rsr 2012 ecommerce report final · ecommerce and cross-channel, as well as more targeted email...
TRANSCRIPT
eCommerce 2012: Back to the Future
2012 Benchmark Report
Nikki Baird and Steve Rowen, Managing Partners
January 2012
Sponsored by:
Supporting Sponsor:
ii
Executive Summary
Even in the darkest months of “The Great Recession,” consumers flocked to the online channel to
shop. While virtually all retailers expect more revenue to ultimately come from the online channel than
ever before, they are more challenged than ever to keep up with evolving consumer behavior.
This pace of consumer behavior change is only accelerating faster. Proliferation of new digital
channels (including shoppers’ rapid adoption of personal mobile devices and their willingness to
engage socially with one another via social networking technologies) has brought about the need for
a genuine redefinition of what online shopping really looks like – and could look like in the very near
future. Never before has an exciting online shopping experience that understands the customer’s
lifestyle – and how the brand and products can engage and suit that lifestyle - been more important in
the retail portfolio.
The best performing retailers (Retail Winners) understand this best, and in this research, we uncover
what processes and technologies are helping them in their efforts. Here are some of the report’s key
findings:
- Retail Winners are far more interested in revisiting past efforts to build communities to help
consumers engage with them; more than twice as many Winners express the ability to provide
more ways for consumers to connect with each other through their brand as a top-three
challenge.
- Operationally, retailers report that their top challenges are understanding how different customer
segments engage online and difficulties coordinating with other channels to create a seamless
cross-channel experience. Laggards don’t even know where to start in creating a differentiated
online experience; Winners have made significant inroads, understanding that inventory plays a
key role.
- Retail Winners feel the need to upgrade their eCommerce channel, either to accommodate cross-
channel capabilities, or in the case of online pureplays, to create an outstanding online
experience that eclipses the need for stores
- The biggest eCommerce opportunities come from the cross-channel imperative. Retail Winners
agree that the eCommerce platform will serve as the central point of all digital activity across
channels; laggards have less clarity.
- Winners are more focused on online merchandising and the rich media that goes with it, while
laggards are looking at search and browse as their most valuable capabilities.
- Winners are also more focused on improving the fulfillment process - a very mechanical aspect of
eCommerce and cross-channel, as well as more targeted email campaigns.
- Retailer increasingly recognize the need to prioritize and start managing the technologies
customers will appreciate most sooner than later.
- Retailers are becoming less beleaguered to allocate human resources to experiment with new
eCommerce offerings.
- They no longer believe that piloting these new offerings will be as painful as it has been, even in
very recent years.
- Supply Chain Executives’ input is drastically underrepresented in the strategic direction and
management of eCommerce going forward.
iii
- Retailers continue to focus on ‘bread and butter’ technologies, such as online analytics product
reviews, and product recommendations., Retail Winners have a disproportionately large appetite
for each.
- Single-source content management is increasingly catching the attention of retailers.
- Winners also ascribe much higher value to such technologies as Product-level Social Networking
Integration, Site Performance Monitoring, Distributed Order Management, Internationalization of
Site, User Tagging/Personalization, Product Video, and Self-learning Search/Facets.
- Many retailers have delayed an investment in POS in anticipation of the day when their
eCommerce platform can perform double duty.
BOOTstrap Recommendations
- We offer our full recommendations to retailers at the conclusion of this report, which focus upon
the three main components of the shopping process that appear to be universal across all
channels: Content, Community, and Commerce. By understanding each – and what it means to
your highly individual enterprise – we hope to help facilitate the internal questions which must be
addressed in order to provide the consumer with the differentiated experience she demands.
iv
Table of Contents
Executive Summary .......................................................................................................................... ii BOOTstrap Recommendations ................................................................................................ iii
Table of Contents ............................................................................................................................ iv Figures .............................................................................................................................................. v Research Overview ......................................................................................................................... 1
Why This Study Was Conducted ................................................................................................. 1 Methodology................................................................................................................................. 3 Defining Winners and Why They Win, and Why Laggards Fail ................................................... 3 Survey Respondent Characteristics ............................................................................................ 3
Business Challenges ....................................................................................................................... 5 Community 2.0 ............................................................................................................................. 5 Getting to Know You .................................................................................................................... 6 A Virtuous Cycle .......................................................................................................................... 7
Opportunities ................................................................................................................................... 8 Assuring the Future ...................................................................................................................... 8 Opportunities in the Here and Now .............................................................................................. 9 Not Just For eCommerce ........................................................................................................... 10 A Digital Platform to Unite Them All .......................................................................................... 11
Organizational Inhibitors ................................................................................................................ 12 A Light in the Tunnel .................................................................................................................. 12 Tension and Experimentation .................................................................................................... 13 Look Who’s Not Coming to Dinner? .......................................................................................... 14
Technology Enablers ..................................................................................................................... 16 Value Abounds ........................................................................................................................... 16 What’s in Store ........................................................................................................................... 17 Benefits across Channels .......................................................................................................... 19
BOOTstrap Recommendations ..................................................................................................... 20 Converging on a Digital Platform ............................................................................................... 20 Content ....................................................................................................................................... 21 Community ................................................................................................................................. 21 Commerce.................................................................................................................................. 22 Brand vs. Buy ............................................................................................................................. 22
Appendix A: RSR’s Research Methodology .................................................................................... a Appendix B: About Our Sponsors.................................................................................................... b Appendix C: About RSR Research .................................................................................................. d
v
Figures
Figure 1: Mobile's Wild Growth ........................................................................................................ 1
Figure 2: Online Expectations Continue to Eat into the Store Opportunity ..................................... 2
Figure 3: Online Engagement Must Be Social ................................................................................ 5
Figure 4: Knowing is Half the Battle - But So is Acting on That Knowledge ................................... 6
Figure 5: eCommerce Becomes So Much More ............................................................................. 8
Figure 6: Still a Long List of eCommerce Opportunities .................................................................. 9
Figure 7: Cross-Channel vs. the Basics ........................................................................................ 10
Figure 8: All Money is Good Here ................................................................................................. 11
Figure 9: A Bright Spot Emerges ................................................................................................... 12
Figure 10: Trials and Tribulations .................................................................................................. 13
Figure 11: Supply Chain’s Input Required ..................................................................................... 14
Figure 12: Matter of Perception ..................................................................................................... 16
Figure 13: Where To? .................................................................................................................... 18
Figure 14: Soon Arriving at the Platform… .................................................................................... 19
1
Research Overview
Why This Study Was Conducted
Three wrenches have been thrown at the steady pace of eCommerce's evolution over the last
few years. First, social media exploded on the scene. And while no one was immediately sure
how to incorporate social channels into the overall customer experience, one thing was clear: it
had an enormous impact on the eCommerce channel, particularly because the virtual distance
between a retailer's eCommerce site and a shopper's social presence is literally a click away.
