FREEDyourMind

Welcome Kevin Ertell, our new VP of Retail Strategy!

I couldn't be happier to announce that Kevin Ertell has joined ForeSee Results as Vice President of Retail Strategy. For those of you who don't know Kevin, he was SVP of e-business at Borders, and before that, he was SVP at towerrecords.com. Kevin has actually been a client of ours for years now, so he's a true believer in the ability of online customer satisfaction metrics, and more specifically the ACSI, to transform the way retailers are doing business online and across channels.

We brought him on board for a few reasons. Our retail business is growing so much, that we really needed someone to ensure that the quality of our products and services remained as high as it has been, even as we grow. And I don't think you'll find someone with more expertise, thought leadership, and the respect of the retail community than Kevin. Because he comes from a retail background and had so much success transforming the online businesses of Borders and Tower, he's going to bring a unique perspective that will really help our product, delivery, and marketing teams create and implement solutions that retailers really need.

Kevin is blogging at Retail: Shaken Not Stirred--so go check it out and leave him a comment. Hes also on Twitter @kevinertell.

Retailers: Time to Answer the Call

Mobile, the next frontier for retailers is fast approaching.  In an article in Internet Retailer, it is reported that only 5% of the largest e-retailers offer mobile solutions, with 4% offering mobile optimized websites and 1% offering iPhone optimized sites.  Our recent research (ForeSee Results) of visitors to the top 100 Internet Retailing sites showed the following:

• 15% of visitors have a smartphone
• 10% of visitors have used their phone to check prices
• 6% of visitors have used their phone to look at product reviews
• 11% of visitors have used their phone to send a picture of a product to someone

So, how important is it for retailers to have a good mobile solution?  Well, the largest online retailer, Amazon, has a pretty good iPhone app that allows you to check prices, look at product reviews and purchase!  If you are a retailer, most likely Amazon is a competitor. You need to have a competing mobile solution for your customers. 

If I am a retailer, I sure don't want my potential customers walking down my aisles using the Amazon iPhone app. And not to have an option to use my iPhone (or mobile optimized) app.

It is time for retailers to deploy high quality solutions to the mobile platforms.  And the key to success will not only be a great mobile (and iPhone) application but also great integration across the channels, making it easier for consumers to move from web to store to mobile.

U.S. Online Sales Up In Q1

US online retail sales rose an average of 11% in Q1 according to Shop.org.  They studied 80 companies with the help of Forrester Research.  58% of the companies surveyed reported that their online sales increased over the same quarter last year. 

Now, these are self reported numbers, it is only one quarter and only 80 retailers responded to the survey.  That all being said, this is very encouraging news for the online retail industry.   

What is happening with my conversion rate?

This is the question I received recently at an emetrics conference.  The web analyst was getting questioned by his management why their conversion rate was dropping.  After all, his boss kept reading about the importance of conversion rate.  I hear this question a fair amount.  Recently I heard this from a senior exec at a multi-channel retailer.  Their online sales were soaring, so was their traffic.  And customer satisfaction was also increasing. But conversion rate was dropping.  They wondered why?  Well, let's take a closer look. 

As we looked at the data we found a couple of interesting things going on.  Their traffic was soaring for two reasons.  A good percentage of the growth was the result of a very effective SEM campaign reaching out to new customers.  New visitors were converting at a lower rate then the normal site traffic.  Not a surprise, we expect to see new visitors convert at a lower rate then returning visitors.

Another strong contributing factor of the growth was a significant increase in visitors doing research for purchases in the store.  This segment of the audience will also convert at a lower rate then traffic that is  looking to purchase online.

Now, the reality is that everything this retailer was experiencing was positive, yet it was driving conversion rate down.  Conversion rate can be an important metric, but only when used properly.  I find that most sites are using it incorrectly.  Conversion rate at an aggregate level is a great example of a misleading metric.

Be careful that the metrics you use measure success, not simply measure what you can count!

Netflix Delivers 2 Billionth Movie

Netflix announced this week that they delivered their 2 billionth movie. It was Nick and Norah's Infinite Playlist, and the guy in Alabama who ordered it got a free lifetime subscription to Netflix. I don't think that 2 billion number includes all the videos they've streamed, just those they've delivered by mail. They're mailing 2 million movies PER DAY. That has got to make them the USPS's greatest customer. Wonder if they get a volume discount?

I mention this because Netflix has come out at the top or tied for the top position in eight consecutive ForeSee Results e-retail studies: we measure online satisfaction with the top 40 online retailers every Christmas and the top 100 e-retailers every spring. This means that Netflix consistently has the best customer satisfaction in the e-retail industry, and the research indicates that companies that have high satisfaction reap significant finnacial rewards. Netflix revenue grew more than 13% from 2007 to 2008, while the industry average was more like 7%.

We're analyzing the data for the Spring 2009 Top 100 e-retailers list now, and I'll give you a hint about whether or not Netflix made the top spot again. Wait, no, I won't give you a hint. What fun would that be?

