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A Few Thoughts on This Year’s IRCE Conference

6/17/2014

Last week I attended the 10th Annual Internet Retailer Conference & Expo (IRCE), one of the leading e-commerce conferences that draws around 10,000 people to Chicago each year to explore the latest trends in online retail. This is the third year I have attended, and each year I have come away more impressed with the speakers, the discussion topics, and the level of sophistication permeating today’s e-commerce techniques. And although it seems like each year’s unofficial theme is “Amazon is at the center of the universe” (it’s not), I wanted to share a few thoughts that I took away from the three days.

Strong Keynote Addresses. This was refreshing to see, as I find that Keynotes can be hit-or-miss, with some downright hollow and simplistic. Not this year. Ebay CEO John Donahue kicked things off with a very applicable address about getting as close to your customer as possible. He was absolutely right in saying that people “just want to shop” and they don’t think in terms of channels or devices - It does not occur to them. It is the job o the marketer and the UX expert to “put the customer in the middle” and make cross-device interactions a seamless and intuitive experience. Wikipedia founder Jimmy Wales reminded us that his online community of information seekers is one of the most heavily-trafficked sites and can play a huge role in shaping an online brand. Day 2 featured Niraj Shah of Wayfair and Sukhinder Singh-Cassidy of Joyus – both of whom again reiterated the notion of a customer-centric focus for their business. Mr. Shah described a strategic shift at his company that consolidated the websites under one brand and significantly beefed up content marketing in order to strengthen the bond with its customers. Joyus, as Ms. Singh-Cassidy described, also uses content as its primary lever with customers, as the entire business model hinges on engaging, educational, and simple videos; video is clearly a rapidly growing and evolving tool in e-commerce.

Customer-centric Merchandising and Personalized Service. I mentioned it above as a theme in the keynotes, but it reverberated consistently throughout the entire conference. Video is becoming a hot trend in the world of e-commerce & omni-channel. The convergence of entertaining content and clever merchandising is allowing niche brands & marketplaces (i.e. The Grommet, Houzz, and The Children’s Place) to thrive in the face of Amazon, because the experience is memorable and forms a strong bond with customers. Similarly, highly responsive and personal customer service is back at the forefront of the minds of online retail execs. Social media and always-on smartphones have raised customer expectations, as well as the negative consequences if companies do not follow-through on their value proposition. It’s now table stakes, but not everyone can execute properly – I heard this everywhere – from the panels to the lunch line.

E-mail Still Matters. New technologies and big data are driving a resurgence of e-mail in a big way, as well as the ability to view it on a mobile device (what push notifications?). E-mail can still drive up to 40% of a site’s traffic, so it is imperative to get it right and stand out in today’s crowded inbox. New developments discussed included algorithmic platforms that allow 1-to-1 e-mail personalization at scale, email retargeting, frequency-adjusted drip campaigns, win-back campaigns and opt-down preference settings. This, coupled with novel A/B testing techniques allow faster learning cycles and can lead to conversion increases of up to 25%.

Big data – As In Big and Scary. This has been the buzzword for a few years now. But now it is really here and retailers – especially the smaller nice ones – need to get their arms around it to leverage its power. Everyone knows the amount of customer data will not be getting smaller, and ignore the fast-paced developments at your own peril. Luckily a few firms emerged at the conference as thought leaders in helping growing e-tailers tackle this large, complex, and potentially resource-draining opportunity. These firms included AgilOne, GoodData, RJMetrics, and SpringMetrics.

Good M-commerce Apps a Key to Winning. Shoppers using mobile devices may have widely varying objectives for a session: to make a purchase, to research, to kill time, to socialize, or to check on an existing order. Discussions about mobile commerce (still in its infancy in my view), all focused on this scattered set of needs. This served to drive home the notion that a shopping app has to perform really well, or the customer will not return. Specifically, it was called out that an app must be a simple but useful tool that drive customer engagement and are easy to use. They must be fast and reliable (1-3 second load time with only a 1% crash rate). Lastly, they must be easy to find and download – across multiple mobile O/S’ as needed. Achieve these goals and shoppers will find and use your app to shop.

