AIAIO: Our Blog

AIAIO: Our Blog

The pulse and reviews of Alexander Interactive

Archive for the ‘Business’ Category

What does Walmart’s free shipping mean to the industry?

Last week Walmart announced free shipping on walmart.com for the holiday season. The scope is staggering: the offer covers more than 60,000 products and comes with no purchase minimum.

The move is a maneuver in Walmart’s price war with Amazon and Target, coming just days after Walmart lowered prices to compete more fiercely with its competitors. In the level-playing-field world of ecommerce, Walmart is making a compelling case for many consumers not to shop anywhere else.

So what does this action mean for the rest of the industry, not just the billion-dollar behemoths at war? Several things.

1. Expect heavy price wars this season. Indeed, they’re already underway, what with campaigns and discounts starting in October this year, in part to offset the sluggish economy. (Then again, this happened in booming 2007, too.) Every store will be watching its competitors’ prices, and consumers will, too.

FREE SHIPPING no minimum order2. Look for the spread of no-limit free shipping. Already, some larger retailers (like LL Bean, whose promo is shown here) have chosen to match Walmart’s offer. Amazon hasn’t budged yet, in part because its $25 hurdle is fairly accessible. If Walmart chooses to extend its offer past the holidays, though, watch for shipping costs to rapidly become an albatross on mass-market sites.

3. The small-business end of the online CPG market may be in trouble. Walmart’s promotion allows consumers buying $9.88 toys to shop walmart.com for value–good for consumers, bad for small competitors, who may spend $7 on average on shipping. Expect startup retailers to shift focus away from small-ticket items unless they have access to favorable postal arrangements.

4. Don’t expect this to hurt the specialty stores. Bloomingdale’s has free shipping on $300-and-up purchases, Nordstrom $100: this isn’t about them. Nor is it about niche brands whose distribution relies on the digital channel. Those retailers can still charge fair shipping costs, because people are seeking out specific products. Walmart may encourage an expectations shift, but those expectations may or may not extend to every corner of the online retailing industry. (Yet.)

Check walmart.com in January to see if free shipping sticks around or if it’s just a market-share maneuver for the holiday season. That pending decision by Walmart may permanently alter the industry.

Business

A return to brick and mortar shopping

Ah, internet shopping. Nothing like browsing products and comparing pricing without ever having to leave your chair.

For many years I almost completely abandoned visiting good old fashioned brick and mortar stores. I hopped on the internet shopping bandwagon really early. I used to buy CDs from cdnow (RIP) over their telnet service before the much maligned Internet Explorer even existed. When I discovered eCommerce, I never looked back.

Well, I didn’t look back until this past December, when I had a falling out with one of my favorite vendors, Newegg. Much to my surprise, I now go to Best Buy for many of my computer needs.

I used to think of Best Buy as a place that I would go when I needed something badly enough to pay a 10-20% premium. Much to my surprise, many of their products are now competitive with online stores like Newegg. Frequently, I can get products a little bit cheaper since there is no shipping charge. Add to that the instant gratification of getting the product exactly when I want it, and I’ve actually started to prefer brick and mortar shopping again.

Oh, there will always be plenty of stuff I’ll be able to find online cheaper. But for right now, I’m finding a return to brick and mortar shopping to be not only enjoyable, but also a fiscally sound decision.

Just to be clear, I am not abandoning eCommerce. After all, I do help make eCommerce sites for a living :) I’m just reintegrating brick and mortar shopping into my purchase/shopping habits. In fact, over the past 2 months, I’ve spent close to $2500 at amazon.com. I’ve built 2 new computers for my home, and preordered that snazzy new graphite Kindle.

It’s also worth mentioning that I actually spend a lot of time at bestbuy.com. Even though it’s very close, I still don’t want to make the trip unless I know that they have the product in stock. There’s no quicker way to do that than to go to their website.

Not only does their site save me time in the store, but they also frequently have sales online that don’t have in the store. So you could end up spending more money than you have to if you don’t know their online price. They will price match their own online store right at the cash register.

Business

The ROI of being annoying

A recruiter in New Jersey got ahold of my contact information last year. He called and managed to learn from me that I do some of Ai’s hiring. I did not choose to use him for any of our staffing.

Since then, he has called me reliably, every two weeks, to see if I need him yet. Last fall I got tired of his calls and told him, flat out, to please stop calling. We have no relationship and his repeated attempts to wear me down were not working.

He ignored this request and keeps calling. Today was his most recent ping. I now recognize his phone number on caller ID; I don’t pick up when he rings me and I delete his voice mail without listening. And still he calls. (It’s been so long that I feel like I blogged about him once before.)

What percentage of a user base gets worn down by this tactic? Is it worth alienating a high percentage of a potential consumer segment in the hope of finding a sale?

I’m sure my recruiter/stalker has found that repeated calls work on some people sooner or later, but in the meantime, I’ve memorized his name and sworn never to work with or recommend him. Is that good business?

This is a good thing for an online marketer to consider before buying email lists and defaulting signups to opt-in.

