eLayaway

E-commerce Solutions: The Foundation of Successful Retailing

Taking front-end technology to the next level

With e-retail sales exploding—shoppers spent $165.9 million in 2007, up 21.6% from 2006—retailers need to find technology vendors that can take their front-end customer touch points—the e-commerce platform, site design and site search—to the next level. By doing so, retailers can install applications and devise marketing and merchandising strategies that will enable them to compete more effectively for new customers, and grow their sales from repeat customers.

Before selecting any front-end applications, retailers first need to consider the objectives of their business and how they want to interact with their customers. Next, they need to identify a vendor that is likely to meet their needs. When those two exercises are completed retailers can consider the platform and applications they want to run, then how they want to design their site, and finally, how consumers will conduct site search.

The starting point is defining the customer base. Without an understanding of what draws shoppers to their site, what shoppers’ needs are and what they expect in the way of the shopping experience, retailers are only guessing about the types of applications that will improve sales.

“Once retailers understand who their customer is, then they can begin to figure out the features and functionality they want to have on their web site,” says Tony Svanascini, CEO of site design firm Americaneagle.com Inc. “There are lot of advanced technologies out in the marketplace, but in order to create a good customer interface with that technology, it has to be relevant to the customer.”

One of the most common traps retailers fall into when selecting front-end technology is to install the latest bells and whistles, even if they do not necessarily enhance the shopping experience.

Avoiding this trap requires upfront research by retailers to define the functionality their own shoppers want and that will differentiate their site. “It’s a lot of homework,” says Bernardine Wu, CEO of consulting firm FitForCommerce. “But a lot of mistakes can be avoided by performing due diligence at the outset and not listening to the sales pitch hyping the hottest new features and functionality, which can sway purchasing decisions in the wrong direction.”

The downside of failing to define the needs of their audience will be to implement technology simply for the sake of doing so or because a competitor is using it. In the latter case, retailers tend to forget that the technology needs of a competitor’s customers are likely to be different from those of their own customers, which means their shoppers may not respond to those features.

“Retailers have to be willing to try new technologies, but they can’t force fit it if those features don’t appeal to their audience, because if they do, it will be a distraction to the customer,” says Darren Hill, managing partner for e-commerce solutions provider WebLinc. “It does not make any sense for a retailer to begin implementing Web 2.0 technology when they have not mastered Web 1.0. The goal is to first make their site functional at a base level to service their own customers’ needs.”

Instilling confidence

Applications that deliver convenience and ease of use and make shoppers feel confident they can find the products they want in as few clicks as possible provide retailers with base functionality.

“The end goal for retailers is to bring the customer in the store, get them to the product they want as quickly as possible and get them through checkout promptly,” says Miguel Younger, vice president of operations of e-commerce solutions provider Solid Cactus Inc. “E-retailing is not necessarily the entertainment experience that bricks-and-mortar retailing can be. For retailers that don’t provide content, it is best to keep things simple and address the customer’s needs rather than attempt to create an entertainment experience the customer may not necessarily want.”

Many retailers unwittingly overwhelm shoppers with entertaining features, such as video or 3D graphics, because they are popular. What shoppers really want are easy navigation paths. About 50% of site navigation is now done through site search, according to industry experts.

Making discovery possible

“Enabling shoppers to discover the product they are looking for and match the right product to their preferences is what makes for a successful shopping experience,” says Randi Barshack, vice president of worldwide marketing for site search provider Mercado. “Shoppers don’t want to be overwhelmed by a retailer’s technology. What they expect is relevant technology that takes them through the product search progression much like a sales representative in a store would.”

Just as important as keeping the choice of e-retailing technology in line with customer needs is selecting technology that meets the retailer’s long-term needs. The rapid advancement in e-retailing technology is accelerating the pace at which many applications are becoming outdated. It is essential then that retailers select scalable platforms that will grow with their business and remain relevant for many years.

“There are retailers that purchased platforms just a few years ago and have outgrown them already,” says Kelly O’Neill, product marketing director for e-commerce solution provider ATG Inc. “Retailers want to select platforms that can be integrated into existing systems without requiring a major overhaul, that remove the technical limitations to future enhancements and allow them to operate in a more web-centric manner.”

Determining whether a vendor’s technology is a fit with the retailer’s needs requires evaluating the vendor by asking in-depth questions around ease of use, integration, and how often the vendor releases upgrades.

Ease of use is a point retailers need to clarify upfront as many retailers prefer to take direct control over implementing business rules. “Retailers want to be able to add business rules quickly and in real-time through the administration console, not through I.T.,” says Barshack. “Retailers should ask to see results for other clients that implemented similar features and functionality to determine if the money spent will deliver the desired ROI.”

Other ways to measure the potential ROI on any technology is to ask the vendor to show how much sales for other clients increased after implementation and to request before and after versions of those sites.

Doing so can help retailers determine how much of a boost in sales they are likely to experience. “A retailer with a sound business model but a poorly designed site is going to experience a greater boost in sales from new technology than a retailer with a not so great business model, but a well designed site,” says Americaneagle.com’s Svanascini.

