Channel Intelligence Blog

2009: eCommerce Comes of Age

For many years now the dotcom side of the multi-channel retailer house has been treated like a red-headed stepchild. Minimal budget, little focus, no respect.

In 2009 we are at an inflection point.

With a brutal economic environment, a wave of soaring gas prices and ongoing consumer uneasiness all weighing heavily on the bricks and mortar stores, something had to give. Stores have been closing. Retail chains have been filing for bankruptcy. Retailers have been scrambling. Even last night I watched the six o'clock news talk to Starbucks CEO, Howard Schultz as he said "We thought we were recession-proof, but we're not."

Among all this doom and gloom there is a shining star and that star is eCommerce.

Online retail has been doing fine through this holiday season. Channel Intelligence has seen year-over-year sales rise over 15% from what we saw in 2007. Sales are up. Orders are up. Average order value is up. Black Friday sales were up 40% over 2007. People are going online and they are buying.

Discounts, deals and promotions are everywhere enticing consumers to buy. Every Monday is Cyber Monday. Every Friday is Black Friday. Free Shipping. Buy one, get another at half price. These are not sporadic promotions. We see them happening every hour of every day as retailers work to drive online sales.

For multi-channel retailers however, it doesn't end with the online promotion.

Now the realization that the dotcom can drive in-store sales seems to be taking hold. Buy online, pick up in store or "BOPIS" as I like to call it is becoming more than just nice-to-have. It is becoming a must-have. Same price in store as online is a leading message for Circuit City. People are researching online and buying locally. With money being tight in this economy you can't just drive all around town hoping to find the things you want to buy. Retailers have tight inventories this year so they may not have things in stock. People are planning. They're making lists. They're using mobile phones and GPS units to find what they want. They're using the Internet to ensure they are getting a good price, buying the right brand and they know where to go to get it.

2009 is the year that eCommerce comes of age. It is not an after-thought. It is the leading strategy for any successful multi-channel retailer. The dotcom is no longer just another store, it is the store that drives sales to the other stores.

Coby's Clean Where to Buy Experience

I often evaluate manufacturer web sites to rate the effectiveness of their Where to Buy implementation. Coby Electronics has done an excellent job of creating a simple flow for users. Combining clear navigation with a well designed site, Coby makes it easy for people to buy.

I use eight best practice criteria to evaluate each web site. These include: number of clicks to get to a product page, showing MSRP, link design (button or text), link text (active or not active), button position (above or below the fold), button positioned close to the product image, button contrast (color, size, white space) and the number of buying options on the page.

Using these criteria the site is rated on a 1 to 10 scale, where 10 is excellent. Coby rates a 9.0. The only thing Coby is missing from their design is a MSRP or ERP to give the user some idea of the price point of the product.

Don't Confuse Consumers with your Channel Strategy

I don't like to pick on a manufacturer, but Imation is an example of a confusing Where to Buy page. If you go to the page you'll see a list of places where you can buy Imation products. The list includes:

• Retail Superstores
• Office Supply Dealers
• Computer Supply/Data Specialty Dealers
• E-Commerce, Mail Order and Direct Response

I'm a channel guy so I have an expectation of the types of retailers I would expect to see in each of these categories. Let's see how I do...

Retail Superstores - that would be Target and Wal-mart, right? Wrong. Listed under this category are OfficeMax, Office Depot and Staples. Hmmm, I'm confused.

The next category of retailers are Office Supply Dealers - that would be OfficeMax, Office Depot and Staples, right? Partially right. It's those three guys plus Corporate Express, Forms & Supply and W.B. Mason.

Computer Supply is next. I'm really guessing now. I get computer supplies at online guys like CDW, PC Connection and Provantage. Is that right? No. Actually it's a list of the United States that leads me to find my friendly neighborhood Value Added Reseller (VAR).

Now E-Commerce, Mail Order and Direct Response. Direct Response!?! If I'm Joe Consumer my question is 'What is that?' Mail Order? Do they do Mail Order any more? E-Commerce I understand. That's Amazon and Buy.com. Oooh, I got that one right. Buy.com is on the page. So is CDW, Insight, PC Connection, Quill, Staples, Tiger Direct and Zones. But I have questions. Why doesn't Quill have a Web page when all the others do? Why is Staples listed but OfficeMax and Office Depot are not?

This is a Where to Buy experience that was created by a channel person that thinks their users understand Imation's channel strategy like Imation understands it. It's confusing. It's difficult. It doesn't help anyone figure out Where to Buy. Check your Where to Buy section to make sure you aren't making it difficult for consumers to find and buy your product.

