It was a rush of a holiday season: close to half of the retailers we surveyed earlier this month reported year over year online sales growth of 30% or more. Per the 2011 eHoliday Post-Holiday Study, conducted with partner BIGinsight, consumers started shopping online in earnest in November and hardly slowed down thereafter, with more than half of consumers finishing up in the last two weeks of December.

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Retailers reported generally favorable key performance indicators (KPIs) for the November and December period, compared to the January to October 2011 period leading up. While it’s not entirely surprising that nine out of 10 retailers surveyed saw increased average daily site traffic, site conversion increased significantly for almost half and increased somewhat for almost another third. Three-quarters also reported increases in email conversion, and almost half saw increases in average order value. Shopping cart abandonment rates actually decreased for almost half (are shopping cart remarketing strategies perhaps starting to hit their stride?).

Despite largely positive indicators for the just-concluded holiday season, retailers aren’t sitting on any laurels, and many have mapped out a busy year of investments and improvements to make the best of 2012. What did retailers learn that they will do differently for the Holiday 2012 season – and what are they investing in this year to improve those capabilities?

  • Planning & Assortment. Improved forecasting, better inventory allocation for the Web channel, and general inventory management top the list of things that some retailers plan to do differently for Holiday 2012. To that end, many expect to invest in better inventory management in the coming months.
  • Infrastructure & Operations. Retailers shared that site performance continues to be an area that needs attention, so this year they plan to invest in additional server capacity, site stability measures, and additional infrastructure improvements.
  • Marketing & Promotions. Retailers this year are investing in, among other areas, all things search – both site search and SEO / SEM.
  • Shipping & Fulfillment. “Fulfillment improvements,” “operational capacity” and “finding a way to extend the shipping cut off to Canada – lots of missed opportunity” were some of the comments retailers shared about what they will do differently for Holiday 2012. Retailers surveyed noted that logistics and operations will see investment this year, along with investments in drop ship management processes and related measures by which to extend shipping deadlines overall.
  • Mobile. Not surprisingly, smart phone and tablet device optimization will likely see much work this year. (For tablet device design tips, please see also “Proof that tablets are here to stay”.)
  • Customer Experience. Several retailers feel that the customer experience is something they particularly want to improve in time for Holiday 2012, from “end to end customer experience” to the overall multichannel shopping experience. Bravo to retailers who plan to focus on this area, particularly as shopping channels increasingly converge.

Please see the Shop.org site for full results of the 2011 eHoliday Study Post-Holiday retailer and consumer results.

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Retail’s BIG ShowAs quickly as retailers were asking themselves how to optimize for those tiny little smartphone screens, along came tablet devices with – comparatively speaking – oceans of space to fill. Plus, it turns out, consumers use their tablet and smart phone devices for different purposes and in different ways. Little surprise, then, that designing for tablet devices is a distinct discipline, as mobile veteran Stephen Burke of Resource Interactive explained in the Shop.org First Look Track “Designing with the Tablet Consumer in Mind” session.

Given the burgeoning tablet device user base, companies are clamoring to give these customers a great tablet experience: Burke noted that Resource Interactive delivered 65 tablet device-related projects just in the last year, serving CPG and retail clients such as Kohl’s, Sherwin-Williams, and Limited Brands. Burke cited research showing that:

  • 7% of total online sales on Christmas Day 2011 came from Apple iPads specifically, according to IBM Coremetrics. iPads also drove 6% of all mobile online traffic the very next day (December 26, 2011). Their purchase conversion rate? A whopping 4.6% – “almost double the average mobile conversion rate of 2.8%.”
  • Looking ahead, 20% of US consumers say they intend to buy a tablet device in the next six months. For men and adults aged 31 to 40 years old, that’s more like 23% and 24%, respectively. Even among US consumers aged 51 to 60, that’s 21% (just try prying the iPad out of the hands of Burke’s 63-year-old relative who never used her smartphone for anything but phone calls).

What’s interesting about the tablet device, Burke also noted, is that – with the exception of older users – the tablet device is not a replacement for other devices such as the computer at home. Also, Burke pointed to research showing that a high percentage of people who read e-books prefer to use a tablet device for that purpose, prompting Burke to somewhat tongue in cheek characterize e-books as “the gateway drug to tablet dependence.”