Grilling the vendors

Experts also recommend asking vendors for a proven track record of meeting clients’ needs. One way to find such a vendor is to identify web sites that offer the features the retailer wants to emulate and contacting the owner of the site about the vendor. Doing so can also provide an objective reference about how smoothly implementation went and satisfaction with the technology itself.

“Retailers should not feel embarrassed to do this, because there are a lot of platform providers out there that create beautiful sites that have more technology than the retailer can effectively use or that were rough to implement,” says WebLinc’s Hill. “There is no reason to pay for technology that is not needed or to have a painful integration.”

Experts also encourage retailers to ask vendors what services they provide beyond supplying and supporting their technology. Many small and mid-sized retailers have limited marketing and merchandising staffs and can use help in those areas or with analyzing performance metrics. Subsequently, many vendors provide consulting services to help retailers fill these holes.

“Whether a vendor can provide consulting services is becoming as important to retailers as the vendor’s technology and ability to integrate it into their business,” says Hill. “Many times a small retailer may have a marketing position that is unfilled and can use help in that area. Vendors are no longer proving their value solely on their technology and ability to integrate it.”

Choosing an e-commerce platform or application does not mean the platform will stay current with the retailer’s needs for several years. E-retailing technology is evolving rapidly and the pace is only expected to quicken as online sales become a larger portion of total retail sales. Retailers that do not constantly refine their platforms will fall behind.

“The longer a platform is stagnant, the harder it is to make meaningful improvements later,” says FitForCommerce’s Wu. “The risk of making changes is always present in technology, but it must be weighed against the risk of not keeping up with those changes.”

Wu predicts that retailers will replace or make major upgrades to their systems every two to four years. “It can take up to a year to implement new technology and that means starting another evaluation process as soon as 18 months after a re-launch,” she says. “Even though the process appears to always be shifting, it is deliberate in that the retailer has planned for it. By keeping up on the latest technologies, retailers can make the decision whether to implement them faster.”

Integrating channels

When adding any application, retailers need to make certain it can be integrated without disrupting the flow of information between other areas of their business. Multi-channel retailers must be especially mindful of this problem when introducing personalization features that build customer profiles using data from all sales channels.

“A lot of multi-channel retailers will extend systems that are built for other sales channels, but don’t necessarily leverage the core competencies of the online sales channel,” O’Neill says. “That can lead to problems when it comes to personalizing the web store.”

One solution is to link data about customer behavior from each sales channel, and from customer service interactions, to create a customer profile that resides in a central database, rather than to manage multiple profiles built using information from such applications as e-mail and site search.

“In a multi-channel environment retailers want a platform that can pull customer behavior data from all channels, store it in one place, and provide a single view of the customer,” says O’Neill. “Having a single customer profile makes cross-selling and upselling strategies more effective. It is a lot tougher to cross-sell and upsell using multiple profiles created using behavior patterns pulled from different applications.”

Platforms that use algorithms within specific rule sets to weight customer behavior are more effective than rules-based applications. “With algorithms, retailers can dig deeper to create customer profiles, such as the time of the day they like to shop and how they move through the site, and apply it to the individual’s profile to make more targeted recommendations,” O’Neill says.

With this deeper level of information retailers have more options in personalizing the shopping experience. “The rule sets can be used to personalize the shopping experience to customers on which there is no profile,” O’Neill says. “It’s a blend of art and science.”

In addition to having a platform that can create a single customer view, retailers need platforms that allow them to apply analytical tools in their market strategies. This is especially helpful with e-mail marketing.

Don’t assume

“Without this kind of metric capability, retailers are just making assumptions when it comes to creating offers for their e-mail marketing campaigns, rather than engaging in effective campaign management,” says Solid Cactus’s Younger. “Implementing tools to market smarter is the name of the game.”

Solid Cactus recently added an e-mail marketing management solution to its online marketing management services that uses advanced real-time analytics to provide retailers with visibility into what happens after the message is sent. In addition to tracking basic performance information such as bounce rates, delivery rates, and whether the message was opened, the application tracks shopper movement through the site after the shopper arrives on a landing page. The solution can track any and all key performance indicators, such as conversion rates on an item to further segment future mailings.

“Without this kind of metric capability, retailers are just making assumptions when it comes to creating offers for their e-mail marketing campaigns, rather than engaging in effective campaign management,” says Younger. “E-mail is a communications tool, so being able to finely segment the promotion and messages sent can provide a significant boost in conversions.”

Integrating marketing modules, employing analytics and enabling data flows across multiple channels with an e-commerce platform is easier today than it was just a few years ago thanks to the inclusion of source code in out-of-the-box applications, as opposed to having the vendor write custom coding. Providing retailers with access to the source code enables them to smooth integration problems themselves, if they want. WebLinc is one vendor that includes access to its source code out-of-the-box.

“By making the source code available, retailers are being given the keys to the system for integration of future applications and that makes it easier to refine the platform to meet their needs,” says WebLinc’s Hill. “It also makes integration more straightforward when clients switch from a homegrown platform to a third-party platform.”

