Internet Retailer 2006: Report from the conference

A convergence of technology and customer desires

One of the major themes of Internet Retailer 2006 Conference & Exhibition, June 5-7, revolved around using technology to meet customer needs. From the Keynote Address through the final breakoutsessions, 78 speakers in 45 sessions focused on the importance of the Internet in meeting customers' needs--and how e-retailing will not ascend to the next level until retailers understand how customers are using their web sites and how to harness technology to meet customers' spoken and tacit desires.

The conference drew 3,300 attendees and 185 exhibitors to the Hyatt Regency in Chicago. Theconference occupied five times as much space on two levels as IR2005. In addition to meeting vendors, attendees had the opportunity to view live interviews throughout the show at the Internet Retailer Media Center in the exhibit hall. Festivities were capped off by dinner and a concert by Motown hit-makers The Temptations on June 6.

Following is complete coverage of the conference ...

General Sessions
June 6

Day 1 Keynote: The new-age web

Taking E-Retailing to the Next Level, Keynote Address
Thomas McInerney, executive vice president, IAC/InterActiveCorp

More than at any other time since the late 1990's, the web is quickly changing with innovations for online retailing, Thomas McInerney, executive vice president of IAC/InterActiveCorp said in the keynote address at IR2006.

Recent and ongoing developments in e-commerce--including broadband Internet access, new technologies such as AJAX that provide faster online shopping experiences, and the merging of the web and TV--are presenting exciting new opportunities that retailers need to be aware of, McInerney said.

Broadband capabilities, for example, are enabling HSN to show more of its TV programming on HSN.com. The web strategy will range from live showings of full TV programs to segments that focus on particular products. Combined with web site search, this will let HSN shoppers view material on TV, then go online to search for a particular show segment and product, McInerney said.

Other important trends to watch, McInerney said, are how brands can leverage the power of social networking sites like MySpace.com, and how retailers of all sizes are using the web and global-positioning systems to connect with local customers.

IAC, meantime, will continue to look for ways to leverage its presence in online retail and TV programming. "With 500-plus channels, the cable operators are desperate for content to fill those channels, and some of them will be retail," McInerney said. "Ultimately, we think IPTV (web-based TV) can enable the HSN show to be a front door to other services."

Analyzing search

Who's Online and How Do You Reach Them?
John Miniati, vice president, comScore Networks Inc.
Heather Dougherty, senior e-retail analyst, Nielsen/NetRatings Inc.

While it's clear that Internet search has far surpassed other media as a means for finding products, it can be challenging to figure its impact on sales, experts said at IR2006. "People don't always convert in the same web session when searching," said John Miniati, vicepresident of comScore Networks.

In a study of consumer search behavior last year, comScore found that only 17% of search-initiated sales--mostly movie tickets and flowers--occurredduring the same web session. 20% occurred in later online sessions and 63% in latent offline purchases.

It's also important to look at both the amount of traffic as well as sales derived from search as compared to non-search activity, said Heather Dougherty, senior e-retail analyst with Nielsen/NetRatings Inc. In a study of the retail apparel market, Nielsen found that 86% of consumers arrived at a retail apparel site directly, 8% through a non-search-related referral, and only 6% through web search.

While consumers arriving directly at a site also accounted for the lion's share of sales, at 91%, search accounted for a higher share of sales than did other non-search referrals, at 9% to 3%.

The average spend for purchases, however, was less diverse across the three means of arriving at an apparel site. The average spend for direct-visitpurchases was $88, compared to $74 for non-search referrals and $72 for search-initiated visits. Search visitors tend to be more price-conscious, Dougherty said.

Getting Back to Basics

From Zero to a Billion in Four Years
Howard Tong, vice president, Newegg.com

Although Newegg Inc. spent less than 1% of its budget on marketing, it grew sales from zero to $1 billion in four years by giving visitors to its site "as close to the retail experience as possible," Howard Tong, vice president, told IR2006. "It's really just getting back to basics," Tong said. "We wanted to develop strategies to provide the best online shopping experience for our customer base."

Newegg.com, launched in January 2001, is a pure-play retailer of computers and consumer electronics. One pillar of Newegg's strategy is to know the customer, Tong told attendees. "Our core audience is the gamer," he said. "We need to know what gamers love. What would make them loyal? What would make them feel like we were their home away from home?"

Newegg used customers' input to determine which products to stock. The retailer also posted reviews,testimonials, in-depth technical descriptions, and multiple photos of the products, including accessories, software, DVDs and instruction manuals.

"For our tech audience, they want gigahertz, they want nanoseconds, milliseconds, all sorts of geeky terms," he said. "We tried to create an experience that was second to none, that really catered to them."

Tong also credits Newegg's success to its customer-service philosophy--make the customer happy no matter what, even if it entails replacing a hard drive ruined by the customer's misuse. "It's not items we're selling, but the experience we're trying to provide to our customers," he said.

Impulse e-commerce

Wireless Web: Cashing In When the Buying Impulse Strikes
Bryan Biniak, senior vice president of the AG Interactive Division, American Greetings Corp.

Because of the ubiquity of mobile phones and a massive cultural shift from formal to impulse communication, there is a growing market for electronic commerce via wireless phones and other handheld devices, says Bryan Biniak, senior vice president of the AG Interactive Division of American Greetings Corp.

"Though it represents only a small portion of the overall wireless revenue of telecommunications carriers, revenue from wireless data connectivity and services is heating up," Biniak said. He spoke June 6 in an address titled "Wireless Web: Cashing In When the Buying Impulse Strikes" at the Internet Retailer 2006 Conference & Exhibition.

AG Interactive began experimenting with mobile e-commerce three years ago, selling ring-tones, games and wallpapers. However, revenue was insufficient to support the program, and a lack of mobile telecommunications standards among carriers dampened the effort.

After the initial experiment, the company decided to focus mobile e-commerce efforts on two demographics it determined were most likely to purchase via mobile phone.

"African-Americans and Hispanics own more than one device, are first to buy new ones, use textmessaging more, and spend more on mobility," Biniak says. "And they often create what becomes mainstream in popular culture."

