March 31, 2008, 12:00 AM

Breaking Out

Retailers can make connections with online shoppers through effective management of web merchandise.

The Internet channel continues to show healthy growth-an estimated 18-20% for both the recent holiday season and all of 2007, according to multiple studies. That’s encouraging at a time when economic trends bode ill for the overall retail industry. Squeezed by a mounting debt crisis and declining asset prices, the American consumer appears to have lost steam-at least in the offline channel.

Not surprisingly, more and more retailers are focusing on the Internet as a key source of growth, and the fight for consumers’ attention and shopping dollar is certain to be fiercer than ever. Online retailers that are poorly prepared to compete are likely to be disappointed with their performance.

Under the covers of every successful retail operation are the secrets of how to create and present product assortments that engage the consumer and encourage her to purchase time and time again. The basic formula is simple: figure out customers’ needs and aspirations, understand how they prefer to shop, and tailor the offer and experience accordingly to drive sales.

It’s about getting into the minds of consumers to understand what presentations and messages are most relevant as they go through different shopping processes. In some cases, the customer is looking for ideas and inspiration, and may want to see products from different categories presented as an ensemble (think apparel and furniture). In other cases, he has purchased or is about to purchase a core product and wants to understand what complementary products are available (think electronics). Savvy multi-channel retailers are leveraging these insights on their web sites to deliver a more enjoyable and relevant customer shopping experience and to capture market share from competitors.

Merchandising for now

In the early days of e-commerce, retailers hurried to put up a site that offered the basics, which often amounted to a skeleton offering of products and a choppy checkout experience. As e-commerce technologies have matured, online merchants are increasingly able to put into practice the tried-and-true merchandising practices that have served them well in traditional store environments-and even improve upon them by taking advantage of the unique capabilities of the Internet medium. Now online retailers can offer sophisticated product browsing, search and comparison features-which today’s consumers increasingly expect as standard.

Unfortunately, many sites today are still running on antiquated technology, offering simplistic presentation of their product assortment and forcing all shoppers to shop in the same one or two ways. They need a more advanced merchandising system that enables the retailer to present products in multiple contexts that are relevant to specific shoppers and shopping occasions. Underlying technology platforms must have the flexibility to address the needs of different customer segments, product categories and selling models within a retail enterprise.

Leading online retailers are showing the way, employing more sophisticated online merchandising practices such as the following:

1. The matrix approach. Different consumers will have their own preferences in how to browse through online product catalogs. Some might be focused on a particular brand, others on a particular style, and still others on meeting needs for a particular life event. The dimensions can be as numerous as there are different product and market segments. Thus, online retailers must be able to merchandise any given product in multiple ways to maximize the likelihood that customers will find it regardless of how they are shopping.

On The Timberland Co.’s U.K. site, Timberlandonline.co.uk, which is a client of my company, a shopper can access a given pair of shoes by browsing a collection (e.g., Outdoor Performance) as well as through the traditional product category hierarchy (e.g., Men’s Footwear). The site intelligently displays the right “breadcrumb” trail to indicate how the customer got to that product to ensure a consistent shopping experience.

The ability to make real-time changes to the product classification matrix helps support marketing programs that drive traffic and sales. For example, a merchant may want to create a special collection of products related to a special event, such as the Red Sox winning the World Series. Products bearing the Red Sox logo thus need to be assigned to both their original categories and the new special collection. The retailer should be able to make this happen within the catalog management system without having to duplicate product content or create multiple SKUs.

2. Shopping by product set. Retailers with strong “merchandise authority” can actively tell the consumer what products go well together, as is often the case in fashion-oriented categories such as apparel or home furnishings. For example, Gap Online’s Gap.com makes extensive use of an engaging “shop-by-outfit” approach. Gap.com artfully presents complete outfits (e.g., top, bottom, shoes and accessories) to inspire shoppers and make it easier for them to obtain a certain look. While each of the products can be browsed and bought individually, there are special ensemble pages that enable the shopper to choose size and quantity for each item in the set and send them all to the shopping cart with a single click.

Through this strong “suggestive selling” approach, retailers can boost average order size and conversion rates. The key is to enable your merchants to decide how to mix-and-match products in the catalog to create these ensembles and get them onto the site quickly and easily.

3. Context-relevant product recommendations. Cross-selling and up-selling as a combined merchandising strategy is one of the retailer’s best tools for increasing basket size and margins. But too many sites treat this as a generic activity, presenting other suggested products without specific messaging that make them more understandable and appealing to the consumer.

In contrast, at U.K.-based House of Fraser, on the web at HouseofFraser.co.uk, another client, context-relevant cross-selling is central to the product presentation. From the product detail page for a dress, the shopper is given multiple ways to explore related products: other dresses that are similar, other products from the same brand (across different categories), and the option to see just a few or an entire page of related products.

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