Retailers also have more flexibility in preserving their platform if they choose to move its functionality in a direction opposite that of the vendor or the vendor goes out of business. “It’s like an insurance policy,” Hill says.

From functionality to design

Once retailers decide on the functionality they want in their platform, they can turn their attention to site design. Ajax (asynchronous JavaScript and XML) is fast becoming a standard feature of site design. The primary benefit of Ajax is that it allows shoppers to move between pages and windows without the entire page having to be reloaded each time. The payoff is an increase in the site’s interactivity, speed and functionality.

“When the process to move around the site is cumbersome, shoppers tend to jump off the site and take their business elsewhere,” says Americaneagle.com’s Svanascini. “Ajax has broken the barrier to creating more user-friendly interfaces, much the way TiVo did when it comes to recording a television show.”

A similar technology to Ajax is called Snap Shop, which Solid Cactus created using industry standard technologies such as Ajax, JavaScript and HTML. Snap Shop enables shoppers to mouse over a product image and open a window in the foreground that provides such details as price and product specifications. Shoppers can place items they are viewing right in their shopping cart without leaving the page. Shoppers that need more information about the item can navigate to the product page directly from the Snap Shop interface.

“Snap Shop is a design feature that streamlines the shopping process so the customer does not have to jump between product pages and the shopping cart,” Younger says. “It’s a feature we felt would play well with shoppers.”

Avoiding clutter is another critical element of site design. Populating pages with too much extraneous information, especially when it comes to cross-selling and upselling, can turn off customers. So too can failing to present this type of information in a consistent manner.

“If information is not relevant to the sales process, chances are it will be viewed as clutter,” says Svanascini. “The other rule of thumb is to keep a list of items frequently purchased as a cross-sell or upsell in the same place on the page. This ensures the shopper knows right where to find it when they want to access that information.”

Relevancy of data presentation also applies to site search. With search engines such as Google raising consumer expectations about the quality of search results, shoppers are less inclined to wade through site search if they must execute several queries to locate the product they want.

For example, if a shopper enters the term “red backpack” and the search engine returns all results related to the word “red” and “backpack,” it will include products that do not match the intent of the search string. Most shoppers are disinclined to sort through these type of results, especially if the results for red backpacks are scattered about.

Matching customers’ needs

“If a retailer is not going to show site search results relevant to the search term, then it is not worth offering site search because shoppers don’t have the patience to plow through bad results,” says Mercado’s Barshack. “Site search is about matching the product to the customer’s needs by creating a richer product discovery experience.”

Part of that richer experience is to present search results that offer consumers the best possible choices without overpowering their senses. This can be accomplished by providing refinement tools at the start of the search process that allow shoppers to select a category, such as women’s, and a generic product name or a brand, such as shoes or Prada.

“Shoppers need to have a way to prioritize their search so they can get the variety of results they want, but narrow down the number of results so they are relevant without being overwhelming,” says Barshack.

It is also important to customize site search to the type of customer. Many bath and kitchen retailers, for instance, service commercial clients in addition to homeowners. Each customer group searches for products using different criteria. “Commercial customers are more likely to get into specifications of the item while the homeowners will look for brands or use more generic terms,” says Svanascini. “Effective site search takes into consideration all the characteristics of the product to allow customers to search by their desired criteria. It comes back to the retailer knowing who their customer is and how they behave on their site.”

Retailers that build customer profiles can use that data to enhance their site search by attaching cookies to shoppers’ computers that identify those shoppers upon return visits. Once the shopper is identified, the retailer can apply information from the profile to order results based on past purchases. For example, some shoppers may be more inclined to view items from the lowest price to highest or they may prefer house brands over brand name items. Rules can be applied on an individual basis or by an automated system that groups shoppers by like characteristics.

Rules that appeal

“Rules are being applied at the category level to configure results in a way the shopper will find more appealing,” says ATG’s O’Neill. “Changes to the rules can even be made in real time to reflect current promotions or other marketing campaigns.”

Tailoring site search to reflect current marketing initiatives is important because retailers do want some level of control over the search results, much like they have when directing a customer to products in a store. Retailers can even instruct the site search engine to show the Top 5 converting items that fit the search query.

“Site search feeds into merchandising and retailers want to have control over their merchandising efforts,” says Barshack. “There may be items that fit the search query that are on clearance at the end of the season or of which the retailer has excess inventory or maybe they are introducing a house brand. In either case, the retailer wants to get these products in front of the shopper as long as they are relevant to the search query.”

Before implementing any e-retailing technology, retailers ought to test it. The best route to follow is incremental A/B testing. This method helps retailers avoid the potential risk of a broader-based test souring customers and prompting the retailer to scramble to return the site to its previous appearance.

“Many retailers have a lot of equity in their brand and don’t want to upset the look and feel of their site too dramatically, because it can harm that equity, so they will test new features incrementally and roll them out as warranted,” says Solid Cactus’s Younger. “The testing process is a lot more refined now.”

