Shop.org Blog

In this session, three great speakers provided insight on how ‘Web 2.0′ is enabling new online behaviors, and how those behaviors are transforming the online experience and the dynamics between you and your customers.

Carrie Johnson, VP and Research Director, Forrester Research began by putting some definition behind the term ’Web 2.0′.

Web 2.0 definition and examples

• Interaction with people
• Facebook  
• Interaction with content
• Burpee seed  
• Interaction with data
• QED  

The majority of web 2.0 development at companies is being done for internal consumption (57%)  vs. customer facing (13%). Even so, it is having a profound impact in the customer channel and we are seeing Web 2.0’s enabling technologies spawn new core applications, which are in turn driving behavioral shifts/new social behavior.

Online social activities

• Listen to me
• Blog, social network
• Listen to us
• Wikis
• Find people like me

And people like the new capabilities. 70% of web users agree/strongly agree that Highly interactive sites enhance the online experience. But, you need a strategy for sucess, so here are a couple of guidelines.

Success criteria of web 2.0 tools

• Your customers like and use them
• They solve a problem
• Product discovery
• Collective wisdom
• Product visualization

Right now the web is great for people finding what they want (are specifically looking for) and new navigation helps them narrow their choices down:

• Customer reviews
• Tags
• Rss

Web 2.0 can also provide new ways for product discovery

-Etsy find a product by color
-Collective wisdom

Customers helping customers; content created by customers to help other customers shop

• Ratings and reviews
• Tags (social tagging Amazon, Buzzillions)
• User Generated Video
• Wikis

Product visualization
Another killer use is to help customers more effectively explore a product and it’s features. Two examples of this are:

-The User Generated Video on expo television
-How Zappos provides photos from every conveivable angle of the shoes they sell

To grow sales online, it is important that we continue to find ways to mitigate the limitations of the web as a shopping tool.
 

Next up was Doug Mack, Vice President of Hosted and Consumer Solutions, Adobe, who stressed that great digital experiences are the exception, not the rule. Doug then presented what he believes are the next 5 themes for the future (3-5 years out)

1. Content is king
    ·The interface is the barrier to the customer getting where they want to go
2. Make it personal
    ·Not only is the Experience tailored to the person, but the person is customizing their own experience and products (check out  MTV video remixer or Zazzle)
3. Empower your customers
    ·Doug demonstrated a special version of the Anthropologie .com store for the desktop (powered by Adobe AIR ) where the user can load a picture of someone, select a color on their outfit and display products that match it.
4. the internet, accessible anywhere
    ·Time to get your pervasive strategy in order
    ·It’s for brick and mortar too; use it to provide product info at Point of sale
5. Create an experience, not a website
    ·Amgen started with “what is the biking racing experience we want to create?”
    ·Provide live updates on a map of all racers with live video feed of the race
    ·Chat rooms
    ·Additional Photos pop up live from the course when available
    ·Detailed course profile showing terrain, slope and grade.

Last up was David Daniels, VP and Research Director, Jupiter Research. David let us know that 85% of web users visit retailer/vendor/manufacturer sites like Amazon, google, etc… while only 25% currently use social sites. However, this is an important and growing segment and vital to your strategy moving forward.

Consumers are more likely to give feedback after a good experience than after a bad one. 31% will tell friends about a good experience vs. 21% who tell friends about a bad experience. Either way, it’s a good idea to focus on taking care of your customers to generate positive buzz about your company. Use the email you get to ID brand ambassadors and involve them. This will improve both your offering and your customers loyalty.

A certain percent of your customers are going to be ‘Super Communicators’.

Super communicators

• 20% of online shoppers
• 12 purchases, 9 product reviews
• 32% of online spending (skews male)

Customers trust what other customers say about your products as much as what you say about them – they look for peers to validate product claims (more so in tech or other categories where there is not as much general knowledge).

So there it is then. Emerging technologies will allow us to vastly improve the online shopping experience, but at the same time we need to go back to the fundementals; listening to and taking care of our customers.

Here are some select posts about the Jan 22-24 event in Orlando, Florida…

Broad international themes from Shop.org
Zia Daniell Wigder, JupiterResearch
This is the third Shop.org event I’ve attended over the past couple of years – it’s been a lot of fun to see global topics starting to play a key role in this online retail conference.

