Eight CEOs of leading retail chains, catalogers and pure-play web stores foresee a shift in 2007 to a focus on customer service, site personalization and improved multi-channel integration. They also are wagering on some, but not all, of the very latest technologies.
By Bill Siwicki
Philip Schoonover has become a believer. “Years ago, I was in denial about Amazon.com and other pure-plays and the sales they were generating. But not anymore,” says Schoonover, chairman, president and CEO of Circuit City Stores Inc.
Now firmly ensconced in Internet retailing, Schoonover is looking to 2007 and crafting a strategy that places the web at the center of Circuit City’s success with an aggressive policy that guarantees fast pick-up for merchandise ordered online and an investment in new technology that replicates the online shopping experience in stores. “Retailers that continue to treat sales channels separately and don’t look at shopping from the customer’s point of view will lose,” Schoonover says.
In his approach to 2007, Schoonover is typical of many retail executives. Effectively interweaving a web strategy with other channels is one area that most of eight CEOs of retailers in the Internet Retailer Top 500 Guide to Retail Web Sites plan to invest in for 2007. The other areas that are grabbing the CEOs’ attention for next year are: broadening and improving customer service; increasing personalization of e-commerce sites; and implementing the latest web technologies (such as RSS feeds and online video) that best suit a retailer’s customers and product offerings.
In-store Internet
When it comes to having a presence in more than one sales channel, Circuit City, No. 17 in the Internet Retailer Top 500 Guide to Retail Web Sites, has conducted business in multiple channels for years. However, the company is in the midst of making significant changes to bring it in line with Schoonover’s forecast of the need to better integrate channels to perfect the overall shopping experience.
Circuit City, for instance, is guaranteeing that in-stock items ordered online will be available for pick-up in a store within 24 minutes of when the customer places the order. It also has launched a test program that enables sales associates and shoppers in 10 stores in Boston and 10 in Florida to use wireless, web-enabled tablet PCs to study product specifications and compare products and prices as they walk through a store. “We’re creating a new kind of in-store experience, bringing the power of web content into stores,” Schoonover says. “Customers can study the specs online while simultaneously touching products in a store.”
The merchant also has been changing its entire business structure to break down barriers between channels by investing in new or more call centers, catalogs and web-selling technologies and changing the psychology of the company and its employees. Its chairman adds that the retailer is far from done with its efforts to better weave together sales channels to best satisfy the wishes and needs of customers. “Executives must force this mindset throughout their organizations and remove obstacles constraining this strategy,” Schoonover says. “Re-examine compensation, look at company structure, identify and promote employees who understand and advance the philosophy and hold them up as a new generation of leaders. Dig in and change the mechanics of the company.”
There is no choice for retailers of any stripe: They must charge forward with a strong plan to be multi-channel in some way and effectively bind their channels together, argues Eric Faintreny, chairman and CEO of Redcats USA, No. 28 in the Internet Retailer Top 500 Guide to Retail Web Sites. The e-commerce and catalog retailer primarily sells in the fashion category but also operates in the home and gifts categories.
“All the major retail players are looking into this in one way or another. Moving forward they are obliged to rethink the organization of their company and the integration of the Internet channel with other channels and internal processes,” Faintreny says. “We are in the midst of a revolution right now, one that demands change.”
The pressure continues
While pure-play web retailers, because of their pioneering efforts in the channel and experimentation with valuable new technologies, continue to pressure multi-channel and catalog retailers to rethink strategic plans, this situation will reverse itself in the not-too-distant future, Faintreny predicts. When web sales growth slows and the channel settles a bit, he adds, the differentiator in the industry will not be which merchants have the best sites but which ones offer the best products, overall shopping experience and customer service.
Moving forward, cultivating extraordinary customer service, especially for the online channel, and using that as a marketing and customer acquisition and retention tool is a must, most of the CEOs say.