“Couch commerce” is really here.  According to Equation Research for Zmags, 70% of tablet usage is at home – specifically, either on the couch or in bed. Consumers use the smart phone and computer to get specific tasks done quickly, whereas tablet device users are “couch browsing” (attributable to Fred Cavazza of Forbes). Ultimately, the tablet is a “leisure device” – albeit one that is starting to drive real commerce.

4 Primary Tablet Device Design Principles.
“Smartphone design is more like fitting a size 12 foot into a size 10 shoe,” Burke joked. By contrast, tablet design is about using the depth and breadth of what a tablet offers – so much so that, “the conversation between agency and client is different.” Overall, Burke isn’t convinced that there’s a vast difference between a good tablet device design and good Web site design – but there are some key tablet design principles to observe:

  • Make it engaging. Realize it must be a fun, engaging, immersive experience. “It’s like touching a stained glass window and watching it come to life,” Burke explained. In general, tablet consumers will engage repeatedly before making their considered purchase. Overall, you’ll want to use less text on a tablet, and instead use more imagery and short video.
  • Make it share-able. The tablet device itself is often shared within a family. Tapping social media, the tablet also “makes it easy to share ideas, thoughts, and even products” with others.
  • Make it shoppable. “The tablet is with people for an extended period of time in a low pressure way.” In traditional web design, “you limit the number of available windows and doors” in order to get people to the cart and to check out quickly. As a highly visual medium, retailers can offer lots of content to “engage and woo” the customer while still (gently) leading him or her to the actual purchase.
  • Make it extendable. “The tablet provides a vehicle for brand stories and product immersion.” Retailers should think about digitizing and then making available on the tablet all kinds of analog content that they already own, such as assets such as circulars, a video highlighting a designer that the retailer is launching – the possibilities go on.

As one example of tablet design, Burke pointed to the Sherwin-Williams “ColorSnap” product and how that evolved from the initial smartphone (iPhone) app to the iPad app that features large, rich imagery that allows users to explore and interact.

Burke suggested that retailers also look into the concept of “Responsive Design”, by which the company uses a universal codebase and set of logic to automatically adapt the content to recognize the device and operating system that the customer is using (for example, the system would perhaps remove two or three items from a tablet design in order to render a good smart phone display).

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Retail’s BIG ShowIt’s pretty easy to spout adages such as “omnichannel customer” and “cross-channel coordination”, but as any retailer knows, the much harder part is figuring out how the retail organization should be set up to make good on those mantras. Enter a panel of five experienced retail specialists at this week’s Shop.org First Look Track “The Organization of the Future” session: Rob Schmults (Intent Media and panel moderator), Jared Blank (Tommy Hilfiger), Kevin Ertell (OnlineShoes.com), Sally McKenzie (Ecommerce Consulting), and Bob Myers (Sheplers Western Wear).

So, let’s start with the age-old e-commerce question: in a multichannel organization, whom should the e-commerce team report into? The panel agreed: directly to the CEO. The CEO provides the cross-silo solution that cuts across all the divisions within the organization. If the e-commerce team is part of another group – marketing, merchandising, licensing, retail, or the like – it will inevitably be overly oriented toward the agenda of the silo into which it reports. What about the idea of having e-commerce report into the retail (stores) division? No, the panel said: retail and e-commerce need to be on par with one another organizationally. Or the idea of having different parts of the e-commerce team report into functional areas? The panel was clear: don’t break up the e-commerce organization – keep it whole, and, oh yes, have it report to the CEO.

Jared Blank, Vice President, E-Commerce at Tommy Hilfiger

As it turns out, this is how Bob Myers has set up his team at Sheplers. Taking it yet a step further, Bob has also implemented a single P&L within Sheplers, thereby allowing everyone within the company to unify around the consumer, versus individual silos. Sheplers has taken specific measures to make this a reality. For example, stores get credit for online sales that originate in their region or zip code, and e-commerce is tasked with driving sales in stores. As Kevin noted, “It’s about [shared] incentives.”  Furthermore, every employee hired – no matter what their job – has to have digital experience, thereby spreading shared digital sensibility through the organization.

