Google analytics recently rolled out a new “Intelligence” feature which is a great attempt to solve this very problem. Google analytics now keeps track of “expected” data patterns on your site and can notify you via email or online reporting if there are any significant changes on your site activity. For example, intelligence feature could alert you if there was a 200% surge in visits from Twitter referrals during last 24 hours or let you know that bounce rates of visitors from India jumped by 40% last week. Instead of you having to monitor reports and comb through all the data, Analytics Intelligence alerts you to the most significant information to pay attention to, saving you time and surfacing traffic insights that could affect your online business.

Take a look at the video below to learn more about this awesome new feature:

Excited? Well, there is more. Now you can also setup custom alerts to tell Google Analytics what to watch for. You can set triggers on pretty much any dimension & metric such as conversion or orders, and be notified by email  when the changes actually occur. If you don’t have these features in your account yet, you should see them in next few weeks. I think this is a great addition and will really help you operate your online store with lot more intelligence and insights that would otherwise have taken significant amount of time to analyze.

Here are some specific examples of how online retailers can use these intelligence features effectively:

1. Understanding seasonality of the products – Setup alerts for changes in conversion rates for specific products or categories over a time dimension so that you can be notified when it is time to review your product assortment from seasonality and relevance perspective.
2. Understanding changes in zero search results – You can setup alerts that would inform you if the % of zero search results spikes above normal. This is usually an indicator that more customers are not able to find the products they are looking for. You can then evaluate the top searched keywords to find assortment gaps.
3. Understanding the effectiveness of PPC campaigns – Lets say you setup a PPC campaign that results in a drop in the conversion rate. This is typically an indicator that the PPC campaign is not driving productive traffic to your website. Setting up an alert in these cases would allow you to aggressively manage your Adwords and other marketing campaigns so that you can avoid throwing money on campaigns that are not very effective.
4. Impact of social media – You posted a new story on Digg which went hot last night. It would be nice to get an alert if the traffic pattern on your site changes due to your social marketing efforts.
5. Drop in conversion rate – Lets say your server receives a huge surge of traffic and the users are not able to complete checkout due to performance problems. Wouldn’t you want to be notified immediately so that you can take corrective action? You can setup an alert that notifies you whenever the conversion rate or the order volume on the site deviates from the expected range.

I think this is a great feature to provide you access to more real time, actionable insights that will not only help you make more informed decisions but would also point out operational problems on your website on a more realtime basis. And best of all, it is free!!

Having been an e-commerce manager for a while, it didn’t take me long to understand the name of the game. When it comes to running a successful e-commerce business, the name of the game isn’t so much about generating traffic, as getting whatever levels of traffic you have to convert. Online conversion can come in many forms. If you’re selling a product online conversion happens when a visitor makes a purchase and becomes an active customer, and if you’re offering a service your conversion might be getting visitors to phone-in. In order to increase your online conversion rates on a budget try my tips below.

1. Mention Your USPs Across The Site – Every online retailer has at least one unique selling proposition. It could be your prices, your level of service or anything of real value to the customer. Most online retailers will mention their USP only on their homepage, but truth of the matter is that many visitors especially those coming from Google search will land directly on a product page. Unless the USPs are copied across the site, they might never be seen so make sure your USPs are visible across the site.

2. Openly Accept Communication from Visitors – Veteran online retailers know that it is important to backup their online offers with a solid communication platform in the shape of telephone and email support. In today’s web reality this might not be enough. You might want to look at additional communication channels such as online chat, Voice Over IP providers such as Skype and online feedback forms to ensure you cater for enough visitors as open communication can help increase your credibility.

3. Compare and Adjust Your Prices On a Regular Basis – Statistics say that 80% of customers will first research before committing to buy. Based on this figure you should aim to ensure your prices are as competitive and as close to your direct competitors as possible because there’s no hidden it, if a better deal is out there customers will find it. When comparing and adjusting your prices, look at the overall price to the customer also taking into account any shipping fees and taxes.

4. Mirror Your Offers Across All Channels – From time to time you might have a fantastic offer on the site. The trick is to mirror your offer across all your marketing channels ensuring that no matter if visitors came from one channel or another the offer is highlighted. Even if on a small scale, you are very likely to employ some form of multi-channel marketing. If for example you are offering free delivery for a day, be sure to mention the promotion on the site for visitors coming directly, in your paid ads for visitors coming via the search engines and in your newsletter for existing customers.

5. Introduce New Related Products – To increase revenue many online retailers focus on two avenues. The first is an attempt to increase the number of visitors to the site and the second is an attempt to increase conversion rates based existing levels of traffic. Another avenue is the ability to increase revenue, to boost conversion rates and expose the business to more traffic by adding new products suitable to the business. As an online retailer you should always be on the lookout for new opportunities and closely follow customer trends and taste.