Retailers can choose from several tools that allow for basic and advanced A/B testing. Solid Cactus offers basic multivariate testing functions such as Google Website Optimizer, in addition to more advanced Geotargeting applications. Google Website Optimizer allows retailers to test blocks of copy images, headlines, or complete page layouts through Website Optimizer, which shows the content and design alternatives to a specified percentage of site visitors. Retailers can select which visitors see the changes being tested based on such criteria as their entry point into the site or average ticket size. Reports detail which changes result in the most conversions.

“There are a lot of good testing applications available and our focus is to provide the latest ones that take the guesswork out of testing and help retailers develop marketing strategies to reach their sales goals and improve their brand,” says Younger.

Other options for testing include gathering customer feedback. The logical choice is repeat customers, as they are more familiar with the look and feel of the site and are likely to be receptive to requests for feedback. The request can be made via e-mail to repeat customers that have opted into the mailing list.

“Customer feedback is important to making the decision to roll out changes, because the last thing any retailer wants is to find they haven’t got the new features right,” says Americaneagle.com’s Svanascini. “If that is the case, conversion may not perform as expected.”

In or out?

One final point for retailers to consider when selecting any e-commerce technology is whether to install a licensed application and operate it in-house or outsource it to the vendor. The decision to license or outsource is based largely on the retailer’s corporate culture and internal resources.

“If the retailer is going to be upgrading their platform and applications several times a year, there is likely to be enough of a challenge to keep the internal IT staff inspired and on the cutting of new technology, but if there are one or two upgrades a year it may not be enough,” says WebLinc’s Hill. “Plus, it can cost $400,000 in salary for a support staff of five. That’s a lot to pay if the IT staff works in a vacuum when it comes to being exposed to cutting edge technology.”

Retailers that opt to outsource will want to consider using an SaaS (software as a service) model, where a software vendor develops a web-based software application and hosts and operates the application for use by customers over the Internet. Customers do not pay for owning the software itself, but rather for using it, which makes it a lower cost alternative to traditional outsourcing, which is more labor intensive.

“If outsourcing is a consideration it makes sense to inquire about the SaaS model, because it is becoming very comprehensive and capable of delivering robust product discovery experiences to the shopper,” says Mercado’s Barshack.

With more consumers shopping online—and more competition to convert them into customers—choosing technology that provides flexibility, scalability and delivers the performance shoppers expect is more critical than ever, because the wrong choice can cost retailers dearly.

“As the shopper base becomes more diverse, e-retailing is becoming more complex and retailers need technology that can automate processes where necessary, be integrated across all sales channels, and share data as needed with search engines and affiliate sites,” says ATG’s O’Neill. “The last thing any retailer wants is technology that slaps limits on what they can do with it, because that limits their success.”

Broadening retailers’ marketing horizons

Just as vendors are helping e-retailers to raise their front-end technology to the next level, they are helping retailers to improve the quality of their online marketing applications. The focus of their efforts is to improve traditional marketing tools, such as e-mail and search, and to develop solutions that help retailers reach consumers in more places on the Internet. By implementing these tools, retailers can develop highly targeted marketing campaigns and establish a brand presence on social networking sites such as Facebook.com and comparison shopping engines.

Driving this trend is the realization there is plenty of marketing real estate on the Internet that has yet to be tapped and that putting marketing dollars into these channels can increase the odds of attracting new customers where there is less competition for them.

“There are a lot of emerging incremental marketing opportunities for retailers to connect with new customers by tapping new online destinations,” says Michael Kahn, vice president of account management and marketing for search marketing firm DoubleClick Performics. “Retailers will always work to optimize their search marketing, but more marketing dollars are starting to shift into these areas.”

What’s next

The reason is that retailers are actively searching for “What’s next” in the way of new technology that can enhance their online marketing, according to Kahn.

The answers to “What’s next?” are further leveraging data feeds on customer behavior and products, employing tracking technologies, and tapping into social networking sites to expand distribution of retailers’ marketing campaigns.

Many vendors are attempting to bridge the gap between art and science by offering applications that leverage customer behavior and demographic data to create audience-specific campaigns that play well with consumers on social networking sites and advertising networks, such as aCerno, Advertising.com and ValueClick. Advertising networks have a broad reach across the Internet and connect retailers with consumers through a variety of Internet destinations.

“There is a large source of potential new customers that are not being reached with traditional marketing methods,” says Suzy Sandberg, president of Internet marketing services firm PM Digital. “The ultimate metric in e-retailing is generating sales from new customers and there are new tools emerging that can help retailers do it.”

The time to touch a shopper

In addition, opportunities exist for retailers to expand their presence on comparison shopping engines, which are growing in popularity and numbers as consumers flock to the Internet to locate the best prices on products. For many retailers, comparison shopping sites are the first opportunity they have with a potential new customer.

“Retailers need to expand their marketing influence to more customer touch points and comparison shopping engines are destinations that offer retailers a chance to connect with the consumer and ensure a consistent experience when interacting with their brand,” says Eric Best, CEO of online performance marketing firm Mercent Corp.

One of the newest marketing techniques to emerge in the past year is remarketing; a technique that tracks shoppers after they have left a retailer’s site without making a purchase and serves them up display ads for that retailer. The remarketed ads are shown only when a shopper visits a site within a participating ad network. The intent of this tracking strategy is to prompt the customer to return to the retailer’s site to make a purchase.

