More appropriate that ever before!
This is cool. Wonder how long time it will take before we will see significantly different delivery methods.
Should apparel brands start online outlets?
Pricing online is a transparent affair. Google and a wide range of comparison sites makes it increasingly easier for the customer to find the product of choice matched with the best total offer in terms of product price, various discounts, shipping and return policies etc.
Pricing is a central component when creating that decision but also very important to your overall business. The right pricing and mark-up policy can make or break it for your company as it is directly associated with your overall profits.
Since the big recession we have seen a lot of ecommerce tactics focused on discounts – product discounts, newsletter vouchers, flash sales sites and online outlets. Theses tactics will quite certainly drive more revenue to your shop and allow you to reduce sales acquisitions costs thus making your online marketing efforts much more successful.
But should you do it? It’s a very tough question and you really need to think twice and consider which problems discounts and reduced sales prices introduces along with the potential increase in revenue on both short- and long-tem.
Short-term problems are somewhat well known. For example one of the most commonly used tactics is a discount on shipping. It might be the last push to convert a user to a customer. But before the return period is up you won’t know, since free shipping and return also tend to increase the total return percentage from you sale. And it is not cheap to handle returns! You can actually end up in a situation where you loose money on the total order because of all the costs associated i.e. the initial order fulfilment and product shipment, the return shipping, new hangtags and re-packing etc. before the products is ready to sell again.
But discounts and dedicated outlets are also dangerous paths in a long-term perspective. Customers tend to get used to discounts and quickly learns your sales-cycles, so if you are not smart and cautious, you might end up in a situation where customers starts to substitute your full-prized items with discounted items. You might experience an increasing revenue, but if the customers has substituted full-prized items with discounted items you could experience your overall profit is shrinking at the same time because the product margin is gone caused by a lower total profit margin. Dangerous stuff and hard to roll back!
The catch is that the best growth possibilities are within the segment of discounted goods and outlets. This is where we have seen most of the growth in online shopping coming the recent years. So if you are still want to investigate the outlet and discount possibilities further you might want to look at how Nordstrom is executing. Nordstrom has for a long time had their normal ecommerce site Nordstrom.com with a discounted area and furthermore they had a flash sale site at HauteLook.com. But last year they decided to take their Outlet concept Nordstrom Rack online. They have separated the full-price and the outlet concepts and launched the outlet as a dedicated shop at Nordstromrack.com (just like offline). This allows them to make tailor-made communications towards the two different segments – one segment interested in news and trends and one segment interested in bargain hunting.
Some clear competitive advantages are created by this separation and it will be exciting to follow and see if Nordstrom’s “scale and separation strategy” is a winner. So far they just released a quarterly report showing strong growth in revenue – again. So for now it looks like the scale mission with increasing the revenue is well on its way.
But it seems like the margins are under pressure, which might be caused by customers swopping high margin products for lower margin products.
The pressure on the margins is obvious and establishes a constant demand for more aggressive top-line revenue growth just in order to stay on parity. So far it looks like they are strugling to get to that level of growth momentum.
On March 18th, ecommerce technology giant Demandware broke the news of their Shopping Index measuring digital commerce growth. They found a 6% increase in shopper spent as well as a 25% increase in shopper attraction totalling a 32% digital commerce growth. These are fascinating figures. It seems digital commerce keeps growing, and naturally so does my interest in finding out what led to this and what lies ahead.
According to the Demandware Shopping Index we’ve seen a digital commerce growth of overall 32% because of higher shopping spent but especially because of increased attraction of shoppers. This is great news for Retailers.
One fact missing though is whether this is gross or net revenue. A very central component when dealing with ecommerce is the return rate. Since a lot of companies struggle with extremely high return rates north of 30%, this has to be taken into account when evaluating growth rates in digital commerce.
However Demandware reveals that the biggest value driver is a major increase in shopping attraction, pointing towards new orders and not just more items (and possible returns) per shopper. How this attraction is happening is not crystal clear but it would be nice to know if this has something to do with increased spending driving traffic to the site, which is a major and crucial cost factor.
Speaking of devices. One very interesting fact is the numbers Demandware published about M-commerce. The companies have been trying for years to give the shoppers the opportunities to access online stores from basically everywhere and from all devices known to man, but now that they’ve succeeded in doing so, is it at all showing at their bottom line?
With the increased traffic numbers from mobile and tablets, it is interesting to see that in the UK they actually manage to convert this traffic to sales. Globally, the overall visit share from desktops was down 16%, and now accounts for 52% of the traffic and 67% of the orders while mobile phones and tablet account for 16% and 17% of the orders. In the UK desktops only accounts for 46% of the traffic and 53% of the orders while mobile phones and tablets accounts for 23% and 24% of the orders. In other words the share of orders on mobile and tablets are more than 40% higher compared to the rest of the world.