6. Diversify Product Offers – Over time we came to the realization that some customer groups find free delivery offers appealing, some find buy 1 get 1 free offers appealing and some find price drop appealing. To become an appealing proposition, consider catering for as many customer groups as possible by diversifying your product offers.

How did you increased your conversion rate?

You can make a safe assumption that the reason I am visiting your online store is because I have an intention to buy something from you. All I need from you is to help me find what I am looking for and then take me from point A (Product Page) to point B (checkout). I am ready to fork over my money if you show me a clear path! So it is up to you to decide how easy or difficult you want my journey to be. Need a few tips? Here are few ideas to consider:

1. Do not force me to register during the checkout process. If I click on checkout, that is usually a safe assumption that I have made a decision to purchase. Please get out of my way so you can take my money as quickly as possible before I change my mind. Don’t present me with unnecessary registration steps or other information that would slow me down. If you want to give me an option to register after the checkout is complete, sure I will consider it.
   
2. Remember that Google is not your target customer – I am. Don’t write your product descriptions or other content containing tons of SEO keywords with a sole purpose to please Google. Sure you need to focus on SEO but the product description has to make sense to customers first. At the end of the day, you might get a good ranking on Google but if consumers don’t understand the content on your site, you will not win.
   
3. Don’t let me add something to the cart if later you will tell me that it is out of stock. If you already know that something is out of stock, can you please show that upfront on the product page so we don’t waste each other’s time?
   
4. Do you have categories which do not have any products online? Can you please disable those categories so that I don’t have to click those categories, just to find a “No Products Found” message?
   
5. Just because you have a lot of promotions and products on your site, you don’t have to show all of them on your homepage!! Please keep the homepage clean and focus only on few key promotional or merchandise messages that truly tell a compelling story. If you have more than 100 links on your homepage, you are trying too hard!
   
6. It would be nice to know when I will receive an item – not just when you plan to ship it. You know my zip code – you know the delivery times with UPS and FedEx, you know your processing time – so can you please show me a date when I should expect to see the item at my door instead of having me do all guesswork in my head?
   
7. If I add something to the shopping cart, please show me the cart before showing any other recommendations or offers that I might be interested in. Don’t slow me down by showing 10 recommendations before I get to my cart page. I have a short attention span and if I get overwhelmed with too much unnecessary information, I might just leave.
   
8. If you take my email address during checkout, please make good use of it! For example, if would be nice of you to follow up few days later to check if the item arrived properly, and if I would be interested in writing a review for the item. I don’t mind writing an honest review – you just have to ask and remind me! Which is a good segue to the next point.
   
9. If I write a negative review about a product, please don’t go out of way to “moderate” the review to put a positive spin to my content. Please remember that customer reviews are supposed to be “unbiased” and any attempt from your side to hide or suppress the negative reviews is a sure way to lose trust with your loyal customers.
   
10. Don’t wait until the final step in the checkout to show me the final price including the coupon discounts, taxes and shipping costs. I would like to know that information at the shopping cart page so there are no surprises during the final step. If you need my zip code in the shopping cart page to calculate these costs, just ask me and I will be happy to provide that information to you. Which leads me to the next point –
    
11. If I have told you anything about myself such as my zip code, please try to remember it. Don’t make me re-enter that information at the time of checkout. There is a good probability that I will not change that information, but just give me an option to change it later if I need to.
    
12. Please don’t try to hide your contact information just because you want to minimize the number of customer service calls. If you have an 800 number hidden somewhere on the site, please display it prominently. Customers need to know upfront that there is an easy way to contact you if something goes wrong with their order.
    
13. When I am providing my credit card information, you really don’t have to ask me what type of credit card it is because you can figure it out from my credit card number. Just show me the credit card type for confirmation and I will let you know if there is a problem.
    
14. While you are thinking about that checkout experience, can you also do something about that Captcha! It is nice to know that you are concerned about our security and want to make sure that I am a human. But for the sake of humanity, please don’t make me decipher that 10 characters Captcha image. Just try to keep it simple, if possible.
    
15. If you display any AdSense ads on your retail store, can you please turn those off? That sends a mixed message to me as a customer. If you are truly an online retailer, your focus should be on selling products, not making a few bucks from customers who accidentally click on those ads and end up somewhere else.
    

Some of the above points may seem very obvious but it is amazing to see even large online retailers who end up building complex checkout processes, overlooking some of these points just because they have a “complex” business. If you think from customer’s perspective, they really don’t care about complexities in business – they are looking for a simple and intuitive shopping experience.

