Lose the Floor Plan

By dint of long experience, the rules of retail merchandising are now an open book: Put the season’s best prospects at the front of the store, flag promotions and hot prices in prominent places that invite traffic, and group complementary merchandise together for cross-selling and up-selling.

Move from bricks and mortar into to the virtual store, however, and merchandising takes on new dimensions. The store’s departments, aisles and shelves become the web site’s sections, pages and links. And they’re connected not by a floor plan that guarantees shoppers will walk past end-decks and featured merchandise, but by multiple paths shoppers can jump to or from at whim.

In-store browsing becomes clickstream data, the online equivalent of tracking how a shopper considers and selects merchandise. The web’s ability to record shoppers’ every move through the site provides a potential gold mine of information on how customers like to shop—if merchants can figure out how to extract the data and shape it into effective business decisions.

“The trick with online merchandising is that it’s much more chaotic than in a physical store,” says Jonathan Heller, vice president of strategy for DoubleClick Inc. “There are so many more ways you can reach a product.”

But while they’re still learning about what makes merchandising work on the web, retailers are today already far beyond their efforts of just a few years ago. The leaders have long since dumped earlier thinking in which they attempted to translate catalog or store experience directly into the online medium, designing web sites that mimicked stores, for example, with illustrated “front doors” at the point of entry and sections depicted as “rooms.”

“There’s been a dramatic change in how effective merchandising is online,” says Petra Schindler Carter, director of consulting services for systems integrator Fry Multimedia Inc., which counts among its retail clients Eddie Bauer, Brookstone and Godiva Chocolates. “We’ve seen a lot of transition from initial experimentation with web sites as a virtual catalog or a virtual infrastructure similar to a store to something that has its own rules and mandates.”

Among those rules and mandates are a few that bear out lessons learned in offline merchandising. The higher the item is on a page, for example, the more exposure it will receive. While that’s not news to advertisers in the print medium, the web can quantify shoppers’ response as never before. As a result, retailers such as The Sharper Image are building online product presentation into an increasingly precise science; for example, tracking and comparing the click-through performance of each position in the 12 thumbnails that anchor its home page and using the data to inform online merchandising decisions.

And, as is the case with catalog covers, what constitutes the best use of prime home page real estate is an ongoing debate among merchants. Some, like Sharper Image, put the potential best-sellers front and center, while others such as Territory Ahead give the more prominent placement to beauty shots that enhance brand image. Experts say there’s no universal role and that the right course of action varies from site to site depending on the brand.

Sometimes, simple works

“For the most part, there are product shots on retailers’ home pages today,” says Bridget Fahrland, Fry’s executive creative director. “They’re successful in selling not just those products, but in showing the breadth of the site’s merchandise and in identifying key categories within it.”

Yet Fry’s site design for Crate & Barrel had just one product image on the front page, along with some mood copy. It was a departure from the look of other e-commerce sites, but right for Crate & Barrel, she says. “Their brand is very much about simplicity and boldness, and the page really carried it across,” says Fahrland. Other retailers such as Brookstone strike a balance; limiting home page product shots to just a few. That leaves room for the photos to be large enough to serve as not just product images but mood imagery as well.

Whether merchants go with a single product shot or page full of images, however, they’ve learned that online, what’s featured on the front page must be directly linked to the opportunity to buy. “Our numbers show that featured products on the home page have incredible lift, so if you’re spending a lot of effort to make the home page alluring, then capitalize on it,” Carter says.

For a long time, she adds, client Godiva used its front page primarily for branding, featuring an image such as a beauty shot of a single chocolate box. But usability testing showed that shoppers who liked that image wanted to find and buy the product. “Now, though Godiva still uses the home page for that beautiful branding, there’s always a clear way to get to that offer or item in the site or the item shown is clickable,” she says.

Successful online merchandising is about more than the product images on the home page. The web’s interactive capacities offer merchandising opportunities unique to the channel for merchants who want to take advantage of them. Near real-time feedback from the site lets merchants re-merchandise online with corresponding speed, as opposed to the longer cycles of store and catalog.

