Maximizing E-Commerce Growth Opportunities As Digital Channels Multiply, Retailers Need to Sharpen Their Strategic Focus

RETAIL SOLUTIONS BRIEF b y A d a m B l a i r

Maximizing E-Commerce Growth Opportunities As digital channels multiply, retailers need to sharpen their strategic focus

-commerce is expanding in multiple directions – a fact that makes it both an enormous op- portunity area and a major challenge for retailers. With so many Epotential routes for their e-commerce activities, retailers need to focus on the channels and technologies that will bring them the greatest return today, and that will continue to generate growth in the future. Many retailers are already successfully seizing available opportunities. During the past year, company after company has report- ed double-digit sales and revenue increases from their direct-to-consumer e-commerce channels. For example, department store retailer Kohl’s projects that, for the first time, its e-commerce sales will top the $1 billion mark. Retailers such as Polo Ralph Lauren are using their e-commerce offerings more strate- gically, leveraging a strong international brand to set up country-specific websites. The retailer already has a U.K.-specific site and is plan- Mobile Still allows consumers to stay connected virtually ning to introduce French and German sites. Rising Rapidly anywhere, has fueled not just mobile com- Even for retail brands with lower name The very definition of what’s considered “e- merce but also social commerce channels. recognition, such sites can serve as a way to commerce” has expanded significantly in re- Retailers including JCPenney, GameStop, Ex- grow international sales without the signifi- cent years. Mobile commerce has seen tre- press and Aéropostale now facilitate shopping cant investment of building brick-and-mortar mendous growth, and there’s no sign that the directly from their Facebook pages. Even for stores in a new market. With more and more pace is lagging. Juniper Research projects that retailers that have not yet taken this step into consumers shopping online globally, it makes the total value of the global mobile payment direct social commerce, Facebook and other so- sense for retailers to use the digital space to market will nearly triple by 2015, from this cial networks have become increasingly impor- “test the waters” in an unfamiliar geography, year’s projected total of $240 billion to $670 tant parts of their customer interaction efforts. while learning valuable marketing, merchan- billion by the middle of the decade, according More than half – 56.2% – of consumers dising and customer service lessons about op- to the 2011 Mobile Payment Strategies report. visit retailers’ Facebook pages to stay up-to- erating in these new markets along the way. Mobile devices’ increasing ubiquity, which date on sales and promotions, and it’s the

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INDUSTRY PERSPECTIVE ADVERTORIAL

Beat Fraud, Boost Sales

Are your efforts to reduce fraud reducing sales, too?

How does better fraud detection improve bottom line sales 1,000,000 affiliates with about 100,000 affiliates participating ev- Qand profitability? ery month. We helped them optimize their fraud platform so they Many companies today are under pressure to reduce fraud and mini- can determine which orders are good and which are problematic mize losses such as chargebacks, product loss and the operational even if it comes from an affiliate. Because of the system they have cost associated with managing fraud. In order to meet those man- in place, they can pay affiliates faster and in turn have realized dates, retailers take drastic measures to reduce the amount of fraud incredible sales growth. they see. Order rejection rates are higher than they need to be. Retailers spend lots of money to drive traffic and convert that traffic Earlier you mentioned that some merchant turn off sales from to buyers and then reject a sizable number of what would be good entire countries, are there really regions with that much fraud? orders due to suspicion of fraud. On average in the US, order rejec- There certainly are geographies where fraud is a higher percentage tion rates are running around 3%, that average increases to about than normal, however, we don’t recommend turning off sales to 8% internationally. If better fraud prevention added 1%, 3% 5% or entire countries or IP addresses because of fraud. Retailers doing more in sales, that’s significant to a retailer. business online are, by default, global. A quality fraud detection and management platform will allow merchants to accept good or- What trends do you see that are hindering merchants ability ders from anywhere, for any type of product and reject bad orders. to increase sales? To cut off an entire country for fraud is like using a chainsaw when Surprisingly, there are a number of ways that retailers handle fraud what really is needed is a scalpel. On a platform like ours, it is very issues that have a drastically negative affect on sales. We see com- simple to create rules that will help determine the validity of an panies cutback or completely shut down affiliate marketing pro- order from any location. grams, turn off sales from certain countries or geographies because of suspected high fraud, or determine not to sell certain products What about gift cards, mobile ecommerce and other alternative such as digital goods, again because they believe the fraud as- payments, do they present any greater risk to retailers than sociated with those product is too high. These are real, everyday traditional card-not-present (CNP) transactions? examples of very crude methods of reducing fraud that ultimately The bottom line is, retailers want to accept more good orders from reduce sales or the ability to expand sales. anywhere, for any type of product and should accept any type of payment. Consumers will be buying gift cards by the millions this Affiliate marketing is an effective way to rapidly expand sales; holiday season, more of them are using mobile devices to make can merchants participate in this sales channel without feeling purchases and new alternative payments are coming out all the the pinch of fraud? time. A good fraud platform will allow the retailer to manage Yes. If managed properly, affiliate marketing can add a substantial all these elements and make it easy for them to do business percentage to a company’s bottom line. One of our largest custom- however the consumer would like, without an increase in fraudulent ers has a very active affiliate marketing program. They have over transactions.