In the offline world, imagine walking into a store and you see clutter everywhere – the only thing that is clearly visible is an exit sign. However good the pricing is, if the store is not organized in a presentable manner, you are likely to walk straight through that exit door. Similarly in the online world, a lot of online retailers do not focus on getting objective feedback from external users on site usability. This is true especially for the small and medium size retailers who feel that things like usability testing are for the big guys who have a lot of money at their disposal. Not any more – there are several cost effective tools available now that would allow you to test and improve the usability of your site in an objective way, without causing a dent in your wallet. Here are 10 low cost ways to understand and improve the usability of your site:

#10 Five Second Test

Five second test helps you easily identify the most prominent elements of your user interfaces. People use five second test to locate calls to action, optimize landing pages, and run A/B tests. Basically, you can upload images that will be reviewed by random Internet users. Users view the image for just five seconds then click on the screen to indicate areas of the images that caught their attention. Using text fields provided on the screen, they describe what they saw on the places they clicked. This works from the basic principle that visitors have a very short attention span and they typically don’t spend more than 5 seconds before moving on to other parts of the page. Therefore, you need to get their attention to the most prominent aspect of the offer in those 5 seconds. This is a free service and can help you identify opportunities with your ad or other image units.

#9 Feedback Army

Start a usability test for your website in 2 minutes. Receive 10 responses from an army of reviewers for $10. This is as cheap as it can get! If quantity is your thing then you can’t go wrong with this site. However, you may have to throw away few responses because at $1 per response, you have to question the quality of some of the responses. However, if some is better than none, you can’t go wrong with them. I dug a little deeper into their offering and it seems the feedback comes from workers on Amazon’s Mechanical Turk service. Started by Amazon, Mechanical Turk is the crudest form of crowdsourcing, where you will find workers willing to do small virtual tasks for less than $1. So is it a virtual sweatshop taking advantage of poor people from third world country? According to this study, the answer is no. An interesting observation from this study is that more than 75% of workers are from United States and at least 50% have a college degree.

#8 Loop11

Loop¹¹ is a web-based user-experience tool, allowing companies to conduct remote, unmoderated usability testing on any kind of digital interface. It is a good complement to lab-based user testing enabling you to quantify usability metrics with 100s of participants. Costs $350 to run a user testing project with upto 1000 participants.

#7 Chalkmark

Want to test the design or UI prototypes with real people? You can use Chalkmark to get powerful insights from real people to tweak navigation and layout. As the results roll in, heat maps for each task are dynamically generated. Clusters of clicks are combined to give percentage read outs.Quickly run a test on your UI prototypes to answer any nagging questions about usability. You can get a 30 day plan for $109 and create unlimited tests and surveys.

#6 Concept Feedback

Getting ready to launch a brand new concept? Would you like to know what other professionals think before you release it to the world? Receive quick, actionable feedback from a professional community by uploading a concept (a website, logo, advertisement or other). Each reviewer has a reputation score so you can pick the best feedback.

#5 Crazy Egg

Crazy Egg lets you create tests to figure out what people are doing on your website. Enter the URL of the page you want to track, enter how long the test will run and CrazyEgg provides one line of javascript that can be applied on your site. The results – you can see all sorts of heapmaps and overlays to figure out what people are clicking on and more importantly, not clicking on your website. For $19 a month, you can track up to 25,000 visits per month. Or for $99 a month, you can track up to 250,000 visits per month.

#4 Ethnio

For $400, you can recruit about 200 research participants from your website and perform a moderated focus group session with real visitors from your site. It works using basic JavaScript and DHTML so integration is fairly quick and easy on your website. When a user chooses to participate, a notification is sent to the person who will moderate the session. The moderator can then telephone the participant and then conduct a moderated session or a focus group session.

#3 Google Website Optimizer

Don’t worry about making it perfect. Brainstorm a few site variations and try them out on real visitors. Meet Google Website Optimizer. If you don’t have this tool setup, get it now. This is one tool that lets you test and learn different variations of banner ads, promotions, design and immediately understand which version is driving the best results. On top of that, this is fully integrated with Google Analytics and it is completely free! Need I say more?

#2 UserTesting.com


UserTesting.com uses the Web 2.0 crowdsourcing model to dramatically drop the price of usability testing. It lets website owners easily get pre-screened users to rapidly do usability testing of their websites. It only costs $29 and the results are typically ready in an hour. You get a Flash video of a user speaking their thoughts as they browse your website and a written summary where that same user tells you what they liked, disliked, and what would have caused them to leave your .

And the Winner Is……..

#1. 4Q From iPerceptions

Want to get quick, actionable insights from your visitors? Meet 4Q by iPerception. It is a free online survey solution that allows you to find out why visitors are at your website, and whether or not they are completing their tasks (and if they aren’t, what’s getting in the way?). It easily integrates with any website, requires only a few lines of code and best of all – it is Free!! The reason I like this the most is because it allows you to create conversations with your users using a simple and direct methodology and it can provide key insights in improving the overall offering or the usability of the site.

To prevent such fraudulent use of credit cards, Reserve Bank of India (RBI) has issued directive for 2FA (Two Factor Authentication) for online / ecommerce payments that has come into effect from Aug 1, 2009.  According to this mandate, it is necessary validate an additional factor of authentication while collecting online payments.  This applies to all online merchants based out of India.