From RSR's past eCommerce research, we found that pureplay eCommerce retailers recognized
the opportunity immediately - that social's impact on the online shopper was initially going to be
more profound than the impact on the store shopper.
Second, channel proliferation spread far beyond social into mobile, through both smartphones
and tablets. Mobile commerce alone has been one of the fastest growing channels over the last
year, almost doubling according to our survey respondents (Figure 1).
Figure 1: Mobi le 's Wild Growth
Source: RSR Research, January 2012
However, note for the first time in the figure above that two channels show a decline in the
number of survey respondents who report a presence in those channels: catalog is one, which
isn't that shocking given the rapid transition shoppers and retailers alike are making to the digital
realm. But stores for the first time ever are on the decline in RSR's research. Granted, most of the
respondents that do not report a store presence are smaller retailers, under $50 million in
revenue, but the trend is there nonetheless.
Retailers with stores immediately recognized the impact of mobile - some of them saw it at the
shelf, whether they provided the mobile capability themselves or a competitor did. And tablet
shoppers quickly gained a reputation as the most valuable shoppers across any channel. But
27%
36%
25%
84%
72%
24%
42%
44%
80%
84%
Catalog
Social Site
Mobile/mCommerce
Stores
Online/eCommerce
What Channels Do You Operate Today?
2011 2010
2
retailers of all stripes are still struggling with how to best enable mobile channels - one platform
with eCommerce driving? A stand-alone platform? Are the use-cases the same as eCommerce
shoppers or different? RSR addressed some of these questions in our inaugural report on retail
and consumer mobile, but we will examine the same questions through the lens of eCommerce
here.
Last year, social and mobile, while disruptive, were still mostly independent efforts for retailers in
our research. This year, you will find more integration between the two - and more integration
across all channels. Which leads us to the third wrench: cross-channel. The vocabulary is
frustrating - inadequate, overused. But the meaning, for once, is the same no matter the term:
consumers don't see channels independently. They see a brand, and have an objective, and will
use whatever the brand offers to reach their objective - including going outside the brand to get
what they want if they have to. Dangerous territory for a retailer.
The net result is a business platform completely in flux. Expectations for what digital channels can
contribute to the business continue to grow (Figure 2).
Figure 2: Onl ine Expectations Continue to Eat into the Store Opportunity
Source: RSR Research, January 2012
Along with that expectation, we find the number of retailers committed to stores as a major growth
strategy declining and the need to do a good job integrating the customer experience across all
channels more and more of an imperative.
So we set out with this year's benchmark looking to understand how these trends impact retailers'
eCommerce strategies. What we found is that Retail Winners have moved on - the initial
investments required to achieve the desired level of cross-channel integration are underway. In
some ways, this is a "back to the future" story. Once assured that cross-channel integration is at
least starting to get addressed, these retailers are turning back to their eCommerce platforms and
evaluating them in light of the even more critical opportunity this platform presents to their
companies' futures. How does that impact their investment priorities? Read on.
68%
19%
3%
10%
26%
41%
22%
11%
Less than 10% 10-24% 25-74% Greater than 75%
What Percent of Sales Comes from Your Online Channel?
Today In 3 Years
3
Methodology
RSR uses its own model, called the “BOOT,” to analyze Retail Industry issues. We build this
model with our survey instruments. Appendix A contains a full explanation of the methodology.
In our surveys, we continue to find differences in the thought processes, actions, and decisions
made by retailers who outperform their competitors and the industry at large – Retail Winners.
The BOOT model helps us better understand the behavioral and technological differences that
drive sustainable sales improvements and successful execution of brand vision.
Defining Winners and Why They Win, and Why Laggards Fail
Our definition of Retail Winners is straightforward. We judge retailers by year-over-year
comparable store/channel sales improvements. Assuming industry average comparable store/
channel sales growth of four percent in 2010 compared to 2009, we define those with sales
above this hurdle as “Winners,” those at this sales growth rate as “average,” and those below this
sales growth rate as “laggards” or “also-rans.” It is consistent throughout much of RSR’s research
findings that Winners don’t merely do the same things better, they tend to do different things.
They think differently. They plan differently. They respond differently.
Laggards also tend to think differently. They may have spectacular vision, but often fail on
execution. They may forget the power and breadth of choices today’s customer has. They fail to
re-invent themselves when it becomes obvious their existing business model is no longer
working. They don’t change their business processes in an effective manner, and so they either
eschew technology enablers, or don’t gain expected Return on Investment on those they DO buy.
In good times, they skate by: in tough times these weaknesses come back to haunt them.
