Hard times call for tough choices. Online retailers want the truth about what they face and how they can survive it, and that’s what they’re going to get from speakers at the upcoming Internet Retailer Conference & Exhibition.
By Don Davis
Patrick Byrne gets right to the point: “Online retailers should be extremely defensive financially. They should look everywhere to strip capital out of their business because capital is going to be more expensive.”
The good news for e-retailers, says the Overstock.com Inc. CEO, is that they need less capital than bricks-and-mortar retailers. A key for getting through the recession for web merchants, he says, will be to leverage all the ways the Internet allows them to use technology in place of physical assets to generate sales.
“The more they’re moving electrons around rather than boxes, the better off they’re going to be.”
That’s the message Byrne will deliver in his keynote address June 16 at the Internet Retailer Conference & Exhibition in Boston. And other speakers are readying remarks along the same lines: The days of a rising e-commerce tide lifting all boats are over. Now e-retailers must be smarter, and make harder choices, if they are to survive and prosper.
At evogear.com, that’s meant refocusing on its core business, and away from experiments in social media and travel planning services, says Nathan Decker, head of e-commerce at skiing and snowboarding e-retailer evo who will be speaking on “How product ratings and reviews affect more than just sales.”
“We’ve been a high-growth company and growth tends to wash away a lot of problems that might otherwise be noticeable,” Decker says. “As we’ve slowed a little in growth, we’re shifting to a focus on the core of what we do: getting orders from customers, shipping the right thing without mistakes, inexpensively. I’m curious to see if that’s the tack other retailers are taking.”
Fastest-growing show
Decker is heading to the right place to find his e-retailing peers, because the Internet Retailer Conference & Exhibition is the largest event in e-commerce, attracting more than 5,000 attendees last year in Chicago. In fact, IRCE was named the fastest-growing conference in North America last fall by industry publication Tradeshow Week, taking the top spot among 13,000 trade shows held in the U.S. each year.
This year’s conference agenda features 91 sessions and 178 speakers. The first and last day will feature all-day workshops—search engine marketing and sessions focused on small retailers on June 15, and mobile commerce and e-mail marketing June 18.
In between there will be four concurrent tracks each day, focusing on such topics as online marketing, merchandising, web site design, fulfillment, payments, security, social networks and the economics of online retailing. There are sessions designed for multichannel as well as web-only retailers, and for catalogers and consumer goods manufacturers.
Featured speaker Mark Kuhns, vice president of e-commerce at Under Armour, will address how consumer manufacturers can use the web to tighten relationships with customers. Executives of such companies as Barneys New York, Petco and CVS will present the retail chain perspective. And Stephanie Tilenius, general manager for North America at eBay Inc., will discuss the major strategic shifts under way at the online auction giant.
In addition, IRCE will feature the largest display of e-retailing technology anywhere. Some 350 companies are expected to exhibit this year in a 130,000-square-foot exhibit hall, 30% larger than last year’s.
By the numbers
But before they decide whether and what to buy, e-retailers attending IRCE will want to know how consumers are reacting to the economic downturn, and whether there are any signs that online sales are improving.
Providing a detailed look at the latest data will be Gian Fulgoni, chairman of comScore Inc., which tracks consumer behavior online. Fulgoni, whose presentation on “Understanding Consumer Behavior in an Uncertain Economy,” follows Byrne’s keynote address, will drill down into comScore’s observations of 2 million consumers who permit comScore to track their Internet activity.
From that data, comScore was able to conclude that spending among higher-income consumers held up well during the past holiday season—online shoppers with household incomes above $100,000 spent 17% more during the season as overall web sales dropped 3%. However, affluent consumers pulled back early in 2009 as the stock market declines made them feel less wealthy, Fulgoni says, and their online spending increased only 8% in January.
Overall, e-commerce grew 2% in both January and February over a year ago, which Fulgoni considers a strong showing when overall retail sales were declining. And because online retailers have lower costs and can offer lower prices, e-commerce should gain market share from bricks-and-mortar retailers, Fulgoni says.
“It wouldn’t surprise me if when we come out of this recession that e-commerce isn’t stronger than when it went in as the economically challenging conditions make the Internet look more attractive to people,” he says.
In order to ensure they’re still in business when the recession ends, e-retailers are looking hard at costs and tailoring their web sites to cater to increasingly price-conscious shoppers. Speakers at IRCE will dig into both strategies.
