The eNova Partnership: A pan–European multi channel advisory group

Welcome to eNova's September 2011 newsletter

Welcome to eNova’s September 2011 Newsletter. In a retail environment testing resistance levels, our multichannel quarterly market summary should provide some much-needed positive sentiment as the pace of growth and innovation in our industry continues unabated. We thought we would focus this Back to School Newsletter on practical advice, but haven’t been able to resist a bit of future gazing...

In our first article we talk about tablets and why we think most people miss the trick altogether bundling them under the mobile umbrella. Tablets hold far more exciting secrets than those of a mobile device. Those of you who have experienced the ailment we talk about in our next article will recognize it immediately. In an expression borrowed from Michael Ross at eCommera we talk about the “post traumatic platform selection stress disorder”: a lightheartedly named but serious and sadly common condition. Our guest writers this quarter are from Lafosse Associates, specialist digital and multichannel executive recruiters. They share their views on one of the most fundamental yet often forgotten keys to multichannel success – people integration.  Enjoy reading and continue sharing your feedback with us at sophie@enovapartnership.com or andy@enovapartnership.com.

 

Contents

Don't miss the tablet trick
The Post Traumatic Platform Selection Stress disorder
Functional integration is key to multichannel success
Multichannel quarterly market summary

Stat of the quarter

"7.2% of site traffic and 6.1% of site sales came from mobile devices in May 2011 for UK retail."
(Source IBM Coremetrics July 2011, “UK Christmas Season Readiness Report”)

 

Don’t miss the tablet trick

Amidst the buzz of the iPad launch in April 2010, two questions seemed to dominate. Firstly, can this new device be as successful as the iPhone or iPod, and secondly, is it a solution to a particular problem – is there a space between smartphone and laptop?

Both questions were answered pretty quickly. Apple sold more than 3 million devices in the first 80 days and c.15 million a year later. And most market commentators agreed that the iPad represents a great piece of technology that has been successful in carving out its own space between the smartphone and the laptop. The market responded to the iPad’s success with a flurry of tablet launches, and Forrester predicts that US tablet ownership will grow 51% between 2010 and 2015.

It is in the analysis of this seemingly perfect growth picture and its impact on the future of online retailing that we think most miss the trick. Tablets may be a remarkable new market force for a whole different reason.
The main mistake is, we believe, in the classification of tablets as “mobile devices”.

Look at your Google Analytics account and iPad visits sit under mobile devices. A recent Forrester report tells us why ‘The Future of Mobile Commerce May be Tablets’. Yes, tablets are more “mobile” than laptops as you can carry them about with you. Many have in-built 3G connections and are sold in mobile phone outlets as well as electrical stores as a result. It’s not uncommon to see someone using one in a coffee shop. However we don’t think we’ll ever see the day when people are shouting into their tablets Apprentice-style.

Jokes aside, we believe tablets should be viewed much more as an evolution of the laptop than a relative of the smartphone. In fact, tablet sales are not hindering smartphone sales but laptop and netbook sales. A Resolve Market Research study asked “Which of the following devices would you not buy after owning an iPad?” 32% of respondents replied “Netbook/laptop”. Only 22% responded “smartphone”, the lowest percentage on the list. A Nielsen study confirms that 77% of tablet users report using their tablet for actions which they previously would have used a laptop or desktop computer.

Why does it matter?

Firstly, because classifying tablet traffic and conversion rates under the mobile banner can lead to misleading conclusions.

Take this quote from a recent Forrester report:

“Even though smartphones far outnumber tablets, retailers surveyed by Forrester report that 21% of their mobile traffic comes from tablets”. This, we believe, is missing the point. Tablets are likely to be taking much more traffic market share from PCs and laptops than from mobile. Similarly, bundling tablets and mobile within a single conversion rates can be highly misleading as tablet conversion rates are likely to be much higher than mobiles’.

So challenge the analysis behind your mobile numbers next time you have the opportunity – you might be surprised at what you learn.

Secondly, because motivations and behaviours are very different according to the device the customer is using, with each device a separate piece to the multichannel puzzle. Customers are more likely to research an item on a laptop or tablet rather than a phone due to the larger screen size and better customer experience. They are also more likely to purchase or reserve it on those devices. If they are in store looking to purchase however, they are more likely to use their mobile to check that the price is competitive, possibly to look at customer reviews. As tablet usage increases it will become more important than ever to understand how you use each device to deliver the right experience through the right touchpoint in a multichannel shopping environment.

As you are reading this you might sigh in consideration of the increasing complexity that yet another device adds to an already complicated multichannel puzzle. Don’t beat yourself too much about it - tablets tell us something else, which is far more exciting.

Tablets are a crystal ball into the websites of the future.

Taking eBay as an example, who reportedly took $2bn in “mobile” revenue last year: Han Yuan, director of engineering, platform business solutions and mobile, reports that “average buy sizes are 50 percent higher on the iPad than on PCs—iPad users are converting at a much higher rate”.  “The engagement is significantly higher for both our iPhone and iPad products. We believe that transactions across all mobile products, including the iPad, are about 70 percent accretive, meaning consumers are transacting in places where they previously couldn’t.”