Survey Respondent Characteristics
RSR conducted an online survey from September - December 2011 and received answers from
94 qualified retail respondents. Respondent demographics are as follows:
• Job Title:
Senior Management (e.g., CEO, CFO, COO, CIO) 30%
Vice President 13%
Director/Manager 37%
Internal Consultant 9%
Staff/Other 11%
• 2010 Revenue ($ Equivalent):
Less than $50 million 31%
$51 million - $999 million 29%
$1 billion - $5 billion 25%
More than $5 billion 16%
4
• Year-Over-Year Comparable Overall Sales Growth Rates (assume average growth of
6%):
Worse than average 25%
Average 33%
Better than average – single digit growth 14%
Better than average – double digit growth 28%
• Headquarters/Retail Presence:
USA 44% 52%
Canada 6% 36%
Latin America 3% 11%
UK 2% 21%
Europe 18% 35%
Middle East 0% 11%
Africa 8% 15%
Asia/Pacific 20% 38%
• Functional Responsibility:
Merchandise Management 5%
Marketing eChannel Operations
21% 21%
Store Operations 5%
IT 40%
Finance Logistics/Supply Chain HR
2% 2% 2%
• Primary Category:
Fast Moving Consumer Goods 34%
General Merchandise and Apparel 29%
Specialty Retail 25%
eCommerce (web only) 12%
5
Business Challenges
Community 2.0
In last year's eCommerce research we found an increased interest in community-related
technologies - retailers reported that they were planning on, in 2011, revisiting past efforts to build
communities to help consumers engage with them. The trend has not abated - in fact, it now
poses a significant business challenge to Retail Winners (Figure 3).
Figure 3: Onl ine Engagement Must Be Socia l
Source: RSR Research, January 2012
As usual, survey respondents say that keeping up with evolving shopping patterns and getting
consumers to engage more online are top-three business challenges to their eCommerce
strategy. And the Great Recession's impact can still be felt in eCommerce's strong growth
imperative, which rounds out the top three. However, across the board, Retail Winners report that
these challenges are relatively less important to them, with one exception: providing more ways
for consumers to connect with each other through their brand. More than twice as many Winners
as laggards expressed this as a top-three business challenge.
The overall impact on business challenges is relatively small - taken across all survey
respondents, providing ways for shoppers to engage with each other moved from #6 on the list in
2010 to #4. More interesting is the decline from 2010 to 2011 in two areas: managing online
29%
29%
36%
36%
21%
64%
64%
57%
17%
17%
21%
29%
46%
54%
54%
54%
Stemming cart abandonment
Price transparency is putting pressure on margins in acompetitive environment (Google product search,
search engines)
Uncertain consumer demand is difficult to anticipate orplan for
Managing our online assortment
Providing more ways for consumers to connect witheach other through our brand
Maintaining growth rates
Getting consumers to engage more with us online
Keeping up with evolving consumer shopping patterns:social networks, mobile, etc.
Top-3 eCommerce Business Challenges
Winners Laggards
6
assortment (from 39% to 28% citing it as a top-three business challenge), and stemming cart
abandonment (from 27% to 19%). These foundational selling capabilities have become far less
important compared to the overall need to keep up with consumers and engage with them online.
Getting to Know You
Operationally, retailers report that their top challenges are understanding how different customer
segments engage online, and difficulty coordinating with other channels to create a seamless
cross-channel experience (Figure 4).
Figure 4: Knowing is Half the Batt le - But So is Act ing on That Knowledge
Source: RSR Research, January 2012
A clear outlier above is laggards' uncertainty about what makes for a differentiated online
experience. They don't even know where to start. Winners definitely do not have that problem.
While they are almost as likely as laggards to say that they are challenged to understand how
customers want to engage with them, Winners are far less likely to say they don't know how to
define a differentiated experience for their customers. And looking at other challenges that
Winners identified, it's clear that one cross-channel resource plays a crucial role in that
differentiated experience: inventory.
Winners were almost twice as likely as peers to identify real-time inventory management as a
challenge, an important precursor to enabling cross-channel transactions. Related, they were
also slightly more likely to say that optimizing inventory to speed delivery times is high on their list
of challenges - a nod to the eCommerce channel's need to be as close as possible to providing
the same kind of instant gratification that stores can provide today.
75%
33%
25%
17%
33%
25%
58%
75%
13%
22%
22%
22%
35%
48%
48%
65%
Have not yet defined what a differentiated onlineexperience looks/feels like for our brand
Transparency in product mix and shoppinginnovations - competitors can see and copy…
Coordinating price and promotions with otherdepartments
Competitive price transparency
Optimizing inventory deployment to speeddelivery and minimize holding costs
Real-time inventory management
Difficulty coordinating with other channels tocreate a seamless cross-channel experience
Understanding and accommodating how differentcustomer segments engage with us
Top-3 Operational eCommerce Challenges
Winners Laggards
7
A Virtuous Cycle
As retailers struggle to keep up with consumers' cross-channel shopping behaviors, it appears
that those cross-channel challenges are creating new priorities for the online shopping
experience. While cross-channel capabilities are certainly not fully mature (a topic for another
report), it has become clear from this research that Retail Winners feel the need to upgrade their
eCommerce channel, either to accommodate cross-channel capabilities, or in the case of online
pureplays, to create an outstanding online experience that eclipses the need for stores. Either
way, without that fundamental understanding of how customers want to engage, laggards stand
to make little progress.
8
Opportunities
Assuring the Future
By far, survey respondents report that the biggest opportunities they see for eCommerce come
from the cross-channel imperative. Even for pureplay online retailers cross-channel has
relevance - it can easily mean reaching across multiple online-driven channels, including social
and mobile (Figure 5).
