A Retailer's Guide to Optimizing Their IT Budget
In times of financial hardship, prioritizing IT investment is essential. For those retailers facing sustained pressure on their IT budget, there's a growing awareness that rather than having to make a difficult decision to justify investment in new financial or warehousing solutions, incremental add-ons to existing infrastructure can deliver real benefits.
So why is it often much tougher to pick between any number of add-on solutions that focus on the small, but key, areas of business need than it is to make the big decisions (e.g., enterprise resource planning or electronic point of sale)? Why do online retailers so often invest in personalized marketing tools or complex web analytics when basic processes such as address verification are overlooked (a practice that leads to expensive resending procedures and poor customer satisfaction, by the way)?
Well-focused, modest investments that can deliver return on investment within months and improving the customer checkout experience should be top priorities for all online retailers.
Economic Challenge
Financial difficulties continue to rumble on, and these are no more evident than at the small to midsize business level. Compared to large, global corporate businesses, small retailers have been forced to make bigger gains from smaller spend to survive in a fiercely competitive marketplace. With budgets becoming tighter however, increasing revenues by even the smallest amount has become no easy feat.
Certainly the provision of IT services has traditionally been seen as a business enabler, and if applied effectively a retailer can be empowered to enhance its customer service, drive efficiency and directly improve its bottom line. Today, however, organizations are struggling to prioritize investment and assess how best to squeeze more value from their IT budget and infrastructure. Indeed, while in the past it was a relatively simple process to make the case for a new core business application, companies are now faced with myriad choices for sweating the existing IT asset base by making targeted, incremental investments.
So where should e-commerce businesses be focusing their attention? Obviously the shift towards a software as a service (SaaS) model opens the way for investment in incremental add-ons that can scale in line with business growth, which is compelling. This flexible model shouldn't distract companies from the core objective of gaining maximum value from a limited IT budget, however.
Incremental Value
For any e-commerce business, there's a temptation to invest in tools that provide better customer insight, from business intelligence to web analytics. The problem is that getting results takes time — and the company then lacks the money needed to implement the required changes. Yet there are some obvious, fundamental steps that should and could be taken that don't require complex analytics that will improve the performance of every e-tailer.
Organizations need to look closely at the key areas of operational pain. One of the most significant and unnecessary overhead costs is the level of failure of first-time customer delivery due to inaccurate address details. The cost of this problem is significant. In addition to the cost of reprocessing and reposting the returned package, companies also have to make significant and time-consuming attempts to minimize the risk of losing the customer, from a telephone call or email to explain the problem and verify the correct address to offering a discount or voucher for future orders.
Focused Investment
For organizations selling perishable or time-sensitive goods, replacement items may have to be provided at a significant additional cost. B-to-B retailers may well be in breach of a service-level agreement if goods aren't delivered on time.
It clearly makes no sense to be investing heavily in online marketing techniques or complex and sophisticated web analytics if your checkout process is inefficient and inaccurate. Consumers want simple and effective online shopping experiences; e-commerce providers must therefore look to minimize manual intervention and achieve a streamlined process.
The adoption of address look-up technology not only minimizes the risk of address errors, but by requiring just five keystrokes to eight keystrokes, plus one click of the mouse, it significantly reduces the time customers spend on the checkout process, eliminating up to 80 percent of the keystrokes required to input an address. The approach is intuitive, requiring just the input of a ZIP code, which provides a drop-down list of possible addresses. Research from Marketing Sherpa has shown that 27 percent of consumers will drop off before completing an order if the process is too long or difficult. Streamlining the checkout process with address verification technology has significant incremental benefits.
While it's tempting to leverage online insight to become increasingly sophisticated, the e-commerce model should be essentially simple: Customers want a smooth, accurate, rapid and successful transaction. Rather than being distracted by investment in tailored emails or offers, retailers need to recognize that the first step must be good processes. Simple changes to the efficiency and effectiveness of the purchase process will make a major difference to customer perception and level of activity.
Emma Gooderham is the managing director of World Addresses. Emma can be reached at emma.gooderham@worldaddresses.com.
- People:
- Emma Gooderham
- Places:
- UK