The panelists all emphasized, however, that the most important tenets of classic retail remain: the traditional adage of “retail is detail” is as true as ever, but now it’s a matter of organizing around the customer (or, perhaps, “retail is detail plus digital”). E-commerce in 2012 simply isn’t like the online retail of 10 or 15 years ago – this is true retail, with “real retailers” running the business who understand the importance of factors such as inventory turn. “You have to be voracious about being in stock,” Bob noted as one example – retailers can’t just rely on the idea that the website is the infinite warehouse and that customers will be satisfied if you offer to order their size / color combination for them online, especially now that anyone with a smartphone in hand can do that on their own. (In the out-of-stock situation, Bob advised simply saying to the customer, “Let me get that item for you” – like we used to decades ago! – and then tracking that item down from other stores or even a competitor, simply to deliver on one’s promise to that customer.)

So, how about that other age-old e-commerce question: where does the retail IT team fit into the organization? Retail IT is generally used to build employee-facing tools – tools for employees to learn and use, maybe with training and manuals and on-site help. Consumer software and applications, of course, are very different and thus require a very different approach to development, implementation, and ongoing evolution. The panel agreed that it’s likely prudent to work initially with a third party development team to develop e-commerce solutions, as they know how to design and build for the consumer. As Sally noted, however, no one wants to use external resources indefinitely, so the ideal situation is to bring in and enable the internal IT team over time, gradually transitioning to make IT a true e-commerce partner.

How about e-commerce leadership? Gone are the days of “bright young things” coming in as generalists to run an e-commerce business, the panel agreed. Now, retailers need e-commerce specialists with deep expertise and experience to lead the e-commerce team. Jared described that he spends a lot of time with his merchandising and marketing teams (among others) “getting into the weeds” to understand in great detail what’s going on, how the team is doing, whether the right skill sets are in place. Sally added that understanding whether the right people are in place takes attention and time. E-commerce leaders need to invest in their team by giving them opportunities to develop their understanding of the market and to deepen their skills through venues such as Shop.org events (her words, not mine!). Also, some CEOs may not understand some of the specialized skills needed for e-commerce that are different from more traditional retail roles – for example, a usability expert, whose skills can increase site conversion and otherwise improve the customer experience.

With the e-commerce market developing so rapidly, how do organizations manage budgets? Some things in a budget, panelists noted, are must-haves like “air conditioning – you can’t not have that.” On other things, Bob explained that he listens carefully to his direct reports, and that if they all feel that something on the table needs to be included in the budget, he takes that input very seriously. What about the “shiny new keys” – emerging technologies that may not yet have proven track records? For those, Bob noted, “You place your bets.”

As Kevin pointed out, “Defending the status quo kills companies.” But if your organization isn’t yet quite as future-state as Sheplers, Sally summed up a few key steps towards the retail organization of the future: do ensure the e-commerce team reports into the CEO; focus on integrating *processes* first (i.e. integrate the organization further only once the processes are in place); and ensure that you have the right people for the job.

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Retail’s BIG ShowAs I started to take notes, I was a bit startled to hear Amy’s opening question: “If you and I were alone in this room, how would you kill me?” A self-described usability specialist, Eight by Eight’s Amy Africa knows how to get one’s attention – but more importantly, what gets people to buy (and not). In the Shop.org First Look “Neuromarketing and the Influence on Buying Behavior” session at Retail’s BIG Show this week, Amy delved into what makes us tick – as human beings and as shoppers – which in turn are keys for retailers to entice customers to buy.

Amy Africa, CEO of Eight by Eight talks about the human brain and shopping.

So back to that unusual opening question. Amy used that – and a series of follow up “what if” scenarios – to get the audience to think about how we make decisions. Turns out it has a lot to do with our “reptilian brain” (I hadn’t heard of it, either). Forget the more common “right brain / left brain” categorization – Amy explained that we in fact have three brains: the neocortex (rational data processing), the mid-brain (emotions and gut feeling processing), and, finally, our reptilian brain. The latter is the arbiter or tie breaker between the first two and triggers decisions, as its primary concern is one’s survival, and, as Amy described it, “deciding what’s safe and what isn’t”.