Why? “Our iPad app is actually easier to use than our Web site.”

Many who have used one of the eBay apps, or visited the mobile site would testify that it is a lot easier and more pleasurable to browse around that going to the traditional website.

Device size and the “blank sheet of paper” approach around developing a tablet interface have forced retailers to do something that too many have forgotten how to do on a traditional website: taking out all of the complexity and clutter, and concentrating again on the core needs of the customer. 

We have long said that websites fundamentally haven’t evolved as fast as technology and graphical innovation, with most still following a linear, word-based, and catalogue-style architecture. And there was no real need to challenge that in an industry growing in the high 30’s until recently.

What tablets will help do, we think, is force that step change in interface design innovation. With HTML5, and features such as touch screen swiping, automatic flicking between horizontal and vertical views, quick zooming and multi-touch, current websites relying on lists, clicks and words will soon feel like dinosaurs whilst that “Minority Report”-type experience suddenly won’t feel that far away.

Our advice? Take a step back from these Analytics figures telling you about the stellar growth of the mobile channel, and consider what you can learn from tablets: they might be much more than your fastest growing mobile channel.

The Post Traumatic Platform Selection Stress Disorder

“I though my brand new platform was supposed to solve problems not give me more headaches!”. Welcome to the Post Traumatic Platform Selection Stress Disorder. A term coined by our friends at eCommera, referring in that instance to retailers discovering that the platform they had bought wasn't 'fully international'.

If this term makes you smile the way it made us smile, you’ve probably, alongside the majority of retailers, suffered from one form or other of “PTPSSD”. One of the common stresses is the lack of flexibility and ease to simply trade a website on a new platform once it goes live.

The truth is, some form of stress is inevitable in an industry that’s constantly catching up with itself. In the early days in particular, platforms were running to catch up with technology and retailers’ wishes, who didn’t really know what they wanted themselves in such a fast moving industry. As the landscape continues to change with mobile and tablets on the rise demanding yet another type of interface, that part of the equation seems set to continue.

However, PTPSSD is in large part self-inflicted and can in most cases be avoided.

The first point is, the devil IS in the detail with platforms. A lot of retailers don’t spend anywhere near enough time in the requirements phase. It is imperative to gather experience from outside and to delve in to every aspect of the requirements. For example, it is not enough to ask for a promotions engine in the list of requirements. Each type of promotion must be laid out in detail so that the vendors know exactly what is required. Can “Buy One Get One Free” promotions be run? Does the second product automatically drop in the basket or do customers have to put it themselves? Can several promotions be run on the same product? Can promotions be different according to geography, channel or audience? Who can modify the promotions?
Another typical example is the requirement for international capabilities and multicurrency. Does international mean separate sites, translated sites, are currencies translated using an FX rate or do prices come from local pricelists…the list of examples could go on for ever but each of them is one more headache post platform selection if it hasn’t been thought through properly.

The second piece of advice is to fully understand what parts of any platform are 'off the shelf' and what parts are bespoke.  Whilst there is no issue with bespoke developments, you should ask yourself the question around the potential for less flexibility later on if you wish to change certain items.  Be sure you either own the source code or the systems integration house will support changes and the costs of those changes.

The third observation is that the skills of the internal team should match those required by the chosen platform.  It sounds simple, but you don’t want to end up with a trebling of staff just to trade the site.  Some platforms require more IT and internet skills than others, and you should ask yourself that question before the site goes live and simple tasks such as adding a product or a promotion need to be performed repeatedly.

With any platform, you should go out and talk to other retailers who have used it and see what stress they have encountered.  Equally, ensure the Systems Integration House you choose is of a similar culture to your own workplace.

And now for the single most important piece of advice that far too many years of observation and crisis management have made one of our mantras: Don’t let the platform run the build! The first step of any platform selection process and the key to avoiding PTPSSD is NOT to talk about the platform but about what you need it for and what you’ve already got. It’s all about customer journeys, optimizing your existing systems and processes and most importantly your staff assets.

Whilst the platform choice is definitely essential to the success of anyone’s eCommerce ambitions, one should choose the platform that meets their needs and fits their style, not think that the platform will deliver a solution.

We recently heard a wonderful analogy from an anonymous observer: “Why do retailers call in the building company to dig the foundations and build the walls when they don't even know what the house will look like yet?”

If it was your house, you would call in an architect, discuss your needs, look at concepts, consider the practicality of maintenance, then draw up detailed plans, and only after that call in the builders. You might well get high level quotes before the detailed plans to see if you can afford it, but you would already know what you want. Think about this next time you consider a new platform, and PTPSSD will have never entered your vocabulary. Thank Goodness.

