid auction rate securities, foreclosures, losses on home sales and defaults on credit card balances, there is significant strength among the payment processors. The American consumer continues to spend.

The chart below displays the payment processors versus the pure play credit card issuers.



However, the pure play payment processors are exhibiting unbelievable growth. MasterCard has skyrocketed over the last year, and Visa has demonstrated incredible strength since its IPO earlier this year. Visa demonstrated 8% year over year volume growth in its credit card volumes in the US and 28.5% in the rest of the world. Visa also reported more significant strength of 13.6% in its debit card volumes in the United States.

Mpayy's secure online payment processing system is a debit instrument that allows shoppers to pay online with their checking accounts. Mpayy saves the retailer money, guarantees payments and eliminates fraud liability. Shoppers receive enhanced security and cash back guarantees on top of expanding their ability to send money to their friends and family for free anywhere in the US.

Much Ado About eCommerce

With brick & mortar retail sales demonstrating a paltry 0.1% growth in June, artificially supported by rising gas and food prices, there is a concerted move among big box retailers to enhance their online sales presence.



Comscore reported last week that ecommerce sales continue to refuse to succumb completely to the weakness of the American consumer. The rate of growth has fallen by 50% year over year, but ecommerce spending continues to demonstrate growth in the low double-digits. There is faint hope that the stimulus checks will continue to provide further boost to online retail spending.

Retailers are demonstrating that the lesson of this divergence between the growth prospects of online and offline sales is not being lost on them. Internet Retailer notes that, "At Sears Holdings Corp., same-store sales at Sears and Kmart retail chains declined 8.6% for the quarter that ended May 3, the company lost $56 million and shuttered 62 stores, yet the company increased investment in its online and multi-channel operations by $10 million."

Shop.org, the online arm of the National Retail Federation & the e-tailing group have each published white papers concerning the focus of those eCommerce investments in "The State of Retailing Online 2008" and "Investing in eCommerce, Despite the Times", respectively. Universally, there is a great deal of focus on improving on-site merchandising tools, including search, personalization, and integration of product presentation for the online and internet spaces. From the e-tailing group's document:



Opportunity for Mpayy

According to Shop.org, which conducted the research in conjunction with Forrester Research, more than 75% of retailers cite the Checkout Process as a tactic and investment priority. Of that group, 80% want to improve their shopping cart page; 79% want to improve their checkout process; and, 57% want to include "Third-party Email Payment" capabilities.

Mpayy is in finishing stages of launching its Lightbox Checkout Window that will streamline the checkout process for its online retail partners. (Check back for sneak peeks.) Mpayy's offer for online retailers enables them to reduce cart abandonment and growth their sales online.

Mpayy is a secure online & mobile payment processing system that processes payments from shoppers' checking accounts at a 50+% discount to credit cards. Mpayy provides 0% fraud liability for retailers, and guarantees payments. The application is developed by and housed at US Bank (NYSE:USB) in an environment that meets PCI DSS standards, and is compliant with USA Patriot Act, OFAC, Reg E and Reg Z.