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Online retail

The need to build trust in ecommerce

By | Online retail | One Comment

This is the time of year when people love to publish lists. They mostly fall into two groups, the ’10 best XYZ of 2013′, or the ‘Top 10 ABC predictions for 2014’. I prefer the latter type and have just read Business2Community’s Top Ten 2014 eCommerce Trends. It’s a good list, and item no. 7 really got me thinking:

Buying decisions will be primarily guided by community

As more online shoppers buy products they have never seen in person from retailers they have never used before, they will increasingly rely on input from their digital peers to make their decisions. In 2014, expect to see traditional ratings and reviews supplemented with features that connect shoppers to community support networks.

Community is without doubt playing an increasingly important part in ecommerce, but the larger point here is the one that’s interesting to me. More shoppers are buying products they have never seen from retailers they have never used before. These shoppers will need to be given reasons to trust and believe in their online retailers. Good back story, authenticity, social proof, provenance, a friendly returns policy and good design are minimum requirements these days and tomorrows winners will find new and better ways to build trust. Bringing an element of true human interaction and clever use of data from social sites are two areas where we’re seeing retailers do interesting things.

Jack Dorsey’s Square

By | iPhone, Online retail | 4 Comments

If you haven’t seen a demo of Jack Dorsey’s Square yet, take a look at this video.  The Square could revolutionise retail point of sale, making it a) radically cheaper to implement systems and b) much easier to introduce new ideas, like voucher redemption.

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Some internet stats – including Facebook matching Google on mobile

By | Online retail | 2 Comments

Goldman Sachs published the results of their eighth annual internet usage survey on Monday.  Here are a couple of the highlights (data for the US except where otherwise stated):

  • Time spent online on the desktop is flat at 22.5 hours per week
  • Time spent online on a mobile (i.e. smartphone) is rising at a ‘teens rate’
  • More people would consider cancelling their Pay TV service to save money than their ISP (21% to 10%)
  • Consumers age 18-29 visit Facebook as much as Google on their mobile phones
  • The dominant activities on social networks are messaging (72% of respondents), photo sharing (55%) and games (27%)
    • and 20% of those gamers spend money, averaging at $35 per month
  • The percentage of people who download or stream video content doubled to 25%
  • Two thirds of consumers prefer pay per use revenue models, one third prefer subscription services
  • Global ecommerce spend forecast to rise 21% this year due to a 14% increase in number of shoppers and single digit increase in spend per shopper
    • 2009 global ecommerce spend was 2% down on 2008
  • Average online spend per shopper in 2009 was $399
  • Shoppers buy online for price (younger folk) and convenience, and buy offline for immediacy and to avoid shipping costs
  • Shoppers choose between online sites based on price, free shipping, ease of use and selection

If you love your customer set her free

By | Online retail, Privacy | 12 Comments

There is a great story on Jared Spool’s blog of how a desire to build a relationship with customers can be counter-productive (thanks to Joe Andrieu for the pointer).

The un-named etailer made the mistake of asking customers to register with the site before they checked out – I can fully understand the impulse behind this – build a list of registered members, improve their future purchase experience, and hopefully improve their loyalty and repeat business stats.

The result, however, was very different.  Total mayhem in fact.

Firstly, when it came to it customers didn’t like having to register:

We conducted usability tests with people who needed to buy products from the site. We asked them to bring their shopping lists and we gave them the money to make the purchases. All they needed to do was complete the purchase.

We were wrong about the first-time shoppers. They did mind registering. They resented having to register when they encountered the page. As one shopper told us, “I’m not here to enter into a relationship. I just want to buy something.”

Some first-time shoppers couldn’t remember if it was their first time, becoming frustrated as each common email and password combination failed. We were surprised how much they resisted registering.

Without even knowing what was involved in registration, all the users that clicked on the button did so with a sense of despair. Many vocalized how the retailer only wanted their information to pester them with marketing messages they didn’t want. Some imagined other nefarious purposes of the obvious attempt to invade privacy. (In reality, the site asked nothing during registration that it didn’t need to complete the purchase: name, shipping address, billing address, and payment information.)

Lesson 1 is don’t make people feel like you are making them trust you or that you assume they want to be your friend.

I’m not here to be in a relationship – that sums it up for me.  If I think about the good relationships I have with offline retailers they didn’t start on the first visit – they started some way down the track, once we had started to get to know one another.  The first visit was all about efficient execution of the purchase process.

