6 Ways E-Commerce Survived the Recession
LAS VEGAS, September 21 — For the annual summit of Shop.org, the digital arm of the National Retail Federation, over 2,500 registered attendees made it out to the desert here -- attendees who, according to a poll during the show, are mostly optimistic about the upcoming holiday season. The positive outlook, according to organizers of the event, reflects a significant shift from the same time a year ago, when economic devastation was the prevailing theme. Another factor, according to a keynote speaker here? Online retailers, who make up the bulk of summit attendees, generally fared far better during the recession than their bricks-and-mortar counterparts did.
To explain how Web retailers not only survived the recession but thrived in the midst of it, Forrester Research Vice President and Principal Analyst Sucharita Mulpuru opened her keynote address by drawing an analogy between the state of online retail and Charles Darwin's theory of natural selection. While Darwin's famous island finches couldn't control the structure of their own beaks, businesses do have control over the strategies they select. According to Forrester's recent findings, she said, successful Web retailers exhibited at least one of the following six deliberate efforts to drive growth despite the challenges of the past year.
- Reset goals as needed.
- Redefined the competition.
- Respected the technology department.
- Reinforced partner relationships.
- Reacted well to the people power.
- Recognized the mobility revolution.
Reset goals as needed. E-commerce has to focus on more than just the single sale. Unlike bricks-and-mortar outlets, customers can "leave" with a single click of a browser button. Therefore, customer service has played a crucial role in differentiating online retailers. Providing a successful customer experience requires more than merely making products available online. Online retailers must also focus on details such as site usability that will continue to deliver on the value proposition.
Redefine the competition. Competing on price can only go so far. The online channel allows retailers to introduce new products and address new customers in ways that would be expensive and difficult through other channels. Clothing retailer American Eagle, for example -- which has a presence both on- and offline -- also owns the 77Kids brand which sells children's clothing exclusively online.
Respect the technology department. Rarely do companies think about the technology team that builds and maintains the e-commerce systems. Technology is critical to enabling the features that give online retail its advantage over the bricks-and-mortar experience, such as rich Internet and mobile applications and purchasing without having to provide credit-card information. According to Mulpuru, Web retailers spend 7 percent of revenue on technology. In the overall retail sector, that figure is 2 percent; in all other industries, 3 percent.
Reinforce partner relationships. Consumers love their brands -- and are more likely to be loyal when they do. In fact, Mulpuru reported that roughly a third of e-commerce spend is generated or driven by manufacturer and brand Web sites. However, competition between branded and private-label goods often complicates retail's ability to collaborate with partners.
React well to the people power. Social media connects consumers to each other, but also enables them to communicate directly with companies. Mulpuru told the audience that she sees retailers generating blogs, forming microcommunities, and joining social networks such as Twitter and Facebook, but admits there are a wide range of driving forces behind retailers' efforts:
- 66 percent say return on social marketing intiatives is unclear.
- 50 percent are pursuing social media because of industry buzz.
- 34 percent report social marketing strategies have in fact helped them grow their business.
While many retailers claim social media represents a long-term strategy for customer engagement, there are companies seeing substantial short-term returns: Eventbrite, an online provider of event-registration services, claims social media generates the highest source of revenue after online search.
Recognize the mobility revolution. Retailers, Mulpuru said, should "like social, but love mobile." She emphasized that the statement didn't necessarily require an increase in spending on mobile initiatives, but that mobile will be critical to creating the ultimate multichannel experience. "More people will access…sites through mobile," she said, citing one product platform that was recession-proof in the last year: Apple's iPhone. Retailers who hopped onto the application platform early, she said, saw immediate advantages -- but she noted that the iPhone isn't the only mobile application consumers are using, nor is it the most popular. Other devices, in order of popularity, include:
- operator brand;
- multiple brands;
- Nokia; and
Mulpuru did not disparage the more-traditional digital channels, but noted that while email marketing "still works," it's "not the future." According to research from Forrester, email is used by a larger share of people over the age of 65 than within the 18-to-29 age bracket (67 percent versus 65 percent). Nevertheless, she said, as a marketing strategy email remains substantially more effective than social media:
- Social media marketing sees an average of .04 percent clickthrough rate among the 65 million active social network users in the United States.
- The 166 million active users of email produce a 22 percent open rate on marketing emails.
In closing, Mulpuru recommended retailers implement two strategies immediately:
- Introduce alternative payments to the mobile site to increase consumer confidence and simplify the shopping experience; and
- improve site legibility on mobile devices. This initiative may be complex given the variations in carriers and devices, but Web-accessibility specialists can help manage the migration from Web to mobile.
In another sign of the shifting technological landscape, the conference unofficially began the day before with an all-day Bootcamp, in which roughly 250 attendees covered topics from social media to analytics to email marketing.
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