Demandware says 30 of its clients booked more than $100 million in online sales in 2015, up from 22 a year earlier.
New web address options present tough choices to e-retailers and consumer brands.
Like it or not—and many retailers and major brands don't—the Internet appears about to change in a big way.
Whereas web addresses all currently end in one of a finite number of extensions (.com, .org, .jp, .es, etc.), beginning in January individuals and organizations will be able to apply for any word or phrase (including brand names) as an extension. Within the next two years, we could see web addresses ending in things like .shop, .golf, .Microsoft or .Paris. This is the product of decisions made in June by the Internet Corporation for Assigned Names and Numbers (ICANN) the organization that oversees the Internet's addressing system.
These extensions, known as generic top-level domains, or gTLDs, will change the naming landscape of the Internet.
On one hand, they will open up the space significantly: There is only one BackToSchool.com, for example, but with new gTLDs, there could be a BackToSchool.Target, a BackToSchool.JCPenney, a BackToSchool.Staples, and more.
On the other hand, new gTLDs will mean that brand owners will have to spend money to protect their brands across a much wider range of gTLDs—up to 1,000, according to ICANN's predictions.
Having their own gTLD can provide certain benefits to retailers, like the opportunity to control a branded space online and bolster their digital presence. Some retailers have considered giving out new gTLD domain names to their customers as a way to build loyalty.
For example, Football Fanatics Inc. could give John Doe the domain JohnDoe.FootballFanatics, and use it to host a customized version of the Football Fanatics site designed around his purchasing preferences. Football Fanatics could even give John Doe John@JohnDoe.FootballFanatics to use as his e-mail address. (When they decide to apply for a new gTLD, most brands will work with a registry infrastructure provider, who will handle all of the technical details of assigning individual domains and e-mail addresses.)
New gTLDs, however, also pose some risks to retailers. For one, failing to secure their brand names on the left side of the dot in certain gTLDs could lead to consumer confusion and even harm. If L.L. Bean, for example, were to secure LLBean.Shop but not a domain like LLBeanOutlet.Shop, a cybercriminal could register the latter and use it for phishing or other malicious activities. That could expose L.L. Bean's customers to dangers like monetary or identity theft.
Beyond the benefits and risks, the two most important things that retailers must know about ICANN's new gTLD program are, first, that applicants will not know who else is applying for which gTLDs, and, second, that ICANN has not announced when or if it will accept additional applications. This means that retailers will not know which of their competitors are applying for gTLDs until after ICANN stops accepting applications. Those who decide not to apply may not have another chance for up to five or 10 years.
This could be particularly problematic for online retailers. If all the most popular retailers start using a branded gTLD, consumers will likely notice and assume that all of the more digitally astute retailers will adopt this new addressing nomenclature. Those that choose not to apply and instead stick with their .com URLs could risk seeming out of date.
What it costs
Applying for and operating a new gTLD will not be cheap; this has led some to speculate that new gTLDs will only make sense for the biggest brands. The application fee alone is $185,000. Brands will also have to invest in operating a registry, ensuring that Internet users can reach addresses in their domains, and enabling brands to sell subdomains to other organizations.
Fortunately, as mentioned above, those technical functions can be outsourced, making it possible for even smaller and midsized retailers to afford their own gTLDs. A conservatively run gTLD with fewer than 1,000 domain names could be launched for less than $500,000, with annual costs of less than $100,000 after the first year.
Especially for retailers whose brands are generic terms, like Buy.com, investing in a new gTLD might be worthwhile just to keep it out of the hands of others who may shut them out of using a domain closely associated with their names. New gTLD operators will be able to run their gTLDs however they choose. This means that they can run open registries, allowing the public to register second-level domains such as Shoes.Buy, or closed registries, only allowing a select few to register.
If a registry entrepreneur applies for the .buy extension in order to sell domains to the public, for instance, Buy.com will have the chance to object to the application, but there are no guarantees of succeeding. If .buy lands in the hands of an another company, that could seriously dilute Buy.com's brand equity.
In an alternate scenario, a brand's competitor could apply for its namesake as a gTLD and shut the brand out of the category. Given that Batteries.com can attribute part of its success to its descriptive brand and domain name, it may be too big of a risk for it to allow Proctor & Gamble (which owns Duracell) or Energizer Brands to acquire .Batteries. So while the financial outlay is likely more meaningful to Batteries.com than to P&G or even Energizer, Batteries.com needs to seriously consider the potential downside of not investing.
The broader question for retailer marketers is how to use new gTLDs. In terms of technology, there is nothing that new gTLDs can offer to brands that existing gTLDs cannot. For instance, Jeans.Levis has no inherent advantage, technologically speaking, over Jeans.Levis.com or Levis.com/Jeans. This has led some marketers to question what kind of return on investment new gTLDs can offer.
How Levi's could use .Jeans
For some retailers, the best approach will be a conservative one, where they leverage new gTLD domains in marketing messages and advertising and redirect those domains back to existing URLs; in the Levi's example, that would mean redirecting Jeans.Levis to the home page of Levi.com, the Levi's brand retail site from Levi Strauss & Co.