Strategically speaking, changing the primary focus from web site construction and infrastructure to developing deeper and richer relationships with customers is a very important goal for the Internet sales channel in the years ahead, says Anthony Boldin, president and CEO of AtomicPark.com, a pure-play web retailer of software and other computer products. The company is No. 207 in the Internet Retailer Top 500 Guide to Retail Web Sites.
“Most people in the industry still view e-commerce as making efficient transactions. But most e-retailers are pretty competent in this area now that they have had the resources to acquire and implement the fundamental technology they need. The bottom line: Efficiency is not the reason the Internet exists,” Boldin says. “So now that there is a solid technological foundation, to succeed e-retailers must notch up customer service efforts to the point where they can treat online shoppers the same as if they were shopping in a store. When customers are at a web store, they’re not there to rush through a transaction—they want to find the products they’re looking for.”
2007 will be a year when more Internet retailers truly realize they must turn from more conventional concerns like e-commerce platforms and learn to better stay abreast of what shoppers and customers want, says Ryan DeLuca, CEO of Bodybuilding.com, a pure-play web retailer of fitness products and services. The company is No. 163 in the Internet Retailer Top 500 Guide. “Further, retailers can so quickly get sidetracked with new technologies and such things that ultimately are not as important as serving the customer,” he says. “Executives can lose focus very easily. The whole point of what we do is to provide customers with desirable products and services.”
Everything is secondary to that, DeLuca says. “Web analytics, testing Page A vs. Page B, search marketing—these kinds of things are important, but it’s just looking at numbers on a screen as opposed to better understanding the kinds of people visiting your site,” he says. “The numbers can make executives lose sight of the fact that there are people out there who want things.”
Customers influence design
One pure-play Internet retailer who strongly agrees with the trend toward heightened customer service in 2007 has merged foundational web site technological issues with enhanced customer service. Shoe merchant Zappos.com Inc., No. 34 in the Top 500 Guide, lets shoppers direct the continuous tweaking of site design, allowing customers to decide the best ways to improve the e-commerce site experience as well as customer service.
“When it comes to site design, we don’t really follow the rest of the industry,” says Tony Hsieh, CEO of Zappos.com. “Our site design is based almost entirely on customer feedback. We gather this feedback via e-mail. Customers say things like, ‘It would be great if I could do this’ or ‘Give me this kind of information on the product pages.’ With site design and customer service, when enough customers ask for something we place it on our development priority list.”
Zappos.com’s method for site design enables customers to help fine-tune the design and operational style of the merchant’s e-commerce site. Another trend most of the CEOs see in 2007 is the inverse of this methodology: a rapid adoption by merchants of web site personalization techniques for customers.
To be competitive, e-retailers must aggressively pursue as much site personalization as they can, says Boldin of AtomicPark.com. “Shoppers must have a consistent and focused experience online; personalization is key to this. Similarly, e-retailers have to reduce visual clutter. There are many e-commerce sites that throw a lot of information at you, and most people can get lost. People don’t want to be advertised to, they want to shop—and in a personalized way that helps them in their hunt.”
Getting personal
Gaining a deeper respect for their community of customers, understanding precisely how the customers want to interact on web sites, then giving customers personalized information and tools to meet their wishes is what e-retailers now must do—and indeed will be doing more of in the coming year, states Chris Gorog, CEO of Napster Inc. The pure-play e-retailer, which sells digital music, wallpapers and ringtones, is No. 100 in the Internet Retailer Top 500 Guide.
He agrees with Boldin that a strategy that can aid personalization is a site design that avoids visual clutter and is based on the concept that less is more, which helps shoppers focus on the personalized information they’re being presented. “People are very busy,” Gorog adds, “and if they cannot quickly get to exactly what they want, an e-retailer really puts itself at risk of losing customers and potential customers to competitors.”
