Application Stores: The New Explosion in Ecommerce

Linda Bustos

April 7th, 2010

There's a trend in ecommerce that's exploding like a supernova in the same way online stores did 10 years ago; application stores, and they're not just for mobile phone applications. New application platforms for software, hardware and even enterprises are popping up every day, targeting businesses, consumers, developers and even employees. Currently, the Wireless Industry Partnership lists 68 known application stores (up from 34 only a few months ago). Analysts expect the app store boom will push Apple's App Store market share below 30% by 2013. This does not mean Apple's growth will slow. Rather, the market will become more competitive, with more platforms and options for consumers and developers to play with. Who's opening an app store?Software platforms:

Hardware platforms:

  • Smartphones - RIM (Blackberry), Apple, Samsung, LG, Motorola, Nokia etc.
  • Mobile carriers - Sprint, Orange, Verizon Wireless, China Mobile etc.
  • TVs - Verizon, Samsung, KT, Rallycast
  • eReaders - Amazon, Sony, Samsung
  • Printers - HP
  • Netbooks - Intel, Acer etc.
  • PC - Dell, Citrix etc.
  • Home automation monitors - Control4

Enterprise app stores:

What's the purpose of an app store?

App stores exist to increase the attractiveness of the platform to end users by engaging third party developers to increase platform capabilities. The more functionality developers can bring to the table, the more useful the platform will be, the longer people will stay with it. For example, Facebook launched its F8 platform because it understood it could never internally develop as many applications that others could contribute. By providing a marketplace for third party applications, the platform enables developers to monetize their apps. An application is submitted for approval to the application store operator, and then made available for purchase through the app store. End customers make their payments to the store operator, who takes a cut of the sale.

How application stores are more complex than traditional ecommerce

Because there are three parties in an app store transaction (the store operator, the developer and the consumer), the app store, like a marketplace, has complex requirements. These include implementation, interfaces to set catalog prices, individual developer sales performance reports, approval process for submitted apps, support for different devices, versions and upgrades, and multi-platform store interfaces such as a desktop app store and its mobile version.

The current state of app stores

Today, most app stores are Apple imitations, with only basic ecommerce functionality such as browsing menus, searching, ratings and reviews. Missing are the advanced capabilities, such as personalization, cross-sell, upsell, trial downloads, video demos etc., all of which can really help developers with selling and consumers with discovery. Another phenomenon in most current app stores is the rich get richer; apps are listed by number of downloads or by star rating. Search and browse tools favor the top ranking apps, and it's these who win the most downloads and generate the most revenue. This makes it difficult for new developers to get noticed. Store operators need to provide better tools to help lesser known developers succeed. Currently, most app stores are built in-house or by a systems integrator as an extension to the website, much like the early days of ecommerce before commercial shopping carts and ecommerce platforms became available.

How can application stores move from first generation to next generation?

Application stores need advanced ecommerce functionality, adapted for the marketplace environment in order to grow store operators' and developers' revenues. They need to offer multiple ways to monetize intellectual property, such as share, rent, in-app ads, bundling and in-app payments. For example, especially on business platforms, an application may be shared across multiple seats. Developers may wish to offer multi-user licenses. Or, developers may wish to team up to offer bundled application packages for a discounted price. The ability to purchase additional credits or features within apps and from inside the application store is also helpful, like accessories in an ecommerce store. App stores can also improve by offering multiple communication channels between developers, users and operators. For example, customers should be able to contact the developer directly for support and feedback, and vice versa for remarketing. As app stores continue to grow in popularity, SaaS (software as a service) products developed by commercial vendors will likely displace some of the in-house builds, further accelerating the adoption of app stores as they become quicker to launch and less expensive to develop. For a deep-dive on application stores, you can catch the full replay of our webinar

App store - a new way to sell software, media, and anything digital on-demand at http://elasticpath.com/webinars/apps/

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Linda Bustos

Linda is an ecommerce industry analyst and consultant specializing in conversion optimization and digital transformation.