Ramblings from Etail

I was at the Etail conference in Phoenix last week.

Some observations:

• Almost 400 retailers attended - not a bad number.  But keep in perspective there were probably almost as many vendors as retailers.
• Not as many attendees as last year.  Not a big surprise based on the economy.
• A lot of folks that I haven't seen before at an online retail conference (etail, shop.org or Internet Retailer).  It is good to see new faces and new companies attending.
• Also some new vendors...and some vendors we are used to seeing weren't there.   
• Some great content...although not all sessions were at the same level.
• I loved Jessica Tsai's running commentary on Twitter of the sessions.  A great use of Twitter, following along the sessions and making the sessions a little more interactive (in a tech, geeky kind of way).  Although, it today's world, every "online" conference should provide free wi-fi in the conference area.
• It is always fun to talk with James Samford of Citi Investment Research and get his insight on the online retail economy.
• I didn't catch every session, but a few that I liked:
  • Kevin Ertell gave us a great overview of what he had done at Borders - some very cutting edge stuff.  And he provided a good rundown of some good technologies out there.
  • Noah Maffitt from LiveNation is always interesting to hear from.  
  • A good panel on allocating resources with Michael Cooper from Home Depot, Laura Christine from Skechers, Jamey Maki from Golfsmith, Vicki Updike from Miles Kimball and Fiona Dias from GSI Commerce.
• As always there was plenty of time for good networking.
• And we hosted a great dinner for some friends of ForeSee Results. 

And of course there is the weather.  Nothing like mid 80's and sunny, especially when coming from the frigid Midwest.

Latest ACSI Results From The University Of Michigan

The latest American Customer Satisfaction Index results from the University of Michigan were released yesterday.

In the E-Commerce sector, Newegg comes out on top, wrestling away the top spot historically held by Amazon, although Amazon's results, while down slightly from last year, nevertheless very impressive.  Check out our commentary on the E-Retail, Online Brokerage and Online Travel sites covered by the ACSI Index.

Now we all know we are in a tough economy, so does Customer Satisfaction matter in a tough economy?  Yes - more then ever.  What we have is a hyper-competitive environment where the rising tide that previously lifted all of the e-commerce "boats" is no longer rising.  In other words, the amount of consumer spending (which drives 2/3 of the economy) is shrinking.  Yet we for the most part we have the same number of companies competing for that shrinking consumer spending.  The result, a much more competitive environment where there will be more winners (Amazon, Newegg, etc.) and more losers (Circuit City, etc.).  So, there has never been a more important time to satisfy your customers. The satisfied customer will be the one that spends the most, is the most loyal, recommends you the most and is the last customer to leave you.  The dissatisfied customer will be gone as soon as they can.  And remember, you cannot manage what you cannot measure.

On a broader, economic stage, what do these results tell us?  In order for consumer spending to rebound, two things must happen.  Consumers must get gratification and satisfaction from their spending and consumers must have the means to spend, with cash or credit.  Well, customer satisfaction is holding it's own and now we need consumers to get the means to spend money.  Hopefully the Stimulus plan can have some impact.

Observations From Shop.org

Some thoughts and observations as a result of attending Shop.org's annual Strategy and Innovation Summit down in Florida last week. 

Attendance was way down from prior years.
Not a big surprise.  This has been a tough few months for retailers and it will continue for a while.  However, online retailing has done well in comparison.  Many retailers were still represented at shop.org, but fare less attendees per retailer.  Also there were many senior execs there.  For retailers, online is the area of hope (and growth) for 2009.

A tale of two strategies
There seem to be two different strategies being talked about, both at the sessions and in the hallways.  One strategy was we need to "cut, cut, cut", and hold on and wait for the recovery.  The second strategy was a time to fight, take share, innovate and rise above the competition -- and do it as cost effectively as possible.  Now while I understand what drove some folks to take the first strategy, it sounds like a death march.  How long can you get away with cutting costs to keep up with dropping revenues and market share?  Probably not long enough to survive.  Yet, a strategy of focusing your efforts on moving up, gaining market share is a drive to success.  I pick the second strategy every time.  Remember that what this economy has brought us is a very competitive environment.  The same number of people competing for a shrinking (or not growing) pool of consumer spending.  Those that can win the competition will survive and thrive.  Those that lose the competition will lose...and probably not exist in the future.  And how do you win - you satisfy your customers.  A satisfied customer will buy more, recommend more and is the last one to leave.  A dissatisfied customer jumps to the competition at the first chance they get.

Is it the year of mobile?
While there was a lot of talk about mobile, mostly centered around creating a merged channel experience; bringing the web into the store; the best comment I heard was it "was the year of the mobile, just like it has been since 1999".  Similar to the point above, those that move forward will win and those that don't will lose.  Just imagine this scenario, people are shopping in your store and when they find the product they want, they grab their iphone to check the product reviews.  But you don't have a web/iphone application so they go to Amazon and lo and behold, they order from Amazon with a simple click on their phone instead of in your store.  Not a good scenario (unless you are Amazon).  Much better if they are on your mobile/iphone app checking those product reviews, product specs, etc.