One of the factors driving the increased personalization trend is that the Internet, the most incredible customer service tool a retailer has ever had, is becoming increasingly impersonal because of challenges presented by identity theft, e-mail phishing, spam and other problems, says Maxine Clark, founder and CEB (“chief executive bear”) of multi-channel Build-A-Bear Workshop Inc., No. 400 in the Top 500 Guide. As a result, retailers must battle these menaces by making customers feel more comfortable online, she says.
And Clark asserts that personalization is a great weapon against the online menaces, as well as a tremendous tool for boosting sales. “When it comes to personalized things like product recommendations based on your shopping history, I’m like 1-800-SUCKER,” she admits. “On Amazon.com, for example, they know what I like. There remains so much potential for retailers to make online shopping much more personal, but most companies haven’t figured it out yet.”
Not just bells and whistles
Backstage technologies are the engines that drive personalization of e-commerce sites. Another trend many of the CEOs see for 2007, though, involves e-retailers more robustly using quickly evolving technologies that stand in the spotlight when the curtain rises on an e-commerce site. While some of these newer technologies to date have been considered unnecessary bells and whistles, they in fact are proving to be useful tools for many e-retailers, tools poised for widespread adoption, according to many of the CEOs.
Any retailer not implementing RSS (really simple syndication) information feeds already is behind the game, AtomicPark.com’s Boldin contends. The e-retailer offers its gamers RSS feeds and will expand its use of the technology next year. “The technology helps build connections and establish trust between shoppers and e-retailers. And an increasing number of web shoppers are asking for RSS,” he says. “What e-mail became a few years ago for e-retailing, RSS will become in the next couple years. When you can get web shoppers to sign up for your RSS feed, that clearly shows a preference, or at least serious interest, in your goods and services. And that’s a huge win.”
Next year, growth of the use of RSS feeds is going to be explosive, concurs DeLuca of Bodybuilding.com, which offers customers fitness feeds. “The next version of Microsoft Office will have RSS functionality, and the new Internet Explorer 7 has a built-in RSS reader,” he says. “These kinds of developments will make RSS much easier for the average web user and take the technology to the next level. The whole idea of the Internet is finding things you want, not someone giving you things they think you need. It’s like TiVo: Give me what I want and let me skip over the other stuff.”
E-retailers need to keep a sharp eye on RSS and ensure they understand exactly what people want from the technology, he adds. “People subscribe to RSS for content, not coupons or specials,” DeLuca says. “E-retailers need to create content that is so useful and desirable to shoppers that the shoppers are compelled to subscribe. Once they develop that relationship, they can weave in occasional coupons and specials. Retail executives, though, have to be careful so that RSS does not go the route of e-mail and become one big spam-fest.”
Fighting saturation
Faintreny at Redcats USA believes web users are saturated with information and marketing, and RSS feeds are an excellent way for web users to gain more control and e-retailers to better get their message across. “A shift from push marketing to pull marketing is on the way. The more an Internet retailer can establish itself through technologies like RSS feeds, the less they will have to push.”
Mike Faith, CEO and president of Headsets.com Inc., has faith in RSS feeds, a technology he says ultimately could be revolutionary not just for e-retailing but many other industries. The niche web retailer and cataloger, No. 389 in the Internet Retailer Top 500 Guide, plans to deploy an RSS feed in 2007.
“The downside to RSS, though, is that advertising opportunities may get marginalized,” Faith notes. “More and more content is being provided offsite, as is the case with RSS, and advertising is not going with it. But as RSS develops, we’ll see advertising embedded into content in some way. When GoTo.com came along around 1998, everyone said no one will use a search engine where companies are paying to get results. GoTo became Overture, which then was bought by Yahoo. Then Google came along and quickly followed Yahoo’s lead. Everyone said search engines with paid search programs would not last—web users would not let advertisers take over the Internet. But in this case the advertisers won, and the method has delivered better results for everyone concerned. RSS feeds will follow this same path.”
While RSS seems to have a lot of wind in its sales, podcasting, another technology that can help strengthen e-retailers’ bonds with customers and bolster marketing efforts, is receiving less than enthusiastic response from the C-suite. Many of the CEOs believe podcasting will not increase in importance in 2007 or beyond.