Business

The ROI of staff training

I called US Airways the night before a recent business trip to ask about a travel detail I couldn’t find online. (I’m not name-checking US Airways just to pick on them; it’s part of the story.) Their customer service is obviously outsourced to an overseas location–I had to call twice, and both representatives had trouble speaking clearly and understanding my question.

But this isn’t about offshoring, or customer service reps whose native tongue isn’t English, which doesn’t offend me. (I certainly couldn’t administer tech help in Hindi.) Rather, it’s about training.

Upon completing my second call, the US Airways CS rep said to me, “Can I help you with anything else today?”

“No, that’s it,” I replied.

“Thank you,” she continued, “for calling Use Airways.”

Use Airways. I headed to the airport the next morning still shaking my head about the woman who doesn’t know her employer’s name. Shortly after taking my seat on the plane, a flight attendant got on the PA system.

“All electronic devices must be turned off at this time,” he said. “If you do not turn them off and put them away, we will return to the gate and deplane you, and you will have to rebook on a later flight.” (Emphasis his.)

My seatmates chuckled at his earnestness, but I just thought about my phone call. In the span of a few hours, I encountered two different but striking examples of poor training and comprehension by consumer-facing employees.

My trips on US Airways have largely been pleasant and comfortable. But what is the brand impact of these employees’ mistakes? How many other people notice what I notice, and book their next flight on another carrier?

Airline flight attendants routinely say, “We know you have a choice.” What they–and their management team–need to say is, “We know you notice. And we’re trying our hardest.”

Business

The 140-character pitch

Tired: “the elevator pitch.” Also: escalator pitch, Reader’s Digest version, treatment, etc.

Wired: the Twitter pitch. Call it the SMS pitch if you prefer. It’s the new “25 words or less”–give me the summary in the length of a tweet.

Modern, timely, fun. Plus the first ten times you use it you’ll get to explain the term to your audience and lighten the mood of the room.

Business

The ROI of transparency

I was struck this weekend by the positioning of a question in the New York Times Magazine’s Ethicist column. A person was referred by her doctor to a lab partially owned by said doctor. The doctor didn’t disclose his stake, and much hand-wringing about the omission ensued.

Based on the phrasing of the question, Randy Cohen’s ethical guidance was firm: “That’s why a physician should not send patients to facilities in which he has a financial interest. It is neither prudent health policy nor good medical ethics to put a doctor or a patient in such a position.”

But the inverse is also true. Patients should want to go to facilities in which the physicians have a financial interest. The doctors have a vested interest in providing their customers with the same professionalism and quality of care that they give in their own offices.

This is true in any industry. Think about hair salon that opens a spa, the deli with a catering business, the ad agency with a media buying arm. Businesses create corollary interests for financial purposes, yes, but the implied message is one of consistent performance. Indeed, that’s often the hook behind the sale.
The error in the Ethicist column is therefore about the omission, not the referral. How might the answer have been different if the question were phrased this way (my edit in bold):

“A specialist recommended that my wife get a CT scan and suggested that she use a lab in which, the physician clarified, he had an interest. She wasn’t required to use that lab, and there was no reason to question its quality or his calling for a scan. I’m O.K. with this lab — I say you either trust the specialist or you don’t — but my wife is not so sure. What do you say?”

Suddenly the question shifts from cagey profiteering back to trust. As the questioner remarks, if the patient (client, party-thrower, CPG marketing manager) trusts the adviser, the recommendation of a related business can be more trustworthy, not less.

All businesses can benefit from this transparency, ecommerce sites among them. A strong parent company or sub-site can give added validity and confidence to customers. Don’t hide facts when they’re not worth hiding; empower people to make well informed decisions. Providing knowledge can build trust and boost the bottom line.

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Business

Facebook Goes Distributable

On Wednesday, Facebook CEO and President Mark Zuckerberg unveiled the next step towards a more socially integrated web at Facebook’s f8 developer conference in San Francisco. Facebook’s latest release includes open APIs and a suite of plugins aimed at making third party web sites more personalized and social.

With very little coding effort, sites will now be able to import experiences and interactions once limited to within the confines of facebook.com. Examples of these distributable features include a web-wide “Like” button and contextual activity feeds. These feeds will show which of the user’s Facebook friends have viewed an article or product, and offer recommendations based on friend activities. Sites like Yelp, CNN, BuzzFeed and Pandora have already integrated the new Facebook functionality.

facebook_1.pngFacebook’s “Like” button integrated with an article page on Buzzfeed. Clicking the button automatically updates the user’s Facebook Wall and their friends’ activity feed.

The implications are astounding and limitless. And the importance to business owners is multifold: users will be more likely to treat sites as destinations if they can accomplish socially-oriented tasks without leaving the site. This will translate into longer visits; more exposure to content and products; and an overall richer experience for the user. Furthermore, from a business perspective, the new functionality is so easy to implement that it will save countless programming hours.