Secondly, even if people don’t mind registering in theory, in practice it is a massive hassle:

Except for a very few who remembered their login information, most stumbled on the form. They couldn’t remember the email address or password they used. Remembering which email address they registered with was problematic – many had multiple email addresses or had changed them over the years.When a shopper couldn’t remember the email address and password, they’d attempt at guessing what it could be multiple times. These guesses rarely succeeded. Some would eventually ask the site to send the password to their email address, which is a problem if you can’t remember which email address you initially registered with.

(Later, we did an analysis of the retailer’s database, only to discover 45% of all customers had multiple registrations in the system, some as many as 10. We also analyzed how many people requested passwords, to find out it reached about 160,000 per day. 75% of these people never tried to complete the purchase once requested.)

The form, intended to make shopping easier, turned out to only help a small percentage of the customers who encountered it.

Read the punultimate paragraph in the above quote again – those are some jaw-droppingly-big numbers.

Asking people to register makes the mistake of assuming you are important enough to the customer that they will remember the details they have used.  The second lesson therefore is the folly of that (arrogant) assumption.  (Note this pattern will shift as OpenID and Facebook Connect gain traction.)

Joe quotes Doc Searls as saying “a free customer is more valuable than a captive one” – I’m a big believer in that.  Trying to capture people (or forcing them to register) makes you less attractive.  In the real world we have always known that being needy is a turn-off – yet somehow this doesn’t always get translated online.

And the punchline?  When the un-named retailer changed the process so people weren’t forced to register sales lept up by $15m in the first month and $300m in the first year.

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Forrester projects ecommerce will do well this year

By | Online retail | 8 Comments

I get asked all the time about the impact of the credit crunch on the venture capital industry, and one of the things I quite often say in reply is that good VC is all about investing in fast growth markets, and that sure they will be affected by the downturn, but there should be enough growth there in the first place that even if the growth rate halves the market will still be an interesting one.

Or put another way good VC is all about getting behind long secular growth stories that are driven by structural changes in society.  These changes play out over 5-10 years or more and whilst the rate of change might slow in a recession it won’t grind to a halt.

eCommerce is a good example of this.  Technology (the web) is changing the way we shop and will continue to do so for many years to come.  Projections out from Forrester have it that US non-travel eCommerce will grow 11% in 2009 – down from 18% last year, but still a respectable growth rate for a market this size.

Moreover, when you break the market down there will be some areas that are more mature (books, DVDs, where eCommerce penetration is I believe around the 30% level) some that are in the midst of their fast growth phase (e.g. clothes – look at ASOS and  Net a Porter here in the UK) and some that are just getting to the exciting point (e.g. eyewear where 1800Contacts has made great headway in the US over recent years and London based Glasses Direct is doing some interesting things under the leadership of my friend Kevin Cornils).

These newer categories are the ones that lend themselves less obviously to the web – and the startups that are being successful are the ones that are innovating to overcome the disadvantages of losing the instore experience.  For clothes etailers generous returns policies have been key to overcoming the problem of not being able to try things on, and similarly Glasses Direct has a ‘try at home‘ programme. 

Threadless – the crowdsourcing company

By | Business models, Community, Online retail | 2 Comments

At dinner on Monday Daniel Ek of Spotify described Threadless as the ultimate crowdsourcing business and this post has been building in the back of my mind since then.

Threadless is a t-shirt e-tailer and the cool thing is that they crowdsource both supply and demand.

This is how the site works, from Wikipedia:

Members of the Threadless community submit t-shirt designs online; the designs are then put to a public vote. A small percentage of submitted designs are selected for printing and sold through an online store. Creators of the winning designs receive a prize of cash and store credit.

On the supply side the community submits designs to the site and then votes on which designs should be produced – so Threadless crowdsources the design and selection of their merchandise.

And then the reason the whole things works so well is that people who have voted for the designs are then much more likely to buy them, which is what I mean by crowdsourced demand.

The power of community in action – eBay

By | Community, Online retail, Strategy | 2 Comments

I have often remarked on this blog that the fact many web companies are based on community has profound implications for their strategies. Firstly they have to put the long term interests of the community above all else (including in the case of Digg risks to short term survival), and secondly they are vulnerable to waves of negative sentiment flowing through the community and causing people to leave the service. The good news, of course, is that managed well a strong community is a fantastic asset that nobody can take away from you.

