E-commerce has taken on added importance for retailers during the recession. And nearly 5,000 gathered in Boston for IRCE 2009 to learn how to better leverage the web in the coming recovery.
By Don Davis
A trade show can provide a good gauge of the health of an industry. And the message delivered by the 2009 Internet Retailer Conference & Exhibition was that online retailing remains strong, despite the recession.
Nearly 5,000 attended the four-day event in Boston in June, just a hair below the attendance at last year’s pre-recession IRCE in Chicago. In a year when many trade shows were much smaller than in the past, IRCE turned some heads.
“As a frequent presenter at trade shows and conferences I was absolutely amazed at what Internet Retailer was able to achieve in Boston,” said Eric T. Peterson, founder of consulting group Web Analytics Demystified, author of a book by that name and a speaker at IRCE. “While many conferences are struggling in 2009, Internet Retailer was packed with great brands, great vendors and totally engaged participants.”
Over the four days of the conference, those participants took advantage of 91 sessions, 18% more than IRCE 2008, and heard from 173 speakers, a 20% increase from last year. Attendees garnered insights on such nuts-and-bolts topics as site navigation, handling returns and e-mail marketing as well as on such leading-edge issues as personalization, social marketing and mobile commerce.
Facing facts
To be sure, speakers made clear that the recession has impacted online retailing—and likely will for some time to come. Keynote speaker Patrick Byrne, chairman and CEO of online discount retailer Overstock.com Inc., told attendees that fresh capital will be hard to come by in the near term, and that will lead to industry consolidation.
Byrne urged attendees to cut costs, including by reducing inventory, outsourcing technology services and keeping a close eye on marketing expenses. “I wish I could take our marketing guys and staple a bookkeeper to each of them,” he said.
Gian Fulgoni, chairman of comScore Inc., which measures web activity and e-commerce, provided data showing the ongoing effect of the downturn. He noted that e-commerce grew by 1% in the first quarter of 2009, while overall retail sales were flat, meaning the web gained some share of retail sales. But online retail sales slipped 4% in May, the last month for which data was available, which Fulgoni said could be attributed to e-retailers discounting less once they had sold off excess inventory.
Fulgoni highlighted a pullback early this year in online shopping by older consumers: Those over 45 in households with income of $50,000-100,000 reduced online spending 11% in the first quarter, while those 18-44 spent 15% more online; in above-$100,000 households, spending by those 44 and under increased 8% in the first quarter, while there was no growth in purchases by those 45 and older.
“Older people are trying to rebuild wealth, they have kids going to college and they’re concerned about retirement,” Fulgoni said. “The question is: How long will it continue. If it does, we could see stagnant growth for e-commerce.”
But, even in a depressed economy, some categories of online retailers are doing better than others, pointed out Jack Love, publisher of Internet Retailer magazine, who presented data from the annual Internet Retailer Top 500 Guide that tracks the 500 leading online retailers in North America by revenue. Web-only retailers in the Top 500 increased online sales by 21% in 2008 and consumer goods manufacturers by 15%, while retail chains gained only 8% and catalogers’ web sales went up 5%, Love reported.
Manufacturers produce results
The Internet-only category was boosted by the relentless growth of Amazon.com, whose share of online retail sales grew last year to 10.8% from 8.7% in 2007. Love attributed that growth to Amazon expanding into new merchandise categories, investing in technology and maintaining its fierce competitive drive.
Manufacturers, he noted, are investing more heavily in the web as their profit margins are squeezed by giant chains like Wal-Mart Stores Inc. Manufacturers’ profit margins are higher online where they sell directly to consumers, Love observed.
Overall, Love noted, online retailing gained market share, growing 4.6% in 2008 while total retail sales went up only 1.4%. Still, that’s a far cry from the 20%-plus growth rates that online retailing had been posting for the last several years. “The easy growth is over,” Love concluded.
But, he added, “Recessions do not last forever. When it’s over, a rushing wind of e-commerce will blow through the retailing market once again. Those who have invested in technology, those who have become No. 1 at something, those who are aggressive in marketing even in a recession, will be the players who inherit this wind.”
The winds of change are already blowing, as was evident in several presentations that highlighted how e-commerce players are adapting to market conditions.
A prominent example is eBay Inc., the iconic online auction site that has reported declines in merchandise sales in recent quarters. EBay has embarked on a new strategy of building sales by providing a platform for larger retailers to dispose of excess and out-of-season inventory. “EBay is moving upmarket,” Stephanie Tilenius, senior vice president and general manager of eBay North America, told IRCE attendees in a featured address.
She described several changes meant to accommodate major retailers, including last year’s launch of eBay’s Large Merchant Services program, in collaboration with technology vendor Mercent, that makes it easier for retailers to sell large quantities on eBay. Site search has been upgraded, the fee structure revised to benefit merchants selling at fixed prices, and eBay is testing coupons and a cash-back offer and is working to resolve disputes quickly with good customers, Tilenius said.
“EBay is a company in transformation,” she said, and promised more changes in the fall.
Just as eBay is adjusting to consumers’ declining interest in online auctions, so, too, catalogers are changing their strategy as more sales move to the web. That was illustrated in a presentation by Tracy Schneider, vice president of e-commerce at CWDKids.com, who noted that the company mailed only 12.4 million catalogs last year, down from 15.6 million in 2003, and plans to reduce that number to 10 million by 2010.
She said the retailer devotes more space in its catalogs to highlighting the availability of a wider selection on its e-commerce site, and is putting more effort into segmenting customer lists, so that it mails catalogs to prime prospects.
“We’re still mailing catalogs and doing it profitably,” she said, noting that her customers include grandmothers more comfortable with writing a check than entering credit card data online. “But it’s important to know who your customers are. If you are marketing to twenty-something males, maybe you can cut out your catalog because maybe they are buying online.”
