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Feb 25, 2003

eTail 2003 Show Wrap-Up Report: Metrics, Search Marketing & Targeted Email Raise Sales 27%

SUMMARY: Could not make it to the show? Here are our notes, including info from Eddie Bauer, CompUSA and Macy's. Also describes trends on search marketing, email marketing, site usability, and measurement for eretailers; and quick tips on what Amazon's looking for in partnerships.
According to US Commerce Department figures released yesterday, online retail sales leapt by 27% to $45.6 billion in 2002.

The entire category of retail sales, online and off, grew just 3.1%; so while online is a tiny slice of the pie (just 1.4% of all retail sales), you could call it the slice that is on steroids.

What is most fascinating about this growth is the fact that it is not newbie-driven anymore. You used to be able to say, "Well there are 10 million more Americans online so of course that will drive more sales."

In fact, the growth rate of Americans online leveled off last year just as eretail sales were soaring.

What made the difference? Smarter online marketing.

We attended the eTail 2003 conference held by Worldwide Business Research in Palm Springs last week to learn what tactics eretailers are using to raise sales.

-> Quick overview

It is no longer about driving zillions of eyeballs to your site. (In fact we only spotted a single slide out all the hundreds shown during various presentations had the word "traffic" on it.)

It is no longer about crazy TV ads designed to grab attention (but you already knew that).

It is about investing in tightly-targeted direct response advertising; continually tweaking your site to get the most possible sales from the new traffic; and then, targeting your email follow-up campaigns to get return buyers.

The eretail industry now resembles the classic catalog industry far more than it does brick and mortar retailers.

Most of the sales advances of the past year have come from a combination of old-fashioned DM skills mixed with the latest Web metrics.

-> Search Marketing is the biggest new sales driver

The new term on everyone's lips is "search marketing." It is a combo of:

1. Search engine marketing: Paying for listings via Overture, Search123, Google AdWords, and other services that feed search engines.

2. Search engine optimization: Making sure your site pages are copywritten and structured in such a way that search engine robots rank your site high in the no-cost listings.

(Best quote: "PPC search does not mean you should exclude search optimization," Eric Sternbach, VP Ad Sales Overture.)

3. Paid shopping portal listings: Such as mySimon, SmartBargains, Dealtime and other middleman sites online shoppers surf.

4. Improving your site's internal search function results.

All of these tactics take advantage of the uniqueness of the Web. You can put yourself in the path of a shopper at the exact moment they are looking to buy precisely what you are selling.

Far less wasted advertising. (Supposedly anyway.)

Brand marketing then becomes more a function of customer experience (your Web site's usability, the excellence of your customer service and fulfillment, the type of data you provide consumers for each SKU, and your follow-up emails), than it is a function of general advertising.

-> eConsumers do not shop on price alone

Of course the big problem with search marketing is that your competitors are coming up in the same search results, and shoppers often open multiple windows or click on several links in a row, to figure out which site to buy the product at.

Two years ago, the assumption was "Ok then we'd better have the lowest price on the Web to get the sale."

According to eTail 2003 attendees, to a large extent that assumption was wrong.

"Less than 12% of people sort on price on Dealtime," CEO Iggy Fanlo told attendees, "We've been able to demonstrate a good ROI even for manufacturers that sell direct at list price, even though their channel partners are selling for less also on our site."

He continued, "There are many factors that go into the shopper's decision to click through to a merchant: brand, availability, reputation, merchant rating, and total delivered price."

-> Usability = profits

"Customer-focused design leads to increased profitability. You never arrive at a perfect home page; just learn and progress," proclaimed Troy Brown, VP ecommerce at Eddie Bauer.

Every speaker agreed that site design and features had a profound impact on their bottom line. However, no one talked about a big site revamp. Instead we heard countless stories about tweaking, testing, measuring, and then tweaking some more.

No design is frozen; and, design and marketing staff resources are budgeted assuming a constant year-round flow of tweaking projects.