Figure 5: eCommerce Becomes So Much More
Source: RSR Research, January 2012
Winners are clearly engaged on the cross-channel opportunity - absolutely no Winning
respondent disagreed with the concept that the future of online lies more with cross-channel. But
along those lines, the vast majority also agrees that the eCommerce platform will serve as the
31%
50%
39%
44%
8%
6%
23% Laggards
Winners
"The future of online commerce lies more with cross-channel or merged channel capabilities"
Strongly Agree Agree Neutral Disagree Strongly Disagree
8%
33%
54%
56%
15%
6%
23%
6%
Laggards
Winners
"Our eCommerce platform will ultimately become our digital platform across all channels"
Strongly Agree Agree Neutral Disagree Strongly Disagree
9
central point of all digital activity across channels. Laggards are slightly less certain, but still
nearly as exuberant about the opportunity.
Opportunities in the Here and Now
The top three opportunities that retail survey respondents identify for their eCommerce strategies
include improving online merchandising and assortment, providing richer product detail like video,
and investing in cross-channel capabilities (Figure 6).
Figure 6: St i l l a Long List of eCommerce Opportuni t ies
Source: RSR Research, January 2012
Overall, respondents report that almost every opportunity has at least some potential - with the
exception of three. Retail respondents are extremely skeptical of third-party deals like Groupon
and Living Social - 64% said this kind of deal poses little or no opportunity. They are only
marginally less frosty to deals of the day when they come under their own brand - 38% of
respondents said that opportunity posed little or no value. Finally, respondents reported
skepticism over the opportunity to be gained by improving the payments process (33% rated it
little or no value). Apparently that particular opportunity has come close to being maximized,
though certainly still valid from the perspective of international expansion.
8%
19%
20%
33%
37%
38%
42%
43%
49%
56%
56%
28%
43%
55%
46%
31%
44%
42%
53%
38%
35%
31%
64%
38%
25%
21%
33%
17%
15%
4%
13%
9%
13%
Third party deal offers (Groupon, Living Social)
Branded deal of the day/promotional offers
More sophisticated paid search campaigns
Embedding more social capabilities in our full site
Improving the payment process
Targeted email campaigns
Improving fulfillment processes
Improving search and browse capabilities
Investing in cross-channel capabilities
Providing richer product detail information (photo, video)
Improving online merchandising and assortment
eCommerce Opportunities
Very Valuable Some Value Little to No Value
10
By performance, retail survey respondents report some significantly different priorities around
opportunities, with Winners focused more on online merchandising and the rich media that goes
with it, and laggards looking at search and browse as their most valuable capabilities (Figure 7).
Figure 7: Cross-Channel vs. the Basics
Source: RSR Research, January 2012
Laggards are also more likely to say that they see a lot of opportunity in embedding more social
capabilities in their site and in branded deal of the day offers. Laggards, given the tough
economic environment, have historically been very promotionally-oriented in RSR's surveys, so
their interest in branded deal of the day offers is not that surprising. However, their greater
interest in search and browse as well as embedding social capabilities into their sites vs. peers
reveals something of a catch-up effort.
Winning retailers are much more focused on opportunities related to cross-channel - even
improving online merchandising and assortment as well as investing in rich media capabilities can
be seen as cross-channel efforts, particularly when viewed in the light of eCommerce as the
central digital platform. But Winners are also more focused than peers on improving the fulfillment
process - a very mechanical aspect of eCommerce and cross-channel, as well as more targeted
email campaigns.
Not Just For eCommerce
Retail survey respondents voiced a more mixed opinion about one last opportunity: the
opportunity to make money with their site by looking at it as a media property instead of just as an
14%
29%
21%
36%
43%
29%
36%
57%
50%
43%
50%
9%
14%
24%
19%
38%
43%
52%
43%
59%
61%
65%
Third party deal offers (Groupon, Living Social)
Branded deal of the day/promotional offers
More sophisticated paid search campaigns
Embedding more social capabilities in our full site
Improving the payment process
Targeted email campaigns
Improving fulfillment processes
Improving search and browse capabilities
Investing in cross-channel capabilities
Providing richer product detail information…
Improving online merchandising and assortment
eCommerce Opportunities "Very Valuable"
Winners Laggards
11
eCommerce site. Winners more firmly agreed than laggards that product sales aren't the only
way for a site to make money (Figure 8).
Figure 8: A l l Money is Good Here
Source: RSR Research, January 2012
When you combine this statistic with Winners' expressed interest in building a greater sense of
community among their shoppers, this idea of retail eCommerce site as media property becomes
more interesting. Assuming that a retailer has a credible entrée to creating a community around
its brand, it appears that Winners are already anticipating media-related benefits (i.e. advertising
revenue), more so than their peers.
A Digital Platform to Unite Them All
At first blush, it appears that survey respondents are trying to hold two contradictory eCommerce
opportunities at the same time - investing to support cross-channel, alongside investing to build
up the eCommerce platform itself. The two are not contradictory at all - the more capability that is
embedded in the eCommerce platform, the more that will be available for other digital channels.
And the more that retailers can get shoppers to engage via this one digital platform, the more
retailers will learn about cross-channel shopper behavior and how to create further differentiating
experiences. An opportunity, indeed.
23%
33%
15%
28%
23%
17%
31%
6%
8%
17%
Laggards
Winners
"Our website has potential to make money as a media property in addition to product sales"
Strongly Agree Agree Neutral Disagree Strongly Disagree
12
Organizational Inhibitors
A Light in the Tunnel
As it pertains to what’s standing in the way of moving forward on opportunities, not much has
changed in the past year. However, one very positive trend emerges in Figure 9, below: retailers
are starting to get a handle on prioritizing and managing the resources necessary to capitalize
upon the multitude of online opportunities available to them.