A quick overview on 2FA.  The first factor of authentication is what you have, which is the information on your credit/debit card (name, card#, expiry date…).  The second factor of authentication is what you know, which is information that is known to you but is not on the card. If you have done any online purchase since the new law went into effect, you would be aware of what I am talking about.  The second factor of authentication supported by most online merchants is Verified by Visa (for Visa cards) or SecureCode (for MasterCard cards).

A related noteworthy point, online fraud in UK declined 23% in the first half of 2009 (the first time ever), thanks to 2FA [and sophisticated anti-fraud systems deployed by ecommerce service providers].  European Commission Payments group indicate that online fraud can be reduced by 80% by deploying strong authentication.  Therefore, there is a lot of benefit awaiting Indian ecommerce industry.

Deploying these secure online payment is simple.  Adding a few lines of code to your payment page.  Secure payments increase conversion rate as customers are more comfortable doing business at a more secure site.  Additionally, reduced fraud results in reduced chargeback, thereby reducing merchant discount rates and profitability.

New York, 2010: It is 11:30pm and Sally is looking to buy a new dress for the upcoming Christmas party. She logs on to Looklet.com, picks up a dress and matching shoes and saves the new look in her profile. She gets prompted by Looklet if she would like to get an opinion from her friends. Looklet displays all her online Facebook friends via Facebook connect . Sally sees that her best friends Nancy and Tina are still online and invites them to give an opinion on the new look. They are able to chat and view the products in real time. Both Nancy and Tina love the new dress but aren’t too crazy about the new shoes. Sally is able to find other “Fashion Experts” on Looklet who have favorited the same dress – and she is able to find better shoes based upon recommendations from those experts.

Welcome to a new phenomenon in online retailing – “Social Shopping”. This term has been used more and more in the past few months to describe the future of online shopping. Although the above two examples are not yet real but several pieces of these concepts are already in action at several online retailers. Given all this hype around social shopping, I thought it would be good to talk about some of the practical examples where online retailers can start thinking about implementing some of these concepts on their platforms.

The Progression of Social Web

If we think about the progression of social web, it has significantly evolved over last few years. It started out “Relationship based” where people could just connect with others and stay in touch. Then it evolved into an open medium where the social platforms took the role of an operating system allowing third party applications to enable significantly richer social interactions among people . Now, it has evolved even further where all interactions are context based (think Facebook News Feed) where users only see information and conversations in the context they are interested in. The next logical step in this evolution is to allow sharing of products and services within the social context so that users can turn to their friends and trusted experts for advice on buying products.

For those who think social shopping is just a fad, consider this–What makes a great product recommendation? Is it the number of strangers who recommend something or is it the person who recommends it that matters most? In other words, if you are asked to chose between a book on Amazon that is rated 5 stars by 10 strangers and another book highly recommended by a close friend who has very similar tastes and background as you – which book are you more likely to buy? If the answer is latter, then you believe in the power of social shopping. The only thing needed is a platform which helps you listen to your trusted friend’s and follower’s recommendations in a structured format. Facebook Connect is the first step that would make these interactions possible in a meaningful way. Still not convinced? Let’s hear what our friends from Nielson say –

“Recommendations by personal acquaintances and opinions posted by consumers online are the most trusted forms of advertising globally, according to the latest twice yearly Nielsen Global Online Consumer Survey. The Nielsen survey, the largest of its kind, shows that nine in every ten Internet consumers worldwide (90 percent) trust recommendations from people they know, while seven in every ten (70 percent) trust consumer opinions posted online”

Ok – enough about general ideas and numbers. Let’s look at specific opportunities that are likely to shape up the social shopping landscape in the coming months and years:

Key Opportunities in Social Shopping

Opportunity 1: Product Discovery (Help me find a good product)

This is where most of the action is today. If you think about most of the social shopping sites today such as Kaboodle or Stylehive, they allow users to follow other experts and discover new products every day.

The key tools to make this concept are following:

1. Product Experts – There needs to be a notion of unbiased product experts who have authority in various categories. These experts have ability to share products that others will discover. The key aspect is that these experts need to be recruited by the online community using some sort of unbiased reputation/ point system. This leads to my second point.
2. Reputation Management – Experts earn reputation based upon the quality of their contributions to the online community. This needs to follow a democratic process where users vote for expert’s contribution and based upon pre-determined eligibility criteria, certain users are able to earn an “Expert” or “Guru” status in specific categories.
3. Online Profile – Ability to know about the tastes, preferences and the products currently owned by an individual would allow platforms to better connect individuals with each other based upon their common interests. I think this is a critical step in a successful social shopping platform because it would make all shopping related interactions context sensitive. Imagine logging into Facebook and seeing News feeds from all Facebook users at the same time! Facebook has allowed users to customize the context around their own friends – similarly the social shopping sites should allow the users to customize the context around other “experts” and individuals who have common tastes.