The company is investigating the lack of mobile telecommunications standards, knowing retailers for the time being cannot create one overarching mobile system but instead must develop different applications for varying mobile devices. It also is honing itsoverall mobile efforts, Biniak says, ready to follow where customers lead.

Content is king

Delivering Web Content That's Focused on Customer Needs
John Thompson, senior vice president and general manager, BestBuy.com

When seeking to deliver the best and most focused e-commerce site content, retailers must know their customers very, very well, says BestBuy.com.

There are numerous ways to communicate with customers, and e-retailers must draw on all of them to accumulate and analyze information on customers' wishes and needs, says John Thompson, senior vice president and general manager at BestBuy.com.

"Customers are unique, and e-retailers need to create customer databases to best understand them," Thompson advised. He spoke June 6 in an address titled "Delivering Web Content That's Focused on Customer Needs" at the Internet Retailer 2006 Conference & Exhibition. "Know your customers, listen to their needs and focus sharply on their unmet needs. In the process, make certain to stay true to your brand and not make investments you can't pay for."

Best Buy Co. Inc. operates six e-commerce sites and 930 retail stores. Multi-channel retailers like Best Buy have far more opportunities than pure-plays and catalogers to understand and address customer needs, Thompson added. "Multi-channel retailers must have very engaged employees on the front lines of all sales channels, employees who can learn a ton about shoppers' desires and in turn help mold online content."

It's a "customer-centric journey," he said, that requires retailers to stay on top of change and prioritize methods to quickly meet changing customer needs.

Getting it right

Traps to Avoid in Creating and Operating Retail Web Sites
Lauren Freedman, president, the e-tailing group Inc.
David Fry, president and CEO, Fry Inc.
Jim Okamura, senior partner, J.C. Williams Group
W. Gregory Dowling, senior analyst, JupiterResearch

Web site design should aim at "giving customers' what they want," says Lauren Freedman, president, The E-Tailing Group. A recent J.C. Williams/E-Tailing Group study found that 92% of shoppers said customer reviews are helpful. Other functions rated highly by shoppers were onsite keyword search (71%), store locator (68%), product comparison (64%) and zoom/rotate (64%).

Consumers responding to a JupiterResearch survey expressed similar opinions, says W. Gregory Dowling, senior analyst. They cited clarity, simplicity, efficiency and relevant content as important features of a retail site, second only to security. "Usability is very important," he said.

Even detailing shipping information early on in a shopper's visit to a retail site has been shown to increase conversions, said David Fry, president, Fry Inc. "Provide plenty of information early and often, and the more information, the better," he said.

Online gift registries also can boost conversion rates. "They're a huge source of revenue opportunities," Fry said. "More than 50% of registry purchases begin and end online."

In addition, by using comparison shopping engines, a retailer can bring new customers to its site, he said.

And retailers should not ignore other channels when designing web sites, said Jim Okamura, senior partner, J.C. Williams. "Multi-channel shopping behavior is now the norm," he said. That means there must be consistent content, branding and pricing across channels. "There's more to it than just saying you're a multi-channel retailer."

Taking Web Site Design and Content to the Next Level
Track A -- June 6

A new look

Redesigns: The Need for Them and Strategy Behind Them
Geoffrey Robertson, vice president of eCommerce, J.C. Whitney Inc.
Debbie Hess, Internet marketing director, Norm Thompson Outfitters

Sometimes a web site just cries out for a redesign. For auto parts cataloger J.C. Whitney, that cry came in the form of a low add-to-cart rate and online average order values $20 below catalog orders, Geoffrey Robertson, vice president of e-commerce, told IR2006 attendees. In addition, J.C. Whitney wanted to increase the spiderability of the site. "We were one of the largest in the industry but couldn't get in the top 10 positions (in search results)," he said.

For Norm Thompson Outfitters, outdated creative and site architecture, inconsistency between the site and other channels and brand direction, and outdated platform technology led to a site redesign, said Debbie Hess, Internet marketing director. After the redesign, customer satisfaction scores rose and web orders set new records, she said.

At J.C. Whitney, redesign led to an 8% increase in conversion rates and a 4% increase in average order, Robertson said.

Small changes, big results

How Small Design Changes Can Yield Big Conversion Rate Gains
Jeff Schueler, president, Usability Sciences Corp.
Lynette Montgomery, general manager of e-commerce, Levenger Co.

Even something as simple as integrating account creation with the checkout process can lift conversion rates, Jeff Schueler, president, Usability Sciences Corp., told a packed IR2006 breakout session. "People don't like to register," he said. "Make the creation of the ID and password the last step in checkout--after you have their cash."

Other changes that will increase conversions include making product images as impressive and functional as possible, providing simple product comparison functions, and making checkout obvious, Schueler said.

At Levenger Co., creating a global top header with all of the categories reduced the number of clicks to the product page and increased conversions for new buyers 43.5%, said Lynette Montgomery, general manager of e-commerce. Conversions for active buyers increased 18.3%.

A redesign of the shopping bag to make the checkout button as obvious as possible, to incorporate a box for catalog codes and to add cross-sell opportunities led to a 3.71% increase in conversions, she said.

The multi-channel challenge

Making Cross-Channel Inventory Management Work
Lisa Dyson, director of e-commerce and customerrelationship marketing, Famous Footwear
Tony Gasparich, vice president of direct sales, West Marine Inc.

For a multi-channel retailer, the web site is a window to the company, said Tony Gaspirch, vice president of direct sales, West Marine Inc. "If customers see a product online, they expect to go in the store and be able to get it," he says.

That means that brand value must transcend the physical boundaries of each channel and be unified. "Customers view us as one brand," he said.

The impact of a multi-channel retailer's web site can't be measured solely online, because one-third to one-half of customers use web sites to shop in the store, said Lisa Dyson, director of e-commerce, Famous Footwear.

Many customers decide to visit a store based on the merchandise on a retailer's site, Dyson said. Because of that, Famous Footwear expanded its search function beyond inventory to available SKUs at local stores. Between 10% and 45% of site visitors have used the shoe locator, she said.