Figure 9: A Bright Spot Emerges
Source: RSR Research, January 2012
This data point (“We don’t have enough eCommerce resources to manage all the available
opportunities” – 59% last year, down to 43% this year) has emerged as a significant pain point for
retailers since we first started conducting this research four years ago, and the 2011 data marks
the first time that significant inroads have been made. “We love the concept of all of the rich
eCommerce bolt-on functionalities we see at tradeshows, but simply don’t have the manpower to
make use of them all” has morphed into something new: retailers are narrowing down the field
of new technologies to ones they think the customer will appreciate most, and they
increasingly recognize the need to prioritize and start managing them sooner than later. This is
the direct result of eCommerce’s growing popularity among shoppers (and its consequently
renewed interest among high-ranking LOB leaders), as well as increased pressure from such
players as Amazon, forcing smaller and specialty retailers to take the leap in order to stay
competitive.
14%
27%
14%
20%
59%
45%
45%
47%
21%
25%
25%
32%
43%
51%
51%
53%
The marketing organization does not understand thedigital strategies we need to support eCommerce
Difficulty getting IT resources for eCommerce projects
Stores don't understand the mobile or cross-channelopportunities
Stores are a higher investment priority
We don't have enough eCommerce resources tomanage all the available opportunities
Budgeting - there is little capital investment available
The existing technology infrastructure is preventing usfrom moving forward
ROI is hard to quantify
Please identify the top three (3) organizational inhibitors standing in the way of taking advantage of these
opportunities:
2011 2010
13
Tension and Experimentation
While a streamlined technology platform/infrastructure earns top honors as the best way to
overcome internal roadblocks (58%), one of the emerging stories in Figure 10 is the tension and
communication challenges that exist between eCommerce and the marketing department. This
was a brand new option for survey takers this year, and with 52% of the total response base
noting it as very valuable, it is no small thing. Winners find it to be even more of a way through
the obstacles of the existing landscape: 60% of Winners (and 65% of Double-digit Winners) cite
more coordination with marketing as very important: for laggards, that number is only 43%.
Figure 10: Tr ials and Tribulat ions
Source: RSR Research, January 2012
What’s also interesting is the significant drop in respondents who cite “easier pilots” as an integral
component to getting past their internal inhibitors. Last year, 43% of retailers identified simpler
pilots as a very valuable means to overcoming roadblocks, compared to only 27% this year. From
this, we can deduce that the technology asset and its ease of implementation is evolving at a
more rapid pace than that of retailers demands - and further still, retailers’ concerns about the
feasibility of new eCommerce “add-ons” are dwindling even faster. The net of the previous two
charts confirms that:
- Retailers are becoming less beleaguered to allocate human resources to experiment with
new eCommerce offerings; and,
- They no longer believe that piloting these new offerings will be as painful as it has been,
even in very recent years.
23%
27%
27%
31%
38%
38%
52%
52%
58%
Case studies/success stories in my vertical
Vendor ecosystems/partnerships that make pointsolution selection easier
Easier pilots
More coordination with stores
Solutions that don't burden our IT department
More experimentation
An executive tasked with managing and improvingthe overall customer experience
More coordination with marketing
Investment in a streamlined technology platformor infrastructure
Please rate the value of the following in overcoming the organizational inhibitors you face to improving eCommerce
processes (Very Valuable):
14
Not surprisingly, Winners are even more bullish: 40% of Winners (and 47% of Double-digit
Winners) cite “more experimentation” as very valuable to overcoming their internal roadblocks,
compared to only 29% of laggards.
Look Who’s Not Coming to Dinner?
What is surprising is that given the previous data surrounding eCommerce and Marketing’s need
to get on the same page with online offerings faster and in a more cohesive fashion, few retailers
think Marketing needs to increase its participation in the strategic direction and management of
eCommerce going forward. Instead, our respondents tell us that Supply Chain Executives’ input
is drastically underrepresented (26% currently participate, while 41% want increased supply-
chain influence). Clearly, as consumers’ demand for whatever they want, however they want it
grows, the ability to fulfill those orders across a globally distributed supply chain becomes more of
an issue. If you operate stores, and online stock is depleted, how do you manage fulfilling online
orders where product is plucked from store inventory? If stores are out of stock, how can the
eCommerce channel be best leveraged to save the sale? These challenges are growing daily,
and the need for Supply Chain Executives’ seat at the eCommerce table to navigate their
implications grows with them. Winners’ are driving the importance: 43% of Double-digit Winners
want increased participation from their supply chain personnel.
Figure 11: Supply Chain’s Input Required
Source: RSR Research, January 2012
21%
31%
41%
18%
33%
23%
33%
26%
28%
41%
9%
26%
26%
28%
32%
38%
49%
49%
62%
81%
Cross-channel Executive
Store Operations Executive
Supply Chain Executive
COO
Chief Merchandising Officer
CFO
Chief Marketing Officer
CIO
eCommerce Executive
CEO
Who participates vs. who should in the strategic direction and management of eCommerce?
Currently Participates Should Increase Participation
15
While RSR has been systematically advocating the need for a Cross-channel Executive (or Chief
Customer Experience Officer) in much of its recent eCommerce, Mobile, and Omni-Channel
research, it is worth noting that retailers increasingly agree with the need for a) such a role and b)
its voice to be heard. While only 9% of respondents report they currently have such a title, more
than double that number – 21% - say an executive whose charge is to ensure what the
customer’s experience looks and feels like across any/all shopping channels is vital in
determining the strategic direction of the retail eCommerce offering.
16
Technology Enablers
Value Abounds
When it comes to the perceived value of eCommerce technologies, retailers’ top three are online
analytics (56% cite them as very valuable), product reviews (52%) and product recommendations
(50%, Figure 12). This is highly consistent with previous years’ research, and continues to prove
that retailers see their safest bets are those which give the seller insight into customer behavior,
as well as those that give consumers the confidence to buy based on other buyers’ feedback.
