Striking up the Broadband

If only Boo.com were still around. The once snazzy online apparel retailer, whose animated Ms. Boo greeted visitors with shopping tips, tried to wow shoppers with futuristic technology before dying an early death, having blown hundreds of millions of dollars on a site few consumers could appreciate.

But that was five years ago, when consumers accessed the web on dial-up connections and waited—and waited—for Ms. Boo and other such pages at other sites to load.

Today things are different. Just listen to an avatar talking head on Chrysler.com, step into the shoe configurator launched last month at Reebok International Ltd.’s RBKCustom.com, or zip through the latest “Season of Surprises” book, DVD and music CD gift finder at Borders Group Inc.’s BordersGifts.com. With more consumers using broadband connections to access the web in seconds, at a fraction of dial-up speed, retailers like these are not only wowing shoppers with new features but also showing results in higher sales and conversion rates.

“The capabilities of the Internet have never been as good as they are now,” says Michael Tam, senior vice president of marketing and the top e-commerce executive at Borders Group, noting that the Season of Surprises gift finder has boosted traffic from throughout the world to BordersGifts.com and brought a “significant uplift” in store as well as online sales. “Now we’re primed to take advantage of the Internet because of the capabilities of broadband and rich media technologies. We see the Internet now as a really important means for us to differentiate Borders going forward.”

Indeed, the broadband environment is a watershed in the evolution of the Internet that has the potential to put a gulf between leading retailers and their less innovative competition, experts say. Although there’s still a risk that retailers could push the broadband envelope too far and alienate customers with confusing or useless features, broadband and the technology it supports are offering retailers the opportunity to charge ahead of their less forward-looking rivals. “If retailers do it right, this will absolutely help them leapfrog the competition,” says Sucharita Mulpuru, senior analyst in the consumer goods and retail practice at Forrester Research Inc.

The boom in broadband

The revolution is being driven by in-home broadband Internet access: In 2005, the proportion of online households accessing the Internet via broadband reached 51% and that number will balloon to 79% within two years, according to Forrester Research, which based its findings on a survey of nearly 70,000 households for its 2005 report, The State of Consumers and Technology Benchmark.

Other projections are even higher. eMarketer Inc., using sources including the U.S. Department of Commerce and Internet access providers, figures that 50% of U.S. online households used broadband in 2004, and estimates broadband’s share at 59% in 2005 and 84% by 2008.

Researchers can differ on the actual extent of broadband, but no one doubts that it presents retailers with a new set of opportunities as well as challenges. The opportunities go beyond whiz-bang web pages featuring cutting-edge merchandising displays. Rich media applications like Gap Inc.’s new interactive “quick look” merchandising pages and shopping cart—which let shoppers expand product information or add to their carts without leaving the page they’re on—or the new engagement ring configurator on Borsheims.com may be the most noticeable effects of broadband.

But there are several other broadband-driven developments that are having an impact on marketing strategies and consumer shopping behavior as well as online merchandising. Altogether, these developments are thrusting online retailers into a new environment where they can interact with consumers in more ways and more often than most merchants had ever thought possible. “Communicating with customers on the Internet is becoming more important,” Tam says. “The spread of broadband allows us a way to communicate with them in an engaging way.”

Mainstream customers

Borders and other retailers now send e-mail marketing messages imbedded with rich media images, audio and video clips, or they stream constant product updates to consumers’ desktops through really simple syndication, or RSS. And though RSS itself doesn’t need broadband to be distributed, broadband’s always-on capability makes it more likely that RSS messages will be seen by their targeted audiences.

Retailers can no longer ignore the opportunities and challenges broadband is placing on them, experts say. Rich media and other broadband-enabled applications, they add, are no longer just extra fluff to dazzle a highly targeted group of shoppers, but, rather, are features that more than half of online consumers expect. “We used to say that these were good things to aim at a broadband customer,” says David Fry, president of web site technology and design firm Fry Inc. “Now we say these are things that most if not all customers will expect. Broadband is effectively your customer base.”

Until recently, most web sites that have been using broadband-supported technology to its fullest have been outside of the retail industry, Fry adds. “The cool stuff happening on the Internet by and large has not been happening in retail,” he says. “It’s been on Google and social networking sites like MySpace.com.” Google has its cutting-edge “Earth” and “Local” mapping services that let users scroll around the world in an unending series of map impressions, and MySpace offers access to multiple media from a single profile page of one of its members.