Acquisition Versus Retention - New Thoughts on an Old Argument
Mitch Joel, Twist Image
While attending the Shop.org Strategy And Innovation Forum in Orlando today, I had the pleasure of presenting on the topic of Social Shopping with Carrie Johnson from Forrester Research. We each did a twenty-minute presentation with about fifteen minutes of questions and answers. One individual asked our thoughts on where online merchants should best devote their time - on retention or acquisition?Canadians

Canadians Take Shop.org Innovation Forum by Storm
Evolving Shift, Simon Rodrigue
I just got back from Shop.org’s first Strategy and Innovation Forum and I am happy to report that Canadians stole the show. As an aside if you haven’t been to one of the shop.org events you need to put one on your schedule for 2008.

The second keynote of the morning featured Andy Nulman, President and Chief Marketing Officer, Airborne Mobile. To say Andy is enthusiastic would be an understatement. Unlike many speakers, Andy asked everybody to turn their cellphones on and up. His company is in the mobile content delivery business, a ringing cellphone is money in his pocket.

Mobile devices are everywhere, they’ve become a third appendage. Couple this with people’s passion for shopping and you have powerful mix…but how do you use it?

The fear, from consumers, was that mobile marketing would be disruptive. If it was, the mobile marketing business would be dead.

Mobile marketing is at its core, 1 to 1 marketing. It’s about building a stronger relationship. You need to allow people to opt-in, but this should not lead to opt-in overload. You want to be perceived as a dear friend….not a nudge. What would you whisper to them? What can you tell them that will make love your more?

NOW is the word and the acronym that Andy’s been thinking about.

Near-by, customers need to be in your radius, close, local
Only, there has to be a limit
Wow, make a compelling offer

The power is getting the person when they’re ready to buy. The basic building block is the text message (SMS).

Andy provided five things you can do NOW.

1 The NOW Pssst: Limited time offers, but it needs to be engaging and special. Target people near your location.

2 The Secret Sale: Things like in-store sales, or special offers. Texting to a special number will provide them a message/discount/coupon. It’s completely opt-in. No paper costs.

3 The In-Store Experience: Give the customer control of what they want. Give them additional information, the backstory on products.

It should be noted that text messages have to be short, so the message is message, no marketing speak.

4 Woot! Like Countdown: Send limited offers to opt-in customers. The idea is similar to Woot!

5 Mini WAP Sites: Basic mobile web sites that provide information about a store.

What are the benefits? Once again an acronym HUMID.

Hyperlocal - Operate things at a local level. Give local managers the tools and power.
Uurgent - Text messages hit, e-mail sit. People respond to text messages quicker than other forms of communication.
Measureable - Mobile is a data-crunchers dream.
Immediate - Promote cold, fast, hard sales
Dynamic - Take action when you need to. Empty store? Do something.

Shoppers love discovery, talking, bargains and recognition. Mobile delivery can address all of these.

Day two of the Strategy & Innovation Forum kicked off with a general session by FAO Schwarz CEO Ed Schmults. Ed talked about the challenge of expanding their reach, while protecting their brand.

FAO has been around since 1862. There were two recent bankruptcies in 2002 and 2003. However their direct-to-consumer business is growing. Their retail locations are in New York City and Las Vegas. With their brand equity they are looking to expand their private label toys.

FAO has some brand perception issues. They’re perceived as expensive. The store is sometimes seen as a museum or a tourist site. Other issues: Net relevant to today’s kids, it’s all about the New York store, just for the holidays.

The plan was to repurpose the brand. This started with the merchandising strategy. They wanted to target items that had: Quality, Design Integrity, Orginality, Health/Safety.

With this change they removed hundreds or brands and vendors. Shortly afterward same-store sales rose 20%. Other than Thomas the Tank engine, FAO did not carry a single recalled toy. That’s part of their focus, safety and quality.

Their product mix is very selective. There are more private label products and exclusives. The brand repositioning has allowed FAO Schwarz to stand out among children’s retailers once again. This change has led Hollywood to their door. Movie studios look to FAO for exclusives for movie-related toys (think Charlotte’s Web, Harry Potter, etc).

Their research has shown that FAO is strongly associated with quality. They also had a very high net-promoter score. FAQ has brand recognition similar to large global luxury brands. There is also high affinity within children.

Research showed that FAO is seen as the expert in child development. At first it’s kind of scary, but now they’re looking to really embrace that. FAO is working with an advisory board to help build that development arm. Ed was sure to mention that their advisory board was a real board of experts, and not a pretend board like some others.

The key questions are: How do they appropriately participate in the parenting community? Who is our audience? Women are a key customer segment. “Women don’t just buy brands, they join them?”

