The race is on! Results of The E-tailing Group’s Fourth Annual Merchant Survey, along with findings from the past three years, show the pace of e-commerce adoption and sophistication accelerating at a fast clip. It is a multichannel rally, with initiatives from both marketing and merchandising perspectives being integrated online and offline. Case in point: Of the consumer marketers whose sites were surveyed, 40% were selling via a three-channel strategy vs. 36% in 2004 and 26% in 2003.
In terms of e-commerce as a portion of total sales, it’s a case of the haves and the have-nots: Online sales represented just 1%-10% of overall business for 36% of those surveyed, and more than 40% of overall business for 34% of the survey. A similar split on the extremes occurred when merchants were asked what revenue changes they anticipated in 2005 over 2004: 5% expected static revenue, while 8% of the sites projected revenue growth of more than 75%.
PURSUING PROFITABILITY
Those in the executive suite were slightly less satisfied with their online results this year than in years past, no doubt because they now have higher expectations of e-commerce as a portion of their overall business. And no doubt satisfaction will continue to slip unless companies continually push the envelope on e-commerce strategies.
Profitability was top of mind among those surveyed, with 68% ranking it one of their most important strategic goals. Improving performance metrics was a focus for 67%, followed closely by customer retention (63%) and customer acquisition (61%).
Running the distance online takes being creative, innovative, and consistently testing new tactics. The winner’s circle holds the rewards of customer satisfaction, loyalty, and ROI.
WEBSITE FEATURES AND FUNCTIONALITY
Merchants have clearly realized the potential of e-commerce. Best-in-class leaders are swiftly adding features and functionality to their sites, while catch-up is the name of the game for those with “average” sites. As strategies become more tactical, merchants rely more on old-fashioned retail tools. Seasonal promotions, sales and specials, and coupons and rebates were among the Website features that survey participants rated as most valuable (see chart on page 46).
But Web-only tactics such as keyword search were also among the tools judged most effective. Clearly merchants must make decisions daily about including or evolving site functionality.
CONVERSION RATES
Certainly one of the most watched indicators of performance, conversion is the most common measurement of page/feature effectiveness for 63% vs. 58% last year. More analytics are available, but managing the data is an issue for those with limited resources.
Thirty percent of those surveyed report conversion rates under 2%, consistent with last year’s results. But 41% reported that their conversion rates have increased somewhat during the past year, while 23% said their conversion rates have remained the same. Another 8% of respondents didn’t know their conversion rates — a vast improvement from last year’s 20%. And speaking of improvements, 21% of those surveyed reported conversion rates of 2%-3% conversion range, up from 11% of last year’s participants.
SHOPPING CART ABANDONMENT A CONCERN
Cart abandonment remains too high. Only 10% of the sites surveyed had abandonment rates of 10% or less. Nearly 20% reported abandonment rates of more than 60%, with 6% suffering from rates of more than 80%.
Evolved Web merchants are paying ever greater attention to cart abandonment, using onsite pop-ups and e-mail to encourage shoppers to complete their purchase. Streamlined shopping carts with clearer checkout directions and upfront shipping costs can also more effectively convert browsers to buyers.
MARKETING BUDGETS ARE ON THE RISE
In hopes of driving revenue, increasing conversion rates, and boosting average order sizes, merchants look to acquire customers. And to improve their customer retention rates, marketers are working hard to increase the frequency of purchases by those customers. Many are doing so by leveraging the immediacy and ease of e-mail.
Reviewing the content of e-mails sent, sales and specials maintain their lead as the most commonly featured content, with 83% of respondings using them in their e-mail messages. The use of e-mail as a branding vehicle has greatly increased, with 73% using it for that purpose compared with 40% last year. Personalized messaging, however, has yet to reach its stride, at 24% penetration — down slightly from 28% last year.
While e-mail is considered a cost-effective means of marketing, the percentage of the Website sales budget designated for marketing is nonetheless increasing as the Internet becomes a more integral part of merchants’ businesses. What’s more, more money is migrating from offline marketing budgets to online budgets. This year a mean 76% of respondents’ marketing budgets was allotted to online initiatives and 24% to offline efforts. Last year online marketing accounted for 71% of respondents’ marketing budgets; two years ago it was just 55%.
