Online Retailing Industry 2007 Outlook

The key to successful online retailing is to have top management lead the charge…at least so said JC Penney CEO Mike Ullman at Shop.org’s FirstLook conference held February 1-2, 2007. To the etailers I interviewed for my article, every single one agreed with this statement: Internet success starts at the top.

Of course, for a monster retailer like JC Penney, it’s not always easy to smoothly integrate, market and track their various sales channels, and Ullman admitted they still had quite a bit of work to do. He claims that Penney’s is “agnostic in terms of where the customer comes in from.” I asked other etailers about their ability to not only track various sources but also how each source might have influenced web sales. Only about 50% claim to have this ability down pat; others say that it’s a 2007 goal.

Digital agency, Avenue A | Razorfish revealed they doing several studies around the impact of channels on one another. “In the last 10 years, we?ve all done a good to great job of measuring and optimizing our individual online channels (like web [advertising], search, email), but we haven?t done a great job of figuring out how each channel influences each other,” said RJ Hilgers, Vice President, Digital Marketing. “That?s all changing. For example, if you take web [advertising] and search, we know that search performs at a higher rate if it is combined with web advertising than if a user interacts only with search on its own.”

Online retailers still don’t wholly know what to make of social media. They clearly “get” that social media can increase the interaction that the consumer has with a brand, but the extent to which online retailers are willing directly solicit this engagement outside of their own site is yet to be determined. Etailers are even less likely to do anything with mobile marketing for the better part of 2007, as it seems not to be on their radar screen at the moment.

From the information presented, Shop.org panelists hoped to nudge online retailers further along the continuum. Through its presentation on the social Web, Yahoo is trying to help break down some barriers and fears. “Advocates,” defined by Yahoo as “connected opinion leaders,” have nine key self-described attributes:

• They are social and well-connected
• They consider themselves natural leaders with people always listening to their opinions
• They feel good brands are worth talking about
• They often tell friends about products that interest them
• They go out of their way to recommend good products and brands
• They enjoy expressing their opinions and viewpoints
• They tend to be the first among their friends to try new products
• They like to discover new content on the Internet
• They have written comments about products or services online

Brett Hurt, Founder & CEO of BazaarVoice, a company that assists online retailers harness the power of consumer product reviews, reminded retailers that consumer reviews are “more authentic than testimonials” and that these reviews can be used in multiple ways such as to:

• Create email and advertising creative featuring “customer top-rated items, which can generate up to 50 percent more revenue than other creative”
• create a word-of-mouth portal
• Expand into shopping portals
• Syndicate reviews to help sell product
• Use in in-store &/or catalog promotions as well

To add to this list, Jacob Hawkins, Senior Vice President for Online Marketing of Overstock.com said that reviews can help copywriters identify what they should be using to describe merchandise. Also, that your customers can say things that your copywriters can never even write because coming from you, it wouldn’t sound convincing. Speaking to authenticity and consumer trust, all panelists agreed that the consumer community recognizes falsehood and self-polices. But a marketer has to be prepared for the negative to appear next to the positive review — it helps improve authenticity.

Patti Freeman Evans retail analyst with Jupiter Research predicts that by 2011, “50 percent of all retail transactions will be influenced by online research” though she feels that online retailing sales is maturing and will likely peak and not exceed 10-15% of total retail sales by 2011.

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