How Puma speaks Spanish

Tapping America's Second Market—Hispanics
Craig Davidson, director of business intelligence and e-commerce, Puma North America

In weighing Puma's potential expansion into Latin America and the need for Spanish language translation, "there were huge issues we had to solve," Craig Davidson of Puma told attendees. "We couldn't start a huge bureaucracy around language if it would erode our profits."

Ultimately, Puma chose to address Spanishspeakers in U.S., but its solution provides a blueprint for later Latin American expansion. The TransMotion content management and translation system from MotionPoint Corp. combines human translation services with software to render and keep updated a Spanish version of Puma's site, without requiring Puma to go to the expense of building and maintaining it from the ground up.

Sales expectations for the North American Spanish language site were conservative, Davidson said, as Puma views the project as a cost of doing business. That said, results exceeded expectations, with Puma garnering about the same revenue from that site as from its longer-established Canadian site, he added.

Closing the deal with deep content

From Content to Customers
Andy Stevenson, senior director, Crutchfield.com

When it comes to a complex purchase such as car or consumer electronics, the sale rests on helpingcustomers through the decision process. Crutchfield.com distinguishes itself with deep content that does just that, in what Andy Stevenson, senior director of Crutchfield.com, called "a strategic imperative."

The advantages of in-depth content which Crutchfield offers in formats ranging from extensive product detail to the Crutchfield Advisor informational site, are many, Stevenson told session attendees: Such content increases site visits, adds reviews and ratings, and aids in search engine optimization as well as building customer loyalty.

Creating deep content , however, isn't easy. Crutchfield employs writers and editors who create and update the content daily. But the benefits are worth it: Visitors to the Crutchfield Advisor, for example, view 50% more pages and conduct 25% more sessions than other Crutchfield shoppers. "We've also seen higher conversions and higher average order size from these customers," he said.

Web Site Marketing: Going Beyond the Basics
Track B -- June 6

Quantity better than quality?

Vertical Search Engines: The New Way to Find Products
Patti Freeman Evans, retail analyst, Jupiter Research
David Hills, CEO, LookSmart

There is no dominant source from which online and offline shoppers seek information on retailers and products; as a result, retailers need to get their name in as many venues as is possible, Patti Freeman Evans, retail analyst at Jupiter Research, told IR2006 attendees.

"Vertical search engines are one kind of information source, and they play a great role in the shopping process," she said. "However, there are a great many search sites on which consumers will look for information while shopping. Consequently, ubiquity on vertical search engines is important for retailers."

There are more vertical search engines for retail than for any other industry, Freeman Evans said. "Though young," she added, "retail vertical search engines are far and away more advanced than others."

Additionally, while price may catch consumers' attention, it's not enough to close a deal, said David Hills, CEO of Looksmart. "Price is an eye-grabber, but people want more when querying."

Red rewards

Online Retailers Finally Discover Loyalty Programs
Gary Korotzer, vice president of marketing, RedEnvelope Inc.
Mark Goldstein, CEO, Loyalty Lab Inc.

After analysis of its e-commerce data, online and catalog retailer RedEnvelope reached a key conclusion: The number of new customer repeat purchases in the first year was too low. "We began to focus our customer loyalty efforts on the lifetime value of a customer," said Gary Korotzer, vice president of marketing.

With lifetime as opposed to short-term in mind, RedEnvelope decided to create RedBox Rewards to address the low first-year repeat purchase volume and work to increase long-term customer loyalty. The rewards program gives customers a $20 RedEnvelope gift certificate for every $200 spent. The company launched the program from Loyalty Lab Inc. targeting specific customer groups with e-mail marketing.

To date, Korotzer says, RedBox has showntremendous value as a new communication channel with customers.

Loyalty programs actually are relationships with customers, said Mark Goldstein, CEO of Loyalty Lab. "And knowing your customers will give you a competitive advantage.

Persuading peers to purchase

Social Networking: The Peer Persuasion Marketing Tool
Peter Kosciewicz, director of e-commerce, The Eastwood Co.
Chris Saito, senior director, shopping products, Yahoo Shopping

Social networking plays a critical role in how individuals succeed in meeting personal goals; the same now can be said for e-retailers, said Peter Kosciewicz, director of e-commerce at The Eastwood Co.

"Word of mouth from friends or other consumers totally trumps any message that can come from a corporate entity," Kosciewicz says. The multi-channel retailer of automotive tools and equipment operates a users forum, dubbed Shop Talk, as part of its e-commerce site.

The efficacy of conventional marketing strategies and tools is eroding significantly, Kosciewicz says, citing recent studies from Forrester Research and Datamonitor. "Social networking," he adds, "helps users cut through the increasing clutter in e-mail and on the Internet."

And with the steadily increasing popularity of general social networking sites, more online shoppers will become familiar with and attracted to the technology, says Chris Saito, senior director of shopping products at Yahoo Shopping.

Online malls help boost traffic

Making Sense of Online Shopping Malls
Jacob Hawkins, vice president of online marketing, Overstock.com
Cory Nielsen, Internet marketing manager, Woodwind and Brasswind

"Whoever said money can't buy you happiness didn't know where to go shopping." Cory Nielsen used the wit of Bo Derek to begin his IR 2006 address. Online malls can be key to boosting traffic to an e-retailer's site, said Nielsen, Internet marketing manager at Woodwind and Brasswind.

"You must know all the players; each brings something different to the table," he said. "Once you decide on which to work with, you must know how to work with each one. It's useful to have a mall account manager to help optimize your presence."

Account managers, Nielsen added, can assist an e-retailer with tracking traffic and conversion, creating marketing opportunities, and deciding how tools can help or hurt.

They also can help with understanding shoppers and customers and their online activity, said Jacob Hawkins, vice president of online marketing at Overstock.com. "You have to understand things like what they're looking for, and why they clicked on the links they did."