Podcasting as a marketing or informational tool simply will not have much of an impact in e-retailing in the next 12 to 18 months, AtomicPark.com’s Boldin predicts. “Podcasts perhaps could be used as another method for customer reviews to increase site personalization, but even something as basic as that would add labor costs because, like text customer reviews, they must be screened. It’s just too early to tell with podcasting.”
Bodybuilding.com is far ahead of the curve when it comes to using the latest technologies as both free services and content for customers as well as marketing tools for itself. The e-retailer employs podcasting as well as RSS feeds and online and mobile video content.
Unlike most e-retailers, Bodybuilding.com has deployed many podcasts. Its customers have embraced the merchant’s podcasts, portable instructional tools they can use in a gym that help them learn how to pump up muscles and stay fit. Still, DeLuca believes the use of podcasting in Internet retailing will not get much bigger than it is today, saying there is only a finite number of people interested in the technology and that it offers a limited number of applications. “Podcasting will not be on magazine covers anymore,” he says. “It’s not going to take over the world.”
The force should be with you
One technology that may just take over the e-retailing world is online video. In 2007 online video content will be well on its way to becoming an enormous force in Internet retailing, predicts AtomicPark.com’s Boldin. The company has begun exploring how it can deploy online video technology. “Today the industry in most cases has what amounts to lame product descriptions with little tiny pictures when compared with what online video can present customers,” he contends. “Online video represents a huge step in improved customer interaction. It adds to a greater look-and-feel for products being sold online, which gets customers closer to feeling like they are actually in a bricks-and-mortar store and creates more excitement about products.”
Driving increasing use of online video technology is the adoption by consumers of broadband Internet access—it’s finally reaching critical mass, DeLuca says. “In the next couple of years, virtually all Internet users will have a broadband connection. The unbelievable growth of YouTube is a perfect example. People are clamoring for online video, which requires broadband web access,” he says.
Tube tops
It comes down to keeping up with the Joneses. As the number of users of YouTube and similar sites with content that requires broadband access increases, there will be more buzz that in turn will lead more dial-up users to make the switch to broadband, DeLuca says. “It won’t be long before we laugh about the old days of web site design and access,” he says.
Applications of online video in e-retailing can be very effective in certain retail product categories, especially those where customers can benefit from an explanation, says Build-A-Bear Workshop’s Clark. The multi-channel merchant’s e-commerce site offers online video content that shows what the company’s party services are like. “In the old days you used to go into a department store to the housewares department and watch a live or videotaped demonstration on how to use a Cuisinart. Now retailers can do these demos on the web with online videos, which of course have links next to them: ‘Click here and buy.’”
Napster earlier this year decided to try its hand at online video, using the technology as a form of viral marketing. “We launched an entertainment program called Napster Girl and had a lot of success; as a result, Episode Two was just released. The program has been picked up on all the big video sites like YouTube, and that created an enormous amount of traffic for us,” CEO Gorog explains.
E-retailers who intelligently select a topic and present it in a compelling or entertaining way can be successful with this kind of application of online video, he adds. “Like anything else, it’s all about execution,” Gorog says. “There are tons and tons of videos on the web. So you have to do something special that piques interest and excites viewers in order to get the viral effect that helps boost brand awareness.”
The requirement
For e-retailers looking to succeed in the year ahead, they need to be doing “something special” in interweaving channels, enhancing customer service, increasing personalization and adopting new technologies, the CEOs say.
“Innovators always will have a leg up. And they’re the ones doing the things that increase brand power,” Gorog says. “Because competition will only be getting broader and heavier, brand power will be more important than ever. Respected and well-known brands more easily rise above the clutter. If an e-retailer can become one of the top three default brands in a product category, it will succeed and be very difficult to dislodge—assuming it continues to innovate. This is a requirement, not an option.”
bill@verticalwebmedia.com
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