The gift concierge service that uses artificial intelligence is part of 1-800-Flowers’ technology and service strategy.
When the Super Bowl rolls around again, TV viewers will once more find the action on the field served up alongside some of the cleverest advertising ever to issue from Madison Avenue. But don’t look for many e-retailers to be shaking their pom-poms at halftime-most will leave that to portals, content providers, and other Internet companies still trolling the mass market for as many eyeballs as they can find.
The smart e-retailers, analysts say, have moved on to newer and more targeted tactics that reflect an evolved marketplace strikingly different from that of last year’s pre-shakeout high. And if they haven’t, chances are they won’t even be around for the next Super Bowl.
Where maximum exposure was once the goal, online merchants have learned that eyeballs are one thing and customers are another. And they’re learning to switch focus accordingly. “Advertising is the way to build a brand, but not necessarily the way to get people to buy,” says Rebecca Nidositko, analyst with the Boston-based Yankee Group. “Everybody knows the Pets.com sock puppet by now, but to get a Pets.com customer to go back, they need a different type of tactic and strategy. And that involves knowing the customers and marketing the right things to them, either before or after they buy.”
A new wave of users on the web and the increasing expectations of experienced users have changed the rules for e-retailers since the first shoppers started ordering online a few year ago. Despite the buzz surrounding broadband access and wireless communication, analysts say changing demographics will have a much greater impact on e-retailers than any technology changes. “Existing online merchants who designed their business models to attract early adopters will have to adjust their strategies,” says Barry Parr, director of consumer e-commerce research at IDC, a Framingham, Mass.-based research firm. “They’ll need to expand their offerings to attract lower-income households while making sure they don’t overlook the growing number of high-income households.”
Stepping back from oblivion
And Parr’s words don’t even address the impact of the biggest earthquake to shake the e-retail marketplace in the past several months. The capital sources whose wide-open coffers sent e-retailers on spending sprees have largely clamped the lid shut, looking for returns on existing investments. That means web merchants who staffed up and spent big in the expectation they’d go back for additional funding won’t be doing so.
For most of the merchants present at the beginning of Internet shopping and still here today-and those who aspire to be here tomorrow-the takeaway is clear: the ball game has changed, and their approach to the marketplace must change with it. Like the size-38 man who insists on struggling into the size-34 pants that he wore in college, e-retailers must face up to the fact that there’s been a significant shift.
The dawn of web shopping was characterized as an age of younger, male techno-geeks at home with the medium and captivated by bells and whistles on sites where they went to buy books, CDs and gadgets. “Two years ago, all of the marketing campaigns were about free shipping, discounts beyond belief, can’t get it elsewhere. They were very focused on price because that’s what the early Internet shopper expected,” says Elaine Rubin, president of Shop.org. “And while there’s no one kind of shopper or retailer online today, now it’s much more about convenience and value than lowest price, so marketing programs are reflecting that as well.”
Programs launching now are less inclined to promote price and free services. For example, supersite Buy.com-now playing No. 2 to Amazon in online retail-launched four years ago with ambitions to beat the competition by offering the lowest prices on the web. Analysts said it wasn’t a sustainable model-and they were right. After nearly discounting itself into oblivion with below-cost pricing, Buy.com has raised its prices on most items-it gets another revenue stream from advertising.
Today, surviving e-retailers are moving emphasis away from customer acquisition and toward customer retention. “Everyone has learned the lesson about spending so much on branding,” says Jupiter digital commerce analyst Heather Dougherty. “A lot of retailers are now looking to keep the customer base they have. With repeat purchasers, the value of the average order goes up.” That means greater use by e-retailers of tactics like email marketing programs, loyalty programs and personalization features-things they didn’t do two years ago because they didn’t yet have solid data on customers-and didn’t yet realize the importance of retention marketing.
Recent moves by eToys provide an example. In September, eToys emailed favored customers from last year with the news that the holiday season’s hottest toys were already in stock and offered them the first opportunity to buy them. As every holiday-harassed parent knows, the holiday’s hottest toys get scarce as Christmas gets closer. That makes the first option to purchase a reward for loyal customers.
Web merchants also are tweaking programs to reflect a much broader audience that’s expanding in several different directions. Shoppers are both older and younger than in the past, and more likely to be women. More of them have less disposable income than did first-movers on the Internet. The changing demographics are more in line, in fact, with the U.S. population as a whole than was the early web audience.
According to Jupiter Media Metrix, New York, new online buyers comprise the bulk of the market; this year, about 45% of those shopping online have been online for two years or less. New users include adults 55 and older, the fastest-growing sub-group online. Their numbers are expected to more than triple from 11.1 million last year to 34.1 million in 2004, when they’ll account for 20% of all online shoppers, says IDC. Forrester Research projects that by next year, half of all new online users will come from households earning less than $35,000 annually.