Soothing the jumpy consumer

Getting the Nervous Nellies to Buy Online
Gerry Sweeney, senior vice president, Visa USA
Michael Phillips, Internet strategist, Yankee Candle

With customers wanting more payment options, web retailers have to address these desires to get still-wary potential web shoppers to purchase online, said Gerry Sweeney, senior vice president at Visa USA.

"Debit cards, for example, are becoming more popular; they help shoppers better manage their budgets," Sweeney said. "But because debit cards are tied directly to people's checking and savings accounts, they're very concerned about security."

But security is not an issue unique to the web--it's a concern facing all sales channels. Nonetheless, the perception among shoppers is that security is a greater concern online.

"As a result, e-retailers must address the issue," Sweeney said. "And the best way to do so is through educating shoppers. Education can beat perception."

Nervous consumers' negative perceptions of Internet security is the core issue, said Michael Phillips, Internet strategist at Yankee Candle, which uses a security signature to ease consumers. "Getting the message out is key," he said.

Operations & Payment: Winning New Users with Excellence
Track C -- June 6

Doing DIY customer service right

Web Site Self-Service Doesn't Mean Auto-Pilot
Gustavo Garcia, director of business development, Genesys Telecommunications Laboratories
Tom Denison, director of e-commerce, Personal Creations

When it comes to online self-service, customers will come if retailers build and market their programs the right way. In a recent survey by Genesys, 73% of executives rated interactive self-service as a high or very high priority for their organization's web site, says Gustavo Garcia, director of business development. "Consumers are growing used to, and preferring, self-service applications for getting questions answered and issues resolved," Garcia said.

To encourage customers to use its latest self-service tool, a live chat box that scrolls across its customer service page, PersonalCreations.com uses incentives such as 10% off a purchase to generate a customer contact. The live chat feature also enables shoppers to initiate and control the customer service session. "This self-service program gives us new ways to cross-sell our merchandise and personalize the exchange," said Tom Denison, PersonalCreations.com director of e-commerce.

Quality, not quantity

Lost in Cyberspace: Do E-Retailers Just Ignore E-Mail?
Terry Golesworthy, president, The Customer Respect Group
Mike Faith, president, Headsets.com

E-mail doesn't have to be spam or just one more unopened message in a customer's inbox if retailers are willing to better manage their programs, Headsets.com CEO Mike Faith and The Customer Respect Group president Terry Golesworthy told the conference.

The retail industry is responsive--only 13% of all messages are ignored or go unopened by recipients, Golesworthy says. But only 25% of the e-mail thatretailers send to their customers is personalized. "Retailers are missing opportunities," Golesworthy says. To build lasting customer relationships, Headsets.com answers all e-mail within one hour, but just being responsive isn't enough, Faith says. "Quality matters even more," he says.

Headsets also sets up education programs for all service reps that include ongoing training andbetter ways to be courteous and responsive. "An auto responder that says 'Thank you for your inquiry' should not be acceptable," he says.

Satisfying the customer and the board

Growing into the Next Level E-Commerce Platform
David Brumback, director of operations for American Eagle Direct
Doug Allen, marketing director, ComputerGeeks.com

Web retailers must keep multiple channels in mind as they plan their next e-commerce platform upgrade,director of operations for American Eagle Direct David Brumback told attendees at Internet Retailer 2006. Over time American Eagle has upgraded its web and store infrastructure to support one integrated platform, which next year will help the company launch a buy-online-pickup-in-store program. "Multi-channel clients spend four times as much as single channel clients," Brumback said.

For some retailers, outsourcing an e-commerce platform upgrade can save time and money. But merchants also must show senior management how the company will achieve a solid return on investment, said ComputerGeeks.com director of marketing Doug Allen. For instance, the marketing department was able to purchase new site search and analytics applications after it demonstrated how better technology could improve sales conversions. "The improved technology helped us to increase sales by 40% in 2005," Allen said.

Outwitting the crooks

Taking Security Into Your Own Hands
Julie Fergerson, vice president of emerging technologies, Debix Inc.
Ezzie Schaff, vice president of risk management, Ice.com

Some fraud-prevention measures most commonly used by online merchants are losing their effectiveness, said Julie Fergerson, vice president of emerging technologies for Debix Inc. and a member of the board of the Merchant Risk Council.

"Merchants must continually invest in new tools," Fergerson told the IR 2006 conference, noting that as the number of merchants adopting a specific anti-fraud measure grows, the effectiveness of that tool decreases.

And online retailers need to use a suite of fraud-­prevention tools, rather than a single measure, if they want to successfully battle fraud, said Ezzie Schaff, vice president of risk management for online jewelry retailer Ice.com.

Today's crooks have easy access to information, such as addresses, card account numbers and cardvalidation codes, that is used by retailers to verify a shopper'sidentity, Schaff said. That means retailers relying on a single anti-fraud tool--for example, the Address Verification System--are vulnerable.

The un-credit cards

Alternative Payments: Moving Beyond Credit Card Only
Dan Schatt, analyst, Celent Communications
Alicia Berry, director of operations, DVDEmpire.com

The lack of alternative online payment options to credit cards is slowing the growth of e-commerce, Dan Schatt, senior analyst at Celent Communications, contends. "There are lots of consumers who just simply will not make an online purchase because they are concerned that their credit card data is going to be misused or intercepted," Schatt said.

Alternative payment options could account for 26% of all online payments by 2009, up from 14% this year, he says.

But implementing alternative payment options is not easy, said Alicia Berry, director of operations for DVD Empire. "There are all different kinds of problems and issues," she said. "You're dealing with other companies, other servers, all different kinds of people, a turnover in salespeople."

Because of the massive effort needed to introduce a new payment option, retailers need to know their customer base before starting the process, Berry said.

General Sessions
June 7

The big get bigger and more influential

Revealing & Analyzing America's 500 Largest E-Retailers
Kurt Peters, editor-in-chief, Internet Retailer
Larry Freed, president, ForeSee Results Inc.
Matt Poepsel, vice president and general manager, Gomez Inc.

