What’s New?

The dot-com investment bomb of a few years ago has turned into a dot-com technology bloom. With retail and event ticket sales leaping 37% last year to $72.6 billion, many retailers who had been cautious about new approaches and new technology—especially as it relates to spending—are changing their attitudes.

Here’s one example: “We’re seeing a general resurgence in e-commerce,” says Katie Keane, vice president of IBM Corp.’s Websphere Commerce. “More companies are allocating more budget to it—and that is not just at large customers. We are seeing a lot of interest in smaller companies as e-commerce becomes a strategic priority for more people.”

Here’s another: Retailers’ interest in the marketing potential of a relatively new phenomenon known as online social networking has soared in just the last three months at technology consulting firm Molecular Inc., according to vice president Darryl Gehly. “It’s indicative of the climate,” says Gehly. “For the past two and a half years, people have not been interested in anything new—they have been concentrating on saving their careers. But things are starting to change. They are starting to explore new concepts that would give them a competitive edge.”

The openness to new technology is reflected in the latest IT spending figures from researchers and consultants Gartner Inc. Gartner’s Technology Demand Index shows that companies overspent their IT budgets in February by 5%, the first time that has happened since Gartner created the index a year ago. Companies surveyed for the index report that they are expecting to increase their IT spending by 10% this year over last. The February results indicate that that expected 10% increase will hold over the year, Gartner says.

The increase in tech spending as well as the focus on using technology to gain a competitive edge are driving what’s new in the marketplace today and even more, what’s still in the labs of technology developers focused on e-commerce. And though new developments range all the way from applications like e-mail that launches images and video dynamically to analytics that track online customer behavior to new levels, they’re generally focused on one thing. And that’s how to get even closer to whatever it is that makes the individual shopper push the buy button.

Where ‘network’ means people, not machines

Search engine marketing is in full flower, but forward-looking retailers casting about for something to augment search marketing might keep an eye on the fast-growing phenomenon of online social networking, based on Gehly’s experience at Molecular. “It’s could be a powerful medium that gives retailers another avenue besides search engine marketing. It’s a concept that leverages many of the technologies that are already out there, and it’s growing quickly,” he says.

Offline networking is nothing new, and social networking online works in much the same way. The concept is that a participant in a social network is a member of an online community to which he or she discloses personal information of potential interest to others in the network: job, interests, activities, background. A handful of technology development companies are working on or already offer software that accelerates the process of collecting that personal information online. Community members can view the profiles and contact each other over data points of mutual interest—for instance, seeking a resort recommendation from someone in the network whose profile indicates he’s a frequent traveler to Hawaii.

Typically, participants are invited into the network by someone they know and they, in turn, invite others in. That means community members seeking recommendations or information from anyone in the network are in theory only a connection or two away from actually knowing that person personally.

“The idea is that if I know you and you know someone who could provide a service or a recommendation, I’m more likely to trust your judgment than that of a complete stranger,” says Gehly. Move that into the realm of shopping—and the idea that one also may be more likely to make a purchase based on the recommendation of a friend of a friend than a stranger or an impersonal marketing approach—and the commercial potential becomes apparent.

Gehly’s own company has an internal message board on which employee users can seek or post information and recommendations. “People are turning to their friends or their social network before they turn to the yellow pages or traditional marketing,” he says. “Our feeling is this is a powerful mechanism that retailers and consumer goods manufacturers could use to help accelerate adoption of their products.”

Just how online social networks could be leveraged for that purpose is still in the conceptual stage. One Molecular client is considering aligning its classified ad program within a social network. What’s clear is that any solution would have to strike the right balance between commercial positioning and the unedited information exchange at the core of online social networks.

“Think of the reviews on eBay,” says Gehly. “If you ever use unfair selling practices, it doesn’t take long for you to be discounted.”

The new, ‘made-for-me’ market

Online retailers with the basics of product presentation in place already are looking to the next generation of imaging technology to support a growing trend in online retail: an ever-broadening range of merchandise that can be customized and ordered online, says Doug Mack, CEO of imaging technology provider Scene7. After initial forays into custom apparel on the part of leaders such as LandsEnd.com and the custom items long available at dedicated gift retailers such as PersonalCreations.com, more retailers are becoming interested in what Mack calls “made-for-me.”

“Since somebody figured out the fulfillment process of making lots of one for consumers, I see a mega trend in made-for-me items,” Mack says. “I talk to retailers every day and this is a big wave that is going to hit. The Internet is enabling it because customers can go online, have an interactive experience with the retailer, order custom goods and have it drop shipped to them.”