But more retailers are getting on board with broadband-supported features, and Fry and other site developers note that 2006 should see a more aggressive move into rich media and other technologies and strategies designed to enrich the online shopping experience and communicate with consumers more broadly and effectively.

Although many retailers are not ready to announce their plans, a common strategy in the works is to give online shopping more of the real-life experience of shopping in a store, experts say.

“We have aggressive plans to enrich our entire shopping experience, with a lot of enlivened product presentations in 2006,” says Mark Duff, director of web strategy at outdoor sports and apparel retailer Recreational Equipment Inc., which is working with Bothell, Wash.-based site developers Heck Yes Productions, whose web site, HeckYes.com, shows a demo of a backpack that can be zoomed, rotated and opened all in one movement of a computer mouse. “With 360-degree-view technologies, shoppers will be able to turn our canoes around and see the ribbing inside,” Duff says.

Coordinated shopping

When shopping for clothes in a store, notes Fry, consumers will see a display of shirts near displays of coordinated pants and sweaters, then take a bunch to a checkout stand to buy them, perhaps picking up an impulse item like a belt displayed near the cash register. Now apparel web sites designed with more innovative merchandising—enabled by software that allows retailers to display more images and information on a single page, without forcing shoppers to click and wait—will have a more store-like experience. “In apparel sites, we’ll see more wardrobe opportunities that let shoppers put several products in a contextual fashion,” Fry says.

A fourth-quarter 2005 study of 100 online merchants by The E-Tailing Group Inc. showed several year-over-year increases in the percent of deployment of rich media applications. Displaying alternate views of products showed the sharpest increase, growing to 48% from 21% (see box, p. 27).

Broadband-supported development tools like Dynamic HTML, AJAX, Rich Internet Applications and Macromedia Flash 7 are creating eye-catching new shopping features that work faster and more smoothly than anything seen before, thanks to the way they process applications. Instead of requiring a user to click an image or button on a computer screen to request an image or software process from a distant network server—causing the user to wait for the requested image or process—the new development tools and applications are designed so that most of their software processing sits in a consumer’s web browser, with partial amounts of supplementary data that can be quickly pulled from another server when necessary. That’s basically what happens when someone uses Google Earth, experts say, and the same principle applies to rotating product presentations, product configurators, and new-age shopping carts—the goal in each case to make the online shopping experience more like real life.

Joe Chung, a founder and former CEO of leading e-commerce technology provider Art Technology Group, recently founded web tools developer Allurent Inc. to do just that—building rich media applications like online shopping carts that are easier for shoppers to use as well as simpler for retailers to use as merchandising tools.

The online shopping cart is an ideal use for the latest in Internet applications, Chung says. When he was looking for a way to apply cutting-edge Rich Internet Application technology after having retired from ATG, he and his colleagues brainstormed about which industry could best benefit from an improved customer experience. “It was obvious that it was retail,” he says. “It wasn’t too much of a leap to get from the broadband revolution to online retail, where we can deliver a better customer experience for an immediate ROI.”

Indeed, the aggressive growth alone of large retailers is pushing more development of rich media, and some product suppliers are beginning to show a willingness to help foot the bill because they see the potential to sell more goods. “In some cases, product suppliers are paying for new product images because of what the new technology can do,” says Duff of REI.

The fact that many retailers have finally hit their stride in producing large profits is also driving up interest in rich Internet applications, Chung says. “Show me another industry whose top 100 players are doing $40 billion and growing 20% or more a year,” he says.

Defining a strategy

While choosing which forms of broadband-supported features to dress up a web strategy, retailers need to define how it fits into their customer-serving strategy, experts say. “You have to ask first, who’s your customer,” says Lauren Freedman, president of The E-Tailing Group. “If you have rich media, make sure it’s intriguing and easy for a shopper to use.”

BordersGifts.com, for instance, was designed to extend the atmosphere and forte of its stores into an online experience that, in turn, drives more traffic into its stores as well as its e-commerce site. With its stores known as informative places to shop, with experts on hand to suggest books and CDs, the retailer’s BordersGifts.com and its Season of Surprises gift finder were designed to offer the same—and more online. “We understand the passion people have when they read books, so we try to incorporate our ability to entertain and advise on BordersGifts.com in a spirited way,” Tam says.

The success of BordersGifts.com is crucial to Borders, which years ago forfeited a major direct e-commerce presence. Its e-commerce sales are all conducted through Amazon.com and accounted for less than 1% of Borders’ total 2004 revenue of $3.9 billion, according to the retailer’s financial statement. Indeed, analysts have criticized Borders for losing out on sales of music CDs, which industrywide are moving online but still take up valuable floor space in Borders stores.