Opportunity 2: Product Selection (Help me pick between the products that I like)

This is the next step of the purchase process. Once the user has discovered a few products, they need to select which one would be the best match for them. Whether it is a dress or a pair of shoes or a gift for a co-worker, a lot of times people look at their trusted advisors or friends to select a product. Technology has now evolved such that social shopping platforms can now enable these interactions. Following are the key components that will act as the technology foundation of this aspect:

1. Facebook Connect – In my mind, in the short history of social shopping, Facebook connect is the most powerful development that will help take the concept of social shopping to mainstream. For those who are not aware what Facebook connect is, it is a powerful set of APIs for developers that lets users bring their identity and connections everywhere

So what’s the big deal? Well, this would allow users to take their friends along with them for shopping. Shopping online, that is. With Facebook connect, the shopping platforms now have the capability to allow interactions across the 300 million users who are currently on Facebook. I have some examples later that illustrate the practical implementations of Facebook connect in a social shopping context.

2. Google Wave

For those who don’t know what Google Wave is – here is a great2 minutes illustration of what it can do.

Now you might think that this looks slick for email communication but what does it have to do with shopping. Well – given that the API is open for developers, the opportunities are endless. For example – an Outdoor apparel retailer could allow customers to connect with each other via Google Wave and share their pictures of favorite Ski Vacations, showcasing all the products purchased at the online retailer. The opportunities are endless – the key thing is that Google Wave is a revolutionary product that opens up new way of communication and collaboration which could be easily applied to social shopping to connect individuals with common tastes and interests.

So what are some of the retailers doing in the collaboration and product selection space? Here are some real life examples where the concept of social shopping is already advancing to the next level:

1. My Zappos: Users are able to add items to their closet, and can then invite their friends from Facebook or Twitter to help select the best product. After registering, you can get introduced to groups with similar interests, such as Zappos Golf, Zappos Beauty, etc. Consumers can create shopping lists of items they want, have or like. Friends can tell them what they think and/or suggest new “stuff” for them. In the past when you shopped online, it was a lonely experience. With My.Zappos, consumers can shop together and have their “best friends” give them feedback.

2. Jansport has done something similar where prospective customers invite friends from Facebook (using Facebook Connect) to shop with them; then share comments and ratings conveniently—without a need to leave Jansport.com. Shoppers are able to converse freely with those whose opinions matter the most: their friends and family. Purchase validation can be achieved without interruption.

3. Apparel retailer Charlotte Russe has also implemented a “Shop Together” concept. Users can invite their friends to simultaneously shop the latest styles. Friends can view, compare, chat about and create a “favorites’ list of items together. This allows online customers to share synchronized shopping sessions with friends and family.

4. Vans.com has taken the concept of social shopping to customizable products. Shoppers can now invite friends to help design their customized sneakers. The collaborative-shopping technology allows consumers building custom shoes online to chat with friends in real time about the product design. Click on a link saying, “Invite friends to design with you,” and access friends through AIM, e-mail or any other service a link can be sent through. Assuming the friend is also at a computer, she can join a chat on the Vans site to give a thumbs up or down on the design, as well as make her own suggestions.

Opportunity 3: From Affiliate marketing to Social Marketing

The concept of Affiliate marketing has been quite successful for online retailers to drive sales to their portals. I think affiliate marketing will continue to be one of the important marketing channels – but we shouldn’t underestimate the potential of Word of mouth marketing that is possible at social platforms such as Facebook and Twitter. Out of 300 million users on Facebook, approximately half of them log in to their account every day – according to Facebook more than 6 billion minutes are spent on Facebook everyday. If these users are able to recommend products to their friends, resulting in a sale at an online retailer, this opens up a new marketing opportunity – some people call this social affiliate marketing. If the retailers are able to figure out an incentive structure to reward individuals who share products with their friends that eventually lead to a sale, the opportunities are limitless. Keep in mind there is a fine ethical line between sharing “authentic recommendations” with friends, vs. paying individuals to become social advertisers. In addition, FTC has issued guidelines (albeit vague) that would require users to disclose the association with a retailer if they are getting paid for driving sales. As marketers continue to over-do influencer outreach – trying to capture the attention of influencers like mom bloggers and food bloggers such that they authentically talk about products – we can expect to see some simpler and more direct solutions to transparently engage those influencers as affiliate marketers. The benefit back to them is a percentage of sales – all very transparent, of course. The same concept could be applied to users on Facebook and Twitter. However, the incentives don’t always have to be monetary – they could also mean earning a better status/ reputation on the retailer’s online platform.