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To support that trend, Scene7 is developing enhanced visualization technology for broad distribution. Set to debut in the second half of the year, it will provide online shoppers with a detailed look at how their custom item will appear before they actually have to buy it. And it could be applied to let the customer visualize everything from monogrammed apparel or towels to personalized mugs, custom tailoring and more. Without such technology, Mack contends, shoppers have to guess what the custom items would look like, which dilutes the power of the offer.

Scene7 also is working on technology that supports at a cost effective price point the greater use of dynamic images in e-mail, and farther along, dynamic imaging platforms that routinely deliver multimedia sales pitches online. “Despite what the whole world is saying about spam, e-mail is very successful for our customers. But the risk is that over time, much like banner ads, e-mail will atrophy in its performance because it burns people out,” Mack says. “So the next generation of e-mail is dynamic.”

What does that look like? Mack describes a rich HTML e-mail with images and graphics customized by recipient based on shopping and browsing behavior. Images—even video—can launch right in the e-mail to grab the shopper’s attention.

“People have the capability to delete an e-mail when it’s in preview before they actually have read one word of it, but it’s almost impossible not to look at that image before you hit the delete button,” Mack says.

Put the right image in front of the right customer, overlay it graphically with a free shipping offer if the customer has been shown to respond to free shipping promotions, and you have what Mack calls “the double whammy. It’s just going to pull you in.”

The amount of content included and exactly how it’s delivered to each customer will depend on the retailer’s content strategy, but the potential is there to integrate features like clickable swatches and zoom right into the e-mail for featured products without requiring the shopper to link back to the site.

Hitting the motivation bull’s eye

What happens at the customer interface online starts behind the scenes as online marketers attempt to zero in on what will trigger a browser into becoming a buyer, based on that individual’s online history and behavior. Web analytics providers point to developing trends that will make hitting that sweet spot more critical than ever to online retailers’ success in the future.

The rise of online marketplaces such as BizRate.com, Shopping.com and PriceGrabber.com is to some extent diluting the importance of brand among online shoppers, says Chi-Hua Chien, director of marketing at web analytics provider Coremetrics Inc. “They are taking the issue of brand off the table because they all have ratings,” he says. “Because I am willing to go to any online store that gets at least four out of five stars, I will shop at Joe Blow’s electronics store online, even though in the pre-marketplace Internet world I probably would have paid $10 extra to shop at a branded store because I trust it.”

As a result, it’s increasingly important for retailers to derive maximum value from each customer interaction and extend the lifetime of those interactions as far as possible, lest they pay multiple times to bring the same customer back from a competitor. Yet capturing all a customer’s interactions with a retailer is challenging when those interactions occur across multiple channels. “They look at your site, they close the browser, they go to the call center to complete the transaction. How are you going to determine the ROI of that click-through?” says Chien.

Currently Coremetrics is working with some retailer customers to pilot a system for tracking that initial click-through to the call center, using its LIVE—lifetime individual visitor experience—profiles. One concept is to present a unique 800 number to each group of customers, depending on the action that brought them to the site. Under this scenario, when a shopper clicks through on a Google keyword, for example, the 800 number the shopper sees at the web site will be different for every interaction.

It’s not inexpensive as it requires the retailer to deploy 800 numbers dynamically, and that depends on the capabilities of its content management solution or commerce platform. And it’s not a perfect solution because it doesn’t track the purchase that the customer who researched on the web may make in the store—but that’s expected to change, too.

Chien says that while commerce transactions at stores now reside chiefly on private networks, in the future, many cash registers will shift to an IP-enabled form. That means those transactions will become web-enabled, therefore trackable by analytics products that track IP-based systems—and can be linked to the customer’s online behavior.

Already here

Some of the next generation of e-commerce tools and applications are already in limited use as they’re being tested, while even those that seem the most remote may be not more than a few years away. In fact, the technology to support the new applications in most cases already exists. Their emergence into the marketplace and into mainstream use will be a function of when technology developers figure out how to provide them at prices retailers are willing to pay, and at what point retailers figure they’ll lose competitive advantage by not putting them to use. “It’s an adoption question versus a technology question,” says Chien.

So while the constant stream of new tools and applications that marked e-commerce’s earlier days may be released more cautiously now by developers who watch the market’s readiness to accept them, it’s a safe bet that plenty are already waiting in the wings.

“One of the barriers to some of these developments was bandwidth, but now, 20 million homes are connected to broadband,” says Gehly. “That’s making it interesting.”

mary@verticalwebmedia.com