It’s no surprise, then, that Borders put a lot of thought and effort into developing BordersGifts.com and its Season of Surprises gift finder, which sit on Borders’ own servers instead of Amazon’s—though they link to Borders.com on Amazon’s platform when a visitor wants to make an online purchase.

BordersGifts.com functions as a typical merchandising site, though with a series of changing home page photographic images to illustrate a special feature running in its stores—the pop-up story books of Robert Sabuda, for example. The biggest online differentiator for Borders, however, is its Season of Surprises gift finder, Tam says. Developed by a team of Borders’ own experts on books and music CDs, and New York site design firm Firstborn Multimedia Corp., it offers a playful, interactive tool that lets a visitor build a profile of a friend or relative based on the recipient’s interests, then receive a list of suggested books, movie DVDs and music CDs.

Spirited and engaging

“In the book, movie and music world, expectations for interesting and compelling experiences are really high, and we have to be out in front,” says Rich Fahle, associate director of creative services for Borders, who played a leading role in developing the gift finder with Firstborn Multimedia. The gift finder was designed to be both highly useful and entertaining, he says. “Season of Surprises is a useful shopping tool, what customers need, but it also helps separate us from others, because it says who we are—spirited, engaging, the things that separate us from everyone else. It says who we are as a brand.”

As confirmation of the gift finder’s success, it continues to help drive up customer activity, he adds. “We’re on track to greatly exceed last year’s traffic numbers, and we were excited about our growth last year,” Fahle said in the middle of the 2005 holiday shopping season.

IRCE 2008 Conference Multi-Media CD-ROM

An effective application like the Season of Surprises gift finder can also generate unexpected benefits, he adds. “We’re getting new traffic from all over, because when you break through the clutter with a unique application, people will share it with their friends.”

Indeed, Tam notes that the popularity of BordersGifts.com and the gift finder have resulted in unsolicited positive feedback as well as a positive impact on traffic from consumers in places as far away as Japan and Russia, where Borders has no stores but can fulfill online orders through Amazon.

In addition to new web page technology and designs, broadband is also ushering in new consumer behaviors in online shopping and in using the Internet as a research and communications tool. In the recent holiday shopping season, there was much ado about how online shopping hit most of its peaks on “Cyber Mondays,” as consumers took advantage of the speed and ease of shopping through the broadband connecting their workspace computers to the web.

Just another Monday

But the spread of broadband access from the home is spreading out those peaks, as consumers are increasing their shopping from home computers. “Cyber Monday is just another busy Monday for us,” says REI’s Duff. Like other retailers, REI is working on ways to engage customers over broader periods to capitalize on the broader online shopping window. “We want to have 60 peak days in the holiday season, not just a few,” Duff says.

Borders began a new e-mail marketing strategy last fall that will extend the interactive rich media presentations of BordersGifts.com throughout the year, Tam says. It’s e-mailing to its regular customers a Borders Short List of updates on the latest books, DVDs and music CDs, based on a customer’s known preferences, and letting them click in the e-mail message to link to online samples of book text, or activate a video or sound clip. “We’re more than trying to hawk things,” Tam says. “Our customers are hungry for information, and we’re giving them the ability to try things that are relevant to their interests.”

Broadband also has its downsides, and it can lead unprepared retailers into situations where their sites can’t handle all the heavy draws from broadband users. The more rich media attracts broadband users, the greater the stress on a site’s servers. “It’s like more thick straws taking from the same bowl of soup,” Fry says. “But it’s a solvable problem that’s totally manageable. Retailers just have to be prepared.”

That can mean more backup server capacity from providers like Akamai Technologies Inc., and access to the networks of fiber optic cables that telecom companies overproduced during the early boom days of the Internet.

No directions

In addition, retailers have to know their customers. “Most shoppers still think you have to click and wait,” Fry says. “It seems slow and bland, but it’s the way people are used to shopping online. So there has to be a paradigm shift, and there could be problems in bringing people along too rapidly. A retailer has to make sure their customers want to shop in a new way.”

A lot has to do with a retailer’s targeted audience. When Reebok launched its shoe configurator in mid-November to kick off the 2005 holiday shopping season, it discussed with its developers whether or not to present textual instructions that would guide users through the various steps of customizing running shoes.

