RSR Research: How Retailers Are Investing in Online Technologies
By
Steve Rowen, Managing Partner
Through
a special arrangement, presented here for discussion is a summary of an article
from Retail
Paradox,
Retail Systems Research’s weekly analysis on emerging issues facing retailers.
According
to our recent study on eCommerce, Online Commerce in
2009: The Game Has Changed – Have Retailers?, practicality
and feasibility permeate our retail respondents’ thinking around investing
in new online technologies. They are focused on the tools that provide the
insights (and core operability) to hone the basics of online retailing: determining
who is shopping the site; what general patterns emerge from their overall
behavior; and insuring availability of cheap and easy recommendations and
reviews to help sway and connect shoppers with products.
In the responses, site analytics (63 percent), product recommendations
(59 percent), and site performance monitoring (46 percent) are highly prized.
User tagging for personalization purposes and product reviews also hold significant
interest (44 percent of the total pool assign “very valuable” status to each).
Retailers
have consistently been leveraging the easiest-to-implement systems, like
site analytics (75 percent already have basic systems in place, including
such tools as Google analytics). Further, roughly half of our retail respondents
have already folded in site performance monitoring, product recommendations
and product reviews. These tools are now table stakes for an effective, operative
site.
More budgetary dollars are allocated for mobility than any
other technology. Sixty percent of respondents reported that mobile applications
remain a big untapped opportunity for their companies. Twenty percent have
discretionary dollars set aside for development of a mobile (WAP) site,
while an additional 20 percent have funds allocated to developing mobile
applications. Another 43 percent have plans in place awaiting funding.
While few are willing to bet the farm on how shoppers will really use online
communities and social networks, a safe bet is that consumers will appreciate
the ability to shop from wherever they happen to be – in a store, in an
airport, or in an airport store.
Some notable differences by performance, revenue, and percentage
of goods sold online included in the report:
-
Pure-play retailers have more plans (though still no budget)
to examine social networking opportunities than any other group (50
percent vs. six percent of mixed-model and 16 percent of multi-channel
retailers); -
Nearly half (47 percent) of multi-channel retailers have
no plans to utilize employee or corporate Twitter accounts in any way; -
Pure-play and mixed-model retailers are already far more
invested in call center/CRM solutions than are multi-channel retailers
(50 percent and 47 percent, respectively, vs. multi-channel retailers’
25 percent). This represents a viable opportunity to steal away market
share based on an enhanced service model; -
Mobile is the domain of Retail Winners – 22 percent of
Winners have budget allocated for new mobile applications, while 24
percent have budget set aside for mobile sites.
Discussion Questions:
What do you think should be the key focus for retailers, in time and
money, around e-commerce? What investments will provide the most near-term
ROI? Which ones are necessary for long-term ROI?
Social networking is the big thing right now. Those 47 percent that don’t plan on using Twitter will be short changing themselves. This is a free way to market your brand across the masses. Technology is always changing and retailers are sometimes hesitant to embrace new things, but I foresee the demise of print media in the next 10 years. Yes that’s right. No more Saturday or Sunday circulars.
I can’t really understand why retailers wouldn’t embrace this no- and low-cost way to market themselves. It’s nothing to set up and takes a few minutes throughout the day to shout out. It’s an great marketing tool, especially for retail.
Investing in analytics is great. Current data, in general, provides great information about which households purchase which products. The important piece of information not contained in those databases is the motivation of consumers. When creating the communication for mobile and/or Internet messages, motivation will be an important piece of information. Since mobile and/or Internet messages can be individualized and since the consumers who use these media expect customization, knowing individual motivations will be critical for success.
Social networking and mobile applications seems to be the two big [things] today but I suspect retailers would also be well served worrying about what tomorrow’s “killer apps” will look like.
I’m still amazed that some retailers are debating–or ignoring–the potential power of online retailing, and that we are still bogged down in discussions about whether to get involved or not when retailers should be discussing how to hone their online skills.