And this has what to do with retailing? Quite a bit. Amy next outlined a raft of 21 factors about human beings and how those impact your customer’s decision to whether or not to visit your site, stay or flee, and – hopefully – actually buy. Lots of food for thought – think of it as a reality / sanity check for you and your business. Herewith some of Amy’s points:

  • We are self-centered. Translation for your site: does your site really speak to your customers? Does it resonate with them, do they identify with what the site displays, talks about, exudes? Does your site speak the same “language” as they do?
  • We process best in “black and white” – that is, contrasts. In fact, Amy noted, contrast is “efficient” for our brains; we’re programmed to notice differences and changes in our environment (again, a survival technique). Translation for retail sites – “what are your pattern interrupters for your customers on your site?” Amy pointed out that most people vow they can’t stand pop up ads – but, they do make people take notice. The home page carousel (rotating images or content) is also effective, engaging the user to linger a little longer and see what comes next to make sure they haven’t missed something.
  • We are visual. As Amy noted, “You only think you think. You really just see.” Don’t “over SEO” your site, Amy further exhorted, forgetting that the user coming to your site from Google “doesn’t see words as much as he sees pictures.”
  • We look for patterns. Translation for retail sites: customers like to see patterns, as they feel safe and familiar. In Amy’s experience, navigation accounts for 40% to 60% of the success of a site (that’s more like 80% for a mobile site). Why? “Because 80% of [the customer’s] attention goes to the first screen; the top and left hand are patterns and [therefore feel] safe.” Among patterns, human beings particularly look for faces, as they are reassuring. Amy suggested that by adding a friendly-looking picture of a customer service rep on your product and check out pages, you will increase your chances of improving conversions (sounds like a great A/B testing candidate!).
  • We like things that we can touch. Translation for retail sites: are you using words on your site that are meaningless to your customer? If they don’t understand and cannot visualize easily terms like “revolutionary product” or “flexible approach” that you use on your site, they won’t warm to the product or service (or your company).
  • We like beginnings and ends. Translation: are you using deadlines and creating a sense of urgency? Use short deadlines – they help customers focus. Amy pointed out that two years ago the average life span of an email was 48 hours – now it’s 9 hours at best, and likely really more like 4 hours.
  • We respond to emotion. For a retail site, this is all about the story you tell (versus simply selling a product) – again, not just in words, but in your imagery and the overall look and feel of your site. What’s the first impression the customer gets? What are his or her takeaways from interacting with your site?
  • We create false memories. “What do you remember? Our memories are terrible,” Amy noted. “So, how do you compensate for your user’s terrible memory?” For retailers, it’s about putting some action directive (or, a reminder to the customer to take the action you want them to take) on each and every page to compensate.
  • We have inattentional blindness. As Amy notes, “We see what we want to see – and we don’t see what matters, often. Are your action directives clear and on every single page? What’s important to you and does the user know it?”
  • We like what’s first. Customers who do a search will look at just the first two results presented – at best. For retailers, that means making sure your bestsellers are among the top two results.
  • We respond to status. And, Amy posited, “Status and reputation are more important than money.” This is a key underpinning to social media – how many likes or connections, one’s rank as a contributor to customer reviews, and so forth.
  • We respond to scarcity. As we all know, “If it’s rare, we want it,” Amy notes. For retailers, this means thinking about scarcity and how it affects your cart and your check out – are you conveying urgency and scarcity so the customer has incentive to finish the check out process?
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Retail's BIG ShowTake a guess: Which are the five largest markets today in terms of online users? The US? The UK? Germany? Actually, try China, in first place with 369 million online users, followed by the U.S. (253 million), then India (133 million), Japan (104 million) and Brazil (91 million). And, as Zia Daniell Widger of Forrester Research stressed in the Retail’s BIG Show session “Global eCommerce 2012” this morning, these are active online users. Global online retail hasn’t remotely hit its full potential yet – by 2015, Forrester expects online retail sales to be coming from all of these markets (and many more), driven by compound annual growth rates (CAGR) ranging from 22% in China and 18% in Brazil, to 20% in Mexico and fully 53% in India (compared with 9% for the U.S. and 10% for Western Europe).