Buy versus build
Drugstore.com, for example, cut its cost per order by 20% in 2008 as a result of a concerted effort begun in late 2007 to renegotiate agreements with shipping services and merchandise suppliers, says Tracy Wright, chief financial officer, who will speak on “Understanding web site financials: managing to success.”
That cost-cutting campaign helped the web-only retailer become profitable in the fourth quarter of 2008. And it put it in a position to expand its selection this year when prestige cosmetics brands, such as Bare Escentuals, which previously sold only through department stores, agreed to let Drugstore.com sell their products, Wright says.
“Those were huge wins for us,” she says. “We’re seeing prestige beauty vendors increasingly looking online to stop the decline in their growth.”
For Overstock’s Byrne, one of the big ways online retailers can reduce costs is by taking advantage of the improved software available from vendors—which reduces the need for e-retailers to build and maintain complex applications themselves.
“It used to be you had to invent practically everything in house, because most of the third-party technology was not that good,” Byrne says. “But now there’s so much good third-party technology.” As an example he points to Omniture Inc., which not only provides analytics software, but also has integrated that software with content management, site search, search marketing and other technologies from many suppliers.
Leave it to the experts
Not only are software vendors improving their technology, increasingly they’re hosting it, letting e-retailers plug into applications via the Internet, a model called software as a service, or on-demand technology. It’s an approach that’s become increasingly accepted in the past 18 months and that cost-conscious online retailers will want to consider, says Rebecca Wettemann, a vice president at Nucleus Research who will speak as part of a conference track devoted to managing technology.
She says letting vendors take full responsibility for hosting and upgrading software reduces the upfront capital investment and ongoing information technology costs for retailers.
Driving cost out of e-commerce operations is becoming essential because the Internet makes it so easy for consumers to compare prices, she adds. “Unless you have a unique product, it’s all about price and margin,” Wettemann says. “Retailers have to drive cost out of the process. Many are spending an awful lot keeping e-commerce platforms up.”
For many consumers, saving money is top of mind during the recession. And that has prompted RugSale.com to put its sale and clearance items front and center, says Paul Nangle, director of marketing, whose session—part of the workshop for smaller e-retailers—will focus on making it easy for customers to find what they want on a retail site.
RugSale.com’s left-side navigation bar features at the top links to the retailer’s deal of the day and deal of the hour, as well as to clearance items. That navigation bar also includes customer reviews, product categories and information about the rugs the e-retailer sells. Nangle recognizes that many consumers arrive at his site through search or e-mail and go directly to product or category pages—less than half come through the home page—which is why providing that navigation bar content on every page is so important.
That’s a strategy Ken Burke, chairman of e-commerce technology provider MarketLive Inc., will reinforce in his session on combining technology know-how with retail expertise. Every product page should have all the information that would persuade a consumer to buy, because that might be the only page the consumer sees, Burke says.
Even seemingly small changes can make a big difference, he says. For instance, a MarketLive study found the conversion rate is 4.6% for product pages that include a toll-free customer service number versus 1.8% for pages without that number.
For very little money, Burke says, an online retailer can implement a “light” site redesign that incorporates sure-fire winners such as more content on product pages, reassuring messages about guaranteed delivery, putting the most popular categories at the top of navigation bars and a top-10 product list in every category.
Building trust is a core strategy at Zazzle.com Inc., a web-only retailer that lets consumers customize such products as T-shirts, mugs, calendars and greeting cards. The site’s home page gives prominence to “the Zazzle promise,” which includes a guarantee that the retailer will provide a full refund if a customer is not satisfied, even on personalized items. Fewer than 1% of items are returned, although that rate briefly exceeded 1% during the recent holiday season, says Zazzle.com vice president and co-founder Jeff Beaver, who will speak with brother and partner Bobby Beaver on how small retailers can harness the power of the Internet.
Beaver says it’s more important than ever for e-retailers to build trust—and to deliver on promises. “Especially in bad times, people will be increasingly loyal because they’re not going take a chance on the new guy,” Beaver says. “So building loyalty is important.”
Looking ahead
While the focus of IRCE this year will be on nuts and bolts and the bottom line, in keeping with retailers’ focus on surviving the deep recession, several sessions will look ahead at what’s coming. That includes sessions on how to turn social networks to a retailer’s advantage, ways to best deploy rich media and the final-day workshop on mobile commerce.
After all, the recession is not going to last forever. The Internet Retailer Conference & Exhibition will provide plenty of tips on how to survive until the economy turns up, and how to take advantage of better times when they arrive.
don@verticalwebmedia.com
Click Here for the Internet Retailer 2009 Conference & Exhibition Exhibitor Showcase