Kount delivers an all-in-one fraud and risk management solution for companies that have card-not-present environ- ments looking to simplify their fraud/risk operations while dramatically improving bottom line results. Kount provides a single, turnkey fraud solution that is easy-to-implement and easy-to-use. Kount’s proprietary technology has reviewed hundreds of millions of transactions and provides maximum protection for some of the world’s best-known brands.

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top-ranked reason for such visits, according ments are reconfiguring the interaction be- that retailers are providing. A study combin- to the most recent Compete quarterly Online tween retailers and customers. One of the ing consumer research with a retailer survey Shopper Intelligence Study. Based on a sur- biggest changes has been the shift from a revealed that while 85% of consumers expect vey of nearly 3,300 online shoppers, the study cross-channel mindset to an omni-channel seamless multi-channel integration, only 40% reveals that one-quarter of responding con- one. When there were fewer e-commerce of responding retailers can provide their cus- sumers visit an official retailer or consumer channels and they were more rigidly defined, tomers with a cross-channel order history. goods Facebook page at least once a month, many retailers encouraged multi-channel The survey, from Sterling Commerce, an IBM and more than 20% said Facebook pages have shopping. Not only did retailers gain a larger company, showed that 87% of consumers ex- been “influential” or “extremely influential” in share of wallet from multi-channel custom- pect retailers to be able to track an order via making a purchasing decision. ers, but the shoppers themselves tended to be any channel – but that less than half (46%) of There has even been multiplication within among the retailer’s highest-value customers. retailers offer this capability. e-commerce channels. Multiple mobile plat- In an example of “be careful what you wish Retailers are aware of the need for them forms (e.g. for iPhones, iPads and Android de- for,” yesterday’s cross-channel shopper has be- to play catch-up in these areas: only 35% said vices) forced retailers to create different apps come today’s omni-channel shopper. This cus- they were “very satisfied” with their ability to tomer’s shopping journey now encompasses a provide positive e-commerce experiences, and retailer’s website, mobile and social channels 90% said they would focus on improving their and its stores, in sequences and combinations Web retail channel.

With more and more consumers shopping online globally, it makes sense for retailers to use the digital space to ‘test the waters’ in an unfamiliar geography.

