Short Takes

Chastened dot-commers may still find pot of gold at rainbow’s end; the scoop on who’s into CRM

Survivors 2

Every action-movie hero, no matter how appallingly wounded, rises valiantly to deliver the killer blow. Likewise, the survivors of the crippled New Economy are rallying to give online retail another shot. They’d probably do well to consult a how-to manual this time around. An Ernst & Young report titled “Global Online Retailing,” released in January 2001, offers a valuable analysis of global e-commerce and provides remedial coaching for the cyber-challenged.

Based on a survey of 7,000 consumers and numerous analysts and industry experts in 12 countries, the Ernst & Young report predicts that Internet commerce will account for 10% to 12% of sales in categories such as apparel, accessories, and toys. Online market share could jump to 20%-25% in some categories such as books, music, software, videos, and consumer electronics.

Several trends emerge in the retail consumer sector. First, brands remain popular across channels. For instance, although a pure-play e-tailer like still is No. 1 among consumers, brick-and-mortar retail operations such as Toys ‘R’ Us are now solidly entrenched in the top ten Web sites.

Second, an online channel is essential. Nearly two-thirds of respondents worldwide purchased items on the Internet in the past 12 months. Also, more than 75% of respondents in Germany and the United Kingdom bought online in 2000, and 74 % of U.S. consumers made online purchases. Compared to last year, total online purchases have increased or stayed level for 97% of consumers worldwide and 99% of European consumers.

Third, Web shoppers’ demographic profile is moving toward the middle. The average annual household income of online spenders in the U.S. has dropped to $52,300 this year from $59,000 in 1999. Outside the U.S., the average is even lower, dropping to $45,000. Middle-class online consumers are now in the majority, representing 58% of U.S. buyers and 69% of buyers outside the country reporting annual incomes under $50,000.

Consumers also stress consistency. By an overwhelming majority, respondents to the survey say they expect to see “about the same number of products, as well as specials that aren’t available at retail” on the Web site. But apparently merchants aren’t listening; there is a marked disconnect between what consumers want and what they get from multi-channel retailers. Among companies surveyed, only 26% of U.S. merchants report that they offer the same products online and off, as opposed to 40% of companies outside the U.S.

If you’re wondering why they don’t come to your Web site, it could be that you charge too much for shipping. Seventy-five percent of respondents to the Ernst & Young survey placed products in an online shopping cart but did not complete the purchase. High shipping costs are the main reason these would-be shoppers hesitated, and are the leading deterrent to shopping online. Among respondents who do buy on the Web, 53% say lower shipping costs are the number one improvement they would like to see.

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Don’t feel left out if you don’t haven’t invested in a customer relationship management (CRM) program. Only a third of major U.S. businesses have or expect to have one in place in the next 12 months, according to a survey recently released by Harte-Hanks, a direct marketing research firm. Of companies implementing a CRM solution, about 26% build it in-house, while the rest use outside partners and software packages.

Harte-Hanks defines CRM as an integrated information system that is usually developed from disparate data sources. This system is used to plan, schedule, and control all client and prospect interactions within a company. CRM users include sales, marketing, customer service, finance, call center, and other fulfillment staff.

The survey, conducted by e-mail and over the Web in November 2000, had 448 participants, selected from 4,400 U.S. business sites that Harte-Hanks identified as “CRM-probable.”

According to Harte-Hanks, 16% of companies that started CRM projects this year are developing programs in-house, with some external development. Twenty-seven percent of respondents have outsourced the CRM project, while 26% are developing an off-the-shelf CRM package in-house.

It takes about a year to implement a CRM program, according to the Harte-Hanks study. Of the companies now involved in a CRM project, 72% report that it will take up until a year to be fully operational, and 47% of companies planning CRM projects expect them to be fully operational in a year.

Companies that report implementing CRM say their five biggest challenges are participation of different departments (93%); integrating multiple data sources, (93%); securing internal development resources (90%); integration with back-office applications (90%); and managing external partners (87%).

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