Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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No ‘how to’ guide
Each e-commerce plan is unique to its retailer; there’s no single way to decide who should be involved or what aspects of the business it should cover. While marketing was the main focus of Taylor Gifts’ strategic plan, it might not even make the top ten list on some merchants’ plans.
Home Depot Direct’s Seegers, who reports directly to the parent company’s CEO, is responsible for the e-commerce plan, though he seeks input from all the departments that report directly to him, including I.T., operations, the customer contact center and the webmaster. The current three-year plan will be revised annually, and it encompasses all aspects of online operations. It also meshes with the overall strategic plan for The Home Depot Inc. “I’m involved in everything that has to do with strategy and execution,” Seegers says. “It’s a great vantage point for examining how e-commerce can enhance and expand the core business.”
Taylor Gifts plans a quarter at a time. The Sak updates its e-commerce plan every six months and includes Internet, marketing and sales staff members in the process.
Tool King’s first two-year plan involved founder Cohen and his department heads for purchasing, operations, marketing and I.T. Within the plan are a number of mini-plans; for example, the marketing department has set specific goals in the areas of search engine optimization, affiliate program development and improving auction revenue. Each individual plan has one or more people specifically responsible for executing it, and financial incentives to reward the achievement of the goals.
No matter who’s involved or what the goals are, any good plan should start with the numbers, many experts say. Tool King had lots of raw data, but the planning process inspired the creation of 17 new reports to track the numbers that would tell whether the plan was working and exactly where adjustments were needed. “If we can isolate a problem to a department, or even an individual, we don’t have to make sweeping changes like raising ad spending by 5% or increasing staffing,” Cohen says.
Once a plan is in place, Trinity Insight’s Smith recommends reviewing all the numbers every three months. “Any forward-thinking online retailer has analytics, but the majority don’t use them or don’t know how to use them,” he says. Key measures, according to Smith, include:
- Internal stats: number of unique visitors, where they come from, how long they stay, where they go on the site, whether they find what they’re looking for, whether and when they start a shopping cart, how often they follow it through to a purchase, and at what points in the process they most frequently abandon their carts.
- External stats: search engine rankings, shopping engine performance, number of sites that link to the e-retailer’s, and the level of payoff for advertising initiatives.
- The competition: how competitors’ external measures and marketing activity compare with the e-retailer’s.
- Operations and logistics: resources needed to operate at current levels (inventory, fulfillment, customer service, etc.) and how these resources will need to change to accommodate the goals outlined in the strategic plan.
Smith also recommends e-retailers analyze important segments of their customer base by creating scenarios that help identify how their web site experiences can be improved.
Looking for opportunities
After a preliminary analysis of such measurements, an e-retailer should be able to identify where opportunities lie. Home Depot Direct’s Seegers had an ambitious growth plan in place for 2005 based on three metrics: number of unique visitors, conversion rate and average ticket value. “We looked at the e-commerce market for home improvement, assessed our position and decided what we thought our rightful market share ought to be,” he explains. The plan to achieve that goal included not only the marketing mix but also capacity planning for fulfillment and call centers.
One goal was to add whole categories of merchandise not found in a physical Home Depot; Home Depot Direct now offers an expanded line of consumer electronics. “Building home theaters is a megatrend, and why shouldn’t we be the company that’s helping customers build them?” Seegers says. “Over the last couple of weeks it’s been one of our top-selling categories. A year ago it was conventional wisdom that you can’t sell big-ticket items online, but many of them are selling like hotcakes.”
Merchants should be careful not to set more goals than they can achieve, though, even if there are plenty of juicy opportunities, says Shannon of Taylor Gifts. “I started off trying to do everything and things fell through the cracks,” he says. He since has learned to focus on one or two things at a time: today, ensuring that data feeds to shopping engines are working as efficiently as possible; next up, maximizing traffic from search engines.
E-commerce strategic plans should be ambitious but doable, says Tool King’s Cohen. The possibility of getting outside money was part of his inspiration to undertake formal planning. “We’re anticipating an investment group coming in, and that made us get more intensive with our plan,” he says. “A strategic plan makes it easier to show what you’re going to do. But you shouldn’t embellish-you should make it something you’re confident you can achieve.”
Elizabeth Gardner is a Riverside, Ill.-based freelance business and Internet writer.
Web analytics enables planning on-the-go
Even in this era of just-in-time inventory, not every retailer can tailor supply to demand. But with the right information and strategic planning, some can tailor demand to supply.
As with most apparel companies, buyers for online lingerie merchant Bare Necessities have to use their experience and smarts nine to 12 months ahead of time to predict what their customers will want, then place their orders and hope for the best. In contrast, the site’s marketers can see one of the company’s products mentioned on TV at noon and have the home page appropriately tweaked by 1:30 p.m. to respond to potential increased demand.
This disconnect between months and minutes led to a general lack of communication, says Gretchen Wahl, director of online merchandising. “We found that marketing lived in its own world and the buyers and merchandisers looked at their own reports and neither of us were talking with each other or had the same language or numbers,” she says.