Business

INDUSTRY ANALYSIS

The Second Coming of E-Commerce

Consumers have steadily embraced the Web for their retail shopping needs over the last 10 years. Online spending in 2003 was almost US$55 billion and is expected to top $60 billion for 2004, according to reports from eMarketer.

Although some shoppers still have concerns about credit card security or the inability to touch and feel the merchandise, they have been attracted to online shopping by snazzy, eye-catching sites with easy navigation that often convert “window shoppers” into paying customers.

However, keep in mind that the very ease that the Web presents is a double-edged sword for your business. It is just as easy for visitors to your site to switch to another vendor.

Online retailers were the first to take advantage of the Internet during the heyday of the Internet bubble. They projected astronomical growth figures for their online revenues. Much to their chagrin, it was not meant to be; the bubble burst almost as precipitously as it inflated. In the last two years, however, an e-commerce renaissance has driven online revenues to record highs. So what is the difference between then and now?

The Web Channel

There are some significant differences in the role today’s sites play in the overall corporate strategy compared to Web sites from the early days of the Internet. Instead of being an entity in itself, most companies have learned that, in practical terms, the Web is just another channel — to sell goods and services, communicate with customers and improve interactions with partners, resellers or suppliers.

According to a recent study by the Aberdeen Group, most retailers already use a multichannel approach when distributing their merchandise or services. Aberdeen found that only 6 percent of the retailers use a single channel.

So how does a retailer ensure that the Web channel is being used optimally and delivering the best ROI for the company’s bottom line?

In an environment that makes it very easy for customers to switch to another vendor and where profit margins are very narrow, it is sometimes difficult to justify spending a ton of money on incremental improvements in the Web site infrastructure, the navigation design, and the performance and availability aspects of the Web site experience. However, there are many mechanisms by which companies can ensure that the experience on their Web site is comparable to their competitors’ sites or make it even better to gain that competitive edge.

Overall Market Indicators

A good way to analyze overall market indicators is to look at trends, expectations and directions indicated in a published index. Much like the Dow Jones Industrial Average drives the overall sentiments of the equity market, a comparable index in the online retailer space can be extremely valuable for understanding these key indicators — especially when it comes to performance.

Creating such an index from scratch could become an overwhelming undertaking. Keynote Systems has such an index for e-tailers. You can find the high-level data from it published here on the E-Commerce Times. This index provides ongoing visibility into the speed and reliability of major online retailer sites.

Savvy online retailers already recognize that having intelligence on their competitors’ sites can be valuable in determining the right strategy for delivering optimal performance, giving users the most intuitive user experience and even increasing the conversion rate for actual sales.

Fundamentally, the need for tracking the metrics that matter for making improvements, establishing normal patterns of behavior and having a good understanding of how your site compares to others are essential if the company wants to attract (and more importantly, retain) customers to their Web store.

Services and Other Options

How do companies get this type of index-focused information without spending an arm and a leg? There are several options available. Companies could invest in setting up a panel of people that monitors these sites and reports on their performance. Companies may even use software to gather the relevant information in a more automated fashion. But either one of these options can prove to be expensive very quickly.

There are also services available in the Internet performance management space that can deliver such information. The leaders in this field are best known for the credibility of their name and the integrity of the data they publish.

Important factors that should be considered when looking at results from sources that provide industry specific index type of data include: selections of sites making up that index, the manner in which these sites are measured, the consistency of the measurement locations and coverage of locations from where the measurements are taken.

All of these criteria are extremely important when evaluating site performance, page layout, check-out process design and confirmation notification for a particular Web shop.

Often, customers don’t pay too much attention to the intricacy or sophistication of the Web site design, provided they can get their research and purchase completed — until something goes wrong.

Competitive Advantage

For example, pages that download slowly may give customers a negative image of the retailer, one not serious about their investment in the online channel. In addition, a lengthy checkout process may deter a wavering shopper from completing the entire transaction. Problems such as these could also reflect on the future experiences that the customer might have with that site — that is, if they return at all.

The interesting thing about the Internet is that many customers initially just do research, returning later to make a purchase. A single bad experience either during the research or purchase period often has a customer wondering what the rest of their experience with the company will be like. What will the fulfillment phase entail? Will I need to pray that my goods get to me in a timely manner? Am I sending private information to a company that is not trustworthy or efficient in handling it based on the less than optimal experience I just had with their site?

That feeling of trust has been eroded and replaced with doubt. But there are easy ways to avoid these pitfalls and take advantage of the boom we will see in online spending over the next few years and to gain an incremental competitive advantage. By knowing how their site is performing, as well as understanding how the competition is delivering the same experience, can be extremely valuable in helping design a site built for speed and efficiency.

Bottom Line

Remember that how a Web site performs reflects the company’s overall brand, the speed and accuracy of the delivery and fulfillment, and ultimately the quality of the goods or service. In fact, many customers would be willing to pay a premium for a better experience compared to other sites. Smart Web retailers just have to remember to accurately assess the quality of their sites by using available means and jump on any opportunity that gives them a leg over their competition.

As I mentioned at the beginning of this article, the revenue potential for online retailers is a significant one and is expected to increase over the next few years. For those retailers who want to take full advantage of this channel, it would make sense to conduct ongoing, comprehensive analysis of their customers’ online experience, including site design, navigation and, most importantly, performance.

The tools are out there. Find them and use them. Only then will retailers get a true perspective on where they stand compared to their competition on providing the optimal online experience for their customers and prospects.


Roopak Patel has been with Keynote Systems for almost four years and is currently the senior product manager for its measurement and monitoring services.


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