Part of the appeal of remarketing is that online display advertising revenues have been growing at a healthy rate, 21% in 2007—a total of $4.4 billion, according to the Interactive Ad Bureau and PricewaterhouseCoopers LLP. The market for display ads is about half that for paid search—which totaled $8.8 billion in 2007, up 41%—but with growing competition for paid search ads, display can be a more cost-effective form of advertising, experts say. Plus, consumer interest in the medium is expected to increase as more advertisers rollout video ads.

“After paid search, remarketing is a technique that is generating the most new customers for our clients,” Sandberg says. “Retailers are starting to budget for this type of marketing.”

Pushing promotions

From a technical standpoint, remarketing involves the implementation of a pixel, which is a source code similar to a tracking cookie. Pixels are placed on pages throughout the retailer’s site and as shopper’s visit these pages, the pixel records the products they viewed. Advertising networks use that information to determine the type of ads to be displayed after the shopper leaves the site.

“It’s a technique similar to using GPS technology to send text marketing messages to mobile devices when a consumer nears a retailer’s store,” Sandberg says. “It can be a very effective way to push a promotion to a consumer.”

PM Digital, which places remarketing advertisements with ad networks, helps retailers select the advertising networks that will deliver the best return on investment.

The key to successful remarketing is for retailers to place as many pixels as possible throughout their site. “Retailers don’t want to limit pixels to the home page,” Sandberg says. “To create an effective remarketing campaign, retailers must make the commitment to apply the necessary technical resources. It’s not as costly and as time consuming as one would think.”

Retailers must be careful, however, to avoid the appearance of in-your-face marketing when launching a remarketing campaign. “Remarketing has the potential to scare shoppers in a Big Brother sort of way,” Wu says. “Instead of aggressive messaging in the follow-on ads, retailers should offer specials and coupons that benefit the shopper and get them over the tipping point for making a purchase.”

Getting social

Another emerging marketing tactic is placement of display ads on social networking sites. In the case of Facebook.com, retailers can submit demographics of their target audience and keywords they plan to use in their marketing campaigns. Facebook.com will match keywords to those found in member profiles. It will also tell the retailer the size of the potential audience they can reach and will place the retailer’s ads with the appropriate profiles.

“Social networks and other communal web sites are a great way for retailers to expand the distribution of their marketing campaigns in a highly targeted fashion and differentiate their marketing campaigns by establishing a presence where competitors aren’t,” says DoubleClick’s Kahn. “So far, the conversion rates on ads we’ve created to run on Facebook.com have been quite high. One retailer successfully used a Facebook.com ad last Valentine’s Day targeted at male gift givers.”

Another example DoubleClick cites is the inclusion of a banner ad in certain Facebook members’ spaces notifying them that a publisher is looking for freelance writers. The ad was placed because the member profiles indicate that they belong to a writers group and include other references that their profession involves writing.

“These are highly targeted ads that go to a motivated audience and target what information people push out about themselves on the Internet,” Kahn says. “Retailers must still know their audience and offer relevant products, but the opportunity to interact with consumers in new ways through this channel is huge.”

Not surprisingly, social networking sites are still grappling with how to present ad content in a manner that seems non-intrusive, which is why the channel is considered to be an emerging opportunity. Retailers launching these types of campaigns should be careful to produce ads that have relevance to the target audience and do not come as a surprise. “The right message to the right people at the right time should always be the guiding principle,” Wu says.

While comparison shopping networks are not new, their popularity with consumers has skyrocketed over the past year. The marketing opportunity for retailers is to make their product catalog visible on more sites while delivering the same brand experience found on their web site.

“Comparison sites are places where consumers can evaluate products side-by-side, but each site has its own marketing best practices and retailers must figure out how to make use of them to compete for that sale,” says Mercent’s Best.

The most effective way is to make the comparison shopping site an extension of the web store. Mercent combines direct links to a retailer’s web site and warehouse management applications, which enables retailers to deliver real-time inventory and pricing data from the retailer’s site to comparison shopping sites. The platform also provides analytics to coordinate promotional campaigns between the web store and the comparison shopping site.

Reducing the costs to link

The latter is important, because retailers do not want to promote offers on comparison sites not available on their web store or other sales channels. This type of continuity is part of creating a consistent marketing message.

“Information, products and promotions may be specific to a comparison site, but they must be as accurate as what can be found on the retailer’s site,” Best says. “There must be consistency between the web store and other sales channels.”

Mercent’s platform supports product syndication, merchandising optimization, retail analytics, and transactional order processing. Retailers can connect to 50 online marketing channels, including nearly 40 comparison shopping sites through the Mercent Shopping network. Sites include Amazon.com, MSN Shopping and Yahoo! Shopping.

By linking to the Mercent Shopping network retailers are spared the cost and integration issues of connecting individually to comparison sites. “After a retailer connects individually to the leading sites, it gets cost prohibitive to connect to the rest,” says Best. “We can also track the performance of every ad on every channel so retailers can figure the cost versus profit and manage their marketing campaigns more effectively.”