Ed noted that they passed on WebKinz. They had a first look at the product, but they felt the quality of the plush was not that great. But that’s not what the toy was meant to be. With that

FAO is leveraging their brand by working consignment deals. Vendors pay for the build-out, repay staff costs and FAO only pays for inventory sold. Ed noted that he has brands lined up for these deals. For FAO it’s great, they can constantly update/upgrade their stores with no capital outlay.

Recent external capital investments did not focus on IT or infrastructure. Moving forward, one of the key focusses is updating the infrastructure.

With the brand repositioned, FAO is building new revenue channels. They include clothing, health & wellness as well as publishing.

Looking beyond the storefront (Catalogue and Internet) there are things they need to improve on. Their site was boring and not up to date and it doesn’t match the excitement of he store experience. They’re looking to replicate the in-store experience as much as they can.

Retail expansion has been spearheaded by their Macy’s in-store presence. The Chicago Macy’s story is performing way beyond expectations.

The next phase is licensing. They’re working to license the FAO name to media properties, etc. Internally they’re developing a brand book. The brand books sets internal and external expectations.

For Ed, one of the things that drew him to FAO was the ownership. They’re owned by a hedge fund. Ed asked the audience, “How many of you are owned by private equity firms?” A few hands went up….Ed’s response, “Just you wait, it’s coming.”

Ed described the relationship he has with the owners, it’s not unlike a traditional board. There is a need for constant communication. You need to know are they investors or operators? Investors are starting to think like brands. They want to be seen as innovators.

However, owners will always look to extract brand value. You need to watch this since it can lead you astray.

The key challenges of working with owners:
- Want it all, want it now
- Push for every opportunity
- Challenge convention
- Uncomfortable pressure
- How much do you shield your team?
- Must be comfortable working with senior people
- Expectations of success
- Fear

Lessons learned:
- Great brands are much more rugged than most people think.
- FAO’s key asset is its brand. We need to honor our heritage, but keep relevant.
- Chart a path that has a chance to succeed.
- Know your customer.
- All innovation must pass the brand filter.
- Private equity ownership has been a huge plus for FAO Schwarz.

This fast paced session opened with Mitch Joel, President, Twist Image, giving us an extreme example of social shopping; the story of how Neal Schon from the 80’s super group Journey found a replacement for lead singer Steve Perry on YouTube; a 23 year old from the Philippines who had posted videos of his cover band!

This spoke to a major theme of the session – many online retailers are selling much of the same product, so how do you differentiate? (and it increasingly isn’t about best price and free shipping). Also, you need to get your content out there (videos on YouTube, photos on flickr, etc…), don’t restrict it to your site because potential customers are searching for information everywhere!

We are also experiencing a shift online. Looking for content has just surpassed communication as the number one activity on the Internet. People want to connect to others who have the same interests and who want the same stuff (think ‘digital Tupperware party’). Social content lets people fall in with ‘similar others’, and social networkers (facebook) are evolving into social researchers (like digg, but for products). 

Mitch was also adamant to stop thinking about the Long Tail and instead get on the Long Road of content, voice, conversations and ratings. You need a strategy for how your products can rise to the top. At the end of the day, Social Shopping comes down to making it easier for the customer to buy. The average online conversion rate remains at 2%, and social shopping is the only way to crank it up. 

Next up was Carrie Johnson, VP and Research Director at Forrester. If you’ve seen Carrie present before, you know she’s very analytical and covers a lot of data; fast!

There’s a lot of hype around social shopping right now, and many new sites are popping up like kaboodle, meebo, shopwiki, stumbleupon, etc… Don’t get distracted; the trend is more important than the technology. 

What the social shopping trend really means 

• It defines a social structure in which technology puts power in communities, not institutions 
• Social media increases the purchase options available to buyers 
• Networks expose unpopular, hard-to-find products and services (often free!) 
• These same networks create new suppliers of products and services 
• In the mean time, it erodes advertising effectiveness of traditional brands 

Social media will expose more products (than mass media does now) resulting in increased niche sales. 

What do you do about it? 

• Maybe nothing! Create a strategy based on your customers, now what you want 
• Start with figuring out what kind of social shopping profile your customers have then create an objective 

This requires a difficult deep dive on your customers (current or desired) and their participation levels in social media: 

• Who are they? 
• How engaged are they? 
• What is the frequency of their participation in social media? 

Lastly, as we move forward with this emerging media, some of the earlier experiments are beginning to drop off. Second Life, a former poster child has not held up to the hype and is no longer seen as offering any long-term value.