Before holiday bells ring, retailers get their sleighs ready to fly
By Paul Demery
It may have been spring to most retailers, but to apparel retailer Roots Canada Ltd., it was Christmas in May. The weekend of May 3 and 4, Roots processed more than triple its usual number of orders, close to the volume it expects to handle on peak days in this year’s holiday shopping season.
Every year, Roots runs three weekend promotions—one each in spring, summer and fall—to test how its web sites can perform under conditions similar to what it expects during the fourth quarter holiday shopping season.
“We do about a third of our sales in the last eight weeks of the calendar year,” says James Connell, director of e-commerce, digital marketing and new media. “And we find that sales ramp significantly higher online than in our stores as a percentage increase.” So it’s crucial, he adds, to make sure long before the Thanksgiving kick-off to the holiday shopping season to ensure that things like e-commerce technology, merchandising plans, fulfillment operations and employee skills are up to the job while there’s still time to shore up weaknesses.
Beating the economy
The 2008 holiday season presents a mix of challenges and opportunities that call upon e-retailers to be prepared, experts say. While a tough economy this year is likely to crimp overall holiday retail sales, research indicates that the online retailing channel will perform relatively well.
Despite a poor economic outlook heading into the 2007 holiday season, only 15% of online holiday buyers reduced their online spending because of the overall economy, while 24% said economic issues had no effect on their online spending, JupiterResearch says in a report released in April, “Holiday 2007 Postmortem: Comparing Online and Off-line Sales Growth.”
As a result, 2007 online holiday sales remained strong compared to offline sales, growing 20% over the prior year, according to Jupiter, and 19%, according to web measurement firm comScore Inc. While 2007 growth represented a slowdown from the 26% growth that comScore reported in 2006 over 2005, online holiday sales still far outpaced the 4% growth in total retail sales.
To be sure, online retailers will face increased pressure this year from an economy more pinched than a year ago, even if web sales remain strong. In addition to rising fuel costs that result in surcharges from shipping companies, online merchants will likely face consumers looking for more bargains. “Especially in the U.S., the economy is not looking great, and many consumers will turn to the web to look for value,” says Gene Alvarez, vice president and retail analyst at advisory firm Gartner Inc.
At the same time, while online retailers compete for shoppers with the latest in merchandising displays and web site functionality, consumers will demand ease and speed in online shopping. The overall challenge presents tough choices for e-retailers. They can try to attract shoppers with state-of-the-art features like online video and other interactive rich media presentations, but they may risk alienating shoppers with a poor shopping experience if new complex features trip up busy holiday shoppers looking for a fast checkout.
“Interactive Web 2.0 technology is taking on more prominence, but succeeding in the holidays is really about letting shoppers find products and check out quickly,” says Rob Garf, vice president of retail strategies at research and advisory firm AMR Research Inc. “So it’s vital that retailers ensure that pages load reliably and test their inventory management system to ensure that what appears on their web site is actually available and doesn’t result in a canceled order. Busy holiday shoppers won’t put up with a canceled order and will probably find someplace else to shop.”
Quick fixes
Planning for each year’s peak holiday shopping season is never-ending, as most retailers try to learn what went right or wrong after closing out one season to better plan for the next. Although long-range, ongoing plans may include major web site upgrades and changes in retailing strategies, there are also many things merchants can do throughout the first 10 months of the year to maximize business in the final two.
Holiday season preparation strategies for online retailers fall into two general categories: long-term projects for upgrading infrastructure, site design, shopping features and customer service levels; and more short-term marketing, merchandising and customer service projects, which may be subsets of longer ones, that retailers should consider in the last few months leading to the holiday season and even throughout the season, experts say.
Among the relatively quick fixes and upgrades that can have the biggest effect on engaging and converting holiday shoppers, according to analysts and retailers, are:
Deploying product-comparison tools to help shoppers decide what to buy, especially in consumer electronics and other products with multiple specifications that consumers often like to compare. “These can be invaluable in helping shoppers decide how much to spend,” Alvarez says. Most retailers could deploy a product-comparison tool within 90 days, he adds.
Updating an online store locator to ensure it is accurate. Although the ideal is a system that automatically updates store data as retailers close stores and open new ones, retailers should at least manually check and update store locators just before the Thanksgiving weekend.