Mercent’s retail platform is based on the concept of distributive e-commerce, which is about adding value to the shopping experience through whatever channel the retailer touches customers. The platform supports product syndication, merchandising optimization, retail analytics and transactional order processing.

No matter how far retailers broaden their marketing reach, analytics still play a key role in mapping out their strategies. “Analytics rule the world of e-retailing,” says DoubleClick’s Kahn. “If retailers can’t track customer behavior they can’t manage the site experience. It is important for retailers to know what changes are taking place in the user experience that impact cart abandonment, and make the necessary fixes to their marketing strategy and site.”

Identifying problems requires tracking customer behavior and conversion rates for each marketing campaign to identify which campaigns work and which don’t. Other times it requires more digging.

Look deeper

For example, a retailer that suffers a high drop in visitors after they reach the home page may actually have high conversion rates on pages deeper in the site. Setting up paid and organic search campaigns that land shoppers on pages deeper in the site where they are more likely to convert is one solution. “Optimization of search marketing campaigns is a never-ending process,” Kahn says.

Analytics are also being applied to remarketing campaigns to help retailers figure out their true ROI and where overlap with other marketing vehicles, such as paid search, occurs. “Because of the view-based tracking many of the advertising networks use to track shoppers from the remarketing campaign, retailers have to have the knowledge to be able to apply credit to the proper source for the conversion,” says PM Digital’s Sandberg. “Knowing the true source of the conversion helps retailers properly budget for their marketing campaigns. Identifying the overlap in orders from remarketing and paid search campaigns is done by matching order IDs from both programs to information contained in the advertiser’s site analytics application.”

Mercent takes a similar approach by helping retailers calculate the ROI for specific products marketed through comparison shopping sites. Retailers can track the actual cost of the ad to promote an individual product and compare it against metrics for sales velocity. This capability makes it possible for retailers to manage their campaigns on a more granular level to keep profit margins in line with marketing costs for individual products.

“If the retailer’s goal is not to have marketing costs exceed profit margins for every product, it can be done,” says Best. “This is information that goes beyond marketing metrics, such as conversions, and provides retailers more control over campaign performance.”

As intriguing as the new marketing opportunities are, retailers still need to effectively manage traditional marketing channels, such as e-mail, site search and paid search. E-mail campaigns remain frontline communications tools that retailers can use to support their marketing efforts in other channels.

“E-mail is in the center of the storm when it comes to customer retention because retailers can use it to deliver a steady stream of communications in support of other marketing campaigns,” Kahn says. “It remains a great marketing tool that produces solid results.”

Site search also remains a proven marketing tool. With consumers increasingly using site search to navigate a retailer’s site, retailers must make certain that site search not only delivers the most relevant results possible to the search query, but also reflects available inventory and retailers’ marketing and merchandising goals.

Nor can retailers afford to stand pat with paid search campaigns. “Building out keyword lists and optimizing copy for paid search ads should be ongoing,” Kahn says. “Retailers may always be looking to tap new marketing channels, but paid search is a core marketing strategy.”

Total control

Regardless of where e-retailers spend marketing dollars, retaining control over the marketing channels, offers and content of the campaign directly impacts the quality of their brands.

“Retailers need to have influence over every marketing touch point they have with consumers, because that is when consumers are interacting with their brand,” Best says. “Retailers want the widest net possible to catch consumers when they are ready to buy and more marketing opportunities are emerging to connect retailers with consumers and enable them to effectively compete for, and win, the consumer’s business.”

The time for retailers to take advantage of those opportunities is now.

Raising the bar on serving the customer on back-end applications

Payment, customer service and fulfillment may take place on the back-end of the sale, outside of the awareness of most customers, but raising the level of the technology that powers these functions is just as important as any upgrades retailers make to their front-end or marketing applications.

Many customers who are let down at the end of the sale will abandon the shopping cart and make future purchases elsewhere. Subsequently, the biggest challenges facing retailers when it comes to taking their back-end technology to the next level are integration and interoperability with their existing platforms to ensure full visibility into the customer’s order—and thus the ability to provide full service.

“Most e-commerce platforms lack real-time visibility into all the necessary back-end touch points such as the call center, warehouse and order status,” says John Marrah, CEO of e-commerce platform provider ProfitCenter Software Inc. “Retailers need platforms that provide a 360-degree view of the purchase so they can deliver the same functionality across all sales channels.”

Homework

Implementing a platform that delivers a total view of the customer requires retailers to do their homework. Retailers can choose from all-in-one platforms or build a platform using best-of-breed applications designed for a single purpose, such as live chat.

“The selection of point solutions is growing rapidly and it is important for retailers to make sure that the applications they choose are not only interoperable with the existing platform, but also can later be removed, replaced and retooled as necessary,” says Bernardine Wu, CEO of consulting firm FitforCommerce Inc. “If not, retailers will wind up spending a lot of time and money to get it right.”

Beyond integration and implementation issues, retailers need back-end applications that provide flexibility, especially when it comes to engaging the shopper. Nowhere is this more important than in customer service, as more retailers are relying on chat applications to proactively aid the sale process.

