Tag: e – commerce

As Internet Sales Grow, Retailers Go Omni-Channel

Posted on November 25, 2011

As e-commerce grows, traditional retailers are facing increasing pressure to adopt marketing plans that integrate the bricks-and-mortar and online shopping experiences. Using this approach, companies are designing physical stores, online websites and mobile applications that complement each other, and trying to give the shopper reasons to interact with the retailer on all channels.

According to third quarter sales figures released last week by the U.S. Commerce Department, retail e-commerce sales grew an estimated 1.9% to $48.2 billion between the second and third quarters of this year. E-commerce accounted for 4.6% of all retail sales in the third quarter, up from 4.4% at this time last year.

To compete with the steady advance of online retailers, traditional firms must adopt an “omni-channel” approach that leverages the Internet, mobile phones, television and catalogs along with physical stores, says Wharton marketing professor Barbara E. Kahn. “Consumers will decide which channel to use as a function of which is more convenient to them at the time,” she notes. Marshall Fisher, a Wharton professor of operations and information management, agrees. “Multi-channel [marketing] is the hot topic for physical store retailers these days,” he says. “Many worry that their stores will become showrooms for Amazon.”

In one recent example of an attempt to integrate the virtual and in-person shopping experience, Toys“R”Us last week announced expanded mobile offerings timed to the  holiday shopping season. Customers who download the retailer’s mobile app will be able to look up their children’s wish lists via smartphone and access a mobile version of the “gift finder”  suggestion feature on the chain’s website. Toys”R”Us has also worked with partners to develop apps that allow customers to search the inventory of their local store for a specific product and even pay for it via smartphone. Retailers including Best Buy and Staples are working with “one stop” e-retailers like Amazon to get their products on multiple screens, according to CoStar Group, a real estate information services firm.

Kahn suggests that retailers could also use less display space within their bricks-and-mortar locations. The extra square-footage could then be dedicated to developing “stores within stores,” that sell products that complement the retailer’s existing merchandise.

But Wharton professor emeritus of real estate Peter Linneman says the real losers in the growth of e-commerce are catalogs. “Stores have long served the return and-test-drive role for catalogs, as they do now for Internet sales,” he points out. Internet retailers have inherent limitations — shoppers can’t try on or try out most products the way they can at a physical store. Linneman describes Internet retailing as the latest of an ever-changing set of retail concepts. “A study of retail history is the study of constant change and innovation, with today’s winner being tomorrow’s loser,” he says.

For more on this topic, check out this Knowledge@Wharton story from earlier this year: More Than Virtual: Marketing the Total Brand ‘Experience’

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Dos and Don’ts for Amazon’s Redesign

Posted on September 6, 2011

Online retailer Amazon.com announced on Friday that it is now in the testing phase of a major redesign that streamlines the site’s older — some might say “cluttered” — interface. According to an article in the Wall Street Journal, the new design is apparently geared more toward tablet users — with “fewer buttons, more white space and a bigger search box.” The Journal also notes that the new version emphasizes the sale of digital products over physical ones. So far, the test site has been distributed to a limited number of users, and the company has declined to say how soon the new design will go live.

The redesign has led to speculation that Amazon is gearing up for the launch of its own tablet. Indeed, the Journal story says, sources inside the company have indicated that the new device will arrive in the coming weeks.

Amazon is the world’s largest online retailer, earning $34 billion in revenue in 2010, according to the Journal. Even with that lead, it’s no surprise that the company is undertaking a redesign, notes Wharton marketing professor Eric Bradlow. “Amazon, like others, realizes the direction of the wind,” he says. “Mobility — and full access while mobile — is becoming expected. Hence, the ability of firms to tailor their content to web users will become critical going forward.”

Still, Amazon needs to be aware of some potential pitfalls, even as it works to remain relevant in the age of mobility. Wharton management professor Stephen Kobrin, publisher and executive director of Wharton Digital Press, says that although it’s hard to determine what kind of specific changes are in store for the redesign without seeing the test version, one potential pitfall would be if “navigation on a [regular] computer will be compromised to make it easier on their tablet.” According to research firm comScore, 282 million consumers visited Amazon in June — whether to shop, research products or read and write product reviews. One thing many of them have in common is a familiarity with Amazon’s current setup.

Bradlow agrees that there is a risk inherent in undertaking a redesign of such a popular site. “One of the greatest drivers of consumer loyalty/lock-in is the cost of learning a new interface from a new site,” he notes. “If a firm changes its own look or feel, there is the potential to erode the loyalty that was there to being with.”

