Retailers shift their ad spending from TV, radio and print ads to digital ads.
The pace of technology change accelerates for e-retailers and vendors.
Shopko Stores, a Midwest chain of 143 stores, launched its first transactional e-commerce site not even two years ago, in November 2009. But it didn't take long before it wanted to take things up a level.
Realizing that the world of bricks-and-mortar retailing was changing even faster than web retailing, Shopko decided to tightly integrate its new retail site with its fulfillment operations and with the merchandising in its stores—all designed to appeal to consumers shopping in both channels, says Mike Sidders, vice president of e-commerce.
So far, Shopko is basking in the results of its decision to fully embrace e-commerce and multichannel retailing. The proof is in strong web performance that contributes to total sales of over $2 billion with a strong contribution from the web. "We have seen a huge improvement in site conversion rates, up by well over 30% since February across all areas of the site," Sidders says. Shopko, which is privately held, doesn't provide more detailed financial figures.
The Green Bay, Wis.-based retailer is hardly the only one investing in e-commerce and cross-channel integration. More than half, or 52%, of retailers are increasing their spending on e-commerce technology systems this year over last year, and only 5% are decreasing their spending on it, according to a report by Forrester Research Inc., "2011 Online Retail Technology Investment Outlook."
Driving much of that investment is retailers' increasing recognition that they must provide personalized and efficient service to consumers across multiple channels, from stores and web sites to social networks and mobile commerce, says Forrester e-commerce technology analyst Brian Walker, the report's author.
A strong web commerce platform, he adds, is central to an effective cross-channel strategy. "Many retailers have reached a certain scale now where they have to drive better business processes, with stronger integration between their e-commerce platform and their back-end order management and fulfillment systems," Walker says.
Indeed, the Forrester report notes that integrating e-commerce with back-end systems like order management and inventory management was cited as a priority this year by the largest number of respondents, at 62%.
E-commerce technology vendors, meanwhile, have been responding to this retailer demand by developing broader technology platforms that integrate core online shopping platforms with order management, inventory management and financial accounting systems, Walker says. This has been behind much of the merger and acquisition activity among major retail industry Internet technology providers within the past year, he adds.
As part of this trend, Walker says, more technology vendors as well as retailers are working to more closely tie together web-selling technology and in-store point-of-sale systems, providing a single system for processing customer sales transactions online, in stores, and through mobile commerce, social networks and contact centers.
"Three to four years from now, entire retail companies will be running off their web-enabled commerce platform," Walker says. It will be more common, he adds, for retailers to rely on a single electronic commerce system for processing all sales across all retailing channels, giving merchants a single platform for getting a view of how their customers shop, whether they buy on a retailer's web or mobile site, in a store or by calling a contact center.
Such a system means not having to gather and make consistent information from separate systems for online and stores, for example. That will enable retailers to more quickly accumulate, analyze and respond to cross-channel customer activity with more effective merchandising and marketing campaigns tied to known customer interests. "We're calling this agile commerce," Walker says.
Shopko moves ahead
In Shopko's case, the retailer launched its first e-commerce site just in time for the 2009 holiday shopping season on a technology platform purchased from SpeedFC, which hosts and manages the licensed platform and also provides order management, fulfillment and warehouse management in SpeedFC's warehouse facilities. The new site met Shopko customers' demands for an online shopping option, and it also helped drive up store traffic by enabling consumers to go online to research products and store promotions.
"This endeavor is an important part of our retail business going forward, and we believe our e-commerce platform will enable us to better serve our customers as they have the option to visit our stores or shop online," Shopko president, CEO and chairman W. Paul Jones said when the site launched.
Within the first year of operating the new site, however, Shopko decided to redesign it. Still on the SpeedFC platform, Shopko.com launched a new design in February 2011 that, among other things, reconfigured site navigation to make shopping online for regular customers more like shopping in its stores. Shopko planned its site redesign after conducting usability studies with consumers in a lab at the University of Minnesota.
Drawing on that consumer feedback, the retailer revised branding, color schemes, and the way products are presented in a pattern so as to make the site easier to navigate. "We've developed more consistency in what shoppers experience both in our stores and online," Sidders says. "Shopping online now is more consistent with customers walking into one of our stores and physically navigating the areas they want to shop."
SpeedFC also provides Shopko with warehousing and fulfillment services for shipping online orders, and that allows Shopko to accurately show web consumers whether a product is available on its customer-facing e-commerce site. "One of the biggest things we focus on is cross-channel order management and fulfillment capabilities," says SpeedFC CEO Jeff Zisk.
And Shopko isn't resting on its laurels. It's looking ahead to an even more engaging cross-channel retailing environment with more personalized online content, new features like customer reviews, and improvements in basic online shopping functions like site search and navigation. "We want to up the ante with more robust content management and marketing capabilities," Sidders says.
Among the retailer's priorities are enhancing category pages with more product images that shoppers can scroll over to activate a "quick view" feature which pops up a window of extensive product details and a click-to-buy button. The retailer also aims to introduce a version of its site better optimized for mobile devices.