“Knowing when to voluntarily engage the customer so as not to disrupt the shopping experience is extremely important,” says Chris Wampler, chief technology officer and co-founder of chat technology firm UpSellit.com. “Retailers tend to put a lot of time into their platforms technology-wise, but not necessarily as much business-wise. Knowing when and how to engage shoppers can enhance and further monetize the customer relationship.”

Besides selecting a platform that provides a 360-degree view of customers and flexibility when engaging them, retailers need to consider how to take checkout to the next level. One solution is to offer payment options beyond credit cards, which can boost conversions, as there are still millions of consumers reluctant to provide credit card information on the web to make a purchase, do not have a card or just prefer not to use a credit card for certain purchases.

Momentum

“Alternative payments are gaining momentum and the more unique payment options that retailers can provide, the more opportunities they have to grow their business,” says Sergio Pinon, CEO and co-founder of payments provider eLayaway LLC.

As its name implies, eLayaway provides traditional layaway terms which retailers can offer on products, allowing consumers to pay for them through an installment plan backed by HSBC Bank. When the purchase is paid in full, the retailer ships the item. Although layaway programs fell to the wayside as alternative payment methods moved into the mainstream, interest in them is returning as retailers want to grow their online business by reaching consumers that don’t use credit cards, Pinon notes.

“Layaway programs provide shoppers that don’t want to use a credit card to pay for a purchase or that don’t have one with an opportunity to purchase the item they want rather than put it in a wish list,” says Pinon. “The risk with putting an item in a wish list is the shopper may never come back to purchase it or they may buy it later from another retailer.”

To purchase an item on layaway, shoppers click on the eLayaway icon at checkout and are then asked to provide a bank account and bank identification number. Next, they select the period over which they will pay for the item. A monthly payment amount is calculated and presented to the shopper, who has the option to adjust the amount up or down, which automatically adjusts the date the product will be paid in full and available to ship.

Monthly payments are debited from the shopper’s bank account via the automated clearing house. Payments are processed through HSBC bank and sit in escrow until the full amount is received. Shoppers pay a flat 1.9% transaction fee and eLayway earns interest on the money in escrow until the full amount is received. Retailers are notified when each payment posts and receive the entire sum of the purchase when payment is complete.

To ensure payments can be made by the customer and prevent fraud, eLayaway will validate the customer’s bank account. “Unlike a credit card authorization that is done in real time, we’ll put the transaction in slow motion and take the time to validate the account and the customer,” says Pinon.

Ideally, retailers will make shoppers aware of the layaway option prior to checkout so they will feel they have the buying power to get the items they want, Pinon says. “Layaway programs are a way to reduce sticker shock for consumers because they enable shoppers to purchase product over time, rather than downgrade the purchase because they don’t have the money at the moment,” Pinon says. “Retailers can also aid in the reduction of sticker shock by showing shoppers what they would pay in interest if they purchased the item and carried a balance on a credit card.”

The most effective time to make shoppers aware of the layaway process is during browsing and research. “Monthly payments and estimated payment time should also be made clear at checkout,” says FitforCommerce’s Wu. “If the customer can trust that this is a viable payment option, they will be more inclined to purchase.”

Retailers are also discovering that the use of live assistance applications to answer a customer’s question at just the right moment can mean the difference between a sale and an abandoned shopping cart—and can lead the consumer to spend more.

“If a customer abandons a shopping cart, it’s important to ask the customer why before they leave the site and offer an incentive to stay,” says UpSellit’s Wampler. “If the customer is stalled on a page for several minutes, the odds of making a sale decrease, so it’s a good time to engage them with an offer of customer assistance.”

Artificial agents

UpSellit’s SMARTagent is an automated customer interaction application that opens a chat window and behaves as if the shopper is conversing with a live person. The application can handle routine interactions, such as presenting incentives to make a purchase, answering frequently asked questions or redirecting shoppers to other pages in the site, thus freeing customer service agents to focus on problems that require an actual live agent, such as initiating a refund, or answering questions the application does not recognize due to odd phrasing.

“Most retailers want live chat, but can’t afford the staffing costs,” Wampler says. “Our application does the heavy lifting by using artificial intelligence to properly interpret a question and provide an answer, not just respond to keywords. It also filters out the generic questions that can bog down a live agent.”

The application is infinitely scalable in the number of customers it can simultaneously service and can take on a persona, so shoppers think they are interacting with a live agent. “Some customers even give the application a human name, such as Jane,” Wampler notes.

Retailers can track up to three years worth of chat sessions to help them identify frequent problems customers encounter on the site. One client used its archived chat sessions to identify the cause of its high abandonment rate. The reports showed that consumers were complaining the checkout page was not secure.

“In certain browsers, like Firefox, an icon shaped like a padlock appears at the bottom of the page indicating it is secure,” Wampler says. “A lot of consumers know what to look for when it comes to security and the reports helped the retailer pinpoint and identify the problem.”