The Internet's biggest retailers keep on growing, but it's the top 100 that dominate and set the standard for customer satisfaction and web site performance. The web's top 500 retailers registered 1.42 billion visitors per month in 2005. The Top 500 also rang up combined sales of $68.9 billion--63% of all U.S. Internet-based sales, Kurt Peters, editor-in-chief of Internet Retailer, told the IR2006 conference.

The Top 100 accounted for 54.5%--$59.6 billion--of all web sales in 2005, Peters said. But the Top 100 retailers also have a direct impact on other key market drivers, including customer satisfaction. ForeSee Results teamed with FGI Research to look at browser satisfaction levels among the top 40 online retailers as ranked by annual sales in the Top 500 Guide. Of the top 40 online retail sites measured by ForeSee and FGI, four scored 82 or higher on the 100-point scale; 82 is considered a superior rating. Netflix.com was the leader in browser satisfaction with an 85, followed by Amazon.com at 83 and QVC.com and Newegg.com each at 82. "Measuring satisfaction is very predictive of an online retailer's future performance," said ForeSee president Larry Freed.

NASCAR.com Superstore was the most consistent performer of all the Top 500 retailers Gomez evaluated on factors such as web site availability and response time. "They delivered the best overall performance," said Gomez vice president Matt Poepsel. "That's important because web shoppers are less willing to wait for a home page to load."

Day 2 Keynote: A multi-tiered lesson plan for e-commerce

The New Role of Market Segmentation
Seth Radwell, president, e-Scholastic.com

Scholastic Corp. is making the successful transition from a one-track content provider into a multi-faceted web retailer that's generating revenue by combining online shopping, content and an interactive community into a single business model, e-Scholastic president Seth Radwell told attendees during his second day keynote address.

Scholastic is building an online business model that provides content, as well as products and services, to e-Scholastic's primary customers: teachers, parents and students. E-Scholastic also is using what Radwell calls "Internet enablers" tocreate synergies with parents,teachers and students. For instance, e-Scholastic is using really simple syndication feeds to augment its interactive marketing program with messages that convey more than just a sales offer to the customer. "Our customer segmentations need to be leveraged to take advantage of the unique capabilities of the online environment," he said.

E-Scholastic is evolving from a subscription service into a web business that offers a unique experience to each user, he says. For example, teachers can use Scholastic.com and additional microsites to shop online for educationalmaterials, as well as download curriculum material, create interactive lesson plans and post and track individual homework assignments. "We provide each user with a customized view of the information they need," Radwell said.

Scholastic's established brand and business base offers e-Scholastic an excellent opportunity to reach an audience that includes 100,000 schools and 1.5 million teachers. "We can leverage our extraordinary reach," Radwell said.

Loyalty pays

The Many Ways the Internet Can Drive Brand Preference and Loyalty
Michael Tam, senior vice president, head of e-commerce, Borders Group Inc.
Kevin Ertell, director of interactive marketing, loyalty and CRM, Borders Group Inc.

To acquire repeat customers in a crowded market, a retailer should figure out how to earn their loyalty through valuable shopping experiences rather than by just buying their loyalty with discounts, Borders Group executives said at IR2006.

"Our mission is to be the preferred place forknowledge and entertainment," senior vice president, chiefmarketing officer and head of e-commerce Michael Tam said.

Early this year, Borders launched a rich media-enhanced online loyalty program that attracted 6 million members in its first two months. Borders attributes the quick growth in membership partly to its integration with an online gift finder that lets shoppers click through a playful tool that asks questions about the gift recipient's interests beforerecommending several CDs and DVDs. "That really got our customers excited," Tam said.

In addition, Borders designed its e-mail marketing campaigns as tools that customers can use to explore the world of books and digital media. "We want our e-mails to be eagerly anticipated as a customer service," Kevin Ertell, director of interactive marketing, said.

Borders sends out a weekly e-mail that highlights its shortlist of recommended books and videos, with links to special features intended to engage customers in multiple ways. Customers are able to select e-mailcorrespondence segmented by 31 subject categories, includinghistory, business and food, presenting them with billions ofpossible e-mail messages when those categories are mixed with a customer's specific interests, Tam said.

Brand revival

Designing for Sales: The Complete Re-Make of a Web Site
Tony Chivari, senior vice president, marketing, Spiegel Bands Inc.

There's nothing like the web for getting a fresh start, and that's exactly what the 140-year-old Spiegel brand has done over the last two years with a complete redesign of Spiegel.com. The new site has boosted average order values by 13% while decreasing home page departures by 19%, Tony Chivari, senior vice president ofmarketing, said at IR2006.

Spiegel's previous web site design had made it difficult for shoppers to find products and resulted in low conversion rates and high abandonment rates, Chivari said. "We sell outfits, but each item under the old design was purchased separately; there was no cross-selling."

By comparison, the new site offers one-click selection of complete outfits. When a shopper adds an outfit to a shopping cart, she stays on the same product page with alternate views and sizing charts.

Among other improvements, Spiegel removed clutter from its home page, deleted redundant links and re-organized categories to let shoppers navigate further into separate product groups. It also set more product images against a white background to better highlight them, and it redesigned its "Idea Resource" shopping guide with moreuseful links to product pages.

Additions to shopping carts from product pages increased by 45%, even as the number of on-site search sessions decreased by 15%, Chivari said.

An overall goal, he added, was to make shopping easy. "We follow the KISS rule," Chivari said. "Keep it simple, stupid."

A Whirlpool shopping spree

The Web's Key Role in Positioning a Manufacturer's Brand
William Kurtz, national manager of business development, Whirlpool Corp.

Like a detective tailing his prey, employees at Whirlpool Corp. followed consumers as they shopped for appliances. The pursuers, though, were spotted because the shoppers were members of focus groups Whirlpool chose for a field trip experiment in brand positioning.

To uncover the rationale and intangible factors of how shoppers decide what to buy, the company decided to go to stores to deduce why consumers purchase certain products. The result helped Whirlpool in its effort to better position its brand across multiple saleschannels, said William Kurtz, national manager of businessdevelopment. He spoke June 7 in an address titled "The Web's Key Role in Positioning a Manufacturer's Brand" at the Internet Retailer 2006 Conference & Exhibition.

