The Science of eCommerce
And the Art of Omnichannelby Courtney Albert
Business conducted through the use of computers, telephones, fax machines, barcode readers, credit cards, automated teller machines (ATM) or other electronic appliances (whether or not using the internet) without the exchange of paper-based documents. It includes activities such as procurement, order entry, transaction processing, payment, authentication and non-repudiation, inventory control, order fulfillment, and customer support.
eCommerce, or electronic commerce, has revolutionized the traditional retailer's channel strategy by making it a customer-demanded alternative or supplement to in-store shopping. Including internet and mobile technology, its ubiquity, ease of use and pace of purchase have landed it as a leader among mainstream channels. This prevalence has compelled some retailers to add eCommerce to their channel offering, while it has also led to the creation of the type of retailer who only offers internet or mobile sales (often called "pure plays").
eCommerce in the retail industry has experienced tremendous gains and is continuing to see growth in consumer adoption, with industry projections anticipating eCommerce sales to rise to more than $300 billion and represent 10% of total U.S. retail sales by 2015 (see Figure 1). Moreover, special online spending days are seeing record numbers. For example, Cyber Monday 2012 holds the title for the heaviest online spending day in history with $1.17 billion spent in one 24-hour period. As can be seen in its consistent growth, eCommerce is a strong distribution channel and has been perceived, by some, as a direct competitor against brick-and-mortar stores. As the environment evolves, a new challenge exists for the omnichannel retailer:
As eCommerce has grown, the lines between channels have blurred, and many customers are moving between channels during the purchase process. eCommerce, particularly the internet, has made it difficult to pinpoint the exact origination of the sale. For example, imagine the shopper who uses her laptop to visit your online site and adds multiple items to her shopping cart. She does not complete the purchase, knowing her items are saved and linked to her account. Later in the week, she receives an automated email reminder that she still has items in her cart; but instead of completing the purchase online she visits one of your brick-and-mortar stores and purchases the majority of items in her cart, which she was able to recall using her mobile phone. Is this a lost eCommerce sale? Omnichannel retailers may find it difficult to properly record sales, since many customers are using multiple channels to make a purchase. This means that retailers need to pay attention to all channels as customers are now using them concurrently.
Since the internet can encourage purchases across channels, retailers must develop eCommerce strategies that capitalize on the internet's influence. In particular, retailers need to focus on the internet's impact on sales in brick-and-mortar stores, product catalogs and mobile devices. Furthermore, as internet eCommerce is a new strategy for some retailers, they must understand how best to incorporate it into their changing operating model.
Even with all of the innovative opportunities eCommerce can provide, many retailers struggle with creating a cohesive customer experience because of the traditional way eCommerce is managed within their business -- as a completely separate channel. This usually translates into completely separate IT systems, completely separate organizations and people, and completely separate processes. Because of this disconnect, retailers not only lose visibility to potential omnichannel improvements but customers may not understand why their shopping experience is not seamless. In this POV, we will address how elements of eCommerce can be integrated with brick-and-mortar, catalog and mobile to create a complete omnichannel environment for your customer.
Brick-and-Mortar + eCommerce
While brick-and-mortar stores and the internet appear to be adversaries at times, the two channels are more often working together than against. In fact, many customers are using one channel for initial research while purchasing in the other. Hal Lawton, president of Home Depot Online, is quoted as saying, "45% of in-store visitors pay a visit to homedepot.com first." For this reason, it is imperative that retail websites are set up to aid in-store purchases.
Some retailers view the website as a digital catalog that can push customers into the store. Others see it as the main location for purchase, but they want to offer a transition into the store if it will save the sale. In both instances, the retailer needs to fully anticipate the customer's in-store needs when on the website. Four options need to be available close to the product page's call-to-action or "add to cart" button:
2: Product Availability
3: Shipping Options
4: Store Pick-Up
These four options are based on the shoppers' needs and expectations. Let's take a look from the their perspective and explore real-world examples.
Where is the closest store?
Store Locator is a great option for any customer who uses your website as a digital catalog to view product, obtain product information and read customer reviews, but who prefers to visit the brick-and-mortar store for the purchase. It is important that retailers capitalize on the customer's current willingness to purchase by offering multiple paths to purchase. Therefore, this is an option that should be clear on the homepage as well as the individual product page and close to the "add to cart" button. For example, this would be necessary for apparel retailers when a customer is looking for the right fit and needs to try on the product prior to purchase. As an aside, the retailer should also consider the return policy and shipping fees in this instance. If customers are worried about the right fit, then the retailer could offer a no-hassle return as a way to mitigate the customer's anxiety and, in turn, encourage the online sale.
Is this product, color and/or size available at my nearest store?