for different devices. Now, retailers including that can differ depending on who the custom- Reshaping Customer Amazon.com, Best Buy and Sears have created er is, what they’re buying and even what time Interactions multiple mobile apps within platforms. For ex- of day they’re making the purchase. The nature of retailers’ interactions with ample, Sears has 10 apps each for the iPhone Not only must retailers keep inventory, customers has also been changing. When e- and iPad in addition to its Android app. price and promotion information consistent commerce first opened up more direct lines of And because social networks make it so across this expanding array of touchpoints, communication, “retailers were laser-focused easy to identify different interests and affini- they must also manage orders and transac- only on getting and keeping consumers en- ties, many retailers have established multiple tions that often begin in one channel and are gaged with their brand. They didn’t want to Facebook pages and Twitter feeds, focused completed in another. That’s not to mention get involved in the conversation between con- either on customer demographic segments the inventory and fulfillment challenges that sumers,” according to Nikki Baird and Steve (such as teenagers) or specific product areas. have multiplied along with the number of e- Rowen of RSR Research. commerce channels in operation. That changed as retailers, particularly those Omni-Channel The quick rise of omni-channel shopping in apparel and fashion, realized the value of Challenges has created a gap between what consum- social media. These retailers are “waking up All these technology and business develop- ers expect and the cross-channel capabilities to an important new business challenge: how

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INDUSTRY PERSPECTIVE ADVERTORIAL

eCommerce Expanding, Enhancing the Customer Experience Lori Seal, VP, eCommerce, Junction Solutions discusses eCommerce trends and opportunities

When retailers expand their eCommerce activities into mobile technology, retailers should invest in staffing resources to perform Qchannels, which elements of their eCommerce technology platform site and channel analysis, monitor trends, recommend site improve- require the most attention in order to maximize success? ments, and drive the effectiveness of promotional and personalized The first is streamlined navigation to allow mobile shoppers to find offers to optimize the use of customer information. and make their purchases in the fewest number of clicks possible. The second is rapid eCommerce performance and page rendering As retailers’ e-commerce activities expand into new channels and new speed, which is especially important for shopping sessions that geographies, what advantages does an SaaS delivery model offer? happen over cellular networks. Lastly, retailers should consider both A SaaS delivery model can reduce barriers to help retailers enter a browser-based mobile site as well as creating a downloadable smart into new geographies. SaaS enables retailers to bypass direct host- phone app. The browser-based site is important to ensure “barrier- ing infrastructure investments and focus on brand building, mer- free” shopping without requiring shoppers to download a dedicated chandising, and fulfillment logistics. By partnering with a SaaS application. eCommerce vendor, expanding retailers can more quickly scale and gain presence in new regions. SaaS solutions are also typically As retailers add social commerce to their offerings mix, what new licensed as a “pay as go” subscription model, which can help retail- demands does this place on their eCommerce technologies? ers place a lower bet as they “test and learn” in new geographies. eCommerce technologies are being leveraged to include product SaaS eCommerce solutions can offer full redundancies and load review information, Q&A capabilities and incorporating links to so- balancing, with expertise in optimizing site uptime, which is critical cial networking sites like Facebook and Twitter. eCommerce must in developing countries with less reliable infrastructure. also accommodate social and viral marketing to generate leads, particularly given the rising cost of search engine marketing and What are some of the most important ways retailers can leverage keyword buys. enterprise-wide visibility to make their overall e-commerce operations more efficient? How can retailers balance maintaining a complete, consistent view Retailers can best gain enterprise-wide visibility and efficiency of each customer with the desire to maximize the functionalities through a tightly-coupled full multi-channel retail solution set. By of different e-commerce channels? Which technologies are most directly linking the eCommerce platform to the warehouse manage- helpful in achieving this? ment, call center, point-of-sale, and ERP back office solutions, retail- eCommerce solutions by nature capture rich data around where ers gain a single point of data entry, real-time information across customers originate from, how they navigate and search the site, systems, and comprehensive visibility and reporting. Such benefits what offers they respond to, and where they choose to abandon include real-time updates to inventory between the eCommerce during their shopping experience or convert to a purchase. Cus- inventory and the warehouse stock counts, automatic order mapping tomer segmentation data can then be leveraged through robust from the eCommerce site to the fulfillment and invoicing system, and eCommerce tools that enable dynamic product recommendations or the ability to manage pricing, product categorization and attributes the generation of personalized offers and/or landing pages, all of from a single source. This yields a more accurate, real-time web which can drive incremental revenue per shopper. Beyond data and store with greater efficiencies and economies for the retailer.