"Based on our findings we created seven shopperpersonas that helped us redesign our web site, an informational and marketing tool," Kurtz explains. "The redesign focused on the goals of these types of consumers and the tasks they perform to achieve them."

The personas include shoppers who already own an appliance from any company but want to learn more about appliances; are building a new home or want to upgrade an existing product; are distressed because they must immediately replace an old appliance; or are predisposed to buying Whirlpool but require more information.

"User-based site design and content can easilytranslate into loyalty," Kurtz says, "and that helps best position a brand."

Lessons from a pink daypack

Micro-Segmentation: The Internet Goes where Stores and Catalogs Can't Go
Brett E. Lauter, director of emerging brands, Home Depot Direct
John Bresee, president, Backcountry.com

HomeDepot is just now beginning to experiment with microsegmentation with its recently-acquired Paces Trading Co. brand, but Brett Lauter, director of emerging brands at Home Depot Direct, has seen enough mistakes in the name of microsegmentation at companies with which he was associated previously to share with attendees at the session key insights on pitfalls to avoid.

Anyone pursuing a microsegmentation approach must focus on the basics first, he said. "Front end technology is just one piece," he added. Furthermore, more segmentation is not necessarily better. Use the 80/20 rule, he advised attendees: segment out the highest-value or most important customers.

For Backountry.com, microsegmentation started to crystallize around a pink daypack. Initially focused on hard-core outdoor gear fanatics, Backcountrygradually expanded its lines to grow revenues, until the pink daypack--which was "selling like crazy," president John Bresee told attendees--made Backcountry realize the broad focus could discourage its original core audience.

Instead, Backcountry decided to pursue growth with niched sites. That's brought success and challenges, especially in operations and development. As in Backcountry's case, execution is helped by a robust infrastructure that supports all niche sites in one database. "We can target smaller markets with relatively little pain," he said.

Brave new shopping world

When TV and the Internet Merge, Web Shopping Explodes
Patrick Gates, executive vice president, Consumer Direct, Discovery Commerce
Robert P. Myers, vice president of merchandising, QVC.com

As media channels and outlets have expanded, they've changed marketing forever, Patrick Gates told session attendees. Having considerable impact is what Gates called "disruptive technologies." The Internet is the most disruptive of those, he notes, with the iPod, cell phones, and wireless computers coming up fast.

In the future, Gates said, those technologies will create more marketing opportunities. For a preview of marketing on new web-enabledtechnologies he advised attendees, "Watch what the leaders are doing--like Amazon, QVC, and Nike."

QVC's Robert Myers noted that manyretailers are wondering what approach to take on video, which isbroadening thedefinition of whatconstitutesmulti-channel retailing. QVC handles that by presenting itself uniformly acrosschannels. "We are one brand in the customer's eye," he said. "Take the approach that you are multi-channel, and how the consumer gets there is less important."

Myers added that celebrities showing merchandise live on video is simply an evolution of the earlier use of static images. Still more evolution has produced a platform in Japan that has the ability to stream live TV to and sell merchandise through mobile devices, and an interactive TV platform in the UK.

A Closer Look at Web Site Financials
Track D -- June 7

Making the sale

Conversion Rates: The Key to Profitability
Lauren Freedman, president, The E-Tailing Group Inc.

Web retailers will have to work harder and smarter if they expect to increase their sales conversion rate, Lauren Freedman, president of The E-Tailing Group, told IR2006. 21% of companies taking part in The E-Tailing Group's most recent annual merchant survey reported a sales conversion rate of between 3% and 4%. Anadditional 12% reported significantly higher conversion rates of between 8% and 15%.

But web retailers will have to work harder to diversify their merchandising strategy if they expect to convert even more browsers into buyers. They also need to invest in technology and programs that will help them better understand customer behavior. "Retaining customers has taken priority over acquisition and it's getting harder to move the needle," Freedman said. "To increase conversions, merchants need to try different tactics and then measure each tactic from an ROI and brand awareness perspective."

Follow the money

Internet Retailer Profit Survey: How Retail Sites Stack Up on the Bottom Line
Mark Brohan, director of research, Internet Retailer
Mary Brett Whitfield, senior vice president, Retail Forward

Web retailers are optimistic about their financial performance. A recent Internet Retailer survey of more than 200 web merchants reveals that 47% expect their web sales to grow by at least 30% in 2006. "Web merchants are very bullish about this year," said Mark Brohan, director of research, Internet Retailer.

The key to sustaining profitability isdeveloping a comprehensive multi-­channel strategy. "Focus on aligning the overall strategy and not in bits and bites," Mary Brett Whitfield of Retail Forward said. Whitfield cited Casual Male, which has a new multi-­channel program that enables customers to select a style and shopping coach online, create a wardrobe, then shop for the apparel in stores or at CasualMale.com. "They are focusing on profitability by making marketing more relevant," she said.

The money men

What Venture Capitalists Expect of E-Retailers
Mike Golden, president, Home Décor Products
Wayne D. Kimmel, managing partner, Eastern Technology Fund

Online retailers in search of venture capital face an uphill climb, said Mike Golden, president, Home Décor Products. Typically, venture capitalists receive thousands of proposals a year, 90% of which are rejected quickly. Only a lucky 1% to 2% of companies succeed inattracting investors, he said.

Investors are looking for companies that will rapidly increase sales and profits, Golden said. They invest for long-term capital gains, not for interest income, and want to recover their investment within three to five years, he said.

Eastern Technology Fund looks at business plans only from companies "referred to us by someone we know," said Wayne D. Kimmel, managing partner. "You need to have a reference--that's a really important point."

Key characteristics Eastern looks for are an experienced, passionate management team, a well-thought out business plan, realistic financial projections, near-term profitability, and big growth potential, he said.

The view from Wall Street

Wall Street Takes a Second Look at E-Retailing
Safa Rashtchy, managing director and senior Internet analyst, Piper Jaffray

Unless a company has highly specialized products and a low cost of operations, e-commerce players need economies of scale to succeed, Safa Rashtchy, managing director and senior Internet analyst, Piper Jaffray, told a final session at IR2006.