I’m not a big fan of twitter for various reasons. Probably the best model–and most effective one for retailers–is something we have yet to see. It’s probably being developed as we speak by some 17 year old in his garage. However, to ignore the power and potential profitability of online retailing is simply foolish.
Along with the capabilities already mentioned in the article, a key focus is capturing a single view of the customer–a “Customer Interaction Platform”–enabling companies to deliver a consistent, customer-centric experience across multiple channels and touchpoints. Maintaining a seamless presence for your brand and your assortment across these channels is among the greatest challenges facing retailers today.
Mobile Commerce, Social Marketing, Web 2.0, Store Front and Search Engine Optimization are only a few of the facets of how online technologies can drive tangible results and secure the retailer’s brand reputation in the virtual marketplace.
While a continued focus on transactional best practices is critical to the operation of an eCommerce site, it is akin to a single-minded focus on operational efficiencies in the brick and mortar world.
There are some retail plays where operational efficiency is the sole, key competitive dynamic, and necessitates single-minded corporate focus. The vast majority of retail plays do NOT conform themselves to such a simple model.
eCommerce sites are retail touchpoints, not mechanistic technologies. A focus primarily and significantly on site mechanics and existing user behavior eliminates the amazing potential behind the cyber-retail opportunity. Yes, finding ways to improve navigation structure to facilitate consumer behavior is important. Yes, delivering predictive and unique product recommendations is important. Yes, investing in some degree of personalization of the online shopping experience is important. Yet, I believe, there is a far more important element to the eCommerce paradigm. Simply, it is the retail experience…not the transactional experience.
Online is the retailing of the future. Any retailer who is hesitant to make a commitment to it will lose. From an advertising point of view, it will replace how one talks to their consumer and from a merchandising point of view, it will provide the lead interaction for merchandising.
In the next twenty years or so, a retailer’s brick and mortar stores will become secondary to their online activities. Rather than online existing for the stores, the stores will exist for online.
Starting with two-way communications, the benefits of online are much too powerful. There is almost always savings of time and money. As more and more shoppers start thinking of online first when they think they need something, the trend will accelerate.
It is only anecdotal, but when I talk to those in the 20 to 30 year old age group, I am hearing that they spend more money and time online than in walled retail establishments. It is almost “if I can’t find it online, I will stop by a store.” There must be data on this. If not, somebody should do some research. It could prove very valuable.
Social networks are brand builders but there’s very little quantifiable ROI associated with presence there for most retailers in the SHORT term (long term is, of course, another story, as we start aggregating the information posted there).
Reviews, on the other hand, both positive and negative have a very demonstrable track record in driving sales. Customers read the negative reviews and then make their own decisions.
There are two aspects to this whole thing. First of all, a retailer has to have in place the integrated processes that allow consumers to move “seamlessly” across channels. An online return to the store should be as easy as a store purchase. Delivery to the store for pickup should be as easy as having it delivered to the home. In all instances, it should be clear to the consumer that the services they are using come from the retailer (not a third party delivery service or the manufacturer); i.e. something they can’t get anywhere else.
Once all the integration is in place, the social networking can begin. But I don’t think the key here is just a network of frequent shopper card holders. Top line growth comes from expanding the purchases of your current shoppers and getting new shoppers. The best frequent shopper program in the world will never be the best way to get new shoppers. This will require innovative thinking as the retailer seeks to get people to use their store. Some of the tried and true methods are perfect candidates for the Internet. Things like adhoc affiliations for Little League Teams, Boy/Girl Scouts, Local School Fundraisers, etc, will draw in shoppers from outside retailers’ current customers. Putting offers onto other websites where community members will find them (assuming the offers can be validated) will increase awareness of the retailer. The merging of TV and Internet which is just beginning to evolve will make this whole thing even more important as consumers become scattered all over the place.
A strong online presence is becoming important, but all the technology in the world cannot make up for poor execution. Customers will be turned off immediately if the retailer cannot deliver on the expectations they have built.