Though figures vary by merchandise category, 19% of those surveyed reported average marketing costs per order of less than $1.00; 39% reported average marketing costs per order of $1.00-$5.00.
BRANDS DRIVE TRAFFIC THAT DELIVERS
Bottom-line thinking makes it essential to understand where your customers are acquired from and when they actually buy. As was the case last year, the plurality of visitors to a Website (31% this year) came directly by typing in the URL. This reinforces why branding is such an important part of any merchant’s success.
Catalogs were the second-greatest source of e-commerce demand, accounting for 15% this year vs. 19% last year, reflecting the melding of channels. New this year are metrics that break out the search elements of pay-for-performance and paid keyword placement; each delivered 7% of demand, as did overall search engine optimization. Portals, comparison engines, and prospecting e-mails generated less demand than they had last year, indicating that they are still not as universally tested as other marketing opportunities. Merchants are also working to understand unaccounted-for names through matchbacks and other solutions as they look to best invest their marketing dollars.
Personalized shopping experiences on the Web are still a long way from being a reality for most of the merchants surveyed. Just 7% of the sites surveyed are dynamically presenting products based on past purchases; 58% have not yet integrated personalization into their sites or e-mail at all.
E-mail is the easiest, most cost-effective method to segment and personalize, and therefore a good place to begin testing an array of tactics. This is the ultimate promise of the Web and must be part of any overarching strategy but it is still a mammoth task to execute in a meaningful manner that will justify the required resources.
TRAINING FOR SUCCESS DELIVERS WINNING RESULTS
Success begins with taking a serious audit of your e-commerce efforts and looking extensively at the shopping experience you are delivering to customers. Shop your site evaluating both the presence of features and current execution. Benchmark your efforts against your closest competitors as well as those who are best-in-class outside of your category. Prioritize opportunities for improvement, and ensure that changes are regularly put in place. This way you will remain be in the race, taking strides that increase conversion and drive revenue throughout the year.
Lauren Freedman is president of The E-tailing Group, a Chicago-based e-commerce consultancy and agency, and the author of It’s Just Shopping. She will be sharing the latest findings on multichannel marketing at several Annual Catalog Conference sessions, including an executive forum on May 23 and “Merchandising Innovation” and “Multi-channel Mastery,” both on May 24.
Website feature effectiveness in descending order as rated ‘very’ to ‘somewhat’ valuable
| Seasonal promotions | 94% |
| E-mail as merchandising vehicle | 91% |
| Keyword search | 91% |
| Sales or specials | 90% |
| Cross-sells | 84% |
| Free shipping | 79% |
| ‘What’s new’ section | 78% |
| Upsells | 75% |
| Advanced search | 70% |
| Affiliate programs | 68% |
| Gift center or suggestions | 68% |
| Coupons/rebates | 67% |
| Top sellers | 67% |
| Customized content | 63% |
| Search/order by catalog | 61% |
| Gift certificates | 57% |
| Product enhancement tools | 57% |
| E-mail a friend | 56% |
| Brand boutiques | 53% |
| Zoom | 52% |
| Store locator | 50% |
| ‘Shop the catalog’ | 48% |
| First-time buyers tools | 47% |
| Frequent-buyer programs | 43% |
| Personalization of product offers | 42% |
| Testimonials | 40% |
| Contests | 39% |
| ‘As advertised’ | 38% |
| Interactive tools | 38% |
| Wish lists | 38% |
| Preorders | 37% |
| Corporate programs | 36% |
| Product comparisons | 35% |
| Product ratings/reviews | 35% |
| Store returns | 35% |
| Shop by outfit/room | 30% |
| Reminder services | 28% |
| Weekly circular | 26% |
| Deferred-payment plans | 24% |
| Limited-hour promotions | 24% |
| Community features | 23% |
| Gift/wedding registry | 22% |
| Live chat | 20% |
| Store pickup | 17% |
| 83% | Sales and specials |
| 76% | New-product intros |
| 73% | Branding |
| 68% | Seasonal messaging |
| 58% | Full-priced products |
| 43% | Coupons |
| 33% | Loyalty marketing |
| 24% | Personalized messaging |
| 22% | Research/surveys |
| 20% | Company news |