Although the scope of social shopping is fairly small today, the opportunities are significant. The opportunities are even greater for multi-channel retailers such as Target, Walmart and Sears in engaging the customers at stores and helping them connect with their online friends who can “virtually” shop with them in the store. I think it is time to start thinking about retailing in the context of people vs. products. At the end of the day, it is the social interactions and conversations that help drive a purchase decision. Therefore, the online retailers need to start thinking about opening up their platforms to allow people to have these types of two way interactions vs. focusing on one-way merchandising aspects of retailing.

Marketplace concept has been fairly common with online retailers such as Amazon.com and buy.com. However, it seems that multi-channel retailers are also joining the bandwagon. Sears and Walmart have both opened up their online platforms to allow third party sellers to list and sell their merchandise. This definitely opens up an alternative source of revenue for retailers and in these trying times, who doesn’t want to have additional revenue sources.

Actually, I am glad that multi channel retailers are opening up their “walled gardens” and thinking more and more from customer’s point of view. A marketplace concept helps fill the gaps in retailer’s product assortment so that the customers can find the products they are looking for. In addition, the retailer makes money from the marketplace sellers for every marketplace order that gets placed on their platform. This is a good first step. However, every time I hear that whistling sound from my sub, I get more and more convinced that the multi-channel retailers are leaving a significant opportunity on the table – an opportunity that can give them a sustainable advantage over pure-play online retailers.

If we take a step back and think about advantages that a multi-channel retailer can offer to their customers – we wouldn’t have to think hard before coming up with following:

1. Ease of buying online, and picking up at a physical store (Easy Product Discovery & research online, Save shipping costs, Pick up the product same day from a local store)
2. Ease of researching in a physical store and then later buying online. (Touch & Feel the product before buying, avoid a second trip to the store by buying online)
3. Ease of returns (Peace of mind – I can return my online purchase to my local store anytime).

So why are the multi-channel retailers not offering the above benefits when it comes to marketplace purchases? For example, I would love to shop a marketplace item on Bestbuy.com if I had the option to return that item to the Bestbuy store which is 4 miles from my house. This would certainly give Bestbuy an edge over other online players who are selling the same marketplace item, probably at the same price but require the customers to ship the item back to the marketplace supplier (potentially at additional cost to customer). I am sure there are few logistics issues to be overcome in handling third party returns at a brick and mortar store. However in today’s day and age, these issues can easily be solved by technology and some innovation in distribution network. The bigger problem is that a lot of times, companies give up because they focus on traditional retailing constraints vs. focusing on what is right for their customer. Several online retailers are now picking up the cost of return shipping because they recognize that ease of return is a very important factor in customer’s mind when it comes to online shopping (Did I mention my Sub?).

Breaking the multi-channel boundaries

Now let’s take this one step further. In today’s connected world, what is stopping a retailer such as Sears, Walmart or Bestbuy in offering this “Return” service to their online competitors? In other words, accepting returns for merchandise purchased at other online retailers such as Amazon. Sounds a little odd because why would a retailer offer such a service to their competitors? Well, the concept is no different than marketplace. It follows the same logic – retailers are opening their online platform to marketplace sellers so that they can list the merchandise for a fee. In a free market economy, companies shouldn’t think about internalizing their assets – they should focus on how to maximize the rents by opening up what they do best to other companies who want to use such services. Retailers like Sears, Bestbuy and Walmart have thousands of stores across the country – why shouldn’t they monetize this asset by offering merchandise return services to online retailers? If the multi-channel retailers begin to offer the return service to their competitors for a fee – it would create a win win situation for everyone. Let’s illustrate this with an example –

Let’s say Bestbuy partners with Amazon and allows all merchandise that is purchased at Amazon.com to be returned at any Bestbuy store. Let’s leave the logistics/issues aside (we will get to them in a minute) and think from a customer’s point of view first. I hope we can all agree that this would offer a huge benefit to the customers because now they don’t have to worry about the hassle of returning the merchandise back to Amazon in case of any issues. They can just drive to the nearest Bestbuy store, present their return authorization from Amazon, return the merchandise and get immediate refund. Here is a tactical blueprint of how some of these logistical issues can be overcome–

1. Customer decides to return an Amazon.com purchase to a Bestbuy store
2. Customer logs on to Amazon, prints the return authorization.
3. Amazon transfers the return authorization information along with the item details to Bestbuy Return Management systems.
4. Customer takes the return authorization to a Bestbuy store.
5. The store associate pulls the information from their POS system, inspects the merchandise and issues a Bestbuy Merchandise credit/ gift card to the customer.
6. Bestbuy leverages the already existing distribution channel to return the consignment of returned merchandise back to the online retailer, or to a liquidator depending upon the arrangement.

