Is this downturn an isolated event? How important are benchmarks and what can they tell us?

Coremetrics has collected data across its customer base in aggregate and created a free benchmark report for retailers to download.

Beyond benchmark data, retailers have to look at ways of exceeding those numbers. Common ingredients for innovation found across a number of related books are:

• Passion for direction
• Dedication to disruption
• Willingness to take on risk

Two pure-play retailers shared how they have addressed innovation.

Mark Katz, CEO & Founder, CustomInk

The market for customized products is growing and innovation has been key to delivering this unique purchasing experience. CustomInk has an aggressive stance on being transparent and creating customer affinity by meeting their unique buying needs. Customer satisfaction is over 99%, and when you ship over 5 million shirts each year, that is no small feat.

The best example is the open and uncensored comments on the company’s homepage along with a publicly viewable/searchable database of feedback. That takes guts, or not – let me remind you of the customer sat figure above! An open company usually takes advantage of user generated content and CustomInk is no different. They solicit customer pictures and stories for follow on marketing programs. These images and stories are collected using contest incentives and end up being self fulfilling (use images to promote a contest to collect images).

Instead of hiding behind ‘business-speak’ or an otherwise generic company profile, they are very descriptive and open about all parts of the history, operations, and people in order to create customer affinity, and it seems to be working. Being close to the customer has lead to other innovations like the sizing lineup. A large number of order are made for groups but by a single individual. The size linup helps that person estimate the approximate fit of each shirt for each person in the group. It’s a virtual measuring stick, in a police line up fashion.

Tomima Edmark, CEO & Founder, Andra Group (HerRoom.com, HisRoom.com).

Her retail company sells men’s and women’s under garments. It is a very visual category and Tomima really knows what makes her customers tick. Images are key and she has nailed it.

On the women’s side each bra has the following:

• Glam shot – supplied by the manufacturer that maintains campaign recognition
• Plain shot – manequin or generic model cropped to exclude the face (front, back, and detail shots)
• Set shot – many items have a matching lower garment that creates an ensemble
• Large size – some large sizes have additional supports, these images are displayed where relevant
• Under top views – 6 challenging necklines for bra selection (how does the bra look under the shirt)

For sports bras the challenge is how they perform so they have created slow motion video of women using the product. This is something a real world shopping experience could rarely replicate. Very innovative and gets to the heart of what the customer needs to know to make an informed decision – beyond just reading textual descriptions most likely written by men, or women of varying body types.

They have also addressed the uncertainties involved with purchasing shapewear. Will it really help, or is it unable to shape my body type? Women often have doubts but it’s simple. Show a real women in before and after photos. Done. Again, innovation only recognized by knowing where your customer’s head is at.

On the men’s side of things they have produced a texture scale. If silk is a 1 and terry cloth is a 10, they can rate every other material in between and a shopper has a pretty good indication of what to expect. They have even gone on to create texture as a navigation facet.

The bottom line in each of these retail examples is know your cutomer. Not just how they behave on the site, but how they operate, think, dream, etc. When you fully understand them, creating differentiating functionality will not seem like innovation, it will seem like the normal course of business.

Here are some snippets of ecommerce advice from each of the panelists:

Peter Cobb, Co-Founder, Senior Vice President, eBags

• Optimize with current point solution partners by upgrading to the latest versions but don’t invest in silver bullet, unproven capital expenditures.
• Expect and plan for a 6-12 month downturn at least.
• Preserve cash (that means no Super Bowl ads).
• Dropshipping is a great business model during this period of time.
• eBags has had to reduce team size but it has given them an opportunity to keep ‘A’ players. Those players have rededicated themselves.
• They are now having to address shoppers who are value shopping.
• They recognize a fundamental change in how customers shop. They are more sophisticated and jump back to Google, coupon sites, repeatedly. Therefore, they must improve revenue attribution.
• They also seek to fill out the SEO side of the business.
• In reference to Avinash Kaushik’s morning keynote, they also need to figure out how to address the 98% of non-converting visits starting with cart abandonment and product pages by doing A/B testing.
• eBags is playing with offers but margin decline is an issue. They don’t want to train the customer to expect discounting once the downturn flattens.
• They work with brand manufacturers to reduce wholesale costs. Many say no but lots will because they are feeling the same crunch.

Plans for 2009 include:

• Testing filtered navigation using testing.
• Testing auto complete on search (30% currently go to the search box).
• Testing video – doesn’t cost too much, quick turn around, embedding in email = adds life and excitement to the product.
• Focus on solid and unique products. Don’t contract the product line, expand it. This also helps SEO with more content/lines to sell.

Kevin Churchill, Director of Merchandising, Patagonia

• Work with vendors, don’t do big capital spends.
• They pulled back on catalogs during last downturn; this time they will be increasing circulation.
• Get back to basics = do usability study groups; learn from actual customer behavior and give them real dollars to spend to recreate real world behavior.
• There is no shortage of good ideas so prioritization becomes more necessary.
• Finding the cash to execute changes on the site also increases in importance.
• Reducing returns delivers immediate benefit, even though many of the best customers are the ones with the highest return rate (Zappos has experienced the same).
• Eliminate objections in the discovery and buying process (better images, video, more textual data, customer reviews = build confidence).
• If they are out of stock, they give suggestions of dealers who have it (applicable primarily due to their wholesale business).