Inventory availability is another path to purchase for customers who have decided to purchase in-store, yet they want to first check if their product is in-stock. In order to show correct inventory levels or ranges at the SKU level, it is critical that the retailer have the infrastructure in place that allows for clear visibility of inventory across all channels. While this is no small effort, it leaves the retailer with a strong opportunity to win the sale. When the customer has selected Store Availability, it is also a good time to display complementary products or a model using the preferred product alongside multiple corresponding products. The customer is more likely to purchase more products than he or she anticipated when going into the store to make the purchase, so it would behoove the retailer to facilitate this transition between channels.
Can I ship directly to my nearest store?
Ship-to-store may be a great option to offer when you hold inventory in a central distribution center. This allows the purchase to take place online in the moment, but it may also offer the customer the option to save on shipping costs by selecting "ship-to-store." The total transaction amount for this customer, again, may improve by bringing the customer into the store to finalize the purchase.
When offering a ship-to-store option, retailers must also clearly outline the steps for picking up the product in store. This helps avoid any hassle and confusion of what to do or where to go when the customer arrives to the store. To offer this option successfully, the retailer must have thoughtfully planned out in-store logistics for storing the merchandise that has been ordered online, for the in-store personnel who is responsible for assisting the customers when they arrive to the store, and for the location that customers need to go to retrieve their orders. Proper instructions should be on the website at the time of purchase and emailed to the customer with receipt of order, and proper in-store signage should be clearly visible when the customer arrives to the store. This process should be simple, easy and inherent, or the retailer risks losing this or future sales.
Can I reserve it online, but pay for and pick it up at my nearest store?
In-store pick-up could be an option for those customers who really want the product, but who are not quite ready to pay for it, who prefer to pay in cash or who are not comfortably using credit cards over the internet. This allows the customer the opportunity to go to the store ensuring that the product is there, while it also removes the initial risk of the online purchase. Even though the sale has not occurred, this option is still a win for the retailer. First, the retailer has already compiled CRM data about this customer and his/her sizes and preferences. The retailer can use this data in bulk to understand general behaviors of segments, or specifically to this customer, the retailer can send customized communication encouraging additional or complementary purchases based on his/her past preferences. Secondly, anytime a retailer can encourage the customer to come into the store, the opportunity for a larger sale increases.
Product Catalog + eCommerce
With a product catalog, the customer has the ability to view the merchandise in an ideal environment or a showcase of its intended use. This feature is still relevant to customers today. With targeted mailing, printed product catalogs remain effective and can even influence purchases online and in the stores. In fact, research suggests that catalogs influenced 42.9% more online purchases than Facebook during the 2012 holiday season. While catalogs are trending toward extinction, they are far from complete elimination. Retailers today must offer both phone and internet paths to purchase within their product catalogs.
The key to an effective catalog in the omnichannel environment is maintaining its relevance to digital consumers. Omnichannel retailers should be looking at ways to include multiple paths to purchase within each channel. To bridge eCommerce with the print catalog, retailers should ensure that the web address and phone number for sales is clearly marked on the front and back covers as well as every interior page. The customer should not have to search for the contact information when ready to purchase.
Retailers can also encourage online purchases by facilitating the transition to the website. Many retailers incorporate quick response (QR) codes throughout the catalog near featured products. When scanned by a smartphone or tablet, QR codes can link to a wide variety of content, such as the company mobile website or a video of the product in use. Some retailers are even using more advanced technologies in their product catalogs, such as augmented reality, which in essence brings the product to life and provides not only product information, but also entertainment to the shopper.
Mobile + eCommerce
The increasing prevalence of mobile smartphones and tablets has changed the way retail customers interact with the retailer. The existence of this channel has precipitated the need for mobile-friendly websites, smartphone applications and mobile-purchase options. During the recent holiday season, 40% of tablet owners and 28.4% of smartphone owners browsed the mobile web for gift ideas, and 23% of shoppers used retailer apps to complete a purchase.1 Retailers operating in this channel need to determine in which aspects of mobile they will engage, such as mobile smartphone application and mobile website.
If you have a customer looking to access your site from his or her smartphone, then it is in your best interest to make the access easy. Therefore, mobile websites that automatically load when a person accesses your site from a smartphone or tablet are preferred. These mobile websites can be developed to load easier and quicker than your full website and can be tailored to feature the most relevant or popular content front and center. Further, they are often touch-enabled and can be created to have the look and feel of an application. Beware, however, of a mobile website that has limited function in comparison to your full website. Since customers are increasingly making purchases using their smartphones, limited functionality can cause friction for your customer and may impede a sale. One approach is to also offer the full site view on mobile devices for customers who are familiar with this version and know where they want to go.
Similar to the mobile website, a mobile application simplifies your customer's access to your merchandise. An application is one step closer to your customer in that it lives on your customer's phone; it is more likely to be top-of-mind and readily available. Retailers can make applications perform all of or more services than the full corporate website. The Amazon.com application, for example, allows users to log in to their individual accounts, make purchases and access all historical information that the website presents. In addition, users can take a photo, using their mobile device, and upload it to the Amazon site to identify and find the product on the site. Mobile applications provide the ability to incorporate native smartphone functionality, such as cameras, scanners, etc., which can be a very powerful tool in engaging customers and encouraging purchases.