Win for Multi-Channel Retailers

So how does Bestbuy benefit from all of this? A few subtle things happen in above example –

1. Bestbuy issues a Bestbuy Merchandise Credit for the refund amount. This will ensure that the money will be spent at Bestbuy in future – easy way to “lock in” the future spend.
2. Retailer spend a lot of marketing dollars in today’s environment to drive traffic to their stores. In this arrangement, Bestbuy will get unsolicited traffic to their store – with no marketing spend. More importantly, every customer in this category just returned an item, and has been issued a Bestbuy gift card – perhaps there is a high probability that they will shop at Bestbuy before they leave?
3. Finally, Bestbuy could charge some sort of transaction fee to Amazon for providing this type of service. After all, Amazon’s operational costs associated with return shipping and handling merchandise returns would significantly drop because of this arrangement.

Win for Online Only Retailers

You are probably thinking why would an online retailer like Amazon want to do this? Especially when there is a potential of some leakage (customers returning an Amazon item might eventually shop at Bestbuy). Again, if we think from a customer’s perspective – the online retailers would now be able to offer thousands of return depots to their customers. This is a significant advantage compared to other online retailers who can’t offer in-store returns. As a customer, if everything else is equal, I would certainly want to shop at an online retailer which gives me much more flexibility and options in returning the merchandise. Ease of Returns has been identified as one of the key factors in online shopping based upon several research studies conducted for last several years. Therefore, the online retailer that offers this option would suddenly get access to a new demographic of customers who are currently not shopping with them due to concerns about hassles in product returns. At the end of the day, the online retailer’s objective should be to offer its customers an end to end experience that is built around what the customer expects, vs. an experience that is built around the internal constraints. Just because the online retailer doesn’t have any physical stores doesn’t mean that they can’t think and operate like a multi-channel retailer by partnering with others.

I realize I am potentially understating the complexity of the integration. However, in a Service oriented world, is there truly a big distinction between integrating systems within the enterprise vs. across the whole value chain? I really hope to see this concept in action sometime in near future – however in the meantime, I am not holding my breath and am off to a UPS store to figure out how to return this whistling device back to the cloud!

There is a perception out there that eCommerce is not really picking up in India and that companies are struggling to scale up their offerings. There is no question that the overall market is still pretty small in terms of numbers. However, we shouldn’t ignore that all factors are slowly moving in favor of eCommerce. Retail is getting more and more organized, availability of global brands is larger than ever, internet penetration is climbing and some internet retailers have started to focus on customer experience as a way to differentiate. Most importantly, and I can personally attest to this one , there are some extremely talented individuals who have recently launched new ventures and are passionate about making a big difference in the eCommerce space in India.

I’ve been thinking about this for a while - despite all this activity happening in the industry, recent startups are not getting a lot of coverage unless they are willing to shell out marketing money to advertise their offerings. Therefore, I have setup an eCommerce Directory that would  showcase all eCommerce related ventures and offerings in India . I think this makes sense -  given that Commercewiki has reached a Million page views , enterpreneurs can use this site as the primary marketing vehicle. Ok, ignore that last sentence because it is slightly exaggerated!! I dont think we are anywhere close to million page views yet but we do have access to the core community that has a strong pulse on eCommerce in India and insights that are based upon real experiences in this space. Quality is better than quantity in this context.

So if you would like to share your venture/ offering, please submit your listing here. It doesnt matter how small or large your venture is. The only requirement is that your business must support the eCommerce eco-system in some way.

I remain highly optimistic about all the eCommerce opportunities that are still out there in Indian market. I am hoping that this showcase would demonstrate all the excitement and energy that is currently going on and would inspire potential entreprenurs who are currently sitting on the fence to join this wave of transformation in online retail.

Update (October 09, 2009): Listings are now live under the eCommerce Showcase section. You can submit your listing here.

Fast forward 5 years – enter the connected world! I recently visited MySears.com and was amazed at the community involvement! Even though you see customers occasionally venting about product issues and their experiences, what is really impressive is that Sears has taken a bold step to let it all out in the open. They have provided an online platform where Customers are free to post their experiences. This is bold because it demonstrates leadership as well as compassion that Sears not only cares about listening to their customers, they are also not afraid of letting customers openly talk about their experiences online, however negative they might be. Interestingly, there is a group “Sears Cares” that addresses the customer service issues posted on the website. I think this strategy will definitely pay off in the long run, as long as the customer issues are addressed in a timely fashion and there is a feedback loop where customers are then able to share how their issues were resolved. In today’s world when there are so many forums and discussion boards where customers can vent about their experience – why not invite them to your own backyard and address the issues head on! MySears also has a section for customers to submit new ideas, and vote on other submitted ideas. Although this level of transparency will definitely improve the level of trust across Sears’ customers, the question is – is this enough?

