Making Money in eCommerce

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- by Inge Selawry on August 11th, 2011.

I recently had the pleasure of speaking to Michael Ross, co-founder of eCommera, an eCommerce technology  provider with whom Ogilvy has formed a partnership. Our two companies offer end-to-end, eCommerce solutions to clients. At the Retailing 4.0 event hosted by WPP in London this past May 31st, eCommerce was the topic of the day, including “How to Make Money in e-Commerce.” Michael told the audience “Companies need to re-think their models of growth and profit” – the economics of physical retail cannot be successfully replicated online.

IS : Michael, what do you see as the challenge for our clients, when you say they need to re-think models of growth and profit?

MR : The challenge is for our clients to embrace the fact that online retail is fundamentally different from physical retail. Online retail is a series of complex, real time, interrelated activities. Pricing can change by the minute depending on stock and demand, algorithms determine the value of cross promotions in real-time and the volume of data exceeds what most clients are accustomed to. Clients find themselves operating in a trading environment which is very different from an offline store environment.


IS : Michael, in the panel discussion [at Retailing 4.0] you spoke about some of the key success factors for our clients to better manage growth in the complex eCommerce environment. In addition to the economics of online retail being different from offline, you also spoke about multi-channel and mobile marketing challenges. Can you please elaborate on this?

MR : Yes, there are three things our clients need to consider. Firstly, about the economics of online retail, our eCommerce clients need to have a single-minded focus on getting the cost structure per order right. (Unlike our retail clients, where the economics is getting the right cost structure per store in place). Online, the critical costs are either variable per order (picking, packing, packaging, postage) or are crystalized per order (marketing, promotions). Understand what happens to profit when different levers are pulled (e.g. free delivery, vouchers etc) and what it does to profit per order and volume of orders is critical to profitability.

Secondly the cross-channel effect; customer behavior today is complex. Some customers browse online and purchase offline, others browse offline and purchase online. It’s a complex and non-linear journey. Customers shop across multiple sales channels but with an expectation of receiving a consistent, end-to-end brand experience. It’s estimated that today some 60% of EU sales are affected by web research prior to purchasing on the High Street. Therefore to manage effectively cross-channels, our clients need to understand:

1. What are the key Customer Journeys? In other words, how do customers use each channel and in what order? Which pathways are most profitable?
2. What causes multi-channel activity? Is online driving offline, or is offline driving online? How does online marketing spend drive offline purchase.

Thirdly our clients need to consider the mobile effect. Customers can scan products, check prices, browse competitor sites and purchase on their mobile from anywhere, including in the store.
On one hand mobile is “another browser” and e-tailers need to ensure their sites are shop-able. And on the other hand, mobile is increasingly taking on a more complex role which necessitates thinking about mobile in a new way. Their impact on retail sales will be far greater than previously imagined. Be prepared for price comparisons via the mobile, be ready to provide brand and product information via the mobile and if you are a retailer consider near-store offers.

IS: Thank you Michael.

Inge Selawry is the worldwide eCommerce Practice Leader and Nestlé Global Brand Partner for OgilvyOne located in Paris.

iPad Users Dominate Holiday Shopping

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By Alicia Eler / November 28, 2011 11:30 AM 

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iPad-using Thanksgiving Day shoppers purchased items nearly twice as much as people using mobile devices, according to data from IBM. On average, iPad conversion rates hit 4.6% compared with 2.8% for other mobile devices. On Black Friday, visits from iPads increased 124% vs 2010, whereas visits from mobile devices only increased 60% vs 2010. Gannett-owned PointRoll shows similar trends, noting that iPad users shopped more from their devices. Offers via iPads grew 85% over 2010, with the most access occurring on the Sunday after Black Friday. On that day, iPad access increased by 223% as compared to 2010 levels.

Black Friday was the heaviest online shopping day of 2011. ComScore reported $816 million in U.S. online holiday spending, up 26% from a year ago. Black Friday mobile payments for 2011 were up 516%.

