Groupon says its focus is on the bottom line, rather than top-line growth.
Last year, most web retailers wanted to be the next Amazon. They spent madly on advertising and promotions to achieve this goal. Not surprisingly, many web retailers, with their go-for-broke ad campaigns, got just what they were going for. This year, layoffs reached tens of thousands and hundreds of b2c web businesses closed. For next year, it’s time to consider strategies and tactics apart from ad spending to differentiate web retailers.
E-retailing has reached its first plateau. Web storefront packages have resulted in thousands of boring and similar online catalog sites. The number of new shoppers, while still increasing, is growing more slowly than in the last two years. As a result, Internet retailers must reinvent themselves. They must evolve from being a novelty act to being a necessity. The near-term focus should be on improving the efficiency of the shopping process, not on improving the visual appeal of a web site.
The key to reinventing web retailing is understanding more about why people visit a web site and why they do or do not become customers, rather than just what they click on and how long they stay. Over the next two years, best-of-breed web retailers will stop simply trying to generate awareness and try to understand and solve the problems of those for whom web shopping is a regular activity. Here are some web retailer do’s and don’ts, based on work consulting with b2c companies and the research we conducted for our book “Doing e-Business.”
Do spend money to add personality and character to your web business. You can hire a spokesperson, but it is better to build attitude into the entire site, including text, graphics and media.
Don’t spend money on elaborate customer experience technology, such as 3D.The investment is not justified for retailers who sell products with which consumers are familiar. Better to spend money on customer service or perfecting the fulfillment process. Also, customers surveyed by research firm Creative Good consistently indicate they want a simple online shopping experience.
Don’t waste money trying to patent ease-of-shopping technologies or processes. The fact that Amazon has patented its 1-Click checkout technology or that Priceline has patented its “name your own price” business model hasn’t helped these companies achieve profitability or kept their stock prices from collapsing.
Don’t try to block shopping agents or bots. A better approach is to determine the origin of these bots and work with content aggregators to ensure your store is accurately represented, rather than not being represented at all, as this technology will be used more and more over the next few years.
Take care of the customers
Do provide positive feedback to customers at every step via opt-in email. As buying online becomes less of an event, people are more likely to forget what they ordered and from whom. Status emails become more important as reminders in such cases.
Don’t spend money on customer care robots, a software tool that is growing in popularity for customer self-service. While some such systems do a decent job of simulating human interaction, there is growing evidence from Creative Good, Jupiter Media Metrix and others that customers with problems want to talk to humans.
Do measure satisfaction. According to Creative Good, satisfaction with selection, shipping, problem resolution and return handling are critical to consumer profitability. There is no substitute for asking customers (particularly those who call or email with complaints) if they are satisfied with their interaction with your store.
Don’t drive the last mile. The new crop of home delivery companies such as Kozmo, Streamline, HomeRuns and Webvan have yet to figure out an acceptable model or system for reconciling all the different products destined for the same home or street. We doubt this can be profitable in the near term.
Do implement a multi-centric business architecture. This is just a geeky way of saying that there is absolutely no reason a company cannot have two or four or 10 types of web retailing storefronts selling exactly the same product. One storefront could be straight retail, another an auction model, and the third a buyer aggregation model, like Mercata. For example, uBid and eCost are different front ends on highly similar content from the same parent company.
Do develop relationships between online and offline stores. A study in June by McKinsey and Co. found that pure-play online retailers could not be profitable without an offline partner to achieve economies of scale, build brand identity and support customer service and fulfillment. Do train in-store employees on web site content. Do establish consistent policies and prices.
Don’t offer free shipping or other loss leaders. Consumers do not mind paying shipping and are not more loyal because a company offers free shipping.
Do list your site with independent retailer rating services. Rating services serve as a referral agent (for a fee) and are an important sources of user ratings regarding experiences and opinions. Companies such as BizRate, Gomez Advisors Inc., and ePinions are some of the well-known companies to consider.
Do focus on a well-defined micromarket. Personal and micromarket web sites already generate more than 75% of the web’s aggregate page views, according to Forrester Research, so it is not surprising that some of the fastest web retailing growth is among the entrepreneurs that are establishing micromarkets affiliated with groups such as affinia, Amazon or Yahoo.
Do join one of the Micromarket Malls launched under the umbrella brands of the major portals and top-tier web retailers, such as Amazon and Yahoo. Web retailers that are not already household names should not waste their capital on massive advertising blitzes.
Do join a third party e-loyalty program, such as NetCentives, Flooz or MyPoints. Make sure that the program is targeted at exactly your audience.
What’s in the future?