10 Lessons That e-tailers Can Learn From Traditional Retailers

Often those setting up a store on the web do not come from traditional retail. Or they rely on a web development company that is sound technically but lacks real world understanding of how shoppers browse, select and buy. Below are ten things that e-tailers can learn from traditional retailers.

1. Not all shoppers are alike.
Consider the fact that check-out line management in traditional retailers has become a discipline onto itself. Shoppers who know what they want prefer to get in and get out as quickly as possible. Thus convenience stores, express lines, self-service and the advent of a new phenomenon, the small format stores. How do you do this on the web? One possible answer is to ask right upfront whether they are browsing or know exactly what they want and then display navigation, assortments and search options that best serve their needs.

2. It is all about the sale.
Can you imagine how annoying it would be if you are trying to check out and the cashier insists you join their frequent shopper program before taking your money? It is for this reason we do not recommend requiring shoppers “join” before checking out of your store. Instead give them a choice by asking if they want to be remembered next time they shop.

3. It’s all about the experience.
Traditional retailers have invested heavily to make their stores present product in the best light and give shopper a pleasant experience so they are willing to stay longer and buy more. Yet most e-tailer sites by comparison look like a pipe rack operations and fail to “romance” their goods. e-tailers should study catalogues to see how to present product in an enticing way and add aspirational urgency to presentation.

4. It is better to be wide than deep.
Most larger stores are designed to allow shoppers a wide field of vision and use ceiling signage to help them see the extent of merchandise. It also helps shopper to navigate the store. In effect, it respects their time by putting more of the store into a single view. By 2010, it is projected that widescreen monitors will account for 30% of sales. These are likely the early adapters who are probably the heaviest web user demographic and consequently the most lucrative online shoppers. So why not design sites that put more of the store in sight on the first page?

5. Display merchandise to encourage cross-sell.
Most e-tailers only display the searched item and fail to alert the shopper to other related purchases. Case in point is a shopper who is searching for a new flat screen television. Try this on Best Buy and you can checkout without being offered associated items such as cables, stands, mounts, speakers, etc. Try this on Amazon and you’ll see many related offers before you check out.

6. Positive reinforcement.
Smart retailers train their service staff to compliment buyers on their selection. The anxiety at the moment of purchase is when a buyer is most likely to walk; or in the case of the web, most likely to abandon the shopping cart. A simple message that says, “You’ve made a great choice” can significantly lower the anxiety level and lower cart abandonment and at the same time build long term customer rapport.

7. Location, location, location.
We know the mantra for traditional retailers. The same applies to the web. Therefore, you can’t depend on SEO alone to build your traffic. Most of your marketing investment should be in keyword and pay-per-click where you have the greatest control and ability to measure results. And don’t fall for the data shows conversion rates are higher for organic versus paid listings. If your message is highly relevant and you offer a reward (coupon or discount), traffic will flow and a good store will convert traffic regardless of the source.

8. Multiple locations, multiple locations, multiple locations
If you visit Grand Central Station in New York City, count how many Zarro’s (bakery) there are. These folks did a study that in retrospect is intuitively obvious. One store at one of end of the station produced X dollars. They were concerned that opening a second store in the station would cannibalize the first with each producing .5X. They decided to give it try and the two stores eventually produced more than twice the revenue of the first store alone. It made sense that with multiple exits and varying traffic patterns, a second store reached a whole new audience that probably never would have seen Zarro’s in the first place.

But, that’s not the whole story. There’s something call the “Burger-King” effect. BK found that locating stores close to McDonalds produced far better results than BK off by themselves. In this case, hungry folks with kids went searching for McDonalds and what better place to be than where your targeted customers are headed?

On the web, this means that you follow your traffic and your competition. There are some excellent services that can give you details on where your competition is spending their ad budget and how productive that spending is. And it also suggests you should use several domains (or shall I call them locations) that could appeal to different market segments. For example, you might have domain that implies the hottest, hard-to-get toys to appeal to the early adapters and then a domain that implies best value or free shipping to the value conscious.

9. Focus on value rather than just price.
Smart retailers know the difference between price shoppers and value shoppers. They also know that value shoppers tend to be more profitable and loyal customers. So what is the difference? Price shoppers care only about the lowest price and will go out of their way to get the lowest possible price. Value shoppers can be moved by offering more than price alone. Here are some examples of how to appeal to value shoppers on the web. You can offer and feature superior service such as fast shipping, trade-ins and free follow up advice. Or you can offer reassurance such as easy returns, guaranteed fit or extended warranties. These value additions can be more than paid out with higher margins and larger total tickets.

10. The customer is always right.
This is a simple mantra but you can always tell stores that actually live up to this promise. They do it by offering 100% satisfaction guarantees and bending over backwards to help customers make a buying decision that actually fill their needs. On the web, this means designing stores that provide very detailed product images and descriptions as well as ratings and feedback from other buyers. Do not be afraid of negative feedback on products…you are actually enlisting the help of your customers in making the best decision what to carry and feature. Target Stores tells its customer that “We are your buying agent.” Meaning, their buyers work for their customers. Keep that in mind as you build your site.