Junction Solutions provides vertical-specific on-premise and on-demand software applications and services that enhance operational performance, reduce costs, expand delivery channels and strengthen relationships. Junction Solutions’ ERP-platform agnostic, SaaS eCommerce solution provides a feature-rich platform that enables online retailers to deliver amazing customer experiences, driving revenue opportunities and customer preference.

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to serve as a facilitator of social interactions the merchandise, promotions and even the revealed that even though the retailer had not around their brand,” write Baird and Rowen prices they offer to different customers based yet created a mobile-enabled website, seven in the January 2011 report After the Storm: Con- on individual criteria remains one of the key percent of its e-commerce sales were coming necting with the New Online Consumer. strengths of e-commerce. To be effective, re- from customers using mobile devices. “You What began as simply helping a customer tailers need to invest in accurate content clas- can probably imagine what would happen more easily reach her social media friends so sification of their products and service offer- with that percentage if we actually created an they could encourage her to buy a blouse was ings, in order to correctly use the taxonomy and experience where people could use the phone just the “tip of the social iceberg,” they add. semantic search functions that power person- in a friendly way to navigate the site,” said “Ultimately it reflects a move away from ‘re- alization solutions. Retailers also need to per- Christopher Ladd, the retailer’s head of global tailer as expert’ to ‘retailer as facilitator’ for form customer segmentation that goes beyond e-commerce, adding that Lululemon planned consumers to reach the experts they deem im- the basics, finding the specific markers that to get a mobile initiative under way. portant, whether family, friends, or just ‘other link a particular customer to others that have • Enhancing E-Commerce Platforms: people who bought this product.’” purchased a product or responded to a type of The new demands being placed on retailers’ One of the most adept retailers in terms of promotion. e-commerce efforts and the new functional-

Yesterday’s cross-channel shopper has become today’s omni-channel shopper, with a shopping journey that now encompasses a retailer’s website, mobile and social channels and its stores.

linking social media with multiple channels • Location-Based Campaigns: One of ities needed to compete in a crowded market- is Wet Seal. The retailer recently created a the newest e-commerce opportunities adds place mean retailers need to move to more ad- back-to-school promotion for its iRunway ap- the variable of shoppers’ locations and their vanced e-commerce 2.0 platforms, upgrading plication, which provides customers with the actions to the mix. For example, Best Buy is or replacing legacy systems that sufficed when ability to scan an item in the store and see running a targeted, location-based advertis- e-commerce only meant online sales and the styles that have been generated and rated by ing campaign aimed at shoppers in its stores. entire channel contributed just a small percent- other customers. Customers who come into Using a mobile shopping application from age to a retailer’s overall revenues. the store and try on a pair of Wet Seal jeans ShopSavvy and the vertical ad network Long- Lululemon Athletica recently brought its e- receive an Android-powered smartphone that board Media, the campaign delivers ads when commerce operations in-house, adding online is pre-installed with the iRunway mobile app. customers scan specific products with their functionalities including one-page checkout, The device is available with the purchase of a smartphones, which indicates a strong po- merchandising and search capabilities, rich im- new two-year plan plus data package. tential purchase intent. The campaign also agery enhancements and core business process encourages users of the mobile app to create stabilization. And home improvement retailer Boosting E-Commerce a back-to-school checklist when the applica- Lowe’s scored an impressive 78% increase in Effectiveness tion “learns” that the customer is shopping in its online conversion rates after redesigning Retailers can take a number of steps to im- a Best Buy store. its Web platform, launching a tool that gives prove the effectiveness of their e-commerce • Streamline M-Commerce Offerings: customers the ability to ask product-specific business in today’s social media-connected, As noted, consumers are enthusiastic about questions and receive answers from a variety omni-channel environment. shopping via mobile devices. Yoga-inspired of sources, including Lowe’s employees, other • Personalization: Retailers’ ability to vary apparel retailer Lululemon Athletica recently customers and product manufacturers. RIS

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