Multi-channel car and home audio and video system retailer Crutchfield Corp. tracks sales figures daily and re-merchandises on its web site weekly. “We try to put the best sellers where people will see them most,” says Alan Rimm-Kaufman, vice president of marketing. “We find things that are closing well but not getting a lot of traffic and put them where they will get more traffic. Conversely, if something we’ve placed prominently is getting a lot of impressions by virtue of being on the home page but isn’t closing well, then it shouldn’t have that space.”

Search as a merchandising tool

Yet some experts argue that the nature of the online environment makes placement less of an issue on the web than in print media or in stores, at least for some merchandising activities. Fry’s research shows that bargain lovers behave similarly online and offline, hunting down promotional messages regardless of where they’re located on a page in the same way they’ll search out promotions in catalogs or stores. “Some retailers have experimented with outlet and clearance areas on their site, and even in cases where the area is not labeled prominently shoppers find it,” Carter says. “That indicates that shoppers do read, they do scan, and they do respond from a click perspective favorably to words over images in some cases, depending on the impact of the message.”

And the impact is highly subjective. “If a woman is going to a site to shop for herself, men’s khakis aren’t going to interest her even if they are in a large image in the center of the page,” points out Fahrland, Fry’s executive creative director. “So to some degree, you can say that users will click on what they came for, whatever it is. Placement is almost less important on the web than in print because so much of what users see on the web is driven by what they are looking for.”

That makes on-site search one of the most important merchandising tools for online merchants. Product presentation as driven by site search remains, to a large extent, an activity unilaterally controlled by the shopper. So now, merchants are exploring ways to weave more merchandising right into the search function.

Crutchfield has for three years offered a “What fits my car” feature that filters search results to show shoppers only the audio components that will fit their particular car, based on information the shopper has provided on the make, year and model. The feature is powered by a proprietary database of more than 3,000 cars that Crutchfield has built up over the years, by measuring the relevant dimensions of new cars at dealerships and combing junkyards for older models. Now, with a well-developed knowledge base about not only what fits but what works best in each car for the home audio installer and what other elements are needed for installation, Crutchfield will use the information in a recommendation engine it hopes to launch on the site later this year.

Guide to E-Commerce Technology

“Today, when the site recognizes your car, we just make it harder for you to select a component that we know won’t fit your car. That’s a narrowing process. The new feature will go beyond telling the user what will fit to say that because he is driving Model X, here’s the system that’s the most popular, and here are the things that go with it,” Rimm-Kaufman says. “Rather than just helping shoppers avoid the pitfalls of the wrong selection, it will present stronger recommendations.”

Personalized merchandising

Personalization is directing more online merchandising as increasingly sophisticated technology evolves to support segment-specific and even customer-specific offers, based on both purchase history and data supplied by the shopper. Vendor Art Technology Group Inc. offers software solutions and services that build customer profiles based on implicit personalization, that is, a customer’s shopping behavior, and explicit personalization, information supplied by registered customers. Several ATG clients have gone live with the company’s personalization technology within the last year, and the roster includes retailers such as J. Crew, Nieman Marcus and Best Buy.

Hunting and fishing gear retailer Cabela’s Inc. attributes much of a 60% lift in web site sales last Christmas to ATG’s Commerce personalization product, which allowed it to change merchandising on the site to coincide with the preferences and purchase history of individual registered shoppers. Now Cabela’s is working with ATG to take it to the next level: the creation of a personalized navigation bar for registered users. If a shopper wants information on camping equipment, for instance, but has registered no interest in guns or hunting gear, only the relevant product catalogs will be listed on his personal navigation bar.

“The technology is supporting online merchandising, which is all about allowing the customer to quickly and easily navigate and get access to the items they want,” says Scott Todaro, product marketing manger for ATG Commerce.

Online retailers have depended on the accumulated experience of their merchandisers to present products effectively. Now they are getting a hand from a new generation of analytic technology that pinpoints online shoppers’ behavior with a new level of precision to inform better merchandising decisions.