These are essentially bread and butter issues for successful eCommerce selling in the modern
day, and to further prove that point, Retail Winners have a disproportionate appetite for each:
80% of Winners (and 71% of Double-digit Winners) see high value from online analytics,
compared to only 43% of laggards.
Figure 12: Matter of Percept ion
Source: RSR Research, January 2012
22%
25%
27%
29%
29%
29%
29%
33%
34%
37%
37%
38%
38%
41%
45%
50%
52%
56%
59%
53%
47%
33%
38%
48%
40%
44%
50%
38%
44%
47%
40%
45%
39%
37%
38%
31%
20%
23%
25%
38%
33%
23%
31%
23%
16%
25%
19%
15%
21%
14%
16%
13%
10%
13%
Onsite display or search advertising
Online chat (Click-to-Chat)
Non-traditional payment methods (i.e., eBillMe, PayPal, etc.)
Internationalization of site
Integration to manufacturers' product and content information
Product-level social network integration
eCommerce platform as a SaaS solution
Self-learning search/facets
Distributed Order Management
Product video
User tagging/personalization
Call Center/CRM solutions
Self-learning personalization of site information
Site performance monitoring
Single-source content management
Product recommendations
Product reviews
Online analytics (i.e. page-view analysis, source, etc)
Where do you perceive the value of the following technologies?
Very Valuable Some Value Little to No Value
17
There are a few technologies where the pattern breaks slightly from RSR’s earlier research. Last
year, call center solutions were a top three priority, as 54% of our respondents cited them “very
valuable”; this year that number falls to 38%. At the same time, non-traditional payment methods
such as as eBillMe and PayPal are down from 40% in 2010 to 27% in 2011. As we will see in the
coming figures, this can be attributed to the fact that retailers have already extracted as much
value from Call Center/CRM and alternative payment solutions as they expect they ever will.
Single-source content management, on the other hand, is increasingly catching the attention of
retailers, up from 38% last year to 45% today. With the proliferation of product information
available to consumers at both manufacturer and retailer sites, and its impending need to be
“enough”, accurate, and consistent, retailers increasingly recognize the importance of being “the
only click” that consumers need to make.
Most importantly, however, are the ways in which the best performers’ views of emerging
technologies vary from those of their underperforming peers’. Some of the most stark differences
between Winners’ and laggards’ perceptions of eCommerce technologies are as follows (all are
“very valuable” responses):
- Product-level Social Networking Integration: 47% of Double-digit Winners vs. 21% of
laggards
- Site Performance Monitoring: 60% of Winners, 53% of Double-digit Winners vs. 36% of
laggards
- Distributed Order Management: 50% of Double-digit Winners vs. 38% of laggards
- Internationalization of Site: 40% of Winners, 35% of Double-digit Winners vs. 21% of
laggards
- User Tagging/Personalization: 65% of Double-digit Winners vs. 21% of laggards
- Product Video: 50% of Double-digit Winners vs. 29% of laggards
- Self-learning Search/Facets: 40% of Winners, 41% of Double-digit Winners vs. 29% of
laggards
What’s in Store
While many of the bread and butter technologies have already been implemented (site
performance monitoring, call center/CRM solutions and product reviews and recommendations),
there is little consensus as to where retailers go next (Figure 13).
18
Figure 13: Where To?
Source: RSR Research, January 2012
Only two technologies seem poised for the next wave of eCommerce implementation: 44%
percent of the total response pool have budget or plans to implement Self Learning
Search/Facets, and another 46% are moving toward Self-learning Personalization of Site
Information. However, as we have just seen, these technologies are largely being driven by the
best performers. In aggregate, there remain a great number of technologies for which many
retailers have “no plans,” including click-to-chat, integration to manufacturers’ product information,
and the eCommerce platform as a SaaS solution.
8%
8%
13%
15%
15%
15%
17%
17%
18%
19%
19%
20%
23%
30%
30%
31%
35%
38%
12%
8%
29%
17%
12%
7%
7%
17%
4%
12%
15%
17%
13%
17%
28%
14%
12%
18%
20%
24%
20%
17%
15%
11%
17%
13%
20%
10%
19%
17%
19%
19%
15%
16%
12%
22%
24%
22%
16%
23%
25%
17%
9%
13%
12%
8%
17%
15%
15%
15%
13%
16%
17%
13%
35%
37%
22%
29%
33%
50%
50%
39%
45%
50%
30%
30%
30%
19%
13%
22%
23%
9%
Self-learning search/facets
Self-learning personalization of site information
Product-level social network integration
Product video
User tagging/personalization
Integration to manufacturers' product and content information
eCommerce platform as a SaaS solution
Onsite display or search advertising
Online chat (Click-to-Chat)
Internationalization of site
Distributed Order Management
Non-traditional payment methods (i.e., eBillMe, PayPal, etc.)
Single-source content management
Product recommendations
Online analytics (i.e. page-view analysis, source, etc)
Product reviews
Call Center/CRM solutions
Site performance monitoring
How long has your company been actively involved in the following technology-enabled processes in attempting to
improve eCommerce?
Longer than 1 Year Less than 1 Year Budgeted Project Planned, Not Yet Budgeted No Plans
19
Benefits across Channels
Lastly, RSR has been closely tracking retailers’ willingness/interest in bringing the eCommerce
platform across the organization in recent years, and as a result, 2011 marks the first time we
proposed a question to determine their progress to date (Figure 14).
Figure 14: Soon Arriv ing at the Platform…
Source: RSR Research, January 2012
Perhaps the most interesting data points in Figure 14 are those relating to the eCommerce
platform as a mobile platform. Recent RSR benchmark reports have called upon the store as
being in desperate need of more mobile technologies – both consumer and employee facing. In
many ways, mobile represents the only viable hope of equalizing the consumer/retailer in-store
relationship, currently off-axis in favor of the customer in every way imaginable. But with 34% of
retailers in pilot and another 38% budgeting or planning to make the eCommerce platform the
driving engine of not only the store customer experience, but also that of the entire digital
customer experience, eCommerce platform providers are looking at a potential groundswell of
new activity.