It was a tiring but eye-opening week at IRCE 2014; I never seem to be able to get to see everything I want. I will look forward to returning once again next year to see what creative new evolutionis taking place in the industry – and hopefully I can be the one speaking about some of it.

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Product Listing Ads Are Changing the Landscape of Paid Search

5/8/2013

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Google’s strategy to slowly but steadily monetize its now indispensible peripheral web properties is paying off well for the company (as evidenced by their consistent 20% YoY growth in revenue, and over $50 billion in cash on hand). It is also creating a bit of havoc with needed help for online marketers, specifically search marketing, primarily due to their recent conversion of Google Shopping (which was free for merchants) to Product Listing Ads (PLAs) starting last August, which is a new version of the platform that is no longer free and is subject to an auction based cost-per-click paid model. As PLA’s are forcibly adopted by more and more e-commerce merchants, it is not only draining digital marketing budgets and requiring additional SEM resources, but it is also causing a big shift in the way a Google search results page is laid out and presented. Supposedly Google is doing this for shopper convenience and clarity, as search marketer Eric Barney described:

“PLAs represent Google’s effort to reduce the clutter in the Shopping experience. By charging for clicks, companies need to have a strategy surrounding product submission, feed optimization, and bid management. There’s no point in getting hung up on the cost of PLAs. It is what it is. We should be grateful we got all those free clicks for so many years,” says Barney. (source: SearchEngineLand.com)

The amount of “real estate” now taken up by Google Adwords listings and now the expanded PLA layout has pushed most of the organic search results beyond the first 2 or 3 below the fold, and any result below #8 is now pushed to page 2. This not only raises the stakes for a paid result to now have to stand out more forcefully from its additional competition, it puts even greater pressure on the SEO work that is incorporated into the site content, meta-data, url structure and the back-links associated with trying to draw traffic.

And that’s not to say that the paid PLA algorithm doesn’t have its flaws. Google seemingly has put more emphasis on product relevance to keywords (a good thing), but in executing some exact match keywords, there can still be some incorrect and confusing listings provided. Also often the photos and the merchandising is still not perfected – the shopper may still need to pour over many confusingly similar listings before finding exactly what they were looking for.

On the other hand, the fact that the old Google Shopping – one of the great free sources of traffic – is now charging on a CPC basis, this will drive many merchants who can’t afford the marginal cost out of the market (it can add up to 50% to a search budget), and the remaining players will find less competition for their ads. This approach, plus some eventual improvements in product images, will have impact on the overall success of the program, and it should set up a new marketing battleground in the PPC channel.

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Facebook, Readying for Public Life, Wants To Be Ever Bigger

4/21/2012

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As Facebook makes its final preparations to go public in the next month or two, there must be a tremendous amount of bustle taking place within the company. They are trying to imagine life as a public company: regular filings with the SEC, full disclosure of many key operating and financial figures, and of course the constant scrutiny of every investor, analyst, and pundit in tech and Wall Street. Their user base, currently at about 850 million, needs to continue to grow and must also begin to generate revenue. Ads are becoming more and more prevalent on the site, and reaction from users (so far) seems to be muted. However, Facebook cannot ignore that if they are to have a successful run as a public company they must continue to grow – in terms of users, user engagement metrics, and in terms of revenue channels and opportunities.

How is Facebook coming at these challenges? By being aggressive and getting bigger of course. Its recently announced purchase of Instagram for $1 billion ( http://dealbook.nytimes.com/2012/04/09/facebook-buys-instagram-for-1-billion/?_php=true&_&_r=0 ) so close to the IPO is not a sign that Mark Zuckerberg is distracted or confused. Rather, I see it as a shrewd move to deepen their presence in two key and area in which Facebook is weak: photo sharing and mobile. Facebook will gain much needed expertise in photo capture, as social media engagement is becoming more and more about expression through photos. Similarly, as the cameras on smartphones continue to improve, more users will be taking mobile pictures and will want to post them immediately. Instagram will bring expertise and technology in both of these areas into the Facebook fold – that is why they paid so dearly (about 2x of recent valuation estimates) for the company.