George Coll, VP ecommerce at CompUSA highlighted two recent projects his team completed:

Project #1: Comparison tool visibility

After discovering that CompUSA buyers who used the site's comparison tool spent 33% more than those who did not, and that comparison buyers represented 17% of total site revenues, Coll's team tested ways to make the tool more noticeable and printer-friendly. Results:

- Increased traffic to the comparison tool by 11%.
- Increased sales from buyers coming from the comparison tool by 16%
- Decreased departures without purchases from the store

Project #2: Lowering the shopping cart abandonment rate

Coll explains, “We optimized the shopping cart. Instead of a long form with fields one after another, we put shipping and billing data side by side. We tightened up the form, clarified the copy – put more intuitive instructions and labels.” Results:
- 32% increase in completion rate
- 5% increase in store revenue

Eddie Bauer's Troy Brown agreed with Coll that no matter how beautifully you think you designed things, the customer is always right. Actual customers' site use will always differ at least slightly from what you expected.

"The designers are in the room right next to the usability lab," he said. "They design in real time while the test is going on. Sometimes we assign the customer a task, and they'll be sitting there with their mouse directly over the link they're supposed to click, not seeing it, and the designers will be in the next room saying, 'Just click!'"

Which makes measurement critical.

-> Measurement linked to segmented database marketing is key

Instead of measuring overall traffic results on the site, smart eretailers are breaking down their audiences into a variety of demographic, psychographic, lifetime value and source-driven groups, and measuring results for each group in order to decide which design tweaks and shopper-sources are winners.

For example, Eddie Bauer's team measures how different customer personas interact with the site, including frequent buyers, multi-channel buyers, buyers with no time, buyers with time to kill, etc.

CompUSA's Coll said, "Don't throw away your business instinct, but look at the numbers. You need to do customer usability studies to find out how your customers are actually using your site. Where are they clicking? How does the behavior of the customers who find a particular link differ from that of those who don't?"

Quantifying results by keeping a control site operating during every test is required.

One result: Amazon has found that "multi-channel customers are the toughest customers, but they are big influencers of other customers."

-> Email marketing is also about metrics

"Testing, testing, testing," Quixtar's David Ellyatt described his company's email marketing. "We're all still learning. You never stop testing. It's all a cycle. You run one campaign. You learn something from it. You bring that into your next one."

Ellyat also recommends measuring test results by key audience groupings. "We segmented into 35 segments, but it proved to be too much for us, so we segmented into seven instead. We also hold control groups because we need to have something to measure against."

"We're working to educate internally on the benefits of segmentation. Why would you send a 15% off offer to a segment that's going to buy next week anyway?" Why indeed?

Daniel Korn, EVP Neiman Marcus Online, also concluded that email marketing that goes beyond the mass broadcast to target specific customer groups with relevant offers is worth the extra time and money.

"More frequent 'Quality' contacts strengthens the relationship with our customer and results in more sales for the Company," he said.

-> Notes for Amazon partner wanna-bes

"Two years ago I remember meeting with a company that we were going to be spending $15 million buying impressions from," said Amazon's VP Biz Dev Owen Van Natta.

"They kept referring to it as a 'partnership' throughout the meeting. Afterwards it occurred to me that that would be like my mechanic telling me he had a really great idea for a partnership where I would give him money to fix my car."

Van Natta is working to make Amazon's current retailer partnerships as "frictionless" as the site hopes its shopping experience is already. His three guidelines when seeking partners:

1. Combine the core competencies to build a bigger business for both parties (i.e. working with major offline retailers who may not have the fulfillment or other ecommerce facilities in-house already).

2. Choose partners who complement your brand and market position. (i.e. their deal with Gap which matched Amazon's educated, slightly upscale demographic.)

3. Focus time and resources on partners who have assets to bring to the alliance. (i.e. their deal with Target which offered a "product category Amazon didn't have.".)

The eTail 2003 was organized by Worldwide Business Research.
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