“I raised the question, Shouldn’t we explain to people what to do?” says Andy Lloyd, vice president of marketing for Fluid Inc., the site developer that built Reebok’s new configurator. “But we did a lot of testing, and found out that Reebok’s customers didn’t need instructions.”

In fact, he adds, Reebok and Fluid figured that adding instructions would distract from the intended brand experience—something sleek and fast. “People don’t do a good job of reading instructions, and they have a superior experience figuring out on their own how to use the configurator.”

Not that RBKcustom.com is difficult to use. The beauty of new online merchandising technology is that simply moving a mouse over an image can produce additional details or alter an image, replacing older systems that would require the user to click and wait.

Cutting edge

Broadband-supported technologies are ushering in a new level of excitement that some experts say hasn’t been seen since the early days of online retailing, when sites like Boo.com pushed the envelope of technology and consumer shopping experience. Although pushing the limits can put retail sites at risk of crashing or confusing customers, it also motivates developers and site operators to continue raising the bar of performance. “It brings back the excitement, which makes it fun,” says REI’s Duff. “Can we really predict how many people will come to view our new product presentations and keep the site up and running? It’s strategizing at a new level of complexity.”

But unlike Boo.com, today’s innovative retailers expect to be in for the long term and say they’ll continue to find new and interesting ways to serve and entice customers.

Borders, for one, will continue to build on the interactive technology on BordersGifts.com to strengthen relationships with customers, says Tam. “We’re just in the foothills of what we can do,” he says, adding that next year’s gift finder will offer a whole new set of features.

“We’ll take it up a notch every year,” adds Fahle. “We want people to think, What will Borders do this year?”

paul@verticalwebmedia.com

Fun on the web

The number of online retailers capitalizing on broadband with rich, new applications grows every day. Here’s a sampling:

-- FlyPenTop.com, a unit of LeapFrog Enterprises Inc., lets shoppers try out its electronic sketching pen by using their computer mouse to draw images on its web site.

-- PlayStorm Far East Ltd.’s Playstormtoys.com uses rich media technology from Virtual Iris to let shoppers simultaneously rotate and zoom images of its toys.

-- Bass Pro Shops is using rich media from Scene7 to dynamically size images to view minute details of more than 11,000 products on BassPro.com.

-- Chrysler.com and many eBay sellers are using Avatar animated talking figures from Oddcast Inc. to explain complicated product details.

-- Borsheims.com is offering a Design Your Ring feature, built with rich media from RichFX Inc., that lets shoppers start with either a ring band, setting or stone, then match them with other pieces. With only one store in Omaha, Neb., in addition to its catalog and web site, Borsheims sees the online ring designer as an important tool for differentiating from more established online jewelry retailers and attracting a wider audience, especially among young couples looking for engagement and wedding rings.

-- Musicnotes Inc. has offered online digital sheet music for several years, including a sampling tool that lets shoppers follow along as it points to all the notes in a moving display coordinated with sound of the actual music. Although its sampling tool was designed in-house as a “skinny file” so it could be used by customers on dial-up Internet access, “It took some patience on dial-up to navigate through our tens of thousands of products,” says CEO Kathleen Marsh. “Broadband has made it fast and fun.”

These boots were made for configuring

To make sure no one would mistake it for a provider of old-fashioned, clunky work boots, The Timberland Co. launched in 2004 an online configurator to let shoppers customize the popular men’s six-inch leather boot with special treatments like different colored laces and imprinted initials.

The move brought mixed results. Customer response was so strong that demand quickly amassed for the configurator to handle more sizes and styles, especially for women and children. But the configurator, built by an outside design firm for a new Timberland e-commerce platform hosted by GSI Commerce Inc., was too difficult to expand. “Then we also realized the consumer experience was too clunky, it took too long to see the results,” says Troy Brown, Timberland’s senior director of e-commerce.

So in 2005 Timberland launched a new configurator built on the latest version of Macromedia Flash and designed by Fluid Inc. for the same GSI platform. Brown says he couldn’t be happier. Not only does the new configurator handle seven boot styles, but six of them are routinely among Timberland.com’s top 10 sellers. Conversion rates for visits to the configurator have surged, even though Timberland charges about $175 for customized boots, a $30 premium, Brown says.

Launched in August, the configurator earned a complete return on investment before Christmas. “We’re getting a huge return on this, and it has gone through the roof in terms of sales,” Brown says, adding that Timberland plans to apply the configurator to several more products, including backpacks.