Retailers shift their ad spending from TV, radio and print ads to digital ads.
Like e-retailing, the Internet Retailer Conference & Exhibition keeps getting bigger. Ensuring growth by wowing the customer was the focus of much of the discussion at the show.
The Internet is firmly entrenched as part of the mainstream of U.S. retailing, which means an e-retailer is as likely to be competing for each sale with a retail chain like J.C. Penney Co. Inc. or a manufacturer like Skechers Inc. as with a web-only merchant like Buy Inc. How do retailers succeed amid such stiff competition? By catering to the customer in every possible way.
How to do that successfully was the thread that ran through the Internet Retailer Conference & Exhibition in Chicago June 9-12. Participants shared insights on the best ways to attract consumers to e-commerce sites, help them find what they want once they get there, and make online buying even a bit of fun.
And while there were plenty of reports on what has been shown to work and what does not, speakers also made clear that online retailing and the web itself are still evolving rapidly. What Bob Young, CEO of online publishing site Lulu Inc., said about the Internet in his address to the conference could as easily apply to e-commerce: “It’s still a wild and crazy place, full of opportunity.”
That opportunity to grow online at a time when stores are struggling helped draw a record 5,177 attendees, a 24.2% increase from the 4,168 who attended last year in San Jose. There also were 326 exhibitors, up 30% from 250 in 2007.
Web-only merchants accounted for 25% of attendees, retail chains 16%, consumer goods manufacturers 10% and catalogers 9%, with the rest coming from a variety of other industries. In terms of size, companies with more than $1 billion in revenue accounted for 14% of attendees, $100 million to $1 billion 18%, $10 million to $100 million 29% and under $10 million 39%.
While online retail grew by 22% last year, an impressive showing when same-store sales were largely flat, growth was not uniform across e-retailing segments, noted Internet Retailer publisher Jack Love in a presentation on the Top 500 Guide. He noted web sales of retail chains grew only by 18%, while catalogers grew by 30%, and manufacturers and web-only merchants by 22%.
“Chain retailers have the power, brand and expertise, but they are not dominating the online retailing market,” Love said.
J.C. Penney’s strategy
Some retail chains, however, are increasingly focused on the web. And that includes J.C. Penney, whose executives view its e-commerce site, JCP.com, as “the hub of the brand,” executive vice president and chief marketing officer Mike Boylson told attendees in a keynote address.
He noted that JCP.com is Penney’s fastest-growing sales channel and attracts the retailer’s youngest and most affluent customers. The retailer recently combined its $300 million annual online marketing budget and its $1.1 billion offline budget into a single pool of funds, and, Boylson said, “We see JCP.com as the No. 1 priority as we go forward as far as where that money will go.”
Recognizing that fewer consumers, especially those under 35, read newspapers, Boylson says Penney is seeking to reach customers through the web and mobile phones. Noting that 90% of U.S. consumers are expected to have web-enabled cell phones by 2011, up from 13% today, he observed, “It’s becoming a mobile world.”
He also noted that Penney has consolidated creative and marketing teams that previously had been divided by channels such as store, catalog and web site. “Everything is in one house, we’re beyond the channel silos, and we’re all focused on what is right for the customer without regard to who gets credit for the sale and what channel it comes from,” Boylson said.
That determination to delight the increasingly valuable online shopper also was a focus of featured presentations from catalogers, manufacturers and web-only retailers.
For Redcats USA, which traditionally sold through catalogs and call centers, the web customer has become increasingly crucial, as online sales now account for 40% of its business, up from 5% in 2001, said Eric Faintreny, CEO of the apparel, sporting goods and home furnishings retailer, in a featured address on June 10
As with J.C. Penney, Redcats’ online customers are younger and have more money to spend, Faintreny said, pointing out that the retailer’s average online customer is 47 with an income of $60,000, compared with offline customers’ average age of 54 and income of $52,000. More and more, he said, the images Redcats uses across its 14 e-commerce sites and catalogs are aimed at younger consumers.
Web-only merchants like Shutterfly Inc. and Lulu have taken advantage of the web to enable consumers to create customized products. In the case of Shutterfly, that includes photo albums that a customer creates by uploading digital photos; the retailer’s Shutterfly Gallery social network lets consumers share and rate each other’s photo albums, explained CEO Jeffrey Housenbold. Lulu.com lets aspiring authors produce their own books.
For Skechers, the challenge as recently as three years ago was not to break new ground in e-commerce but just to sell shoes online, said Laura Christine, vice president of direct marketing and e-commerce. While Christine was unable to buy a pair of shoes at the Skechers site in 2005 when she was preparing to interview for her current job, the site is more functional today, and sales on Skechers.com and the company’s Soholab.com nearly doubled last year, Christine told IRCE attendees in a featured address June 11.
Now she is moving into more sophisticated online marketing, such as retargeting consumers who visit Skechers but leave without making a purchase. Working with a dozen online advertising networks she can present ads to those consumers as they move to other sites, reminding them of the Skechers products they viewed. Skechers is getting a 900% return on that ad spend, Christine said.
In some categories, persuading consumers to buy online is a particularly tough sell. For instance, only 5.7% of home improvement shoppers made even a single online purchase in that category last year, Christian Friedland, president of e-retailer Improvement Direct Inc. told the conference in a featured address June 10.