Plans for 2009 include:

• Hone in filtered navigation.
• Leverage reviews across various channels.
• Push live chat more = they experience better conversion for those who use live chat.
• They are good at running reports, but have to refocus on applying learning

Bradford Matson, Chief Marketing Officer, Bluefly, Inc.

• Selling in the luxury space is really tough right now.
• Pushing to drive conversion and building customer affinity is key.
• Offline/online integration has been successful; partnership with Project Runway has driven great results: 30% increase in unique visits in 18 weeks straight.
• Partnerships with content creators (tv shows/sites)  has delivered an increase in brand searches.
• Work with your finance team to make brand building programs happen.
• Delivering a persona driven site by the end of the year should drive positive results.
• Keep cost per acquisition down but the number of new customers up.
• Be creative. They do short sales at lunch (2 hour quickie).
• Preferred customer get first look at new items due to be posted to the site.

Plans for 2009 include:

• Maintain or increase production value as it should be high and shopping should be exciting.
• Taking cues from pop culture in content creation to increase affinity.
• SEO and work on landing pages in order to create a good first impression.
• Continue aggressive emailing of 7-8 per week per individual (segmented out of 35 total emails created).

Of note: Everyone is seeing a drop in conversions (not unexpected), but lots are seeing more traffic.

It’s great having candid conversations with retailers who have two feet on the ground and Lauren asked some good questions.

Over the last couple years there have been lots of questions around Web 2.0. At first it was ‘what is Web 2.0?’ Lately it has shifted to ‘Is Web 2.0 dead?’ The reality is Web 2.0 is simply being refocused and is most powerful when refocused around a purpose. The downturn has made it more critical for consumers to find better deals and spend less. That is a purpose worthy of a retailers’ attention.

There are a few creative ways retailers are exploring including channel evolution, alternative interfaces, and different models for ownership, pricing, and customers.

CROSS CHANNEL

Retailers often have a Cadillac view of cross-channel retailing and think buy online pick up in store is the only true model to follow to achieve cross-channel bliss.

The reality is there is a wide spectrum of what can be done. UK retailer Argos has a full cross-channel set of tools including local stock checking, reservations for in-store pickup, and various mobile marketing and merchandising activities. This full suite is more expensive and resource intensive. Alternatively, Walmart simply offers a ship to store option between 7-9 days. It isn’t a Cadillac when it comes to full cross channel selling but it somewhat matches business strengths and consumer expectations. The goal here should be finding the right balance of company capabilities and customer expectations. Polarization between capabilities and expectations in either direction is risky.

A major hurdle for retailers to overcome has been inventory buffering for in store pickup. Some have tried stocking enough to cover in store purchases, and buy online pick up in store demand. It just isn’t practical or efficient. Alternatively retailers should attempt choosing one regional store for buy online pick up in store, or it can act as a regional supply hub if the lead times are sufficient. They can then optimize inventory on the regional level vs the store level.

MOBILE

A recent Gartner survey asked what consumers would like from retailers in terms of mobile enablement. Consumers rated the following very likely or likely to use:

• 26% Want to check prices on mobile
• 25% Check store location
• 22% Get promotion
• 16% Order items
• 14% Pay using mobile

There was a clear indication consumers want to shop first and worry about payment second (it does not need to happen in the same interface, or session, discovery happened). Try not to force transactions from mobile interfaces. Again, match the expectations of your customers. Many simply want to use mobile as a means of accessing data to do comparisons.

Examples in use today:

• Mobile reviews will increasingly become powerful and more common
• Pushing deals via Twitter to make them more social, but reduce the shelf life of the promotion
• Integrate messaging channels with services like SnapTell where consumers take a photo of product and a mobile app returns relevant information (reviews, promotions, etc.)
• Notifications to drive behavior such as Meijer who sends an opt-in SMS to tell customers of an upcoming increases in the price of fuel

ALTERNATE OWNERSHIP MODELS

• Buyback: Offer consumers the ability to sell technology back (at a discount) once newer models are available to encourage upgrades such as TechForward
• Prepaid: Lower the barrier to entry and let a consumer accessorize or pay-as-you-go in incremental steps such as Microsoft FlexGo in emerging markets
• Rent: Avelle (Bag Borrow or Steal) lets you pay to borrow designer bags; the Netflix of handbags!

ALTERNATE PRICING MODELS

• Barter: Offer free products in exchange for accepting offers from partners. See TrialPay
• Negotiate: Bundling of offers in order to reduce the cost of items being considered (i.e. a lower credit card interest rate if you purchase a mortgage product).
• Dynamic pricing: Raidoheads’ In Rainbows album was a ‘pay what your feel’ model and was estimated to pull in over $4/album still

ALTERNATE CUSTOMER MODELS

• Remittance customers: People who ship to other countries (both cash and products). India has a large portion of retail in this segment.
• Group buyer: Mobile phone developers re-tooling address book functionality to accommodate for groups of people using a single phone in emerging markets.

CONCLUSIONS

• Web 2.0 is not dead
• It is the best year to train your customer to use mobile promotions
• Look for emerging economies for new models
• The Web 2.0 consumer will use use it to ultimately attempt to spend less