Ai immediately incorporated the “Like” button feature onto the product pages of one of their premier clients, Steiner Sports. Now, sports-fan Joe Smith in New York can browse steinersports.com and click “Like” on everything that catches his eye-from a Derek Jeter Autographed Baseball to a World Series Autographed Locker Room Hat-and his cousin in Talkeetna, Alaska will get a real-time idea of what Joe might like for his birthday in two weeks.

Facebook’s latest effort to deepen the social experience on the web represents a significant step forward in creating a tighter internet, where users will be presented with recommendations from friends they know and trust on any site they visit. For customers and businesses alike, the new Facebook feature is an instant wishlist, registry, recommendation tool, and will become a powerful indicator of social and marketing trends.

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Business

Ecommerce growing again

Emarketer: Retail E-Commerce Resumes Double-Digit Growth.

This year, 162 million people in the US will research products online. Much of this research will lead to in-store purchases. Over 82% of online researchers, or 133 million people, will be online buyers. The percent of online buyers will rise as young Internet users, predisposed to e-commerce, replace older users.

Good news for our industry, and one we see in some of our trends, too.

Business

Ecommerce metrics and lost opportunity

The Internet Retailer Web Design 2010 conference confirmed one of my long-held assumptions about the online retail industry: most ecommerce sites underutilize their metrics.

This is actually an understatement. Most companies, particularly small businesses with less than $10 million in revenue, barely use metrics at all. And they’re missing out on huge business opportunities as a result.

By metrics, I refer to the page-level data about user behavior that can identify problems and unseen possibilities to improve an ecommerce (or any) website. This isn’t about sku-level data and revenue per order; on a base level, every seller knows how much he’s selling. This is about knowing how and why those items sell, and how a website is affecting performance.

Time after time at IRWD I asked a retailer about site performance, and each time I got blank stares or embarrassed grins. “We actually don’t have any analytics installed,” some people told me. Many others routinely gave a variation on, “Yeah, we have to take a look at it.” Of all the people I met, I only spoke with one business that was able to recite to me some of its important data points and the efforts being made to improve on them.

Data comprehension may be the single biggest factor in getting incremental growth out of a site. By looking at analytics, a retailer can know what pages are underperforming, where fallout occurs, and how processes and displays can be improved. Simple, free or inexpensive tools can report everything from visits before purchase to the location and timing of mouse clicks, all of which are part of the smart retailer’s arsenal.

But instead of building on these smarts, I got interactions like these:

“Hi, David, I was wondering if you could look at my website. I have two sites selling similar merchandise, and this one has only a third of the sales of the other one. This is the redesign I’m working on for the worse site. Do you think it will help?”

“Well, to start, have you looked at your analytics?”

“No, we have a Google account, but I just know that this site isn’t performing.”

“You have a site that’s up and running and doing well. If you crack open your Google Analytics you can compare the data side by side and see where the lesser site is underperforming. That way you’ll know what to attack. You’re actually in a great position to fix it if you do that.”

“But do you think this new layout is going to help?”

I don’t know if that redesign will work, but I do know that the owner of the site is ignoring his own benchmarks. If he looked, he’d be a lot closer to the answer.

Why dive into a redesign without identifying targets for improvement? “Fix my conversion” is not a useful goal. “Make changes to the product page, which has a high fallout rate, to improve adds to cart while encouraging further exploration” is an actionable one. That actionable goal can be identified quickly and easily, but so few businesses are doing it.

Many, many questions raised at IRWD can be answered in-house with a thorough study of site analytics. Companies that ignore it are almost literally leaving money on the table.

Ai

Duane Reade, testing customer loyalty

Duane Reade introduced a new rewards program today. I happened to be in a Duane Reade this afternoon, where the cashier swiftly upgraded me to the new system and gave me a thick coupon book for my loyalty.

The pharmacy and quick-shop chain is promoting its new program, Flex Rewards, as a consumer-friendly upgrade. They cite the new system’s non-expiring reward points and paperless redemption as the main improvements.

Which is great, until the consumer finds out the real meat behind the change:

What Rewards will I receive?
You will receive a $5 Reward for every 500 FlexRewards points earned.

The old Duane Reade Dollar Rewards Club offered a one-point-per-dollar system that was blissfully simple: spend $100, earn 100 points, get $5 in store credit. It was simple and useful enough that I actually kept my rewards card handy, and I earned a handful of redemptions.

The new program is more confusing and far less valuable. Consumers now get two points per dollar spent and the same $5 reward now comes at 500 points. Or, in layman’s terms, after $250 spent rather than $100. Earning the five bucks just became two and a half times as difficult.

Flex Rewards also has a couple of gimmicks in the system, such as SuperSaver, which encourages customers to not redeem their points in exchange for bonus points back when they finally spend the credit. It’s a cash-back system that feeds itself.

If any of this has heads spinning, I suspect it’s by design. Duane Reade has devalued its loyalty program by a minimum of 60 percent. It cloaked the bad news in technical upgrades and new schemes that try to divert attention away from the devaluing.

With Flex Rewards, Duane Reade stands to give away a lot less value in 2010 than it did in 2009. If I had a stake in the company, I’d be pleased with the new program. As a regular Duane Reade customer, though, I’m probably just going to stop using my card.

Branding