I believe it will pay off for Facebook in the not too distant future. With the Instagram purchase they will have new marketing channels and users to satisfy their growth-hungry investors. They will have mobile expertise that will allow Facebook to better monetize their existing social media platform in an increasingly mobile world. Users will benefit from having a better experience overall – with both platforms. Facebook’s lawyers may not like being so busy working on an IPO and an acquisition at the same time, but as a strategic way to prepare for where your customer is going to want to interact, It seems to me that Facebook will be a very interesting public company to watch.

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Googlerola? Motogoogle? Will This Work?

8/18/2011

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Very interesting news this week about Google’s acquisition of Motorola Mobility (MMI). Here is an excerpt from an article in The New York Times describing the deal:

Google to Buy Motorola Mobility for $12.5 Billion
In a bid to strengthen its mobile business, Google announced on Monday that it would acquire Motorola Mobility Holdings, the cellphone business that was split from Motorola, for $40 a share in cash, or $12.5 billion.

The offer — by far Google’s largest ever for an acquisition — is 63 percent above the closing price of Motorola Mobility shares on Friday. Motorola manufactures phones that run on Google’s Android software.

Android has become an increasingly important platform for Google, as global smartphone adoption accelerates. The platform, launched in 2007, is now used in more than 150 million devices, with 39 manufacturers.

The acquisition would turn Google, which makes the Android mobile operating system, into a full-fledged cellphone manufacturer, in direct competition with Apple.

(For entire Story click here)

Clearly this union will have a ripple effect through the mobile industry – both on the hardware and software/content sides. There are several reasons why each company would want this deal (which I will discuss below). However, my first impression is that this is a win for Motorola Mobility, but a defensive and risky move for Google. Perhaps Google had few other ways to protect the future of its Android-centric mobile strategy, but I predict it will be difficult for Google to achieve a desirable return on their $12.5 Billion investment.

The Motorola Mobility Perspective – This was arguably an optimal outcome for MMI. The company, a onetime market leader in mobile technology - with some 24,500 existing and pending patents – has become an industry also ran. In recent years it has fallen behind competitors like Apple, Samsung, HTC and even RIM, losing share in the fast evolving space. Getting $40 per share for the company is a favorable exit for long-suffering investors such as Carl Icahn. Landing in the arms of juggernaut Google makes CEO Sanjay Jha look like a shrewd dealmaker and savvy salesman.

The Google Perspective – It’s understandable (and widely reported) that Google saw real value in Motorola Mobility’s intellectual property – it needed MMI’s patents to fend off a slew of Android-related lawsuits coming from the likes of Apple and Microsoft. Google also gets MMI’s established line of hardware products: phone handsets will help control the fragmentation of its Android OS, while TV set-top box technology helps boost Google’s web-enabled TV product offerings.

But there are serious challenges to making this marriage work. Google’s track record in consumer-electronics is brief and poor: its Nexus One phone product was a flop, and sales of Google TV have also under-performed. In trying to vertically integrate, perhaps Google is jeopardizing its core competency in content and search – is selling tangible, consumer-oriented products in the company’s DNA? Also, Google will now find itself competing with handset “partners” who use the Android mobile OS – an awkward conflict of interest. Lastly, the cultures of Motorola and Google are vastly different. Integration of these two large organizations (19,000 and 29,000 employees, respectively) will require a major commitment of management’s time, energy, and patience – things they are hard-pressed to spare.

Even if Google later sheds the hardware business in a sale or a spin-off (at a big discount without patents), it will still have ended up paying quite a bit for a bunch of patents. I hope I am wrong, but I predict that this acquisition will end up being a huge drag on Google’s strategic focus, as well as its long-term Return on Invested Capital.