Deploying a customer ratings and reviews application, a process that can take about 90 days, Alvarez says. Although it can take much longer than 90 days to get a system populated with a large amount of content, any customer-generated content can help win over other shoppers, and the holiday season is an ideal time to attract content, he adds. Moreover, products rated highly by customers have return rates 26% lower than those of unrated products, says Fiona Dias, executive vice president of partner strategy and marketing for e-commerce technology and services provider GSI Commerce Inc.
Offering gift finders that recommend gifts. These typically produce higher average order values, Dias says.
Planning a gift card program. Although these are most effective during the last days of the holiday shopping season as shoppers run out of specific ideas for gifts, retailers should begin promoting them in September to make early shoppers aware of them, says Ken Burke, chairman and founder of e-commerce platform provider MarketLive Inc.
Testing more effective search marketing strategies. As Roots and other retailers say they expect lower ROI from paid search while emphasizing more natural search, Burke advises retailers to tie search marketing efforts to limited time offers to create urgency.
Retailers should also coordinate online marketing with offline marketing and merchandising, Dias says. Multi-channel retailer Dick’s Sporting Goods, a GSI client, for instance, generated 60% more revenue through e-mail in 2007 over 2006 by coordinating promotions with store activity as well as by promoting the online channel when stores were closed. Dick’s generated an 80% lift in revenue from a catalog-style e-mail design, and its most effective e-mail overall was its Thanksgiving Day after-hours sale, Dias says.
Low-hanging fruit
Other short-term fixes can stem from a careful review of operations. Roots, for example, routinely monitors logs of customer service calls during the peak shopping season—a tedious job, but one ripe with information on how to improve service, Connell says.
Spending one hour per week to review tapes of customer calls and e-mails into its contact center, Roots found that during a recent shopping season some people didn’t receive packages delivered to their apartment buildings because the delivery driver did not know how to buzz them from the lobby. Packages were either left in the lobby, where they could become misplaced or stolen, or returned to the retailer. “There was a fairly small incidence of this, but it was significant enough to increase our cost of shipping and hurt our record of on-time delivery,” Connell says.
Roots redesigned its checkout page with a clearly marked window for entering an apartment buzzer identification. It also started sending more orders in flexible packages after realizing that many recipients couldn’t receive larger cardboard packages in their mailboxes—a move that also saved it packaging and shipping costs.
Accurate inventory
Retailers can also take steps as late as summer to ensure accurate presentation on sites of available inventory. While one of the biggest challenges every year is deciding which hot-sellers to build up in inventory, retailers should take steps in mid-year to ensure an uninterrupted flow of goods as hot stocks dwindle, experts say.
“A traditional holiday season challenge is figuring what products will be hot, but it’s also a challenge for online retailers to continually make recommendations,” Alvarez says. “Their recommendation engines must be dynamic enough so that when they sell out of one recommended product they can immediately offer something else.”
A retailer selling a popular product like Apple Inc.’s iPod Nano media player, for instance, should configure site search and navigation and cross-selling engines to present the most popular alternatives in case a run on the Nano depletes inventory.
At the same time, retailers should consider arranging extra drop-shipping contracts with suppliers as a way to back up inventory of popular products kept in a retailer’s own distribution center, says Kasey Lobaugh, direct-to-consumer practice leader at consulting firm Deloitte LLP. “Margins may be lower this way, but it’s better than disappointing shoppers,” he says.
Long-term projects
Managing product inventory as well as the web site infrastructure that sells it, of course, also takes long-term projects that retailers must address on an ongoing basis to ensure a quality experience for holiday shoppers.
“We have to make sure especially during the holiday season to deliver on a promise that whatever data we put on a site, like product specs and inventory status, is 100% accurate,” says Patrick Colletta, director of e-commerce for computer products retailer PC Universe Inc. “But keeping accurate and up-to-date inventory with 300,000 items is quite a challenge.”
Most major upgrades to infrastructure should begin in January, if not in the prior year, be fully tested by August and be ready to go live in September. “Retailers should use the back-to-school season as a test of any major upgrades before the holiday season,” AMR’s Garf says.
PC Universe works throughout the year with content delivery network Internap Network Services Corp. to ensure web servers are operating properly and supporting quick page loads and pulls of information from product databases. “We make sure that whatever technology we’re developing throughout the year is working at optimal levels,” Colletta says.