I predict that the rest of Europe, as with anything else, will look to the British Isles for inspiration. Therefore we’ll probably see a lot of companies on this side of the canal investing heavily in creating even better and more frictionless purchase solutions making it more likely for shoppers to make the final call on their phones or tablets.
That’s it for now. I’m writing this post on an old fashioned computer and you’re probably reading it on a phone bought on a tablet while trying on a t-shirt you might send back.
So what’s the deal with Google Analytics Enhanced Ecommerce (GAEE )? Google Analytics did a big update on their ecommerce reporting last year. Here’s a run through some of the most important arrivals making GA even more compelling as your Analytics tool.
What makes GAEE so interesting is that it a very huge update with the single purpose to help you getting closer to answering why people visit your website and chose not to finish a purchase?
GAEE is an addition to the Universal Analytics library and it provides you with data on a whole new level. For GAEE to work you need to implement new code and also feed Google Analytics with information from external sources in order to figure out return rates. This is a little tricky and naturally the quality of the reports you receive in the end will depend on the quality of the data you deliver. But it might be worth the effort since returns can make or break an ecommerce company especially within fashion where we see return rates north of 50% in some categories.
Once everything is in its place you can start seeing things like how many times a certain product has been viewed and bought making reports on conversion rates per product possible. This will help you getting a much better grip on your merchandising performance.
You can start tracking affiliate codes, product codes etc. revealing the secrets of coupons and their efficiency.
In my opinion some of the biggest wins happens with the much significantly improved insights into funnel action e.g. which products are added or removed from the shopping cart, add-to-cart rate, login dropoff, shipping dropoff, payment dropoff et.
Investing time in GAEE means investing in a deeper understanding of what makes customers tick and click. But be aware; It only works with Universal Analytics and not older versions and it will make your analytics installation even more complex.
Feel free to drop me a line if you want to know more about GAEE and how your business can benefit from it.
Absolutely mind blowing how much Douglas Engelbart and his team managed in 1968 – even video conferencing (1:16)!
Some of you might have heard of a phenomenon called reverse showroom (or webrooming); the consumer behaviour of researching a product online before purchasing it in-store. Unfortunately, in many cases the wrong store from your business point of view.
Reverse showrooming must not be underestimated. Opposite to what you may think it actually is more common than the other way around. According to a 2013 Harris Poll survey, 69% of 2000 American adults tried reverse showrooming and only 46% engaged in the regular one. Another 2013 survey concluded that more people were into reverse showrooming than its direct opposite. Also in-store shoppers tend to spend more money than online shoppers. 30 bucks actually (204$ vs. 174$). It turns out that avoiding shipping costs, the easy return of unwanted goods and simply being able to touch the products (still) have a massive influence on the choices of the consumers.
Below you’ll find 9 ideas giving you the upper hand in reverse showroom retailing
- Offer free Wi-fi in the store and let the customer use his smartphone onsite to access a company app providing him with user comments, more product information and perhaps a discount code.
- Make it possible for the customer to buy stuff online in the physical store. Provide the employees with tablets containing information of all the products and let it be known that all items can be purchased right off the screen.
- In many cases filling your wardrobe online is the cheaper way, making aforementioned examples worth trying, but don’t forget to make your in-store customers aware of the joys of not having to pay for shipping.
- Also touching the items and actually feeling the fabrics is somewhat of a USP – if your competition is only online. So why not mention this in your catalogues? And while your at it inform the customers of the ancient pleasure of returning an item to the store by simply stopping by and handing it over for cash. This is old skool 2.0
- Another thing also worth mentioning is always having (enough) products in the physical store. Studies from Harvard show that customers tend to go elsewhere if their desired items are sold out.
- Yes, we’re talking physical stores, but don’t forget that insights into online consumer behaviour can help you increase your revenue and at the same create the illusion that you see eye to eye with the Internet’s finest; The Pinterest users. Retail Company Nordstrom arranged its in-store displays based on the top items pinned on Pinterest. This is a fine way of showing key customers that you are where they are.
- Educate your employees even better. Make the customers understand that showing up in the physical store will give them an even better explanation than the one they might read online. A 2013 Deloitte survey showed that half of respondents said knowledgeable in-store staff would make them more likely to buy in-store.
- Competitive prices is of most importance
- A wise man once said, “The customer is always right”, and he wasn’t wrong. Well, there might have been one or two occasions, but to really get the attention of the consumers, you have to become them. You have to be where they are and provide them with what they have come to know and love in their young lives. If the customer wants free Wi-Fi, he should have it. If she wants the exact same item as the one she saw online, this should always be available.