Bradlow adds that for any site design to be successful, the user must come first. “Make search and commerce easy and quick, and don’t think about maximizing site time,” he says. “Think about maximizing consumer needs. Too many [companies] treat site time as engagement; it is not. People may just be confused, or the site may be hard to navigate.”

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The Next Big Marketing Frontier: Smartphone Moms

Posted on August 2, 2011

Smartphone-wielding moms are where the action is — a fact not lost on marketers, more and more of whom are targeting this particular segment. And chances are a fair number of these moms prefer an Apple iPhone or a Google Android device. Such trends, along with increasing sales of smartphones, should significantly reshape marketers’ strategies, says Wharton marketing professor Barbara E. Kahn.

Apple’s share of total mobile phone sales grew 117% between the first quarters of 2010 and 2011, according to the NPD Group, a consumer and retail market research services firm in Port Washington, N.Y. But Apple’s share among moms (defined as adult women with children under 18 in the household) grew 132% during the same time period, as reported by NPD’s ongoing Mobile Phone Track consumer tracking service. By comparison, Apple’s share among adult women without children under 18 in the household grew 103%; among adult men, it grew 121%, says NPD spokesperson Lee Graham.

The next big challenge for marketers is to develop appropriate apps that appeal to moms armed with smartphones, says Kahn. Not only are these women adapting quickly to the smartphone and apps technology, but they have “considerable time” during their day to spend “with the various apps and smartphone products,” she adds.

Mobile Commerce a Big Draw

These new trends are particularly interesting to marketers because of the increasing ubiquity of mobile commerce. “Moms, who already [are responsible for] many of the household purchase decisions, now have a new technology to help them make these decisions more effectively and efficiently,” Kahn says. Not surprisingly, many of the iPhone’s 425,000-plus apps that appeal to mobile commerce-friendly mothers cover a wide range of topics. Those include apps for stocks and options price tracking and trading, personal finance and budgeting.

“We have known about the opportunity of online moms for a while now, but then mobile technology came along and blew everything up,” NPD Group’s chief retail analyst Marshal Cohen told the Washington Post. And, notes Facebook’s Ethan Beard in an interview Knowledge@Wharton published this week, new people are coming online all the time, especially in developing countries where mobile phones are how more and more people access the Internet. Also, as mobile technology gets better and bandwidths get wider, it becomes easier for retailers to target consumers, according to another Knowledge@Wharton report on e-commerce.

The iPhone Gathers Speed

In targeting moms, many of those mobile apps developers would likely choose the iPhone platform first. Research services firm Nielsen, which coined the “power moms” phrase a few years ago, said in a May survey that while Android leads the smartphone market, it has of late been losing ground to the iPhone. Android’s share in new smartphones has stayed mostly flat at 27% in the first five months of this year. But Apple’s share has grown from 11% to 17% in the same period, eating into sales of the BlackBerry and Windows Phone 7 devices, Nielsen noted.

Overall, smartphone sales are set to cross the one billion mark by 2016, according to a recent report by IMS Research USA of Austin, Texas. Worldwide, smartphone shipments grew 76% to 110 million units in the latest quarter ending June, reports Bloomberg News, quoting Strategy Analytics of Newton, Mass. Apple led smartphone sales last quarter with iPhone sales of 20.3 million, followed by Samsung and Nokia, the report adds.

Apple’s iPhone has endeared itself to moms in more ways than one might expect. The mother of all apps turned out to be a menstrual calendar that 30-year-old Lena Bryce of Glasgow, U.K., used last year on her iPhone, according to a report in U.K.’s The Sun newspaper. The app tells when a woman is most fertile. Within two months of using it, Bryce was pregnant. When her daughter Lola was born, she was nicknamed Britain’s first iPhone baby.

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Another Dot-com Boom

Posted on May 3, 2011

A dot-com boom in India is attracting major venture capitalists and other investors from the U.S. and Europe. Modeled on companies like Amazon, Groupon, eBay and Netflix, the Indian firms are overcoming infrastructural constraints such as low Internet penetration to generate impressive revenues and expand their customer bases. It’s a matter of time before e-commerce picks up speed in India, according to Wharton faculty and some dot-com entrepreneurs.

Among the high fliers is Kunal Bahl, 29, founder and CEO of Delhi-based Jasper, better known by its ecommerce site SnapDeal.com. The online retailer sells discounted “perishable distressed inventory” of products and services such as holiday getaways, beauty parlor and gym coupons, sunglasses and watches. A 2006 graduate from Wharton’s management and technology program, Bahl founded SnapDeal in February 2010. It is growing its subscriber base of four million by a million new users each month, and expects to have revenues of $20 million this year.