Regardless of what you're using to shop online, Amazon still ranks number one among Black Friday online retailers. ComScore says that 50 million Americans visited retail websites on Black Friday, up 35% from last year. The top sites were Amazon.com, Wal-Mart Stores, Best Buy, Target and Apple.

Amazon is the top revenue-producing Internet retailer, and its site is completely tablet-optimized.
iPad purchasing was helped among by the couch commerce trend. More online shoppers were checking out the stores from their smartphones and tablets after Thanksgiving dinner. One in three online consumers will use a tablet by 2014.

Holiday Shopping: Will Cyber Monday Outshine Black Friday?

Black Friday was no bust. Retail sales turned out to be far stronger than predicted, rising by nearly 7% compared with last year’s day-after-Thanksgiving shopping bonanza. Finishing off the holiday weekend that’s all about consumption—first, in terms of turkey, and later on, shopping—is the e-commerce spectacular, Cyber Monday. Nearly every retailer with an online presence will host special promotions or discounts, and the rise in sales is expected to surpass even that of Black Friday.

Black Friday wasn’t expected to have a banner year in 2011, with sales expected to rise by a mere 1.6% compared with 2010. But, thanks in part to the midnight openings by many national retailers, shopping centers such as Minnesota’s Mall of America broke records for total visitor numbers on Friday. The retail-data consultant ShopperTrak estimates that total sales hit $11.4 billion, a rise of 6.6% compared with Black Friday 2010. Foot traffic at malls, meanwhile, grew by an impressive 5.1%.

An even bigger rise in sales is expected for Cyber Monday. According to comScore data, e-commerce thus far in November is up 14% compared with last year’s—$9.67 billion vs. $8.47 billion in 2010. Online shopping for all of November and December of this year is expected to be up 15% compared with that in 2010.

Last year, Cyber Monday sales increased by 20%, topping $1 billion for the first time. Strong growth is expected for online sales on the Monday after Thanksgiving 2011 as well: market-research firm IBISWorld predicts a 12.4% increase in online purchases on Cyber Monday this year.
(MORE: Will Extended Black Friday Hours Actually Increase Sales?)

Why are more and more shoppers making purchases online? For one thing, a larger swath of consumers is finally comfortable with the concept of sending credit-card numbers out over the “Interweb.” Online shoppers used to overwhelmingly young. Now, though, as a Deloitte holiday survey points out, the age gap has mostly disappeared: consumers ages 18 to 24 say they’ll do, on average, 32% of their holiday shopping online this year, while consumers ages 45 and older will shop online for nearly the same percentage (30%) of holiday purchases.

Shopping online is also, quite obviously, more convenient than heading to the mall—no crowds, no lines at the register, no traffic and clogged parking lots to contend with and no worries about a store’s hours or an item being sold out.

Perhaps most importantly, shoppers are also turning online in huge numbers because that’s where they think they’ll find the best prices. The National Retail Federation says that nearly 8 in 10 (78.4%) of online retailers will offer special promotions on Cyber Monday, and 92.2% of these retailers say they’ll host special online deals at some point over Thanksgiving weekend.

(MORE: Think Black Friday Has the Cheapest Prices? Think Again)

In another survey, conducted on the behalf of Ebates, the top answer consumers gave for shopping online for the holidays is that this is where the best prices and deals are (64%), followed by the ideas that shopping at home is more convenient (57%) and is a simple way to avoid crowds (47%).
After splurging with in-store Black Friday sales, however, will shoppers still have the desire (not to mention cash) to push Cyber Monday sales to the next level? We’ll all know soon enough.
Tuttle is a reporter at TIME. Find him on Twitter at @bradrtuttle. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.