CPA or CPC

Since Channel Intelligence allows retailers to participate in our ad network (CIAN) under both CPC (cost per click) and CPA (cost per action) payment options, we regularly receive questions from our retail partners why anyone would choose the relatively risky CPC option when the CPA option is available.  The answer is that some sophisticated partners can manage CPC listings in a way that allows them to achieve a higher ROI under CPC than CPA.   Whether considering CPC for CIAN or any other advertizing placement, here are some key considerations that should drive your decision:

·         Nature of publisher’s traffic – Some web surfers are shopping and others are just browsing.  Shoppers are more likely to interact with commerce-focused sites like comparison shopping engines and product manufacturers and as a result these sites tend to drive the highest converting traffic to retailers.  Non-commerce focused content sites tend to have lower conversion as you are more likely to catch the eye of browsers.  Confining your CPC to commerce sites helps maximize the ROI of these investments.

·         Organizational capability – Is your business able to identify and remove poorly performing products quickly?  If not, choosing a CPC option will be risky for you.

·         Product strategy – Because CPA locks in a specific ROI, if you want to drive traffic to as broad a set of products as possible, you are best sticking to CPA.  If you are content to focus on a small set of high-return products, CPC becomes a valuable option.

·         Average order value – ROI is a pretty simple equation.  The higher the selling price of your products, the more click cost you can support for a given ROI.  As a result, advertisers usually have better luck paying CPC for large ticket consumer electronics products than they do supporting the accessories that go with them.  Understanding your average selling price on a publisher will help guide your preference. 

·         Trust in partner – In most cases, the publishing partner will report clicks.  Do you trust them to report accurately and remove clicks it knows to be fraudulent?  If not, stick to CPA.

·         Publisher’s Implementation details – Publishers that display price and availability help improve conversion by reducing exploratory clicks.  At CIAN, we always recommend that our manufacturing partners display these elements in order to improve retailer conversion rates and, equally importantly, improve the end customer experience.   Understanding how and where your product links will be displayed will affect which option a retailer should choose.

Fallacies and Product Promotion

In describing products, there is a natural tension between accuracy and exaggeration. It behooves us to be as enthusiastic as possible about a product while, at the same time, too great a departure from reality is likely to make the consumer suspicious, or worse yet interested but for the wrong reasons, leading to clicks with no sales. It’s a good idea to understand that there are many forms of enthusiasm and to use or avoid them consciously rather than fall into them accidentally. The realms of rhetoric and logic have made a very careful study of the subject, but oddly enough, by far the best source I have ever come across is a marvelous little book called Historians' Fallacies : Toward a Logic of Historical Thought – what follows is largely drawn from this source:

The fallacy of many questions involves the idea of asking questions without answering them. You pose a whole series of puzzlers providing the impression that you have really thought in depth about the area under discussion. You are of course under no obligation to answer any of the questions.

The fallacy of false dichotomies is where you propose two positions; one being the one you want to promote the other being something that you know has a fatal flaw in it. You demolish the flawed alternative leaving the customer with no choice on the table other than the one you want to see adopted.

The fallacy of metaphysical questions involves solving a non-empirical problem by empirical means.

The fallacy of fictional questions involves the neat device of asking a question about some situation you invented. You phrase the question and the situation in such a way that you know the answer will favor your position.

The fallacy of semantical questions involves confusing actual happenings with descriptions of actual happenings. There is a wonderful illustration of this in an interaction between Alice and the White Knight in Lewis Carroll’s Through the Looking Glass.

“You are sad,” the Knight said in an anxious tone: “let me sing a song to comfort you…. The name of the song is called ‘Haddock’s Eyes.’”

“Oh, that’s the name of the song, is it?” Alice said, trying to feel interested.

“No, you don’t understand,” the Knight said, looking a little vexed. That’s what the name is called. The name really is ‘The Aged Aged Man.’”

“Then I ought to have said ‘That’s what the song is called’?” Alice corrected herself.

“No, you oughtn’t: that’s quite another thing! The song is called ‘Ways and Means’: but that’s only what it’s called you know!”

“Well what is the song then?” said Alice who was by this time completely bewildered.

“I was coming to that.” The Knight said. “The song really is  ‘A-sitting On A Gate’: and the tune’s my own invention.”

We should think carefully about how products are described, categorized and labeled as there are numerous and sometimes very subtle pitfalls  and opportunities in these things.

Where to Buy Best Practices

All too often I see manufacturer Web pages that make it difficult to buy. Here are seven best practices that manufacturers can implement to help increase sales:

1) Minimize the Number of Clicks to a Product - Too many clicks to a product page can frustrate consumers and greatly reduce the opportunity to sell. One or two clicks is optimal.

2) Show MSRP - To help the consumer understand the price point of the product they are considering, show MSRP on the product page.

3) Link Design - A button is always preferred over a text link. Buttons attract the eye of the consumer and more clearly indicate an action.

4) Active Button Text - Active phrasing like "Buy Now" or "Buy Online" or "Get Prices and Buy" deliver better results than inactive text like "Where to Buy" or "Online Dealers".

