June 7, 2012
The first full day of sessions at the eighth annual Internet Retailer Conference & Exhibition (IRCE) urged online retailers to "rethink who their customers are" in order to build interactions that are both persuasive and profitable.
To clinch the sale with today's consumer, companies must take steps to support shopping interactions across all platforms, which then requires a focus on the metrics that paint the bigger picture of customer value over time.
Some highlights on how leading online retailers are driving this change in their organizations:
Anytime, Anywhere Shopping
Embracing the reality of a customer who's in control of the shopping experience, Walmart is cranking out new ideas to support omnichannel retail. Through @Walmart Labs, its digital technology R&D arm, and the acquisition of several tech firms so far this year, the retailer is rolling out or testing new programs that Joel Anderson, president & CEO, Walmart.com, U.S. said will make it "easy for people to buy anytime and anywhere."
In his keynote address, "Creating Innovation Through the Next Generation of Retail," Anderson shared a couple of the groundbreaking ideas Walmart.com has been working on.
Understanding that shoppers want more options for ordering and receiving products, the retailer recently introduced a program that lets shoppers order products online but then pay in cash at their local store; the order gets processed and shipped once the consumer makes the payment. This approach helps Walmart expand its reach to consumers who don't have credit as well as those who don't like to enter financial information online—Anderson noted that about one-third of the customers who have used the cash payment option are new to Walmart.com.
Another omnichannel innovation is what the retailer calls "Endless Aisle." This program is currently being tested in stores and involves QR codes on signs that, when scanned with a mobile phone, present shoppers with more product options related to their initial selection. Shoppers can click on any of these additional items in order to buy them and then get their order shipped to their home or a store.
With more consumers "showrooming"—or using brick-and-mortar stores to review products in person but then completing their purchases online (where the sale can go to the store's competition)—Walmart clearly is working to keep in-store shoppers engaged.
In the session, "Identifying the Consumers' Sweet Spot," comScore Chairman Gian Fulgoni noted that 35% of respondents in a study on cross-channel shopping patterns said they engage in showrooming. But what's interesting is that 60% of these consumers reported that they had originally intended to buy in-store and changed their mind once they were on location. One reason for this change of heart is the desire of urban consumers to be able to shop in a physical store, but then have the item shipped so they don't have to carry it home. So while price remains a key influencer of purchasing decisions, Fulgoni encouraged retailers to dig a little deeper into their customer base to surface these new shopping patterns.
Show Them the LTV
To answer the question of how you get management buy-in to develop and launch innovative ideas for your business, Daryl Logullo, internet marketing manager at Southern Fulfillment Services (which owns Hale Groves, Pittman & Davis, and Eilenberger Bakery), advised retailers to shift their focus from the minutiae of key performance indicators to the long-term perspective of lifetime value (LTV).
In his session, "How to Get a Bigger Marketing Budget From Your CFO," Logullo explained that retailers need to stop looking at profitability based solely on ad spend and revenue growth because this data is rooted in customers' present behavior. To invest more accurately, retailers want to shift to LTV so they can better predict customers' future needs and tailor marketing programs in advance.
He offered an example of a customer trying a new product. At Hale Groves, this could mean a naval orange loyalist trying the retailer's ruby red grapefruit. To support this potential for growing the customer relationship, retailers should think about what target behaviors they need to influence and how they can develop and test online programs around those needs.
The ultimate goal, Logullo said, is not to transfer sales from one channel to the next in this retail evolution, but to create incremental revenue that helps you reinvest to continually grow the business.
Don't Let Sales Tax Scares Chase You Out of Affiliate Marketing
In the session, "What's the Future of Affiliate Marketing Sites?," both speakers acknowledged the challenges of leveraging affiliate marketing to acquire customers in the face of growing legislation around online sales tax collection and nexus laws. In fact, Mark Shimahara, internet marketing manager for outdoor apparel retailer Patagonia, anticipates that the Marketplace Fairness Act (which creates the same taxation for offline and online sales) could pass as early as next month.
But where BulbsAmerica.com has retreated from affiliate marketing—primarily because it could easily reallocate this already small percentage of its budget to other channels, said CMO Corey Frons—Patagonia is standing firm.
Of course, admitted Shimahara, it helps that the company already collects sales tax in most states due to establishing nexus through both retail and non-retail sales operations. That said, he noted how strong affiliate partnerships that focus on the quality of the customers you're able to acquire and their LTV can continue to drive performance in this channel—regardless of sales tax collection.
For example, Patagonia's finding success with affiliates like LeafyGreen and Catalogue that Shimahara said "speed up the moment of truth" by better connecting consumers to relevant products, as opposed to focusing on coupons and sales that don't really tap into consumers' deeper interests.