It is also worth noting that 21% of retailers plan to one day use their eCommerce platform at their
point of sale (4% have budget set aside, and 36% say they have already taken steps to do so,
including the 12% of survey respondents who are online-only retailers). In fact, only 38% of
retailers have no plans to extend their eCommerce site to their point of sale. This does not bode
well for traditional POS vendors – much of the industry has been in need of a technology refresh
at the checkout counter for quite some time. The data above only confirms what we’ve long
suspected: many retailers have delayed an investment in POS in anticipation of the day when
their eCommerce platform can perform double duty.
6%
13%
15%
19%
21%
34%
15%
17%
11%
21%
17%
4%
15%
17%
26%
21%
47%
15%
28%
38%
eCommerce as in-store employee-facing handheldapplication
eCommerce as mobile platform
eCommerce as in-store kiosk
eCommerce as Point of Sale
Please indicate your plans for extending your eCommerce platform to other parts of the retail organization:
Longer than 1 Year Less than 1 Year Budgeted Project Planned, Not Yet Budgeted No Plans
20
BOOTstrap Recommendations
Converging on a Digital Platform
If you divorce the customer's shopping process from the retailer's channels, RSR has found three
main components of the shopping process that appear to be universal across all channels:
Content, Community, and Commerce.1
Content is all of the information that a consumer leverages when making a product decision. This
can include both retailer- or manufacturer-provided content, as well as user-generated content -
everything from product specification and technical details, to ratings and reviews, to rich media
like product videos and consumer-submitted images. It can also include third-party contributions,
like the influence of independent bloggers.
Community is all of the people that a consumer leverages when making a product decision.
Retailer or manufacturer experts, sales associates, call center customer service reps - but also,
friends and family, people "like me", and increasingly complete strangers who just happen to offer
an opinion about the product or category in question.
Commerce can be boiled down to the "buy" button. Commerce is the opportunity that the retailer
has to turn customer intention into transaction. It can include promotions and offers, price
incentives, discounts and more, but most important is the ability to capture the sale - making sure
that the buy button is sitting in front and center to the customer when she reaches the point where
she decides she wants to buy.
eCommerce has long been the buy button of retail in the digital space. It is the transaction engine
that has been designed to capture the sale in the online world. As we have seen in this current
report and in past versions as well, retailers have also been working hard to expand their ability to
digitally deliver all kinds of content related to products. And community is more of a priority this
year than RSR has seen in the past.
Mobile and cross-channel are forcing a convergence - if eCommerce already has the digital
aspects of content, community, and commerce, then why recreate the wheel in other channels?
Why not leverage eCommerce's capabilities into other channels to create that single, seamless
customer experience? According to this year's benchmark, the industry is closer to that objective
than ever before. So to help you along your journey, this report's recommendations will focus on
the 3 C's of content, community, and commerce - and how the eCommerce platform can help
retailers bring these 3 C's to every channel.
1 Assembled Commerce: A New Model for Engaging Consumers in Digital Channels", RSR
Research, October 2009
21
Content
Of the 3 C's, content has the most affinity with the online channel - retailers have already done
the most work in aligning content across channels, and certainly have done a lot of work in
capturing the most relevant product content specifically for the eCommerce channel - with no
sales associate standing ready to help, content has had to fill the role online in helping customers
learn about and select products. The first step in getting your arms around digital content is to get
all owners of product content into a room together - from merchandising to marketing to
eCommerce to store operations (including knowledgeable store associates and call center reps)
to discuss the following questions:
• What content do we have and how does it differ across channels? Does the product
specifications that store operations uses to help train employees come from the same
sources as the product information that goes on the web site?
• What content about our products and categories is out there that we're not leveraging
already? For example, have brand manufacturers put a lot of effort into their own digital
sources of content that retailers might be able to leverage?
• Where are we strong in delivering content as part of the shopping experience, and where
are we weak? For example, how well do stores do in presenting product content at the
shelf? Do stores currently leverage online product information?
• What is our overall content strategy? How can we make sure that the best content is
captured from any channel - whether online or even through a store associate's
expertise? And how can we make sure that this content can be distributed and used in
every other channel?
• What is our strategy for user-generated content? And how can we leverage that content
across all channels?
• What is our strategy for rich media? Are we making the most of rich media opportunities
like video, and how can we leverage rich media across all channels?
Community
Community has initially had a closer relationship with the online channel, thanks to the relatively
close association between an eCommerce site and the social networks that can literally be one
click away. However, community has been a little more problematic for retailers to successfully
implement, in part because not every retailer can easily find a natural, vibrant community that is
relevant to its brand. So when it comes to a strategy for community, retailers need to answer one
very big question first: can I support a community on my own as a host, or do I need to find a
credible existing community where I can be a valued and authentic contributor?
In order to answer this question, retailers need to examine their brand and be explicitly clear
about the most important elements of that brand - whether it supports or defines a specific
lifestyle, or supports a hobby, or provides some other deep, meaningful connection into shoppers'
lives. Lowe's has created a vibrant community around its Creative Ideas forum, as Vitamin
Shoppe has also created an active forum around health topics. If that easy connection exists, and
there are not already well-established independent forums out there that meet community needs,
then odds are you will have an opportunity to create a community.
If you don't have enough passionate supporters for a retailer-branded community to live on its
own, then it's important to find independent, credible communities where the retailer can
participate as a valued contributor - in this case, the retailer's role is not host but authentic curator
within an existing community.