5) Position Buttons Near the Product Image - The button should be above the fold to optimize the opportunity for sales. Once above the fold the optimal placement for a button is near the product image. This gives the greatest visibility to the button and can also be important for search engines that are indexing pages. A "Buy" button near an image is a strong indicator to the search engines that the product can be purchased.

6) Give the Button High Contrast - A large, high-contrast button will drive the greatest amount of clicks. The color of the button should be unique on the page. The button should be at least 15 pixels in height. White space around the button also helps to draw the consumer's attention.

7) Remove Other Buying Options - Multiple buying options on a product page can distract the consumer and reduce the number of leads you will send to your channel partners. Even if you sell direct there should be a single "Buy" button on the product page that leads to a page where the consumer can then decide which channel they want to buy through.

Consumer Electronics Traffic is Up, Sales Volume Down

I compared three months of statistical data from May-July 2007 and May-July 2008 for consumer electronics manufacturers Samsung, Sharp Electronics, Panasonic and Philips. Overall traffic to these manufacturer product pages was up 5% on average. Orders were up 28% and units sold were up 59%. However, actual sales dollars were down 23% as the average product price dropped from $471 to $229.

Reflective of economic conditions, this supports my thought that more people are buying online but they are being frugal in their purchases. More people are going to manufacturer Web sites and are buying more products. But the overall dollars they are spending on these products is less.

To help put it in perspective, gas prices in the May-July 2007 timeframe averaged $3.07, about $1.00 less per gallon than now.

Brand's Guide to eCommerce Success

Thinking Like a Manufacturer

Imagine the following: You just built a beautiful product showroom at your factory. It has displays to show off your products to best advantage and employees specially trained to understand customer needs and help them find the right product.  You provide a list of locations where visitors to the showroom can buy your products because you don’t want to compete with your channel partners. You place ads in magazines, on TV, and on billboards to attract customers to your new showroom. And they come, a trickle at first, then in hordes. They love your showroom. They love your products. You feel great. Your new marketing effort is a huge success!

Only, at the end of the quarter sales are barely any higher. What happened!

It’s easy to explain. You got people interested in your products, then left them on their own to figure out how to buy them. You fell victim to the all too easy trap of thinking like a manufacturer. “What’s wrong with that?”, I hear you thinking. “After all, I am a manufacturer.” Yes, but in situations where you are dealing directly with end users, you can’t afford to think like a manufacturer. You have to think like a retailer!

Thinking Like a Retailer

Retailers really are very simple to understand: ‘Sell more stuff!’ Your stuff, your competition’s stuff, anybody’s stuff.  Maximize Sales, they just want to sell more. So they make it as easy as possible for customers to buy.

Walk into a major supermarket or chain store. The odds are good that if you have been in another store from that chain, you can find your way around. Products are grouped by the way buyers expect to find them. New items or products on “special” are on the end caps, readily visible. Overhead signs tell you where you are and where to go. Prices are clearly visible. Checkout counters are highly visible and conveniently placed near the exits.

Your showroom did part of the job. It generated demand by educating potential buyers about your products. It even did that part better than the typical retailer, since you know your own products better than any retailer could. But you missed the most important ingredient: You didn’t make it easy to buy. You sent potential buyers off with a list of retailers, but along the way most of them changed their minds. They got distracted by another product, they store was out of stock, or maybe they just plain forgot. Whatever the reason, the person that left your showroom intending to buy your product ended up not buying.  You didn’t capitalize on the buying impulse, and you lost a sale!

So what do you do?  Well,  let’s start by taking a look at your web site… YOUR FACTORY’S SHOWROOM!

To be Continued…

What Retailers Know About eCom That Most Manufacturers Don't

If manufacturers are going to implement a Where to Buy solution they should look at successful retailer Web sites to figure out how to do it right. One of the biggest mistakes manufacturers make with Where to Buy is allowing the consumer to become distracted.

Look at Amazon for example. When you first show up at Amazon there are all kinds of ways to search and navigate the site.

But once you show your intention to buy, all of that search and navigation goes away. They only thing you can do easily is continue down the path to buy. No distractions.

The simple lesson here is not to put things in the way of the purchase. Once a browser says they want to become a buyer don't include navigation to other areas of your site. Don't distract them from the purchase.

The Future is Now

According to Dan Stanek, executive vice president of Retail Forward, who recently spoke at the Retailing Smarter conference here in Central Florida, "retailers and suppliers will be shaking in their boots because the consumer will have complete control in 2015". I'm not sure what measure is used to determine complete control but if it includes...

• Free will to change their minds
• Abundant choice of products
• Access to multiple retailers that carry a product
• Practically unlimited information on products, brands and competitive offerings
• Social networking that provides instant consumer opinion, ratings and reviews
• Transparent pricing

...then retailers and suppliers don't have to wait until 2015. The future is now.