DoubleClick recently launched a tool for web merchants that will feature analytic solutions in four modules, one specifically targeting the measurement of merchandising effectiveness online. “To run an e-commerce business, you need to go beyond the basics such as conversion rate and top-selling products to find out not just what is happening on your site, but why,” says Heller. “If you’ve got a top-selling product, you want to know is it the product itself that is appealing, its position on the page, its price? We try to isolate what’s behind the conversion rate for a product so retailers know what to work on to improve it.”

DoubleClick’s merchandising effectiveness tool, now in use at the web sites of beta testers Crate & Barrel, J. Jill and Flax Art & Design, tells merchants which products are selling best to which customer segments, which sections of a site are generating the best returns, why and when shoppers abandon carts and average order size or number of items by customer segment. In combination with other elements of the company’s SiteAdvance suite, the tool pulls the data needed to make decisions on changing campaigns or product presentation out of its usual repository in the IT department and puts it directly into the hands of merchants.

Closer cross-sell

The tool reports data that identify key business questions about site performance; the answers guide merchandising decisions on the sites. “One of our beta testers (not disclosed) always had a large product image in a particular place on the site, and the company wondered if it was working for them in that space,” Heller says. “Our answer was, not really. It was generating incremental sales of the product, but analysis showed that the vast majority of sales of this product were coming from people who found it by site search or in the product category section. The special promotion placement wasn’t doing much. So the business decision became, is this the right product for that placement?”

The same retailer wanted to know if a cross-sell on its site was effective. The tool showed that although some shoppers followed the link from the main product to the cross-sell, the numbers weren’t very high. Since the cross-sell display was not located near the main product display, the data raised the question of whether a closer link between the main product and the cross-sell would make the cross sell more effective.

Web site analytics can slice and dice customers’ clickstream behavior in enormous detail, answering a near-infinite number of questions that could theoretically drive the same number of online merchandising decisions. If an item is clicked often but carted infrequently, for example, it may mean it’s too expensive. Should the merchant drop the price or move it to less valuable real estate? Is the click-to-buy ratio for an item high when shoppers find it by site search, but low when they find the same item in summer specials? That could suggest the item’s strongest market is really among those already searching for it, and that other items are better suited to the impulse-buy mentality of special promotions.

With all the possibilities, merchants with new access to information on shoppers’ on-site response could re-merchandise on-site every day or even every hour. But as a regular occurrence, experts say, that’s counterproductive—not to mention a drain on staff resources. “The danger of too much data is wasting time on stuff that’s not a big deal,” Heller says.

A few questions

To help retail clients prioritize merchandising decisions and use data selectively, Heller advises them to start by making changes at the segment level rather than at the individual level. One client, for example, came up with a list of several dozen business questions for DoubleClick’s analytics tool. To narrow the field, DoubleClick ranked the questions by significance of impact. An initial analysis showed that one question, for instance, involved a situation that would have an impact on about 10% of the site’s revenues and 14% of its traffic. “That was a big one, so we put it at the top of the list,” says Heller. “We found that another question would affect about 1% of its revenue and about 0.5% of its traffic, so that went to the bottom of the list.”

Heller advises clients looking to prioritize the use of analytics to improve customer experience on sites to look at particular sections of the site to determine whether they are generating the desired revenue, then decide if the section could generate more revenue with a different treatment. They can next look at different audience segments, seeing if shoppers are following the path toward completion of an intended act, such as making a purchase, and consider alterations there. Another key way for retailers to use analytics is to identify the top most-browsed products that aren’t being purchased, which may suggest that pricing changes or promotions are needed to draw customers more effectively.

Retailers have always known that effective merchandising is merchandising that speaks immediately to the need of customers. The challenge isn’t so different online, but web speed gives a new definition to the term “immediate,” and it requires that merchants learn a new language and master a new tool set to be effective.

“Retailers have been doing merchandising for hundreds of years in stores, and they do a really great job of tracking their customers around a store, setting up a plan-o-gram to make sure products are where they will move most effectively, and populating end-decks with the right items,” says Todaro. “The big thing for them now is to be able to take that same concept that they use in-store or the way they’ve laid out products in a catalog, and apply that same capability online.”

mary@verticalwebmedia.com