Social life
Another change that generated much discussion at the conference was how online retailers can take advantage of online shoppers’ penchant for communicating with each other online, whether through social networks, blogs, forums or writing product reviews.
Under Armour Inc., a manufacturer of sports apparel, knows the teenaged athletes it targets constantly communicate with each other through text messages, e-mail, phone and social networks, Mark Kuhns, vice president of e-commerce, said in a featured presentation. With that in mind, Under Armour tries to draw athletes to its web site, creating its own “social currency” by integrating local clinics and competitions it sponsors with web site features that allow athletes to track their progress, solicit advice from coaches and contribute to blogs.
Listen and learn
Customer reviews have become an important part of the e-commerce site of computer maker Dell Inc. “because this is the voice of the customer,” explained Stuart Wallock, Dell’s senior manager of global community and personalization. “One review won’t cut it, but 50 makes it legitimate. Don’t censor the reviews and exclude the ugly. Show it all, and this demonstrates you are listening to the customer.”
His fellow presenter, e-commerce head Nathan Decker of evogear, said his company solicits negative feedback and displays it prominently. “People seek out negative information and omission erodes trust,” said Decker, who noted evogear posts 97% of reviews submitted.
Another change wrought by the web is the ability of retailers to allow consumers to personalize thousands of products—from mugs and T-shirts to calendars and jewelry. And the founders of one of the most successful of these e-retailers of personalized goods, Zazzle.com Inc., offered attendees the secret of their success: technology.
Enabling consumers to choose from more than 3,000 products and instantly visualize how a personalized item would look has helped Zazzle grow traffic by 900% and sales by 1600% in the past four years, said Bobby and Jeff Beaver, brothers who founded the web-only retailer. They keep innovating, demonstrating for attendees their new animated Stitch Player tool that responds to user commands, showing in detail how embroidery would look as it’s added to a product.
Their session, called “How a small retailer harnesses the power of the web,” was one of many aimed at smaller web merchants, who also could attend a full-day, pre-conference workshop focused on their concerns.
Those sessions offered many tips for making fast gains at low cost. For instance, Au-Co Mai, CEO of Emitations.com, said the e-retailer generated more sales by adding “Customers also bought” recommendations on product pages, a no-cost move because it was an existing feature in her software package she hadn’t turned on before.
Her co-presenter, analyst Adele Sage of Forrester Research, advised retailers not to require shoppers to register before they get to the Buy button. “We found that 23% of shoppers abandon the cart when required to register to complete a purchase,” she said.
At a pre-conference search marketing workshop, Marissa Colwell, director of media at online hardware and appliance retailer Improvement Direct, offered 10 tips for improving natural search rankings. One tip: give each page on a site a unique title tag that helps search engines grasp a page’s focus, avoiding such tags as “untitled” or “page 1.”
In a later session on paid search, Steven Broussard, director of marketing and e-commerce at Golfballs.com Inc., illustrated the value of negative keywords that withhold a bid when certain terms appear. Golfballs.com, for instance, doesn’t want to pay for traffic from shoppers who enter such words as clearance, free or discount. Not bidding on those searches helps improve ROI, Broussard said.
Don’t go!
The day following the main conference featured two final workshops on e-mail marketing and mobile commerce.
How to use e-mail to reactivate dormant customers, a particularly important question during a recession, was addressed by Neil Kjeldsen, vice president of e-commerce at Perricone MD, a manufacturer and retailer of skin care products.
Working with e-mail service provider iPost, Perricone MD sent one-time customers e-mails offering small samples of products at a discount with free shipping; once a customer responded with two purchases, the retailer followed up with full-price offers. That e-mail tactic, combined with other marketing efforts, helped boost online sales by 40%.
But e-mails work only if customers see them, and a quick way for a retailer to be labeled a spammer by e-mail inbox guardians is to send e-mails to many inactive e-mail addresses. A customer not opening any e-mails for months could be a sign of an inactive account, said Austin Bliss, president of e-mail change-of-address and appending services company FreshAddress.
“Over 30% of your customers will change their e-mail addresses this year,” Bliss said. “Watch for inactivity.”
The Mobile Commerce Workshop on the conference’s final day registered the steady gains retailers are making in selling to consumers through the mobile phone.
A prime example is 1800Flowers.com Inc., which has been building its m-commerce capabilities since 2006, starting with marketing through text messages then creating an m-commerce site, and then apps—small programs that make use of the computing power of advanced handsets—for the Blackberry in 2008 and the iPhone this year. It all came together in a concerted mobile marketing push this Mother’s Day that resulted in a 173% increase in mobile sales over the year before, reported Kevin Ranford, director of web marketing.
“Mother’s Day gave us an opportunity to really get mobile out in front of people,” Ranford said. One new feature of the campaign: 1800Flowers.com puts its ads into mobile apps of other, non-retail companies, a tactic he predicts will become increasingly common as more marketers dive into the mobile realm.
Sears Holdings Corp., another mobile pioneer with an m-commerce site at Sears2go.com, also is leveraging the capabilities of high-tech phones like the iPhone, said Ravi Acharya, director of e-commerce. Sears has developed an app that takes advantage of the iPhone’s GPS functionality to identify the location of the user, so that, for instance, Sears can offer Chicago Cubs shirts to customers in Chicago.
While only a few dozen retailers now sell through mobile phones, m-commerce looms large in the future of direct-to-consumer retailing. And the 5,000-strong turnout at the Internet Retailer Conference & Exhibition makes clear that many e-retailers are ready to invest now so they can profit from the economic recovery on the horizon.
don@verticalwebmedia.com
Click Here for the IRCE 2009 Products & Services Guide
