February 27, 2009, 12:00 AM

SPONSORED SUPPLEMENT: The future of e-retailing technology

Internet Retailer

Since technology provides one of the largest points of differentiation in e-retailing, retailers that adopt the latest innovations and properly use them are likely to have the most successful web sites based on sales and the highest levels of customer loyalty.

“Consumers expect e-retailers to give them not just the ability to buy, but helpful content such as how tos, product reviews, blogs and more,” says Jacqueline Methling, e-commerce sales strategist for platform provider and site design firm Americaneagle.com. “Consumers have become so technologically savvy that if a retailer’s technology is lagging their expectations, they will find an alternative web site at which to shop.”

Retailers intent on being on the cutting edge of e-commerce technology can’t limit implementation to just one or two areas of their web site. Instead, they need to look at every area of their business including site navigation, checkout, fulfillment, marketing and payments.

Beyond adolescence

“E-retailing has moved far beyond its adolescence and retailers can no longer be good technologically at one or two things, they must be good at everything,” says Sean Cook, CEO of platform provider ShopVisible. “When it comes to implementing technology to meet customers’ evolving expectations of the shopping experience, retailers need to take a 360-degree view.”

That includes site security and risk management, two areas that retailers can never pay too much attention to as shortcomings in these aspects of their business can undermine any competitive advantage new e-commerce technologies deliver.

“Consumers expect e-retailers to provide a secure environment in which to conduct a transaction and keep fraud screening from being an impediment to completing the purchase,” says Stephen M. Kuzio, vice president, e-commerce strategic planning, card not present, for ClearCommerce/Certegy, provider of payment and risk management applications.

While that’s a given in online retailing, fraud detection technology has become much more sophisticated at not only identifying possible bad transactions but also at saving good ones. One of the biggest issues facing retailers with fraud screening is the false positive, a situation in which a transaction is denied as fraudulent because the shopper triggered red flags that narrowly apply a rejection rule, such as initiating a transaction from a computer with an IP address originating in a country known to have a high fraud rate.

Narrowly applying such rules is a hindrance to business, especially as retailers expand globally. “Customer loyalty is clearly at risk when a false positive occurs because it turns off shoppers to the point they may take their business elsewhere,” says William H. Hazama, vice president of sales, card not present, for ClearCommerce/Certegy. “Retailers can address customer complaints about a false positive, but they can’t soothe the feelings of customers who don’t complain and move on.”

Finding objectivity

ClearCommerce/Certegy uses analytics to automate reviews of transactions suspected to be fraudulent. To bring more objectivity to screening transactions for fraud, ClearComerce/Certegy weights the characteristics of a legitimate transaction and then balances them against what, if any, characteristics in the transaction suggest fraud. Doing so can reduce the number of transactions subjected to further fraud screening from as much as 25% to 3% of total transactions.

While analytics provide retailers with more firepower in combating fraud, they can increase the effectiveness of the technology by adjusting the rules for manual review of transactions.

For example, an electronics retailer that has doubts about the legitimacy of a purchase after it has undergone initial fraud screening, may want to perform a manual review because the margin on the product is slim and the risk is high. Fraudulent purchases of products with high manufacturing costs and slim margins cost retailers more than a product that costs less to produce and carries a higher margin, such as software.

“Retailers can afford to take more risk on transactions where the potential loss is less, even though they may have questions about the legitimacy of the transaction,” says Kuzio. “If e-retailers want to do business globally, they need to broaden their perspective on how they apply fraud management tools to enhance the shopping experience, not detract from it.”

Just as retailers need to alter their view of fraud management, the same is true of how they view the architecture of their operating platform. In the past, retailers cobbled together applications that put customer and business information in data silos. That not only limits what retailers know about each customer, it also creates a cumbersome process in which each application has to be launched individually when retailers want to extract data-a time-consuming and inefficient way to manage a dynamic business such as e-retailing.

“Platform architecture needs to be more transparent and allow for integration paths between applications that enable the free flow of data across the enterprise,” says ShopVisible’s Cook. “Too often, accessing each application individually to get at customer data ends up handcuffing a retailer’s marketing efforts.”

Integration paths

ShopVisible’s platform creates integration paths between all applications and allows simultaneous access to them through an executive dashboard that retailers can use to analyze customer data as needed in real time or to set business rules.

For example, the reporting widget on the dashboard can help retailers identify best-selling products for a specific timeframe, total sales for the week, and sales of items above or below a specific price threshold.

“Retailers need seamless, integrated platforms that consolidate application data and provide access to all applications through a single password so they focus more on their marketing and merchandising strategies and less on managing the platform itself,” Cook says.

A prime example of the power of fully integrated platforms-and also an example of recent innovations in technology-is the ability for e-retailers to extend management of their business to affiliate sites. Using an executive dashboard, retailers instruct the platform to publish the entire catalog or portions of it on an affiliate site, such as Amazon.com. The flow of data between the affiliate site and the retailer’s platforms enables automatic updates such as price changes and availability of an item to be made on the affiliate site. Concurrently, all data around the purchase on an affiliate site is fed back to the retailer’s platform.

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