Functional Integration is the Key to Multi-Channel Success

By Sophie Rogers & Sam Gordon. La Fosse Associates Digital & Multichannel Practice

Ecommerce and digital marketing platforms have become dominant business systems and the convergence of marketing, commercial and technology continues to blur the boundaries between traditional business functions. Tech savvy individuals from marketing and commercial functions are increasingly moving into leadership roles and exerting influence over customer/consumer facing platforms. They have high expectations in terms of the contribution that technology platforms can make to evolving the business.  As a result of the way consumers now make retail choices it has become a necessity for all areas within the business to work in an integrated fashion.  These are our observations on how leaders across marketing, operations, technology and commercial functions should align with each other to make the most of the multi channel business opportunities that exists. For simplicity, our references to “digital” in this article covers both digital marketing and ecommerce platforms. 

• Take risks together

The most successful and fastest growing business stories in recent years have embraced digital innovation. Encourage your Technology and Marketing department to take risks and support them in doing so. You need people in your business who aren't afraid to challenge convention and bring new ideas to the table. This works best when they are seeded at all layers of the organisation and free thinking is encouraged.

• Technology alignment to business strategy

At the heart of any business strategy is developing new ways of winning, converting and retaining customers; digital platforms can be some of the most efficient and effective ways of doing so. The technology leader should therefore work closely with the business leaders in the strategic development of customer facing platforms.

• IT as a profit, not cost centre

The business should view the technology function as a profit rather than a cost centre. The digital initiatives that will really make people sit up are those that make money. For example the CIO of a major fashion retailer who developed the capability to stream fashion shows live with full linkage of the garments to their ecommerce platform. Some success in revenue generating digital initiatives with shared credit from business and IT stakeholders will help drive further investment and innovations.

• Invest in relationship management

The CIO should spend time building a relationship with the marketing function. Many marketing executives are extremely digitally savvy and will have many ideas of how they want to use digital innovation to connect with customers. If the CIO does not provide them with the tools to do so or help shape their strategy then they find the IT organisation bypassed and this creates a fragmented business where IT teams are always playing "catch up".

• Attract and retain top multi-channel talent

The future of successful multichannel businesses lies with a close integration of technology, operations, commercial and marketing; all need to be equal partners. With a huge increase in demand for multichannel and digital experience, the most talented individuals in this space have many options. The right environment is essential not just to attract them but also to ensure you can maximise the major contribution that the right leaders can make to grow your business. 

Multichannel quarterly market summary

Just when we thought retailers could do with a quiet summer to pause and take a breath in an environment testing resistance levels of even the strongest, things got almost surreal with riots, share price plunges and unfortunately no end in sight for the gloom and doom feeling that prevails in the retail industry. BRC reported like for likes for retail down 0.6% for the three months ended July 2011, and there was no respite in the number of retail casualties announced, with, as reported by MyRetailMedia, over 100 retail administrations in the first half of 2011.

Thankfully online continued to provide the industry with much-needed good news, with a better-than-expected 19% growth year on year for the first half according to the IMRG Cap Gemini index. Although this must now sound like a broken record, online sales from multichannel players continued to outperform sales from pure plays, with the figures for May alone being 23% versus 9% according to the same source.

One sector was particularly active over the quarter: cards retailing and personalized gifting. We will watch with great interest how the sector re-shapes following the announcement of several tie-ups or initiative, which make refreshingly good strategic sense: Photobox bought personalized cards and gifting e-tailer Moonpig for £120m; Card Factory announced the acquisition of personalized gifts e-tailer gettingpersonal.co.uk; Jessops announced it was entering the personalized cards markets, and as if that wasn’t enough news for the market, flower e-tailer Flying Brands struck a deal with online greeting cards retailer Hephalump.com. Watch this space!

Encouraged by the results, the grocers are continuing their multichannel push with increasing confidence: Sainsbury’s announced they would push click and collect on non-food through 800 stores by Christmas from 300 after seeing a take-up of click and collect of a third of orders on a trial basis. Meanwhile Tesco continues to put click and collect at the forefront of its multichannel push with availability through 600 stores by Christmas and the announcement it would expand the offer to food.

Multichannel retailers more advanced in their integration like House of Fraser’s and John Lewis are meanwhile giving us a hint on the great debate about the future shape of the High Street with innovative store format initiatives – a John Lewis half the standard size capitalizing on multichannel operations. The medal for the boldest move might go to House of Frasers however, trialing a store of a tiny 1,500 sq ft  reserved for click and collect orders, which now represent 40% of online orders.

Amazon will lose the last big UK retailer using its platform with Mothercare’s announcement that it will follow Marks & Spencer’s lead and migrate out of Amazon’s platform. Dare we say we are not that surprised – putting aside Amazon’s lack of multichannel capabilities, would you trust one of your biggest competitors to hold all you data?

Finally, as our newsletter goes off the press, we are watching with great interest the next wave of the multichannel race starting to unfold: pure plays going physical. ASOS, Net-a-Porter, Amazon are amongst those who are innovating – we’ll let a few others catch up and report on in our next Newsletter!