Retailers can also use the application for cross-selling and upselling in the shopping cart or on the order confirmation page. SMARTagent will thank shoppers for their order and then segue into offering accessories or complementary products, such as a customer loyalty program. Retailers can add such basic data as date the item will ship and projected arrival date to the post-purchase summary.

“Retailers can increase cross-sells and upsells by three to five times over using a static approach,” Wampler says. “Automatically providing shipping information reduces calls to customer service.”

As efficient as live interaction applications are in helping retailers service customers, retailers must be careful not to overuse the application or make it appear intrusive. “Retailers need to be cautious to make sure they clearly invite the shopper to use the application and deliver language and graphics that aren’t in your face,” says FitforCommerce’s Wu. “Retailers also need to match the appropriate timing and triggers for their audience and site dynamics.”

A dynamic environment

Tracking customer behavior patterns to anticipate what items the shopper may purchase next and whether shoppers are likely candidates to place recurring orders is another way retailers can leverage back-end technology to boost sales.

A customer that purchases a printer will need printer cartridges every few months. Offering the shopper an opportunity to set up a recurring order for the cartridges every 60 days can increase the value of that customer up to four times what that customer would spend if he ordered the cartridges as needed. Without a standing order, consumers may occasionally purchase cartridges at local store for convenience.

“Turning a recurring order into a standing order based on the timeframe the customer wants is the Holy Grail of retailing, because it creates a value-added relationship,” says ProfitCenter’s Marrah. “The way to get to that point is to have a 360-degree view of the customer across all sales channels.”

Having this kind of visibility into customer behavior enables retailers to service customers more effectively through all sales channels. For example, a shopper who orders online and picks up the item in a store can be engaged in a cross-selling or upselling opportunity by providing the sales representative with a customer profile. A variation of this strategy is providing customer service representatives with the shopper’s most current shopping session, in addition to purchase history, to enable cross-selling and upselling.

“Retailers want to create a dynamic, flexible environment that allows them to promote and sell using the same information across all sales channels,” says Marrah. “Whether the shopper is on the web site, in the store, using a kiosk or talking to the call center, retailers need a platform that provides full visibility into the customer’s behavior patterns regardless of where the interaction takes place in order to provide a consistent level of service.”

To illustrate his point, Marrah cites the example of a shopper that goes to a retailer’s store and finds a blouse she likes, but cannot find it in her size. The shopper then accesses a kiosk that tells her whether other stores nearby have the item in her size. She can also order it from the web store and have it shipped to her home or pick it up in-store at a later date. Customers can also use in-store kiosks to view how a monogrammed item will look, just as they would when shopping online.

“The challenge to developing a fully integrated, multi-channel platform is creating a singular view of customer purchases, inventory, fulfillment, the call center, bricks-and-mortar stores and the web store,” Marrah says. “Without that level of integration, retailers can’t provide the desired level of customer service.”

Managing the lifecycle

ProfitCenter’s platform is a web-based multi-channel application that automates and manages the entire customer lifecycle across sales channels and provides retailers with unified customer and inventory views that reduce the costs and complexities of traditional software. Retailers pay a per-user subscription fee and have access to the latest version of the platform. Upgrades are made four times a year and loads are managed across multiple servers to ensure uptime.

“The SaaS model (software as a service) provides functionality to small and mid-sized retailers they might not otherwise afford because the cost of functionality is amortized over a larger customer pool,” says Marrah. “That’s a big advantage.”

Regular upgrades are essential to keeping any e-commerce technology relevant. ELayway has several enhancements in the works to its application including the ability for consumers to add personal information to their layaway account that will remind them of upcoming purchases, such as for birthdays or anniversaries, so they can plan a layaway purchase in advance. An analytics package is also in the works that tells retailers the most popular items and brands shoppers are purchasing on layaway and the average monthly payment.

Plans are even in the works for an in-store version that can be integrated into the cash register or an in-store kiosk. “Retailers that offer in-store layaway programs have no supporting software to track payments or send notification of when an item has shipped,” says Pinon. “It’s a manual process handled with index cards.”

The application can be integrated with inventory management systems to automatically notify the retailer’s fulfillment department which items on layaway will be shipping soon. “It can be used for pre-selling items to help retailers improve their forecasts for how much inventory will be needed,” Pinon says.

Making sure it all fits

Other companies are developing other payment options as well. UpSellit is testing its interactive chat application to direct consumers without credit cards to sites where they can apply for a card. Card issuers pay a referral fee to the retailer.

“A lot of consumers don’t have a card, but will browse a retailer’s site only to abandon it without making a purchase,” Wampler says. “This is a way to enhance the customer relationship and help the retailer save the sale, since many issuers will offer instant approval. Even if the shopper chooses not to make the purchase, the retailer will still get a referral fee.”

With the back-end linked so closely to customer service, retailers need to define customers’ expectations before selecting any back-end application, whether they are implementing a new platform or individual applications.

“Having a good fit with any technology means having a good match in terms of requirements versus capabilities as well as operational and cultural fit,” Wu says. “When retailers know the functionality they need and what they are getting and not getting in the technology, they can create a back end that successfully services the customer.” link to story