Whatever you do, you need to consider that you customers don’t think in silos and that the distinction between offline and online is somewhat challenged these days. Reverse showrooming underlines that tendency.
We’ve all seen it coming, the year 2015. It’s been out there for a while just waiting for us to arrive with all our knowledge and ideas. Now that we’re almost there, it’s time to look back at an all-important tendency of the past year, a tendency once followed might make those red figures green.
While e-commerce continues to grow, so does the importance of physical stores. The significance of omni-channelling shouldn’t be underestimated in the years to come. Both shop owners, and on and offline shoppers gain from omni-chanelling and a lot can be learned AND earned from Integrating different business channels. This is emphasized by e-commerce businesses all over.
It’s all about combining different physical and digital channels in order to give the customer the full experience and a number of possibilities. We see a lot of retailers who were previously only available online, now also create physical stores. During 2014 we have seen Zalando open shops in Berlin and Frankfurt and Amazon will open it’s first shop across from the Empire State Building in New York just in time for the Christmas sale season.
Omni-channelling was one of the fastest growing trends over the past year. Driven among other things by the fact that both retailers and former 100% e-commerce players are now counting on meeting the customer through multiple channels.
In the retail sector, it is becoming more common with omni-channel. A great number of companies are in a process of integrating physical and digital channels and the physical stores often act as a showcase for the Internet store, the latter being very important for consumer research.
More and more consumers are searching for the specifics of a certain item online and then buy it in the physical store. According to “E-handel i Norden 2014”, a report on ecommerce in Scandinavia made by PostNord, last year more than half of all consumers in the region sought information about a product in an online store and then bought the product in a physical store.
We also see the opposite happening, where the consumer tries a product in the store and then heads home to compare prices online after which he or she buys the jeans or whatever where it is cheapest.
Existing both on and offline is sooo 2015.
Found this great video from McKinsey‘s David Edelman explaining about a new model for digital marketing and understanding your potential customers.
He stresses that the customer decision journey is not a linear and reductive process but a much more chaotic and winding process. Enjoy!
Another Monday morning. Get out of bed, go to the office, check your Google Analytics to see if your campaigns has generated any revenue and to find out if there is a positive ROI on your campaigns overall.
Let’s say you’ve spent 30.000 EUR on AdWords advertising. The result is 30.000 sessions generating 600 transactions with a total value of 60.000 EUR. This is a 2% conversion rate and an average basket size of 100 EUR. Not bad at all.
You spent 30.000 EUR and generated 60.000 EUR. In Google Analytics you can look into your AdWords performance under your traffic sources and see that you have a positive ROI of 200%. 60.000 EUR in revenue divided with 30.000 EUR invested in AdWords. Things are looking great!
Or are they?
In e-commerce nothing is for certain. Further investigation will show you that Google itself explain that ROI is related to your net profit defined as Revenue – Cost of goods sold (COGS). According to the article the ROI metric you see in Google Analytics leaves out the money you spent on producing your product. The ROI metrics should look like this:
Instead of just: (Revenue / Advertising).
Let’s say you’re a brand manufacturer of fashion clothes for men with a margin of 70% on your retail sales price. This gives you a COGS on:
0.3*60.000= 18.000 EUR
Your ROI is then: 60.000-(18.000+30.000)/18.000+30.000= 25%.
This is quite alright. Still looking at a positive ROI, right?
Not necessarily. When dealing with a physical product within e-commerce you also have to be extremely focused on return rates which in some categories can be above 50%. You also have to think about the cost of handling the order as well as costs for payment and shipping.
In that regard common profit eaters are Free shipping and Free Return. If you offer your customers to pay by invoice or by Paypal, you need to be aware that these payment methods are significantly more expensive than a normal credit card. Bottom line is that all these initiatives might be necessary in order for you to be relevant as a shop but be aware that they take a big bite out of your profit.
When doing cross-boarder e-commerce you will also realize that the behaviour is very different from country to country. Cost of traffic, conversion rates, return rates, shipping and payment costs differs from place to place which makes it crucial to develop a solid P/L model of the total operation showing you whether you are on track in each country or not. You will realize that a positive ROI of 200-1000% is not the case. At the most you will have a double digit ROI – if you’re lucky! There is not much margin left when you have paid everything so you need to be rather precise in your daily business across countries.
A sophisticated operations model will also take into account that you might lose money on the first sale, but if you are able to build an effective retention program and make more sales to the same customer, you might be able to build a truly great business.