Retailers can also use mobile apps to push notifications to the customer that either can bring the customer to the store and website or encourage more purchases while in the store. Push notifications can also simply encourage use of the application and lead to dependence. A 2011 Localytics study found that more than one-fourth of applications are downloaded and only used once. To remain relevant, retailers should consider what would impact frequency of use when determining functionality of the application.
Furthermore, retailers must ensure that the mobile application can be easily accessed while inside of the store. In a recent Parker Avery Point of View: The Customer Experience, we learned that 70 percent of customers are using mobile devices while in-store. With the application, retailers can pique the customer's interest in a product with pricing, customer reviews, product information, and more. For example, ULTA has a free mobile application that allows customers to gain product information by scanning the barcode. This can assist in-store purchases, but it can also be used at home when the customer scans a previously purchased product. The customer can access the current price, customer reviews and similar products and can reorder instantly without leaving the application.
When defining mobile strategy, retailers must understand that customers are using mobile in parallel to online. This means that some customers may begin a purchase online and conclude the purchase on their tablet, or vice-versa. Therefore, consider a mobile strategy that integrates customer accounts or shopping carts across channels and devices. In this instance, decide which customer information can be accessed via each channel. For example, can your customer complete a purchase through the full site, but only pull up past purchases and reviews only on the mobile site? Understanding your customer's motivations will help you to determine how much functionality must be included. As often is the case, more is better than less.
Online = eCommerce
As eCommerce grows into a viable channel for the individual retailer, you should consider the resources, training and platforms necessary for it to function productively. First and foremost, retailers should address the current organization structure and determine who will own the channel and whether or not new resources should be onboard to manage it. Personnel will be necessary to manage the IT infrastructure and eCommerce platform, as well as customer service operations, employee training and communication & processes with other channels.
The most valuable characteristic of the internet is the ability to measure and track customer activity in large data sets. When determining the right platform for the use, retailers should ensure that it supplies as much data as possible, and that they have the systems and roles in place to capture, understand and react on the information supplied. With the success of eCommerce and its increasingly intimate relationship to other channels, many retailers have created online stores, but few are measuring the key information that enables them to deliver better online experiences for their customers and increased eCommerce sales.
The following are four metrics that every retailer should be measuring and reviewing on a consistent basis.
New Visitor Conversion Rate vs. Return Visitor Conversion Rate
Break out conversion rate by your new visitors and return visitors to see how many are converting on their first visit to your site. Review this number over time to see if there is any seasonality associated with the purchase decision. If this number trends low, then identify what about your product is causing visitors to take time to make the purchase and use the insight to make the purchase easier. For example, adding more information about the product, more detail about your company, and secure site logos can motivate your visitor to purchase quicker.
Days and Visits to Purchase
For the returning visitors, how many days or visits to your site does it take to make the purchase? You risk losing the customer forever who leaves your site during the purchase decision. Try to decrease this number by offering incentives to purchase or, if you capture emails in the process, reach out to the visitor directly with an incentive or offer to help.
Average Order Value and Items Per Order
Determine what each order means to your business. If accounting for inflation only, this number should be increasing year over year. Try to grow these numbers by offering add-ons or similar products during the shopping and checkout process. For example, Amazon shows items "Frequently Bought Together" and "Customers Who Bought This Item Also Bought" to encourage additional purchases.
Shopping Cart Abandon Rate by Page
There are so many variables operating in your shopping cart. You should be in the habit of using a dummy account to periodically review the checkout process to make sure it is easy. Review the number of visitors leaving the shopping cart at each step in the process - this will help you to identify the most pressing page for concern. Are there unnecessary form fields, does the site not appear secure, are there too many pages altogether to check out? You have done the hard work to get your visitor to want to purchase your product – do not make it difficult for them actually complete the purchase.
Retailers need to bridge all channels with eCommerce. This means offering features such as multiple fulfillment options, store locator and store availability on the retailer's website in order to encourage offline sales that originate online. The print catalog should include a visible phone number, website address and ways to easily link to online content in order to encourage or continue the sale. Moreover, the retailer should offer a mobile website and/or a mobile application that integrates with other channels and inspires frequent interaction. Lastly, the retailer needs to plan for eCommerce by carefully considering technology, platforms, resources and success metrics. In all instances, the retailer's objective is to capture sales that may have been lost to the competition had it not been for the influence of eCommerce.
If you’d like to learn more about our vision or understand how you might take advantage of this strategy, contact us or call 770.882.2205.
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Courtney has worked with an array of retail and consumer packaged goods companies. Her experience covers a wide variety of issues including brand strategy, pricing, sales and marketing and e-commerce. She can be reached at firstname.lastname@example.org