Guts and Online Glory

A wise merchant understands his customer and the evolution of that customer base while having a clear perception of his product and the positioning of his brand.

Of course, it’s difficult to develop this skill set by training alone. A certain intuitive sense — or “gut,” if you will — is required. In fact, in our first Merchant Survey, a coproduction of The E-tailing Group and the Direct Marketing Association, 45% of respondents cited “gut” as one of the most useful techniques in determining which products to display on their site and where to display them. Michael Crotty, whose e-commerce initiation came at Time Warner’s DreamShop in 1995 and who today is at Neiman Marcus, said it perfectly: “Never underestimate the importance of common sense and good instincts.”

We devised our 38-question Merchant Survey to listen to the e-commerce merchants who toil in the trenches. Responses from more than 200 professionals enabled us to assess perceptions about online merchandising against the reality. Here, just a few of our findings:

Perception #1: Most merchants have been selling online for only a few years.

Reality #1: Thirty-nine percent have at least five years of e-commerce experience under their belt. A number of the survey respondents grew up with the Internet as a selling channel, so to speak, and their companies now boast profitability and prowess in leveraging the Web. You could consider general merchandiser J.C. Penney, apparel and home goods cataloger Lands’ End, and clothing and home goods cataloger/retailer Eddie Bauer, to cite a few, part of this pioneering group.

Donna Iucolano, president of Scholastic Internet Group, began her e-commerce experience at 1-800-Flowers in 1994. She notes that though the gifts marketer was not the largest purveyor of flowers and the like on the Internet, it had a reputation for being “first.” Its firsts include first AOL merchant, first to offer a gift-reminder service, and first to offer real-time customer service. The company knew that its willingness to be first would buy great, and relatively inexpensive, PR.

In the first years after 1-800-Flowers launched what it called the Interactive Services Group in 1992, it participated in many e-commerce tests solely in the name of research and development. The risk was low, with little or no front-end fees and sometimes a small revenue share. It was a cooperative rather than a competitive time, Iucolano recalls, and many other pioneers second that notion. There was much to gain for those who played the game early.

Perception #2: Most online marketers are multichannel players.

Reality #2: That perception is correct; only 6% of respondents worked at single-channel marketers. Forty-five percent of respondents worked at businesses with catalog, brick-and-mortar, and online channels, while another 39% worked at catalog/Internet companies.

Today’s funding constraints and the high cost of building a significant customer base make it difficult for a company to survive as an online-only marketer. Branding is no small feat either, and its associated costs are beyond the reach of most marketers.

Bill Bass, senior vice president of the e-commerce and Internet team at Lands’ End, reports that catalogs drive 80% of the company’s Internet sales. As a result, Lands’ End doesn’t have to spend as much on other media and promotions to drive Web traffic.

Along similar lines, gifts cataloger Red Envelope has come a long way from its beginnings as an online-only marketer. This past holiday season, the company increased its catalog circulation 40%, to 6 million. Indeed, its print catalog is now the center of Red Envelope’s marketing campaign and a key driver of new customers to its Website.

Perception #3: The Internet is a wonderful brand-building tool that gives merchants greater reach.

Reality #3: For certain, 47% of respondents valued the Web for enabling them to extend and boost their brand. But twice as many — 94% — praised the Internet for providing with another selling channel.

More than one-third of respondents (37%) recognized the Internet for its ability to provide consumers with information about products and services. This role may gain in importance as retailers process the power of the Web as a store support vehicle.

Merchants don’t overlook the Web as a tool for lead generation; 27% of those surveyed said that the medium has consistently delivered in this area. One merchant commented that “the ability to build the customer file quickly based on offering Web ordering was certainly one of the pluses of the medium.”

James Tenser, who in 1997 launched VstoreNews, the first periodical for marketers to focus on e-commerce, once suggested an innovative way to gauge the effectiveness of a multichannel marketing strategy: “Measure overall success in terms of your portfolio of multichannel consumer relationships. List this as an asset on your balance sheet. Treat it as having equal or greater value than your brand name. The Consumer Relationship Portfolio is not a mailing list — it is the living heart of your retail business, the sum of your interactions with your customers of all stripes. Optimizing the value of the CRP is the central goal of the multichannel retailer.”

Regardless of the tools, techniques, goals, and purposes to which e-commerce has given birth, and regardless of the perceptions and realities of online merchandising, I think we should revisit Tenser’s suggestion from time to time. It seems that we occasionally tend to leave our most valuable asset, the customer, out of the equation.


Lauren Freedman is president of The E-tailing Group, a Chicago-based e-commerce research and consulting group. To order a copy of It’s Just Shopping, visit www.e-tailing.com or www.the-dma.org.

Methodology

The 214 respondents to the Merchant Survey worked at consumer catalogs covering the gamut of product categories, with apparel/accessories and gifts and home/garden topping the list. Eighty-one percent of respondents were presidents, principals, directors, vice president/general managers, and chief operating officers. Eight percent worked at companies with annual sales of less than $5 million; 40% at companies with sales of at least $200 million.

Level of Management Within the Company
Response %
CEO/president/principal 16%
VP/general manager 33%
Director 31%
Manager 17%
Analyst 1%
Webmaster 1%
Other 1%
Annual Sales
Response %
$1 million-$5 million 8%
$5 million-$20 million 14%
$20 million-$50 million 15%
$50 million-$100 million 13%
$100 million-$200 million 10%
$200 million-$500 million 15%
$500 million-$1 billion 10%
$1 million-$5 billion 9%
More than $5 billion 6%

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