"E-commerce is still a very attractive market, but you need either big scale and efficiency or you really need to stand out," he said. "But it's more difficult to stand out, because search has made it very easy for people to find all types of merchants."

E-commerce is now a basic utility, and consumers have increased confidence in buying online, Rashtchy said. Shoppers also are more sophisticated, increasingly adopting comparison shopping and search and using online research with offline purchase, he said.

Piper Jaffrey estimates that the e-commerce market will reach $159 billion, excluding travel, by 2010, about 3.5% of total retail sales.

The Keys to Successful Online Merchandising
Track E -- June 7

Finding products and selling them too

Site Search's New Role: Promoting the Right Products
Beth Grimsley, e-commerce director, Beckett Media

With 4.3 million sports collectibles SKUs, the demands on site search on Beckett Media's Beckett.com are steep. Beckett's move into a new generation of site search from the solution it had used since 1999 illustrates that site search today doesn't just find products: it helps sell them, too.

Site search can go beyond showing what the shopper wants, according to Beth Grimsley, e-commercedirector, who added that Beckett.com moved to site search provided by Endeca Technologies last year. It also shows shoppers what they don't know they want yet, products with higher retail margins, and interesting content related to what they want.

The key is site search logs, Grimsley said. Mining them can reveal customer behavior, leverage a position on hot products, build more effective searchmarketingcampaigns and even help generate site content. At Beckett.com, she said, they've guided improvements that have led to a better user interface, more effectivemerchandising and an enhanced customer experience.

Standing out in a sea of chrome

Turning Rich Media into Web Riches
Kim Biggerstaff, e-marketing manager, Delta Faucet Co.
Matthew Siegel, vice president, e-retail strategy, HSN-USA

Research findings showed Delta Faucet it needed to build brand presence, or, in the words of Kim Biggerstaff, e-marketing manager, help consumers pick out the brand from competitors "in a sea of chrome." One way Delta does that is by using rich media on its brand web sites, and Delta's experience there reveals insights on how to use rich media effectively on a site.

"It validates the brand if you let consumers choose when to engage it and present it at the right time," she told e-retailers at the afternoon session. Sheconcluded, "Rich media's a valid tool today. Used correctly inpurchase intent, it drives brandawareness. Today, Internet users are ready for all rich media can offer."

Rich media on an e-commerce site is crossing the line from being a question of return on investment to a question of customer expectations of a site, said Matthew Siegel of Home Shopping Network, which uses Scene7 technology. "If we're not there now, we're really close," he said.

Making sure content persuades

The Ever-Growing Challenge of Managing Web Site Content
Noah Maffitt, director of e-commerce, Office Depot Inc.

Managing content is a complex job for e-retailers, as the online content associated with e-commerce sites and the research and purchase process keepsexpanding, Noah Maffitt, Office Depot's e-commerce director, told the afternoon session. Persuasive online content includes product detail, the product discovery process, a site's foundational content reinforcing brand and value proposition, and referral sites and user-created content the brand doesn't control.

Managing each level of content poses different questions for retailers, Maffitt said. For example, what does a customer encounter on the way to discovering a product? An e-retailer's answer to that should include customer-centric information architecture and relevant product suggestions, he said. When dealing with consumer-­generated content, Maffitt said, "You have to embrace it and get over the possibility of negative reviews. If you engage with consumers you will inspire trust."

Building on the marketing plan

10 Easy Steps to Improve Online Merchandising
Teri Hilden, director of merchandising, Wilsonsleather.com
Tom Funk, e-commerce manager, The Vermont Teddy Bear Co.

Having a solid marketing plan is the foundation at both WilsonsLeather.com and VermonTeddyBear.com, but it's implemented differently at each. At WilsonsLeather.com, the promotional strategy online coordinates with stores.

But at the multi-brand Vermont Teddy Bear Co., "Each brand benefits from different mediums," Tom Funk said. While the Teddy Bear brand depends on radio ads in local markets, flower brand Calyx and Corolla getsbetter exposure in a catalog.

Both emphasized how site real estate use affects online sales. Teri Hilden said that by featuring the right products in a standing "hot picks" area, WilsonsLeather.com has sometimes experienced 100% sell through on those items.

Both also mentioned the need to periodically review site navigation. Creating a dedicated tab for extended sizes increased sales of those sizes by 17% at WilsonsLeather.com. Funk pointed out that navigation requirements of sitesdiffer. "Sites like Amazon have really busy navigation because they need to. Yours may not need that," he said.

Taking E-Retailing to the World Market
Track F -- June 7

International opportunity and challenges

Putting the 'World' in WWW: Strategies for Selling Globally
Tamara Mendelsohn, analyst, Forrester Research Inc.
Massimiliano Benedetti, U.S. country manager, Yoox.com

While there still is work to be done and new buyers to identify and convert here at home, some web retailers are beginning to look abroad to nascent markets in Europe, Asia and Latin America, especially Brazil, to expand their customer base and increase sales, said Tamara Mendelsohn, retail analyst at Forrester Research Inc., who recently published a study on overseas web sales.

"As the growth rate of U.S. online sales begins to slow in the next five years, e-commerce sales in foreign markets, many of which are three or more years behind the United States, will grow 30% to 40%," Mendelsohn predicts. "This represents a huge opportunity for U.S. companies, who must keep their eyes peeled for opportunities."

These markets, however, present a unique set ofchallenges. According to Mendelsohn, these include:different cultures, which include language and user behavior issues; payment methods and currencyconversion; and delivery services.

A 'world famous' brand

Creating a Truly Global Market for a Global Brand
Jared Blank, CEO, tripMela.com

Jared Blank learned a lot about internationalbranding before employer Tommy Hilfiger in May dropped its e-commerce business. Blank, now CEO of travel start-up tripMela.com, offered tips for retailers seeking greater brand recognition across the globe.

"Retailers have to think big upfront after deciding to pursue international branding," Blank said. "They must carefully select countries and create detailedspecifications for each country's marketing site."