Zia Wigder, Pricnipal Analyst and Research Director at Forrester Research moderates the discussion.

While I don’t want to overwhelm with data, to understand why there is so much interest in two markets in particular – China and Brazil – a few numbers provide perspective:

  • In Asia, 41% of all online users live in China. Similarly, in Latin America, 41% of all online users live in Brazil. According to CNN Money, China and Brazil rank as the world’s two largest emerging economies in terms of GDP: China at $7 trillion (second only to the U.S., at $15.1 trillion), and Brazil at $2.5 trillion (that’s on par with the U.K.).
  • Forrester expects the Chinese online retail market to grow from $94.6 billion this year to $159.4 billion in 2015 (this includes both the business to consumer and the consumer to consumer markets). While smaller than China, the Brazilian online retail market is the largest by far in Latin America, and will grow from $11.9 billion this year to $22 billion by 2016.
  • In both countries, online consumers across all age groups are shopping online, though on average tend to skew younger than in the U.S. Most online buyers live in major metropolitan areas. Mobile penetration is very high in both markets – though shopping via mobile phone is not yet common practice. Non-local retailers entering China and Brazil will face markets dominated by local players – global retailers have yet to become a major contender in either. Furthermore, consumers are accustomed to cheap or free shipping (so much for that as a differentiator!). And while multichannel shopping is not really in place yet, Zia’s take is that there is much growth ahead on that front.

So – sounds like lots of potential for retailers exploring e-commerce opportunities outside their home markets? Panelists Angela Kapp of Shenzen, China-based Hui She Shang (The Luxury Club) and Gastao Mattos of Braspag in Brazil say yes – but it’s important first to understand the local market, customer preferences, culture, payment systems, logistics, and regulatory issues in order to succeed long term. While I cannot do justice in a single blog post to the wealth of information that the panelists provided today, herewith are a few highlights:

How do Chinese and Brazilian consumers shop online? Gastao noted that Brazilian shoppers are driven by promotions, and that free shipping is common practice. Brazilian online retail for now tends to be dominated by categories such as consumer electronics and computer-related goods. Brazilian consumers mostly use credit cards to buy online, and installment payment plans are a “promotion driver, but with a high negative impact on margin,” per Gastao. Social media is very popular in Brazil, but so far has had a low direct impact on online sales.

Angela emphasized that in China, price comes first and foremost, and competition on price is “fierce”. Chinese consumers buy a wide variety of products across categories: fully 25% of online sales in China are for apparel and footwear, including children’s apparel. In terms of customer service, consumers mostly use online chat, with only 20% of consumers using email (or “EDM – electronic data mail”, as it’s referred to in China). Union Pay estimates credit card usage in China at just 15%, so third party payment systems dominate the market: Alipay leads with over 200 million accounts. Social media is very popular (even without Facebook!) but tends to be more content sharing sites such as market leader Sina Weibo, as well as Qzone and Tencent.

How about the competitive marketplace? As noted earlier, local players dominate both markets, and even for global players such as Amazon (newly entered in Brazil), competition will be high. With prices for goods in mainland China 30 to 50 percent higher than in other markets (even Hong Kong), Angela sees international brands succeeding partly via their expanding network of stores around China, allowing them to develop a multichannel experience.

What about fulfillment logistics? Gastao pointed out that e-commerce sales are growing more than 25% annually. There are only seven logistics companies in Brazil involved in e-commerce, and the trouble is that their growth is not keeping up with that 25% market growth. In China, local courier players dominate outside Tier 1 cities. Angela noted that 360Buy “has perhaps the best system, with more than 14 warehouses, covering 200 cities and 120 collection stations.” The Chinese government also has laws in place to let consumers easily make returns.

As Angela remarked at the very outset of this session, “We [US businesses] tend to want to drive the agenda. [Instead,] listen first, learn first.” Wise words, indeed.

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