Yesterday I wrote
about eBay putting short term profits ahead of the needs of their
community by dealing with buy.com. The post precipitated this reaction
from Patricia013, a constant seller on eBay for 10 years with 100% feedback and over 3,500 transactions:

The concept of auctions was a good one and it was exciting – the sniping at last minute and the hunt to find those vintage or unique items was overpowering – Ebay should have built on that instead of ignoring it! Also with sellers milked dry at every turn their profit margin became less and less and they could offer their buyers less of a good deal than in the past. You can’t feed ebay/paypal’s vociferous appetites for revenue and still turn enough of a profit to make selling on Ebay worthwhile. The simple example: Buy it Now – in return for getting instant sales (which Ebay/Paypal profits from) they have a nerve to charge a fee for buy it now!!! Such an option should be free, encouraging their sellers to use it! Also, international selling now costs yet another fee where it was free to be brought up in search in the past. I can go on and on,  unfortunately, every new fee has caused more sellers to leave – more sellers to list less and the remaining sellers forced to charge more. Now, I see most of my seller friends in the chatrooms and forums of other venues! Ebay is dying – bringing on buy.com with no listing fees and a miserable sell-thru rate of less than 3 percent is not even a bandaid on the gaping wound. With the proper expertise (and Ebay can certainly afford it) this whole situation could have been  avoided – the site tweaked and purged of a lot of fraud – and proper advertising and incentives put in place to lure buyers back.

I love it! Feel the passion. Thanks again for the comment Patricia.

Also, note the serial errors eBay is making, each of which makes the site incrementally less attractive as a place to do business for their community of buyers and sellers. Small increases in fees hurt the sellers, which force prices up thereby hurting the buyers. Additionally they failed to address the issues of fraud – remember when everyone was lauding eBay for it’s reputation system? Something they seem to have forgotten.

All of this is a great example of what happens when a company is run by people with an obsolete set of management techniques. eBay CEO Donnoghue and his team are still looking for orthodox sources of value and have failed to grasp what it is that is good about eBay, as described above. Umair would call this bad corporate DNA, or corporate DNA in decay – a notion which is amorphous but very important. I won’t attempt a definition but symptoms of companies that are in trouble from this perspective include lack of integrity, failure to respect stakeholders, failure to recognise that significant power now resides outside the boardroom (i.e. in the community) and possibly absence of a purpose other than making money.

This notion of DNA has wide reaching implications – this is a link to some of Umair’s writings on the subject.

The digital revolution continues

By | Music, Online retail | No Comments

Apple is now the number one music retailer in the US. From ars technica:

Over the past few years, we have watched Apple climb the music sales chart courtesy of the iTunes. Last month we learned that Apple passed Best Buy to become the number two retailer in the the US. Now, Apple has ascended to the top of the charts, surpassing Wal-Mart for the first time ever, according to the NPD MusicWatch Survey.

And paid digital downloads accounted for 30% of all music sold in January.

No wonder the labels are finally taking notice. I am hearing talk in lots of places that they are (finally) close to deals with some of the free ad supported music services. Let’s just hope they are being sensible about the economics.

As we ponder the economics of free it is interesting to note that the leading music retailer in the US is only in the music business to sell iPods. Unsurprisingly they are aggressively driving the price of music downwards.

Internet retail growing fast but still tiny

By | Advertising, Online retail | 7 Comments

Today the FT reported forecasts from Mintel that online retail spending in the UK and France will triple by 2012. That is a lot of growth, but maybe not that surprising when you consider the low base. Only 5% of retail spend was online in the UK last year and only 1.6% in France (the US figure is 3.4%).

The bad news is that traditional retailers are suffering as a result – at least in their physical shops. Experian Footfall said yesterday that high street foot traffic fell 2.7% in the year to March – I think that is a UK figure. The other interesting fact in the article is that internet retail is now pretty much dominated by traditional high street names, both here and in the US. Amazon is the only pure-play etailer amongst the top 10.

The good news in these facts is for the online advertising industry. The ad dollars need to be spent where people are buying – espescially so for transaction oriented below-the-line spend. Much of that will be on a CPA model. At the same time the industry will need to rise the challenges of increasing ad-blindness and intolerance of interruption. I am still excited by the potential of VRM to overcome these challenges.

I’d have linked to the FT article, but they have a paywall up.