Bahl recently met with venture capitalists, private equity investors and hedge funds among others in the U.S. and Europe. “They are falling over each other to invest,” he says. SnapDeal three months ago raised $12 million from investors, enough to keep it going for the next two years.

Bangalore-based Flipkart.com, an online books retailer modeled on Amazon.com, is also attracting “a lot of interest from investors,” says its CEO, Sachin Bansal, 29. He co-founded the firm with Binny Bansal (not related) in 2007, after they quit their jobs as software engineers with Amazon’s Indian operations in Bangalore. Venture capital firms Tiger Global and Accel Partners India have invested in Flipkart.

What could India’s new dot-com startups learn from other, successful firms in the west? “The main lesson from companies like Amazon is the need to develop survival instincts during the early days of e-commerce,” says Kartik Hosanagar, a professor of operations and information management at Wharton and an expert on Internet commerce. A majority of e-commerce ventures that started alongside Amazon disappeared during the dot-com bust, he points out. “The key was that Amazon survived those early days and was positioned well when consumer adoption of e-commerce hit an inflection point.” For every Flipkart or SnapDeal, there will be “hundreds of casualties during these early days of ecommerce in India,” he predicts.

Few online ventures in India have succeeded over the years. Prominent among them are travel services firm MakeMyTrip.com, matchmaking sites BharatMatrimony.com and Shaadi.com and job portal Naukri.com. Newer ventures include Delhi-based LetsBuy.com, an online retailer of communications, electronics and computer equipment; online library Librarywala.com of Mumbai and movie rental firm Seventymm.com of Bangalore.

To be sure, the new dot-com entrepreneurs face hurdles. For one thing, India has between 80 and 100 million Internet users, or a little more than 5% of its population, compared with 29% in China and Russia. But these numbers should grow to between 180 million and 200 million Internet users by 2015, or 18% of its population, according to a Wall Street Journal report two weeks ago, citing a study by investment bank Caris & Co.

Bansal and Bahl believe the current Internet-enabled population is sizable and will explode with the third-generation mobile services being rolled out these days. Bahl also sees growing comfort with online purchases among nearly 250 million Indians with debit or credit cards.

The main infrastructure for e-commerce is made up of payment and shipping infrastructure, and broadband penetration, according to Hosanagar. “All three — payment, distribution and broadband — need to line up before e-commerce reaches its true potential in India,” he says. “It’s all a matter of time.” Increased banking transactions, mobile advertising, personalized services on mobile devices and greater rural adoption will be catalysts for growth, he adds.

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Let’s Make a (Facebook) Deal

Posted on April 28, 2011

With the introduction earlier this week of Deals on Facebook, the social networking behemoth is bringing its extensive user base and powerful framework to the group buying sector. But can it conquer Groupon?

Deals on Facebook, which is initially launching in the San Francisco, San Diego, Atlanta, Austin and Dallas areas, has the “bargain of the day” format familiar to any veteran of group buying sites. The company is trying to differentiate itself by focusing on “interesting experiences around you to do with friends,” Emily White, director of local at Facebook, wrote in a blog post. For example, Texas music venue Austin City Limits Live is offering vouchers that include concert tickets, backstage passes, sound check access and a catered dinner.

Since launching in 2008, Groupon’s growth has skyrocketed. When Google made an ultimately unsuccessful bid to buy the company in December, experts placed its value at $6 billion. By March, Bloomberg had upped the IPO price tag to $25 billion.

Perhaps more impressive than those figures, however, is the sheer number of Groupon competitors that have proliferated. The boom in group buying has spread to India and Latin America. After failing to buy the site, Google started a group buying service of its own. So have many media companies, such as AOL and Cox Media Group. That’s in addition to dozens of standalone sites including LivingSocial (The Huffington Post has a slideshow of some of the more obscure players.)

In a Knowledge@Wharton story on group buying, Wharton information and operations management professor Kartik Hosanagar cited brand name and reputation as key to standing out in a sea of copycats. Businesses will want to partner with the site that will get their name out to the greatest number of consumers; consumers, in turn, will pick the site with the best and most diverse deals. “Groupon has a significant head start there,” he said. “The others are going to struggle with the issue of very few differentiators.”

Facebook comes into the game with familiarity and a convenience factor. The site’s millions of users are accustomed to using it for anything and everything, including staying in touch with friends, planning events, selling used cars or furniture and making recommendations about products, services and content.

But Facebook also faces the same long-term challenges as Groupon, including personalizing the deals in line with individual consumer preferences. “If customers are flooded with e-mails from group buying sites and private sales sites, they key question is which ones they will bother to read,” Hosanagar noted.

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Open Sesame…Oops, I Mean, Close Sesame!