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Curation: Another Surging Trend in E-commerce

7/19/2011

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In continuation on the inspiration of my last blog post (“Luke & The Mechanics – A look at a Growing Trend in E-business” 6-29-11), today I am going to discuss another keen observation that Gilt Group’s Susan Lyne made a few weeks ago during an interview with BigThink.com. This emerging trend in e-commerce is the concept that has been coined product curation.

Curation refers to an online marketing and merchandising model in which specific products are carefully selected for a targeted set of consumers. These consumers typically have registered or subscribed with the online merchant, and have given an indication of their product preferences, tastes, shopping habits, and spending budget. The merchant then typically uses an decision-making system to present customers a handful of pre-selected products – or in some cases just one – that match their preferences. The products are often discounted and positioned as a “special, one-of-a-kind” buying opportunity.

Up until now, the conventional thinking in e-commerce has typically revolved around abundant selection and broad choices. The benefit of online shopping vs. going to a store was that you were not limited by shelf space. An online retailer, with its vast warehousing capabilities, could offer thousands of products and take advantage of incremental revenue and profit from the “long tail” – those hard-to-find and rarely sold items. To be successful in the long tail, merchants needed to focus on site functionality, intuitive navigation and search, and speed. Shoppers want to quickly load and browse through page after page of product listings and use search to find what they want. They require detailed product descriptions, specs and photos, clear pricing, reviews, and delivery information.

In some ways, the curation model is the offspring of the long tail in e-commerce and search functionality. Items are searched out and pre-selected from the sometimes overwhelming selection by experts – i.e. “curated.” These types of sites need to be clever in choosing items in which to feature and sell, and matching the right items to the right customers is paramount. The cost structure can differ too; more time, effort and investment goes into the front-end process of market research, picking trends, buying and merchandising, and customer acquisition.

Some companies that have successfully adopted this model include Groupon (one selected deal per day), Sniqueaway (for travel), and Svpply (curated shopping “wishlists”). Curation is popular for fashion sites, with the latest styles being selected and offered on sites owned by Gilt Group, Shoedazzle, Beachmint, and ThisNext. Last week I was speaking with an executive from Beachmint – they run sites are Jewelmint.com and Stylemint.com – and he was excited about the prospects of this model. He mentioned that leveraging the loyalty and repeat visits of subscribers across a number of related product categories boosts traffic, lowers customer acquisition costs, and improves targeting.

The curation approach is often used in conjunction with other twists to attract and retain customers. Groupon and Gilt Group utilize game mechanics; Shoedazzle and Beachmint bring in celebrities to curate and endorse items. ThisNext and JustBoughtIt! tap into social networks to enhance the shopping experience, as users share ideas and advice on product picks amongst friends – a niche known as social commerce.

These approaches to online shopping are growing fast and they are here to stay. They are bringing back the fun, social aspect of shopping – one thing that has seemingly been lacking in traditional e-commerce models. Many consumers love “retail therapy” - being shown the latest trends, getting fawned over by store employees, and the excitement of finding great buys with your friends. As long as this experiential side of online shopping continues to evolve, these savvy e-merchants will continue to enjoy growth and gain some very loyal customers.

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Luke & The Mechanics – A look at a Growing Trend in E-business

7/1/2011

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Susan Lyne, the Chairman and former CEO of Gilt Groupe recently gave an interesting and insightful interview to the website BigThink.com, in which she identified some impactful trends that are taking place in today’s e-commerce marketplace. She was right-on with her observations (and they conveniently helped underscore and promote Gilt’s business model), and I feel that two of these concepts – game mechanics and curation - are worth discussing further. Today I will focus on game mechanics, and will cover curation in a future post.

Game mechanics – also known as game dynamics - is loosely defined as any game-play activity incorporated into the user experience of a website for the purposes of driving traffic, enriching engagement, influencing consumer behavior, and deriving fun from online activities such as shopping or sharing personal information. Not unlike popular online games themselves, (World of Warcraft, Farmville, and the Sims come to mind), game mechanics seek to engross participants and distract them from stresses of everyday life.