Multi-channel retailers such as Sears or Walgreens have been focusing on traditional retail for more than 100 years. Although I think it is impressive that retailers such as Sears are able to leverage the online channel to win back one customer at a time, this approach is still reactive. What is more critical is to change the mindset of every single employee in how they think about leveraging the online channel. In today’s world, retailers need to stop thinking about a one-way means to push messages and product assortment to the customers. No company can outsmart or beat the collective intelligence of millions of users even if they spend millions of dollars every month. The online channel offers means to harness this collective intelligence that can help in making the right decisions for the target customers. Everyone talks about it, and yet, when it comes to making decisions, those decisions are generally supported by internal executives’ intuition vs. objective data that is collected from the customers. All the money that is spent by the retailers in marketing campaigns, assortment planning, merchandise planning, product design, store signage – how many of these decisions are based upon real customer feedback at the ground level?

Perhaps it is time to reinvest some of these dollars in platforms where customers can help make these decisions. Perhaps it is time to put the customers in charge – if they matter the most, shouldn’t they be the ones helping make strategic decisions? Why are retailers not investing in building an online portal where customers can collaborate on what assortment to carry in the store? Where customers can vote on what kind of promotions to run in the store? Where customers can rate the performance of the store associates that they interacted with? Where customers can not only help design the marketing campaigns, they can also become part of driving these marketing campaigns? Where customers can participate in designing cool apparel outfits or voting on the designs submitted by others?

I can go on and on but at a broader level, I think there is a significant need and opportunity for retailers to start outsourcing (or “crowdsourcing”) their internal decision-making to their own customers. The concept of Crowdsourcing has been around for few years now and yet only a few businesses have been able to take true advantage of the power of online communities. Multi-channel retailers stand to gain most from the power and wisdom of communities – learning from the customers using the online channels, and applying those ideas in the stores. Yes, it will require some sort of incentive to get the customers to participate in these kinds of communities. It is, however, amazing to see how eager customers are to participate and collaborate as long as their voice is heard and as long as they are able to achieve some sort of reputation/ expert status in the online community.

There are several retailers who make sure every new corporate employee in the company spends few days in a store when they start. I think the companies should also make sure that every corporate employee spends one week understanding the customer analytics that are being collected from the online channel. Every decision should be supported by some objective information that was collected by the online channel. I am not promoting the online channel just because I am biased. In this day and age, especially in a struggling economy, every single dollar that is leaving the company should be based upon a true customer insight – and the online channel offers a perfect means to not only capture those insights but also engage the customers in testing the ideas at a significantly cheaper cost.

An excellent example of leveraging the community in product design is Threadless.com – a web-based startup launched in 2000, which has become a poster child for how customers can actually create a company. Threadless sells t-shirts, but it does not design them. That’s up to its customers, who submit designs and stand to win small prizes if their submissions end up on a product. Then there is Polyvore, where people can combine fashion pieces into outfits they call “sets.” The interesting thing about fashion is that no item really stands alone — they are always combined into outfits. So instead of selling individual articles of clothing and accessories as most retailers do, combine them into outfits. And better yet, let customers do the creative work and then decide which outfits are most popular. The concept of crowdsourcing is now slowly being adopted by traditional companies. Whether it is My Starbucks Idea or Dell’s IdeaStorm or P&G’s Collect and Develop or Campbell’s Ideas for innovation, they all have one thing in common – they believe in the value of customer involvement in product design, and they have begun using the online channel to collect insights that would have been almost impossible to collect in the past.

What Sears has done is a good starting point – and is certainly more than what other “successful” retailers have done so far. Case in point – Target which still believes that the online channel is just another channel to drive sales therefore they don’t see any downside in outsourcing their entire online channel to Amazon. Wait a minute – did I just read that Target announced to end its pact with Amazon and build its own online presence? There are signs everywhere that multi-channel retailers are now seeing the online channel as something more strategic than just a revenue opportunity. However, I am rooting for the under-dogs like Sears who have recognized the strategic value of online channels and taken initial steps in directly engaging their customers. The true winners will however be the retailers who implement practical means to collect meaningful insights directly from their customers and then reform their internal processes to make and evaluate all tactical and strategic decisions based upon these insights.

I’ve been following the US and India eCommerce industry very closely during the last several years.  I have met quite a few talented individuals who are either in the process of or have already built a good online offering. However, I feel there is still a huge opportunity to take the online shopping to the next level and this may be just the right timing to go after that opportunity.

I have now decided to focus on building a next generation shopping portal for US and India market that combines the power of communities, user content as well as product customization in a game-changing way. I am looking forward to the journey over the next several months and I will be sure to post new learnings and insights in this blog as time goes by. Although I feel confident about the opportunity and the timing, I also believe that any successful venture requires a great team with complementary skills and a passion to win! I am in the early stages of building the team of individuals who will support this venture.

I am thinking of building a small team initially that will eventually expand as the idea scales. So if you are an amazing User Experience/Creative individual or if you are an expert in open source technologies such as Ruby on Rails or if you have strong experience in product/merchandising (especially customizable products) but most importantly, if you have the passion and desire to do something big in the eCommerce space – I would love to hear from you.