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By Steve Gustafson, Partner
Everyone has heard the old adage of “location, location, location” being critical for retail success. A simple formula where good locations drive lots of foot traffic into retailers leading to sales and success. The best locations generally have the highest traffic and could count on this driving sales volume. As you think about how this applies to e-commerce, there are a couple key differences to consider. Users can change location with the click of the mouse. Just because someone arrived at a site doesn’t have the same assurances that visitors will make a purchase. How can marketers look to define a similar singular defining criterion for success for onsite conversion?
During the last 5 years, US e-commerce sales have grown from $69.1B in 2004 to $156B in 2009 according to the US Census Bureau. The glory days of this growth were back in 2005 and 2006 as the total industry was growing at 25%. Since then, the industry has seen slower growth, dropping to between 1% and 10% in 2009 depending on the source of reference.
As overall e-commerce growth stabilizes, are any retailers still growing at peak 2005 / 2006 rates?
Size Matters; Product Doesn’t
A review of the Internet Retailer Top 100 companies reveals eleven companies that grew at greater than 25% in 2009, translating to at least $40 million in growth per company. Four of these eleven companies grew by more than 40%. Achieving this level of growth is significant, noting that 35 companies in the Top 100 saw e-commerce sales decline in 2009.
The eleven companies with the highest growth levels last year include well known household brands to lesser known niche retailers, with products spanning coffee, office supplies, vitamins, books, clothing and even printing services.
Company Name |
IR 500 Rank | 2009 Growth % | 2009 Growth $ in Millions | Total '09 E-Comm Sales in Millions |
Amazon |
#1 | 28% |
$5,300 | $24,510 |
| Staples | #2 | 27% | $2,100 | $9,800 |
| Vistaprint | #36 | 29% | $115 | $515 |
| Kohls | #43 |
38% | $135 | $491 |
| Market America | #54 | 35% | $82 | $321 |
| Follett Higher Education Group | #55 | 25% | $63 | $315 |
| Vitacost | #80 | 34% | $48 | |
| Diapers.com | #85 | 109% | $93 | $192 |
| Yoox Group | #93 | 44% | $52 | $169 |
| Green Mountain Coffee Roasters | #96 | 50% | $55 | $166 |
| Build.com | #97 | 63% | $64 | $166 |
So what allows these disparate companies that represent various industries, products, and services to grow at such impressive rates? Rosetta has concluded that customer relevance is key. An overwhelming nine of the eleven fastest growing e-commerce businesses employ some level of site personalization.
More specifically, these companies have demonstrated best practices in making the e-commerce experience and transaction more personal.
Personal in the product, message and offer presented
Personal in leveraging communication vehicles that cross between the online and offline channels
Personal through engagement with a network of friends and people of common interests
Common sense indicates that marketers who understand what differentiates a consumer from their neighbor, friends, or relatives will be more effective in engaging that individual to transact with their brand, product, or service. Some of the best examples of understanding consumers and personalizing experiences observed from the companies listed above include the following:
Amazon continues to be one of the best examples of developing and refining personalization of the online customer experience. Everyone is familiar with the Amazon landing page and personalized recommendations, but Amazon has also developed a robust set of tools to provide consumers with a highly personalized experience. Tools include community settings / public profile, tracking product reviews, registries, shopping lists, gift lists / ideas, and personalized content.
An additional personalization to note is the Amazon recommendations engine, which allows many ways for users to manage and control how it works. Since Amazon provides details on why a product is being recommended, users can elect to have products removed from future recommendations, designate products that are already owned, and treat items that one bought as a gift differently than those bought for oneself.
Amazon is the largest online retailer for numerous reasons, but it is clear that users value and appreciate the personal touch.
Another innovative approach includes that of Vitacost, an online retailer specializing in vitamins and related health products. Vitacost provides users the ability to join the Vitacost community. As part of the community, users get a dedicated page, photo section, progress blog, and place to track product reviews. The site allows the user to define one of four personal objectives (general health and wellness, weight loss, weight gain / muscle mass, or specific health concern) and then connect with friends and other people with common interests. A forum is provided to chat with other members, to see what products other group members recommend, and to share in discussion boards. By allowing customers to express their own preferences and enabling a site experience that reflects these preferences, Vitacost has leveraged the power of social networking to create discussions focused around its products. This personalization serves to drive better, more relevant engagement and promote loyalty to the site’s e-commerce/shopping experience.
Yoox is a premium apparel retailer that focused on mobile commerce in 2009. They launched an iPhone and Android application offering a selection of fashion and design gifts allowing users to ship gifts worldwide. The application also engages consumers in a questionnaire about gifts and tastes and then personalizes the mobile shopping experience.
Not only is it important to personalize the consumers’ on-site experiences, it is equally important to customize the communications sent across channels. Kohl’s asks users for their department preferences upon registration so that they can personalize and prioritize offers and products. Diapers.com tracks the ages of each customers’ children, enabling customized emails to be sent with specific products and offers based on the ages. Amazon.com goes a step further and sends follow-up emails based on a registered user’s site activity. While such personalization requires user-level tracking across site and web analytics, such coordination enables re- targeting of customers who were much earlier in the purchase process than the traditional shopping cart abandonment email. No matter how sophisticated your CRM program is today, it’s important to remember that email, mobile, and social networking sites offer tremendous opportunities to personalize messages in a cost-efficient manner.
These results demonstrate that developing a more personal approach to engaging consumers with your brand is a compelling value proposition.
How can marketers begin to engage consumers using a more personalized approach?
Marketers generally claim that consumer insights are at the center of all of their marketing efforts. Yet, when asked about how products, messages and offers change based on these insights, studies show that only 30% of marketing efforts are leveraging these insights. This leaves 70% of the time when consumers are engaging with brands that provide no differentiation or personalization of the site experience, cross sells, emails, promotions, content, etc.
Developing an approach for practically leveraging existing insight can be challenging. Being relevant to customers requires more than simply versioning content on-site and through communications. It requires developing a personalized experience map that shows how target segments interact with the brand at all phases of the purchase path. Only then can a strategic roadmap be developed to translate the overall experience into the day-to-day marketing tactics that are critical for future growth.
Generally speaking, marketers have access to basic demographic information such as gender, age, race, etc., but personalized marketing messages based on demographic data are typically ineffective. As a result, some marketers have evolved to better leverage insights regarding consumer behavior. Basic behavioral analysis allows them to provide offers, emails and other content tied to consumer purchases, browsed products, products added to carts, etc. This approach feels much more personally relevant to the consumer because of the connection to previous actions taken.
However, the most advanced and impactful form of insights that marketers should learn and apply is the sophisticated intersection of consumer needs, attitudes and behaviors. This powerful combination helps marketers better understand how consumers make decisions about brand choice and product / service usage. As a result, marketers are able to use this advanced understanding as a much more effective way of personalization and targeting than traditional demographic or behavioral approaches alone.
Rosetta’s experience has shown that a direct correlation exists between the extent to which marketers apply consumer insights and the resulting business impact.
Personal beliefs and attitudes are at the core of everything people do. Marketers who are able to tap into these insights and translate them into personalized consumer experiences will continue to outpace the competition. Whether you are an Internet Retailer Top 100 marketer or an emerging niche marketer, it is clear that personalization through advanced insight is a critical component for deepening consumer engagement and driving greater business impact. Consider how popular the future adage of “personalization, personalization, personalization” will be as marketers embrace the power of applying deep consumer insight to transform their online operations.