Applying these dynamics online has emerged due in part to the psychology powering the popularity of social networking - a shared experience where users find it fun and easy to ask questions of advisors and consult friends for key decisions. By making a game out of activities such as purchasing, registering, subscribing, and sharing information, users can feel as though they have “won” or have achieved something special – status recognition, discounts, or even small prizes. For consumers, this is surely preferable to feeling the pangs of having compromised themselves in some small way by conducting an online transaction.

Web merchants and marketers have realized that successfully incorporating a game into their web presence can cause users to visit their site more often, stay longer, refer others, and complete a transaction with lower chances of feeling buyer’s remorse. In a recent article written for Business Week (“Welcome to the Decade of Games”) Harvard Business Review indicated that simple game dynamics can increase traffic to web locations by 4 times in a matter of days, and the average amount of engaged time consumers spend at a business increases by upwards of 40%.

There are several examples of game mechanics in successful online business models. On E-Bay, you don’t just make a purchase - you seek out what you want, make your bid, and win the auction. E-bay also rates users, so there is pride and benefit to being a good “player.” With Foursquare, the game mechanics of “checking in” at locations and achieving certain titles makes it fun; you forget that you are actually revealing your shopping preferences, brand loyalties and buying habits. Groupon has taken an age old promotional tool – coupons – and made it fun where you rush to check out the daily deal (complete with witty, lighthearted copy), then cheer on your virtual shopping “teammates” to reach the purchase threshold and activate the offer. Established brands have even taken to the web and social networks to turn traditional branding initiatives into games – Pepsi’s recent “Refresh Project” challenged participants to submit ideas online to “refresh the world” and garner support via social networks. Pepsi provided funding to execute the most widely supported projects, earning them hugely positive brand associations, deep customer engagement, and a great PR story.

Game mechanics is a fascinating concept, and I believe it will continue to evolve over the coming years with the growth of social networking and creative online activities. Creative marketers will also push the envelope of game mechanics in their quest to gain the attention of media-bombarded web users. If you are running an online business it is a good idea to research game mechanics – get visitors to your site and let them have some fun! They will be relaxed, excited, more engaged, and ultimately more willing to do business with you.

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Microsoft Buys Skype - Smooth Move or Just Skhype?

5/25/2011

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Microsoft's recent purchase of Skype for $8.5 Billion raised some eybrows, not only for it's lofty price (70% of Skype had been purchased by Silver Lake Partners for only $2.5 Billion back in 2006), but also because pundits were wondering what the heck would a Windows software and video game console company do with essentially a VOIP services provider?

While the debate rages on, there could be some excellent possibilities here for Microsoft. The concensus is that Microsoft wanted access to Skype's 600 million users - not an insignificant number - for the ability to cross-sell products and online services that the company is developing. Also, according to tech site Gigaom, Skype instantly boosts Microsoft's position in the online communication and collaboration market. This is an area where Microsoft leaders Steve Ballmer and Bill Gates see future growth and development possibilities - especially leveraging off of the X-box, Windows Mobile and Outlook platforms. This peer-to-peer connectivity will deliver a cohesive user base to which Microsoft can use to develop new social networking applications, offer cloud-like services based on it's Windows and Office software, and lock up tons of inventory for its Double-click display advertising business (some say this could generate over $350MM in incremental annual revenue.) The deal will also give Microsoft more leverage with wireless providers and mobile technology companies such as Nokia - a key requirement for boosting it's struggling mobile business.

Given the number of new users that Microsoft just acquiredm, as well as the number of strategic options that Skype provides, I feel that this purchase was well calculated, bold, and will ultimately be a long-term winner.

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Forward>>

A Few Thoughts on This Year’s IRCE Conference

Product Listing Ads Are Changing the Landscape of Paid Search

Facebook, Readying for Public Life, Wants To Be Ever Bigger

Googlerola? Motogoogle? Will This Work?

Curation: Another Surging Trend in E-commerce

Luke & The Mechanics – A look at a Growing Trend in E-business

Microsoft Buys Skype - Smooth Move or Just Skhype?

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