I would guess that fewer than 10% of all e-tailers pay attention the points I’ve discussed here. That means with a little more effort you can be better than 90% of the online stores. And substantially raise your chances of being a successful e-tailer.

It's not nice to fool MotherGoogle

In case you missed it, check out this Google Blog:

http://googleblog.blogspot.com/2008/11/searchwiki-make-search-your-own.html

It announces a new feature called SearchWiki and if you are thinking about spending money on SEO, make sure you know what you are doing because you could be throwing your cash into a black hole.

Let's step back for a minute to understand what Google is trying to do in producing their search results. Basically it is all about relevance and nothing else. To the degree that you hear an SEO consultant talk about back links, meta tags, formatting and any other gimmicks to achieve high ranking on Google, watch out. Google is trying to keep one step ahead of these tricks to make sure the search produces the most relevant results. And now with SearchWiki they are enlisting the help of users who can kill your listing or trash it. At this point, this only affects your searches although others can see your ratings. But...the writing is on the wall...I expect Google will make use this in a much more active way in the future. For example, it may allow searchers to rank results based on how others have ranked sites. So despite your best efforts to "trick" Google into a high ranking, if your site is rated low by users your rank could be set back many pages into a trivial position.

So, the future is here and the answer is to work hard at making your content relevant, unique and well organized. And stop trying to fool MotherGoogle.

Organic versus paid listings...not so simple

Much has been written recently about the superiority of organic listings versus paid. This is based on data that shows that 80% of the clicks on a search results page are organic. And that organic clicks produce 1.5 times the conversion rate as paid clicks. On the surface it would clearly say that your advertising money would be far more productive spent against organic search than paid search. But, why is it that 80% of search dollars are still spent against paid search? Is it that this is stupid money, or is something else going on here?

Here's my take...

They both are right but generally for my money, I'd usually opt for paid search, especially if the program is time sensitive like a sale or where speed-to-market is critical like a launch. Even in other cases, with paid search I know I can accurately measure my ROI. And I can use trial and error to build a strong bank of key words and combinations that work.

With organic search, it could take months to build a position of visibility that you can achieve in minutes with paid listings.

With organic listings, you are battling for first page position and not always winning. Search engines are constantly changing their algorithms to prevent "gaming" the system and make certain they are producing quality results. With paid listings, you are on a level playing field and can choose when and where you want to spend your money.

In other words, paid gives you more control, predictability and lower risk. And if there's one thing an advertiser cherishes, its lower risk. Thus 80% of spending is in paid.

This is not to say you shouldn't invest in organic. But the smart way is to make sure your site is optimized to give you the best chance of getting a high listing...but don't bet the farm on it.

Sober news for the ad model

In the Forbes issue of Dec 22, 2008 page 66 an article titled Mixed Messages provides some chilling news for those thinking they can make money on the web with a pure ad model. Forbes shows a chart comparing major Internet companies on an annual sales per unique visitors basis. No surprise, the leader is Google at $1.85. What is a surprise is how little the revenue per visitor number is. Yahoo is at $.91 and MSN at $.41. Here's what this means. Rule of thumb when planning a traffic acquisition program is to use 3X the annual revenue and be willing to spend 25% of that number. In Google's case, that would say they can spend $1.39 per unique visitor. In Yahoo's case, that number is $.68.

If you are starting up a new site with an ad driven model, let's see what the cost might be to use banners to drive traffic. Assuming you can buy banners at $3.00/M and you have a click rate of .04%, your cost per visitor would be $.75. Then you need to ask yourself how long will it take you to achieve anything close to the Yahoo ad sales revenue per visitor...if ever.

Perhaps you can come up with fantastic idea that grows virally on the web and brings millions of uniques for practically nothing...the next Facebook. But even these folks are having a hard time trying to build serious ad revenues.

The models that seem to work these days are still ecommerce and subscriptions. Unless I missed something.

There's always time to do it over...

Talk to most investors in web businesses and they tell you that they assume everything will cost twice as much and take twice as long as the worst case scenario. Even sites with the most brilliant and thorough planning often fail to perform as expected on the Internet. You can stress test sites, view on every different size monitor and resolution, optimize for all the major operating systems and yet when you run for real, there is at least a 50% chance that you will experience a problem serious enough to warrant crisis management.

Why is this?

The answer is that the technology behind the web is still very young and rapidly evolving. Just how many Windows patches are there? And each new version changes the playing field. So what you assumed and planned for yesterday, may not work today.

What can you do?

First, never think you are finished with a site. Consider it a constant work in progress. Second, you must have in place 24-7 monitoring and troubleshooting capabilities. Third, never rely only on in-house expertise to keep you up-to-speed on changes and development. And finally, ask everyone you know to use the site and watch them. As crude as it may seem, real life experience of even a few honest friends can give you as good data as spending thousands on sophisticated market research.