Highlighting Brand Value

If you haven’t already done so, take this short quiz. The Answers are at the bottom of this page.

If you got more than two right, you’re my hero. When I tested this quiz with folks at Artefact, the results were appalling. The commoditization of e-commerce experiences is an industry-wide phenomenon, to the point where even the patriotic use of red, white and blue doesn’t make much difference. The sites miss obvious opportunities to articulate their brand values or provide deeply engaging user experiences, a sense of wonder and exploration. Perhaps retailers are hesitant to invest in a great user experience, given low stickiness of online users – after all, it is possible that in search for a better price users will abandon a no-matter-how-compelling online experience in favor of another e-retailer who carries the same goods at a lower price. But without developing compelling experiences, isn’t that a self-fulfilling prophecy?

So why should retailers care to differentiate their online retail experiences? Here are a few facts:

• According to Shop.org and Forrester research, online sales account for 7% of all retail and are growing faster than the overall retail market at 17-24% year over year (and while slowdowns in retail growth have been projected, they are expected to affect online retail less than the traditional retail).
• For retailers, the 7% revenues from online purchases translate into significantly higher percentage of their profits. That’s because margins are thicker for online stores due to lower costs of not having to maintain a physical presence.
• Many users tend to do online research even if they actually later purchase the item in the physical store. So the 7% of actual revenues translates into a lot more first impressions.
• 92% of consumers in the U.S. have shopped online. This is a mainstream way of making up an opinion about whose brand to support. There is a real opportunity to gain a competitive advantage.

Despite these fairly promising trends in online retail, e-commerce sites are facing some tough challenges. As noted before, user loyalty is low. “Brand defectors” – the people who make the purchase in a physical store of a different company than whose site they visited for the research – are a common phenomenon, and as many as two-thirds of online buyers say they prefer to make the actual purchase at the physical store, according to a Forrester Research study. It also turns out that online shoppers are becoming more and more cautious. Even if they do complete a purchase online, the time between the initial visit to the site and the actual purchase has gone up from 19 to 34 hours since 2005, according to a large study by ScanAlert. What are they doing between the initial visit and the actual purchase? Likely more research and reaching out to the community of other buyers. After all, two-thirds buyers believe that the same items should be cheaper online, to quote Forrester again.

You might say, the industry has trained its users to look at online retail as a commodity experience you turn to if you’re looking for the lowest price. Perhaps as a result of these expectations, the key focus of online retail experiences – particularly for these large retailers that carry multiple brands – has been on the efficiency of the site. Web analytics, and design decisions optimized on getting the user from A to B in the lowest number of clicks, and to serve up most relevant recommendations for the user to act on, has been the priority of the industry.

Yet analysts are beginning to call for Web 2.0 innovations. Analysts generally agree that social aspects of shopping have become of particular importance in influencing product decisions. According to Jupiter Research, 77% of all online shoppers employ user-generated product reviews and ratings, 25% consult social and community sites to conduct research on potential purchases. It seems to be working for Amazon, the #1 e-retailer on the web, according to an Internet Retailer article. If retailers delay the integration of online communities directly into their e-commerce site, one can imagine that users will continue to go elsewhere to find the information they are looking for. And they may not come back.

The other aspect of the e-commerce behavior has to do with how engaging the experience is. As discussed earlier, there are good reasons for enhancing click-through and check-out rates, but what’s lost in this race to the finish is the opportunity for genuine exploration and fun. In other words, on the hierarchy of online shopping needs, the basic need for functional, reliable experience has trumped the need for desirable experiences – so far. Yet physical retail stores are investing tremendous amounts of money into creating flashy, immersive environments that optimize for retaining the customer in the store for as long as possible (meandering elevator layout, piano music, coffee bar, lounge, etc.). Nobody seems to be chasing them out of the store. So why doesn’t online retail attempt to preserve some of this customer engagement?

Retailers are beginning to recognize the importance of immersive experiences. The ones who carry their own brands are the first ones to invest in their brand online. Take Nike or Mini Cooper. The car industry in particular has recognized across the board that it’s about building (and building upon) a community of brand loyalists. But we are also beginning to see some explorations of new user experiences among multi-brand retailers. Nordstrom’s Designer Collection makes an (admittedly timid) attempt to provide a special user experience through the use of great photography, easier navigation, and – in their own words – “a delightful dose of charm.”

Don’t get me wrong, Nordstrom is guilty of unimaginative retail experience in many parts of its site. The Designer Collection is but one attempt to spice up the experience for the customer who is willing to pay a premium.

The interesting strategy here appears to be in separating the day-to-day operations of the site (the functional, practical, get-to-the-checkout-fast part of it) from the special part designed for “special” customer. But you could argue this is one sign that major retailers are at least experimenting with the possibilities of e-commerce experiences.

A year or two ago, Artefact developed an e-commerce concept for the Nau brand as a piece of envisioning of what the e-commerce experience can be if one were to truly embrace the possibilities of rich web applications producing a new level of immersion.

Next Generation E-Commerce: Nau Concept Demo from Artefact on Vimeo.

Admittedly, when this demo was produced, it was largely a fantasy. But with web technologies like Silverlight reaching new levels of maturity, there are fewer technical limitations these days. As shoppers, we give up so much of a great experience by shopping online, and I can’t help but wonder if this trade-off is necessary and unavoidable?

The Answers to yesterday’s Quiz:

1. c (KMart)
2. a (Costco)
3. c (Macy’s)
4. a (Sears)
5. d (WalMart)

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