Debunking Conventional Wisdom in Retail
Forrester Research Analyst Sucharita Mulpuru was on hand at the Retail Email Exchange symposium in San Diego last month to offer best practices for four current trends in the e-commerce space. Looking to debunk conventional wisdom, Mulpuru advised that things often turn out to be different than they initially appear. With that in mind, here are the four trends that Mulpuru addressed:
1. Mobile commerce will be enormous. The State of Retailing Online 2011, a Shop.org study conducted by Forrester Research, found that 9 percent of surveyed retailers have a mobile strategy, 29 percent have one and are refining it and 34 percent are in the development stages. Only 9 percent of respondents said they had no mobile strategy at all.
"When you compare this to the same survey conducted last year, where 50 percent had no mobile strategy in place, it's a pretty remarkable shift in how much retailers have absolutely decided that this [mobile] is a place that they need to commit," said Mulpuru. "But the reality, however, is that the numbers for mobile commerce are still a little bit modest."
The study projects that mobile commerce will account for $34 billion in sales by 2016, but only 8 percent of total online sales (tablets excluded). What's more, a Bizrate Insights survey on mobile commerce found that only 14 percent of mobile users made a purchase via their mobile device in the fourth quarter of last year.
Therefore, Mulpuru advises, "It's the volume of multichannel activity that's the important number to watch." This includes tablets, which will fuel "couch commerce" in the years to come, she said. "We're no longer tethered to the desktop, but the ROI around mobile will be more nuanced than direct sales," Mulpuru said.
2. Amazon is the force to reckon with online. While Amazon's growth has outpaced virtually every other e-tailer out there, Mulpuru recalled the company began as sort of a "laughing stock" because it showed no signs of profitability. Since then Amazon's profitability has gone through the roof and it's now a force to be reckoned with — primarily due to Amazon Marketplace.
But Amazon's influence stretches further than just the web; it's the new Wal-Mart. Mulpuru suggested that "even though there are so many web retailers that see Amazon as a competitive influence, the reality is that physical retailers need to see Amazon as a competitive influence too."
3. Manufacturers are all now selling direct. The Shop.org/Forrester Research State of Retailing Online study found that 15 percent of retailers cited manufactures with an e-commerce division as their biggest competitors. For example, Sony sells its products wholesale to retailers for their brick-and-mortar stores and e-commerce sites, but also sells to consumers direct via its own e-commerce site.
In the new retail paradigm of declining margins, manufacturers will be forced to change roles. They'll join the game as "reluctant disruptors," opening physical retail stores to stay competitive with the Amazons and Wal-Mart's of the world.
"That's where the most promising margins exist," said Mulpuru. "Manufacturers are often better suited to sell products than store associates, who may not be as well-trained or well-educated about the products that they're entrusted with evangelizing."
4. Social networks will be the mother of all interactive marketing tactics. Six hundred million Facebook users equipped with peer-to-peer sharing could in fact transform a brand's way of selling online or its marketing strategy. But in reality Facebook struggles being a force in e-commerce.
Fifty-eight percent of respondents in the Retail Online Benchmark Recontact Survey, Q2 2010 said they use social networks to keep up with friends and family. Only 13 percent have viewed networking pages set up by retailers, and just 7 percent have added videos and images from a retailer's social networking page to their personal profile or posted a comment to a retailer's page.
Despite these low numbers, retailers continue to fawn over social media fans. Sixty-one percent of respondents to The State of Retailing Online 2011 survey said they plan to open a Facebook store in 2011 — more than any other social media tactic.
"I think that's a train wreck waiting to happen," predicted Mulpuru. "There's this sense that Facebook stores are going be the next big revenue stream, but everybody that already has a Facebook store is telling us that they aren't all that effective. Search and email still reign supreme."
