At Shop.org's Annual Summit, one speaker rebuts the conventional wisdom that e-commerce has peaked, and reveals the "truths" about online marketing and how to fix them.
Posted Sep 20, 2007
LAS VEGAS -- As part of Shop.org's Annual Summit here yesterday, Forrester Research Senior Analyst Sucharita Mulpuru delivered a keynote address that resoundingly argued against the conventional wisdom that online retail may have already seen its best days. The recurring theme of the two-day event -- which brought together approximately 2,500 attendees interested or involved in Internet and multichannel retail -- consistently emphasized the need for marketers and executives to listen to their customers and let that be the force driving their businesses. Mulpuru drew upon this well known, yet under-executed concept, and challenged marketers to go back to the basics.
"Some think e-commerce has peaked," Mulpuru said, citing recent news reports from sources such as MSNBC.com ("Online Shopping Growth to Slow in Next Decade") and The New York Times ("Online Sales Lose Steam"). But Mulpuru believes that e-commerce still holds great potential -- in fact, she predicts an approximate 25 percent year-over-year growth for both 2007 and 2008.
The Web 2.0 era has delivered very sophisticated functionalities, Mulpuru told the crowd, but the growth she's predicting will not come by depending on technology alone. In her keynote, Mulpuru described many online retailers as "running before they can walk" because they are so caught up in what's new and complex -- such as videos and podcasts -- that they haven't yet nailed down the fundamental attributes of their online presence.
When businesses begin to really focus on what they're offering and how they want their customers to interact with them, Mulpuru noted, solutions will become readily apparent. To that end, she addressed what she called the five pain points of e-commerce -- and said that dealing with them is essential to maintaining a successful online presence:
- Not Available 24/7. First, contrary to the inherent purpose of shopping online in the first place, online retail still isn't user-friendly. Mulpuru reported that her research has found that the number-one reason people shop online is for the convenience, followed by selection, then by price. Web sites should be available and working 24/7, Mulpuru said, adding that that one out of every 50 online transactions fails because of a retail error. Oftentimes, the information necessary to the product description -- such as a sizing chart for a shoe -- is unavailable. Information should always be available online, and yet it is not uncommon for Web sites to direct customers toward the very channel those customers went online to avoid -- brick-and-mortar stores.
- Mismanaged Marketing Resources. Second, Mulpuru said that online marketing is inefficient in terms of what its resources are focused on. Mulpuru calls for an industry-standard definition of return on marketing investments and what profit means for retailers. She questions the extravagant amount of marketing spend devoted to paid search (41 percent, according to her figures), claiming that the costs are outweighing the revenue, particularly for nonbranded terms. Finally, she said, marketers need to focus on customer retention and building customer loyalty rather than customer acquisition.
- Failure to Listen to Customers. Third, marketers need to listen to their customers instead of simply "watching" them. Mulpuru noted that most marketers (73 percent) react to the actions of their competitors. Instead, marketing staffers should work to understand the behaviors of the customers -- especially to determine why customers act the way they do. Information can easily be collected through surveys or product message boards, she said. She also singled out Proctor & Gamble and Intuit as market leaders that exhibit best practices in leveraging their market research and customer information.
- Poor Organization. Fourth, the organization of many Web sites is poor -- that makes it difficult for consumers to navigate and find relevant products. Mulpuru noted that while the tools to help increase relevance exist, they are rarely implemented. For instance, only 37 percent of online retailers use "automated related product placement" tools.
- Lack of Channel Coordination. Last, retailers have yet to coordinate and maintain their multiple channels. Mulpuru reported that conversions achieved through cross-channel sales can be up to three times greater than through offline channels alone. "In a perfect world, offline should be the number-one marketing channel for the online channel," Mulpuru told the audience. But for now, the disconnect has led to tension between the various channels in terms of allocating costs and giving credit where credit is due. Worst of all, the lack of coordination has fostered frustration for the multichannel customer.
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