The retailer also drills down into critical applications like checkout. Working with AlertSite, which tests e-commerce applications, it can simulate typical shopping cart clickstream experiences of customers logging onto its site from multiple locations. “If anything fails during any step of a checkout transaction—for example, if an error page appears or information can’t be added to a billing address form—AlertSite notifies us via e-mail and text messages to our cell phones,” Colletta says. “We do this to make sure we deliver on our promise of a good shopping experience.”
Checking usability
PC Universe uses the Internap and AlertSite services throughout the year. It will also commission a web site usability specialist like LeftClick once every year or two to see if its online shopping features offer the kind of experience customers want. In the first half of last year, for example, it determined it needed a more user-friendly checkout. After a series of A/B tests, it went with a simpler though multi-page design that led to increases in conversion rates and average order values for the 2007 holiday shopping season, Colletta says.
At Zappos.com Inc., which plans to launch a redesigned site in time for this year’s fourth quarter, an in-house team of software developers plans months and even years ahead of time to prepare for the holiday seasons, says Brent Crowley, director of software and technology development. “After every holiday season we look back to see what went well and what didn’t,” he says. “But we have to be careful with upgrades, and we do a lot of analysis up front.”
In preparation for this year’s new site, currently in beta version at zeta.zappos.com, Zappos started developing an open-source MySQL database system for improved data flow among product databases and a more effective site search feature. Although the new site wasn’t scheduled to launch until holiday season ’08, Zappos started working on the new site and MySQL project in July 2007. It halted the project last fall to get through the holiday season, picking it up again in February. “We figured site search would be our biggest bottleneck on the new site, and after the 2007 holiday season we confirmed that we needed new search,” Crowley says.
Managing expectations
As Zappos and other retailers realize, succeeding in the peak holiday season has a lot to do with meeting if not exceeding customer expectations in service as well as product quality. Careful planning of technology projects is one thing, but managing customer expectations can be quite another.
Zappos altered its fulfillment processes as well as its web site a couple of years ago to upgrade its free-shipping program to promise free overnight shipping on both orders and returns, which supported its emphasis on customer service. But it won’t offer free overnight shipping in the ’08 holiday season because when shoppers expect it upfront, surveys have shown they don’t appreciate it as much as when orders arrived sooner than expected. So Zappos has returned to its former policy of promising free general shipping, but automatically upgrading it to overnight at no charge. The policy supports a strategy at 9-year-old Zappos, which expects to do about $1 billion this year in gross merchandise sales, to surprise customers with better than expected service.
The retailer takes a similar approach in its contact center. Zappos operates a contact center with what it calls its “customer loyalty” team of about 440 agents, which it plans to expand to 500 by October. Its expanded staff includes employees from other departments like merchandising who temporarily help manage the phones and e-mail communications during the holiday season.
Unlike some contact centers that measure agent performance by calls per hour, Zappos rates agents on how well they score among customers who rate them for their level of friendliness, says Jane Judd, senior manager of the customer loyalty team.
Going the extra mile
One way the retailer promotes friendly customer service is to help customers find shoes or other products from other retailers if Zappos doesn’t have them available. “Our agents will go to other retail web sites to find products, and call them to make sure a product is in stock,” Judd says. “It’s a very helpful strategy during the holidays. We know that eventually, even if customers don’t buy from us this time, they’ll come back to us first the next time. It’s all about the service. Customers tell us they can’t believe we took the time to help them find their shoes.”
Retailers can also improve customer service during peak holiday periods by learning from how they performed under peak call loads in prior seasons. Tableware e-retailer Replacements Ltd. uses a web-enabled contact center management system from eGain Communications Corp. that lets it check how it handled past call volumes. “We can look at volumes of customer communications from last year’s holiday season by time of day or week, and assess response times and service levels to see if we met our goals,” Jack Whitley, senior vice president of e-commerce at Replacements, says.
The new system enables Replacements to track each customer communication, route it to multiple agents if necessary, and build a database of answers to common questions that support automated e-mail replies for many inquiries. As the average number of monthly visits to Replacements.com has more than doubled in recent years to 2.5 million from 1 million, the eGain system has enabled Replacements to operate with about 19 customer service agents instead of 40, Whitley says.
The ability to respond quickly to customer needs, of course, is key to a successful holiday season. At Roots, its test runs of peak traffic have helped it to reconfigure a home page design that had rotated several large images for multiple product categories. Although Connell and his team thought the images looked great, they caused page loading problems for some visitors. “We scaled them back, reduced the download time, and improved conversion rates,” he says.
paul@verticalwebmedia.com