Posted on February 22, 2011

As the Wall Street Journal recently reported, Beijing-based Alibaba.com, China’s largest business-to-business online auction house, has just given marching orders to David Wei, the company’s CEO, and Elvis Lee, the chief operating officer. The reason, according to media reports, is that “an internal investigation found that more than 2,300 sellers on the e-commerce site committed fraud, sometimes with the help of Alibaba sales staff.” The news hit the headlines on February 21, when markets in the U.S. were closed for President’s Day. By Tuesday, February 22, Alibaba.com stock prices were down by 9% in Hong Kong, which dragged down the Hang Seng index. Yahoo, which owns 40% of Alibaba.com, also saw its stock price drop on Tuesday.

For the time being, order has been established by installing Jonathan Lu, CEO of the Alibaba Group’s retail site, Taobao.com, as Alibaba.com’s CEO. Media reports indicate, though, that the problem seems serious. According to a report in Time.com, Alibaba executives discovered during an internal investigation “an increase in fraud claims beginning in late 2009 against sellers designated as ‘gold suppliers,’ which means they had been vetted by an independent party as legitimate merchants. The investigation revealed that about 100 Alibaba.com sales people, out of a staff of 5,000, were responsible for letting fraudulent entities evade regular verification measures and establish online storefronts.”

Alibaba.com uncovered fraudulent transactions by 1,219 of the “gold suppliers” registered in 2009 and 1,107 of those in 2010. These accounted for some 1% of the total number of those years’ gold suppliers, according to the Time.com report, which added, “the vast majority of these storefronts were set up to intentionally defraud global buyers” by advertising consumer electronics at cheap prices with low minimum order requirements.

Wharton management professor Marshall Meyer, who has done a lot of research on Chinese companies, believes this episode will not have a major impact on e-commerce in China or other high-tech Chinese firms. “The adverse impact on Alibaba will be slight assuming that the scandal does not touch Alibaba Group chairman and CEO Jack Ma,” he says. Meyer adds that the Alibaba Group has a strong integrity and compliance statement; it assures investors that the company is “committed to the highest standards of business conduct,” among other things. “I think they mean it,” Meyer adds.

Reassuring words. Now, if only those pesky stock markets would listen….

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What Are Consumers Saying Online? For Many Marketers, It’s Still a Mystery

Posted on January 20, 2011

In the age of the Internet, every consumer has the power of a professional critic at his or her fingertips. Raving about a great new product, or detailing a nightmarish customer service experience, is as easy as pressing “send” on an e-mail or posting to Twitter or Facebook.

With so many conversations going on in so many different places, it’s a significant challenge for companies to harness all the talk and figure out how it is affecting their brand. As a new survey indicates, many marketers admit they haven’t cracked the code yet.

According to the 8th annual survey of marketers by integrated marketing services provider Alterian, less than one-third of respondents said they had a strong understanding of the social media conversations happening around their brand. Perhaps more significantly, 31% indicated having little to no understanding.

The potential consequences of this were not lost on marketers — nearly 80% said they are concerned that a lack of engagement with consumers, or gaps in understanding of how online conversations are impacting the brand, could be putting their companies at risk.

Debate about what is the right social networking formula for individual firms has been going on at least as long as Facebook, Twitter and other sites began to be widely used. Back in 2007, Knowledge@Wharton published a story on generating value from online input. At the time, Wharton marketing professor Christophe Van den Bulte said that interacting directly with customers through blogs and other venues had two key payoffs for companies: “One, it is a market research tool; you can tap into your customers and find out what  their concerns and objectives are. Two, you can profile your company as one that is working with customers, not just one that is only trying to influence their purchasing decisions.”

More recently, at a Wharton Retail Conference panel on e-commerce, speakers from the retail and marketing industry noted that consumers now expect a personalized experience when they visit a firm’s online store or Facebook page — they want to see product reviews from other customers, get accurate recommendations for future purchases and interact with friends who might be frequenting the same stores. “If [an online promotion] has no value, no creativity, it doesn’t show that you thought about the audience,” said Dave Larkins, vice president of NetPlus Marketing and a co-creator of The Colony online boutique. “A lot of this starts with the audience and understanding and exploring, enlightening and engaging them in a completely different and new way.”

Larkins suggested that companies can use new analytical tools to gauge the response they are getting online. But analytics were a roadblock for many respondents of the Alterian survey. Six percent said they had no analytical experience when it relates to digital media, while 29% said they had only basic skills and 28% struggled to tie the numbers back to a marketing campaign strategy.

Panelists at the Retail Conference stressed that companies need to have technology in place to measure the impact of online branding programs. As the survey shows, however, getting it right is easier said than done.

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