Simplicity?
Sat in on a presentation with a focus on simplicity.  I have to disagree with this.  This may have worked in a simpler time, where the rising tide lifted all retailers.  Not any more.  The competition is not going to be simple.  Unfortunately we have learned that the data you gather, the metrics you use are not going to be simple.  If we simply focus on conversion we will miss huge opportunities.  If we simply focus on bounce rate we are will miss huge opportunities. And if you are a multi-channel retailer and you simply focus on online sales you will miss huge opportunities.

 We have learned time and time again, there is not only one important metric, there is not only 1, or 2, or 3 important questions to ask.  Those that can take data and turn it into information will have the building blocks of success at their fingertips.  We need to move away from trial and error, we need to move away from gut instinct.  We need to apply scientific rigor to all we do. 

Simplicity leaves us with data, science takes that data and turns it into information.

Spend 10% of your budget on tools and 90% on people?
Another suggestion from a presenter and another one I have to disagree with.  Now this was said in context of metrics, data and analytics.   If you have to rely on that kind of an investment in people you are missing the science that is available to you.  This is not a very scalable model, and only as good as the people you have on your team.  We should be able to rise above that. We should be able to set up a system of metrics, a system of analysis and by utilizing scientific and proven techniques be effective. Now, if you have simple data you may need that many people to make sense of it.  But there are better ways -- take advantage of them.

It was much warmer in Orlando then it was in Ann Arbor
It was a shock to the system returning from Orlando to negative temperatures in Ann Arbor.  While I would love to show all my shop.org colleagues around beautiful Ann Arbor Michigan, I was quite glad to spend a few days in the warmer climate of Orlando.

Amazon and Netflix Shine - Satisfaction and Revenue

Amazon announced their fourth quarter results yesterday. 

Now, remember back when the holiday season was coming to a close...at ForeSee Results we released our Top 40 Holiday Research and I wrote about it in this post, and guess who came out on top...Amazon and Netflix.  And not only were they on top, but both had a substantial lead over the next closest pack of retailers. 

There have been many reports about how tough this holiday season was; Comscore reported that online holiday sales were down 3% year over year.  But based on our holiday research, we expected that there would be clear winners...and many others that suffered greatly.  Well, Amazon reported that Q4 sales were up 18% from 2007 Q4.  Pretty impressive results in a tough economy.  And Netflix recently reported subscriber growth in Q4 of 26% year over year and revenue was up 19% in Q4 from the prior year.  Also very impressive results...but not surprising based on their high customer satisfaction scores.  In a tough economy the leaders in customer satisfaction lead the way in financial results as well.  (This is of course also true in a good economy but I am guessing we have a while before we have to worry about that scenario.)

But why?  In a tough economy the pool of consumer spending (or corporate spending) is either shrinking or not growing anywhere near the rate that we have come accustomed to.  So what does that mean?  Well, it means increased competition.  And the competition is increased for two reasons.

First, the number of sellers are roughly the same as it has been and they are now competing for a shrinking (or slower growing) pool of customers.  That translates to increased competition. 

Second, switching costs on the Internet are very low, especially when compared to other channels.  For example, if you are shopping in a store, to go and shop at another store brings with it a cost to the consumer.  You have to take the time and effort to switch and you may not find anything better.  But on the web it is a different story.  You can clone yourself by opening up another browser and be in two places at the same time, with almost no effort.  A very low switching cost.  That translates into increased competition.

So with increased competition the winners are going to be the ones that are providing a high level of satisfaction to their consumers.  (Amazon and Netflix)

So how do you win?  Satisfy your customers...and remember you cannot manage what you cannot measure.

Sears Drive-through - A Very Interesting Concept

Just think about it.  Buying online and picking up in store is not always what it is cracked up to be.  While great in concept, how many times have you had to wait in line at the store, or park a long way from the store, etc.  What is your expectation when buying online and picking up in store?  I always expect it to be just as easy to pick it up in the store as it was to buy it online.  Well, it does not always work that way.

Well, Sears is planning on opening a warehouse style concept store in Joilet Illinois this summer.  The store will feature a drive-through.  I like the idea of that.  This also could be a great way to appeal to a younger, more internet savvy audience, that historically has been a challenging segment for Sears.  Check out more details here.

On the surface this sounds like a very interesting idea for Sears to test out.  I can't wait to find out how successful this concept will be.  Think of the possibilities not only for Sears, but other multi-channel retailers. 

And it could even be an effective way for online only retailers to compete with multi-channel retailers.  Do we see an Amazon Drive Thorugh in our future?  Or, maybe in a shared environment, a drive-through for Zappos - Newegg - Netlifx?

Do you think you would use it?