22
Once this decision is made, many of the same questions about content can be applied to
community:
• What is our overall community strategy?
• Where are we strong in facilitating a sense of community and where are we weak?
• Where can community be leveraged across channels that we are not doing so today?
Commerce
Commerce is the most controversial of the 3 C's, particularly in the digital space. While
eCommerce is the natural home of commerce online, the online world is increasingly reaching
into places once dominated by things like kiosks and point of sale. And this is creating a lot of
disruption in the store environment in particular.
One of the most interesting aspects of eCommerce and the buy button, however, is the
convergence with mobile. By providing a buy button on a consumer's own personal mobile
device, retailers now have a chance to have that buy button ever-present - increasing (hopefully)
the opportunity to convert a want into a need into a transaction.
The problem with the buy button today is that retailers have too many of them - and not enough of
them in the right places: too many point of sale terminals at the front of the store, and not enough
of them on shoppers' phones or at the shelf, where the buy decision really is made. While it may
be pointless or even obnoxious to plaster a buy button everywhere, whether the shopper is ready
to make a buy decision or not, it is important that all of a retailer's efforts - including their efforts at
fostering a sense of community or making it easy for their content to spread out into the digital
realm - can ultimately trace back to or lead to a buy button at some point.
Brand vs. Buy
While it is true that in this era of transparency and commoditization, retailers must find ways to
differentiate themselves - and this often means a laser focus on brand and the value proposition
of that brand to consumers - retailers must also not lose sight of the fact that their purpose in life
is to sell stuff. Converging the digital channels onto the eCommerce platform is one way to
balance these two somewhat opposing ideals - giving retailers the best opportunity to both
provide a differentiated experience, and make sure that this experience translates into purchases.
a
Appendix A: RSR’s Research Methodology
The “BOOT” methodology is designed to reveal and prioritize the following:
• Business Challenges – Retailers of all shapes and sizes face significant external challenges. These issues provide a business context for the subject being discussed and drive decision-making across the enterprise.
• Opportunities – Every challenge brings with it a set of opportunities, or ways to change and overcome that challenge. The ways retailers turn business challenges into opportunities often define the difference between Winners and “also-rans.” Within the BOOT, we can also identify opportunities missed – and describe leading edge models we believe drive success.
• Organizational Inhibitors – Even as enterprises find opportunities to overcome their external challenges, they may find internal organizational inhibitors that keep them from executing on their vision. Opportunities can be found to overcome these inhibitors as well. Winning retailers understand their organizational inhibitors and find creative, effective ways to overcome them.
• Technology Enablers – If a company can overcome its organizational inhibitors it
can use technology as an enabler to take advantage of the opportunities it identifies.
Retail Winners are most adept at judiciously and effectively using these enablers,
often far earlier than their peers.
A graphical depiction of the BOOT follows:
b
Appendix B: About Our Sponsors
Today’s retailers must provide a consistent brand experience with a wide array of selection,
convenience and return options. One glitch and the customer is gone. Manhattan Associates’
“Zero Disappointment Retail” approach to retail supply-chain management preserves current
systems and investments by providing technology that seamlessly aggregates inventory, order,
pricing, promotion, merchandising and execution information across all channels. As a set of
software solutions within Manhattan SCOPE: Supply Chain Optimization-Planning through
Execution, Zero Disappointment Retail offers cross-channel planning, forecasting and order
management so retailers can proactively anticipate and respond to demand to ensure the right
amount of inventory goes where it’s needed. For more information go to www.manh.com.
Oracle provides retailers with a complete, open and integrated suite of business applications,
server and storage solutions that are engineered to work together to optimize every aspect of
their business. 20 of the top 20 retailers worldwide - including fashion, hardlines, grocery and
specialty retailers - use Oracle solutions to drive performance, deliver critical insights and fuel
growth across traditional, mobile and commerce channels. For more information, visit our Web
site at http://www.oracle.com/goto/retail.
ShowUhow, Inc. is the developer and provider of the 360⁰ Product Experience Solution that helps
manufacturers and retailers sell innovative products and services more profitably via a series of
on-demand, video Product Guides, distributed through smartphones, web, and social media for
every stage of the customer purchase life cycle: Pre-Sale Education, Installation, Feedback and
Repeat Business through brand loyalty.
By adding ShowUhow’s mobile platform to the pre-sale and installation stages, manufacturers
and retailers have consistently seen faster installs, reductions in costly support calls, increased
product satisfaction. ShowUhow hosts and delivers straightforward and engaging, video Product
Guides and comprehensive self-support tools that provide effective pre-sales education and set-
up expectations, as well as step-by-step tutorials that improve the “out of box” experience. Learn
more at www.showuhow.com.
c
Kiva Systems takes a totally different approach to warehouse automation for Omni-channel
fulfillment operations by using fleets of autonomous mobile robots and sophisticated control
software to simplify operations, reduce costs and increase flexibility. Kiva solutions enable
extremely fast cycle times with reduced labor requirements, from receiving to order picking to
shipping all in a single solution.. The result is a building that is quick and low-cost to set up,
inexpensive to operate, and easy to change. With Kiva you pick faster, pack perfect and ship
now. For more information about Kiva Systems and its solutions, please visit
www.kivasystems.com.
d
Appendix C: About RSR Research
Retail Systems Research (“RSR”) is the only research company run by retailers for the retail
industry. RSR provides insight into business and technology challenges facing the extended retail
industry, providing thought leadership and advice on navigating these challenges for specific
companies and the industry at large. We do this by:
• Identifying information that helps retailers and their trading partners to build more
efficient and profitable businesses;
• Identifying industry issues that solutions providers must address to be relevant in the
extended retail industry;
• Providing insight and analysis about a broad spectrum of issues and trends in the
Extended Retail Industry.
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