Read more: http://moneyland.time.com/2011/11/28/holiday-shopping-will-cyber-monday-outshine-black-friday/#ixzz1f18XBdXd

Thanksgiving Day, Black Friday Mobile Payments Up 538%

This is definitely a good argument for not always looking at the mobile experience as "in-store" behavior. Plenty of people, like me, are shopping on their couch, during commercial breaks:)

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By Alicia Eler / November 25, 2011 2:18 PM /

Online retailers were expecting hoards of shoppers on Black Friday, the biggest shopping holiday of the year. Earlier today PayPal released data that proves the "couch commerce" predictions right. More people were shopping from their smartphones and tablets than ever before. As of 11am PT, PayPal found that mobile payment volume was up 538% from Black Friday 2010.

This data lines right up with the majority of ReadWriteWeb readers' responses to the big question "Will you be leaving your home to shop on Black Friday?"

Back in September, PayPal predicted that mobile payments would explode this holiday season. That seems to be true, at least thus far.

Give Up, Facebook: You're Not a Mall

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By Alicia Eler / November 25, 2011 11:00 AM 

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Even though Facebook suffered social commerce fails with the Delta ticket window and the now-shuttered Facebook Deals, Facebook social shopping applications for Facebook still keep popping up.


A new study from Sociable Labs shows that 50% of shoppers are logged into Facebook while shopping on an e-commerce site. While that's interesting data in and of itself, the study does not prove any correlation between sharing on Facebook and shopping on e-commerce sites. In other words, businesses may see that their customers are on Facebook - because, really, who isn't on Facebook, save for the very paranoid - yet the idea of sharing what you buy through the world's largest social network has not, and will not, become a part of the Facebook user's experience. Unless it centers around an e-commerce site like EBay that people already know and trust.

Social commerce dashboards like Payvment allow Facebook users to launch free stores on their Facebook pages. Payvment believes in f-commerce, and aims to create a "virtual mall" out of Facebook. More than 100,000 sellers use the app.

Earlier this week a UK-based social commerce app called Shopcade launched. It offers seamless integration with Facebook, 40 million products, real cash rewards and gaming aspects that are supposed to make shopping fun. In an e-mail interview with Shopcade, CEO Nathalie Gaveau suggests that there's still an opportunity to personalize the Facebook shopping experience, and says that is why Shopcade will succeed.

Yet, no matter how much social commerce app creators believe that a personalized f-commerce is the key, there's still a fundamental problem. Facebook began as a space to connect with friends and family, not as a virtual mall. Social commerce evangelists wrongly conflate the social graph and the interest graph in an effort to make f-commerce viable.

In a ReadWriteWeb guest post from David Rogers, a consultant, speaker, author of "The Network Is Your Customer" and a current professor at Columbia Business School, explains the difference between the social graph and the interest graph.

"A social graph is a digital map that says, 'This is who I know.' It may reflect people who the user knows in various ways: as family members, work colleagues, peers met at a conference, high school classmates, fellow cycling club members, friend of a friend, etc. Social graphs are mostly created on social networking sites like Facebook and LinkedIn, where users send reciprocal invites to those they know, in order to map out and maintain their social ties."

The interest graph is a digital map that explains what a user likes.

"Interest graphs are generated by the feeds customers follow (e.g. on Twitter), products they buy (e.g. on Amazon), ratings they create (e.g. on Netflix), searches they run (e.g. on Google), or questions they answer about their tastes (e.g. on services like Hunch)."

The social web, and especially Facebook, has wrongly conflated the two. This is precisely why social commerce apps on Facebook are not taking off.

If anything, integrating a familiar e-commerce platform like EBay into the Facebook ecosystem is how social commerce may actually start to work. It makes Facebook feel less mall-like and more like a space where online transactions can occur.

The Facebook-EBay integration could be seamless and easy. To turn up the personalization aspect a bit, EBay cleverly acquired recommendation technology Hunch.

With the EBay-Facebook integration, Facebook will be able to gather data without actually handling the transactions. In effect, Facebook will not become a virtual mall - that would skew too far from its original purpose. Instead, Facebook will work behind the scenes to gather data on consumer purchasing patterns. So forget social commerce concept already - it's not going to work.