Other recommendations from Blank include:

• Manage international efforts centrally from U.S. headquarters to ensure the company's communications and branding are consistent.
• Create a site template for staff country managers to ensure branding consistency.
• Enable country managers to select content to insert into templates that best reflects the culture and habits of each country.
• Make country managers clearly prioritize site enhancements designed to improve online branding programs.

Global e-commerce standards

Designing Sites for Global Sales
John Yunker, CEO, Byte Level Research
Joshua Lau, CEO, YesAsia.com

Like the international sign for "no," the red circle with a slash, the shopping cart icon is almost a worldwide standard--most online shoppers across the globe know what it means, said John Yunker, CEO of Byte Level Research.

Such standard ways to communicate information are pivotal when designing e-commerce pages or sites for foreign shoppers, Yunker added. "40% of traffic to sites with dot-com domains comes from outside the U.S.," he said. "While e-retailers must look at site design from the users' points-of-view, there are practical standards."

Standards, according to Yunker, include: country names are better than flags; icons speak louder than words; site templates are ideal because they keep costs down and maintain strong branding; and the sweet spot for links to foreign sites is the upper right of a retailer's home page.

"Using a home page template for all sites also may be helpful when standardizing," added Joshua Lau, CEO of YesAsia.com.

Turn back time

Mastering the Subtleties of Global Sales
David Dwek, vice president of marketing, Etronics

"You should not follow our lead," David Dwek, vice president of marketing at Etronics, advised IR2006 attendees, regarding e-retailers moving into the international marketplace. "We dipped our toes in not knowing if it was best for us. Now we're in a state of flux."

Dwek says securing international fulfillment operations is critical to success, and that there are fourstrategic questions he wishes he had asked before trying international e-commerce. These are:

• How committed is the company to sellinginternationally?
• Will marketing or operations drive global sales?
• Is there a compelling reason to sell internationally?
• What exactly does "international selling" mean?

Today Dwek half-jokingly recommends a place to begin foreign efforts: "Study competitors, swallow your pride, use their methods, then take the credit," he said.

Marketing Your Web Site Workshops
Pre-conference -- June 5

Understanding search

Search Engine Marketing: The No. 1 Online Marketing Tool
Gordon Magee, Internet marketing and data analysis manager, Drs. Foster & Smith
Fredrick Marckini, CEO, iProspect.com
Georgianne K. Brown, executive vice president of marketing, BabyUniverse Inc.

Search engine marketing isn't easy but can berewarding for a retailer, says Gordon Magee, Internet marketing manager at online pets product retailer Doctors Foster & Smith. He notes that 26% of his site's sales involved search. Newcomers should outsource SEM for at least a year, he says, adding "you'll get outside advice and help with the web site and learn an enormous amount."

SEM should include both paid and natural search, and should not be limited to major engines like Google or Yahoo, says Fredrick Marckini, CEO, iProspect.com. "Not every one uses Yahoo and Google every time they search," he says.

And effective SEM is as much "an art as it is ascience," says Georgianne K. Brown, executive vice president of marketing, BabyUniverse Inc.

Staying in touch

Affiliate Marketing: The Unsung Hero of Online Marketing
Boris Wertz, COO, Abebooks.com
Steven Denton, president, LinkShare Corp.
Chris Henger, vice president, affiliate marketing, Performics Inc.

For a well-run affiliate program, e-retailers must stay in constant contact with their affiliates, said Steven Denton, president of LinkShare Corp., an affiliate management company. That contact includes keeping affiliates updated on promotions, products and the business, and closely monitoring their activities. "When you decide to have an affiliate program, you really make the decision that you're going to be the vice president of sales," Denton says.

Affiliates are a critical source of online sales forretailers, accounting for between 5% and 20% of online sales, said Chris Henger, vice president of affiliatemarketing, Performics Inc.

At Abebooks.com, affiliates play a fundamental role in marketing strategies, driving between 20% and 30% of sales. "It's extremely important as a growth factor," said Boris Wertz, COO.

Relevance the key to e-mail marketing

E-mail Marketing: The Best Way to Target Your Marketing Message
Mark Friedman, chief digital marketing officer, Warnaco
Don Zeidler, director of direct marketing, W. Atlee Burpee Co.
Matt Seeley, chief executive officer, CheetahMail

"If we don't get more relevant," Matt Seely, CEO of CheetahMail, told a packed workshop session on e-mail marketing, "we are going to see our customers go away."

Boosting e-mail relevance begins with data and audience segmentation. Besides segmentation by demographic or geographic factors, mining customer behavior on the site is fertile ground for segmenting e-mails, e-mail marketing workshop panelists said.

Routine e-mails to customers on operational matters can be used for multiple purposes. Panelists called out Coach's HTML e-mail as an example: It reinforces the brand with the right look in confirmations of orders or completed registration forms. Such e-mails can include relevant cross-sell or upsell offers, even help decrease call volume by providing needed information. Also cited were e-mail campaigns that re-market, such as J. Jill's practice of e-mailing customers who've abandoned carts with a reminder that includes a free shipping offer.

Finding products and more

Site Search: The Web's In-Store Merchandising Tool
David Patterson, Internet director, Edwin Watts Golf Inc.
Patricia Graca, manager, customer experience and web site production, HP Home & Office Store
Laurie Calvert, client relationship executive, Molecular

Site search is critical to the success of online sales, with its core function of leading shoppers to the products they seek. At Edwin Watts Golf, improving site search with a new vendor added up to dramatic gains,ultimately producing a 280% increase in unique searches and being used by an average 30% of sitevisitors every day. "It generates revenue and loyal users," David Patterson, Internet director, said.

Laurie Calvert of Molecular shared why getting search right is so important for online retailers: 20% to 40% of shoppers use search to find products, but 47% of searchers give up when they don't find what they are looking for.

Best practices emerging from site search can shrink the number of unsuccessful searches and connect shoppers more quickly with what they're after, according to Calvert. Among them, she cited the need for marketers to provide relevancy in the results, to strike a balance between the space occupied by what's on the results page and the value it delivers and to keep results pages simple.

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