In the Age of Mobile Networks, E-Commerce Gets Personal

Published: June 09, 2010 in Knowledge@Wharton

Imagine an online store that replicates the experience of stepping into a boutique.
As online and in-store retailing converges with the growth of mobile networks, the daydream could become a reality. Via their smartphones, shoppers at retail stores will have the capability to check the Internet for online promotions, product descriptions and reviews by past customers. Meanwhile, online customers will have access to software that allows them to "try on" clothing, or discuss a buying decision with contacts on social networking sites.

New mobile capability, social networks and better analytics will play an important role in the future of the retail industry, according to speakers on a recent Wharton Retail Conference panel titled, "E-Commerce: Is It the Future of Retail?" "Mobile will be a critical piece of retailing, even more so than shopping online," said Dave Larkins, vice president of NetPlus Marketing in Conshohocken, Pa., and a co-creator of The Colony online boutique.
Mobile technology has not advanced to its full capability, Larkins noted, but continues to evolve due to expanded bandwidth and increasing consumer adoption of smartphones. As networks get better, it becomes easier for retailers to target customers based on where they live or shop, and to communicate with them in real time. Location-based social networks such as Foursquare, which essentially ask users to share their retail patterns with friends, are viewed as another way for brands to link to communities, he added.
The history and visibility of bricks-and-mortar stores helped retailers achieve immediate brand identification for new Internet ventures. But the support is now moving in the other direction -- from the Internet to physical stores, said Kris Roberts, divisional merchandise manager of Target.com. She pointed out that consumers are eager to use mobile devices to inform in-store decisions because accessing online information on the spot is more convenient than having to research an item later via computer. "This brings the two [retail modes] together, and I think it will transform how people shop," Roberts stated.
Cross Channels
Most retailers continue to view online customers and shoppers at physical stores as two separate entities, panelists said. Roberts noted that Minnesota-based Target is trying to develop "cross channels" that would link the offline and online experience, and reach consumers more effectively. But she added that cross channeling is often an overused buzzword that presents many obstacles for retailers, including the need to update organizational systems to integrate in-store operations with Internet retailing. "We will need to see a generation or two of management changeover to really leverage the power [of cross-channeling]."
Successful integration, said Larkins, will require top managers to embrace new technology systems. "It begins with leadership," he said. "It is all about philosophy and how much the C-level executives are going to embrace these channels as one." Retail executives need to reduce divisions in their organizations and bring together people working in catalog, stores and online operations to create new added value. "It's tricky," noted Larkins. "The point is to have everyone at the table thinking about things and not just in silos -- from stores to online to mobile and social media -- beginning [with] the idea process and the planning process and the thought process."
Roberts suggested that the web is the "ultimate" branding opportunity for companies because it is available anytime and anywhere. Buying an item in a store is a "primal" experience that will never go away, she said, but online shopping can deliver new levels of information and convenience for consumers. Roberts predicted that as online retailers interact more with consumers, shoppers themselves will take a role in shaping brands.
Consumers are beginning to expect brands to bring added value to their online stores, and to the social media networks businesses use to reach out to shoppers -- and not just in the economic sense. The creativity a company uses on its Facebook page, for example, is becoming increasingly important. "[Shoppers] expect more now," Larkins noted. "If [an online promotion] has no value, no creativity, it doesn't show that you thought about the audience. A lot of this starts with the audience and understanding and exploring, enlightening and engaging them in a completely different and new way."
Web customers are in search of new information, particularly opinions from other shoppers, and increasingly want to read product reviews, said Tony Capasso, vice president of retail at Bazaarvoice, an Austin, Tex.-based marketing firm that specializes in online customer reviews. When customers read what other shoppers write, it helps deliver a more tactile experience to web retailing, he suggested.
One of the leaders in the development of e-commerce is Amazon.com, which started out as an online bookseller but has now broadened its scope to every major retail category. Capasso said 15-year-old Amazon continues to be the biggest surprise in the industry. Retailers invested significantly in transferring their brand equity to the web, but Amazon -- a store with no bricks-and-mortar locations -- continues to dominate the channel, he noted.
A Quicker Route to Checkout
Despite Amazon's success, the company and other online retailers have yet to create experiences that guide consumers to the specific products that they want, Capasso pointed out. Real-time applications would make it possible to conduct an analysis of shoppers in the moment, rather than pulling data that might be two or three weeks old, he suggested, and technology that makes better use of peer recommendations would also contribute to increased personalization of e-commerce.
Making online stores more relevant to consumers depends on the amount of time, technology and investment executives are willing to spend on integrating and adding personalization to their sites, Larkins noted. It's a question of "just where does it fall in the mix? Unfortunately right now it gets pushed down. But the technology keeps improving and applications are getting better." He predicted that in the next two years, customer personalization will play a much more important role in e-commerce than it does now because of the growing importance of social media in retailing. "If you are not there you are definitely going to be behind," he said. "It will become a necessity, where before it was a luxury."
Developing technology also has the potential to make it easier for retailers to figure out how to infuse their online stores with the look and feel of the company's bricks-and-mortar locations. Larkins pointed to electronics giant Best Buy and clothing retailers American Eagle and Roxy as brands that are working across channels in a way that is immediately apparent when a customer walks into the companies' stores or visits their websites. "It's not just in-store and online; it is in their advertising. It is truly fluid. With these brands it is natural.... You need to get the people in place to make it a natural integration."
But Roberts suggested that, while Internet retailing has made huge advances, online stores are still unable to provide the instant gratification offered by a physical shopping experience. A potential "game-changer" for retailers would be the ability to get orders to a shopper's home within several hours, rather than days or weeks. Speeding that process would allow online retailers to offer shoppers a more timely sense of satisfaction after making a purchase.
Another common problem among Internet retailers is shoppers abandoning their virtual "shopping carts" before finalizing a purchase. Roberts named shipping as one of the main barriers to completing online sales. When customers see shipping charges that represent a significant portion of the item's price, they balk. Visitors to online stores also tend to use the cart as a shopping list, or to facilitate browsing or price comparisons, she added.
Emerging technology may decrease the number of "abandoned" shopping carts by removing other barriers that exist in online shopping, such as the difficulty for customers to grasp the fit of pants or dresses, Roberts noted. She added that computer-generated programs are evolving that allow consumers to "try on" jeans virtually to see how the pants would look on their own bodies.
Larkins' company works with apparel retailers that target teen girls. He discovered that these shoppers need affirmation from their friends before finalizing a purchase. When they walk into a store, they are often with friends and are able to communicate with them to make sure they are buying the "right" product. He noted there are web tools in development that would allow shoppers to open chat sessions and bring friends into the decision-making process online. Another tool to curb Internet cart abandonment, he said, is a dynamic e-mail system that can recognize that the cart has been abandoned and then send an e-mail quickly to the shopper offering a discount or another type of incentive to encourage the final follow-through.
No More Guessing
The level of integration will vary by brand and by customers' expectations of that brand, Capasso noted. "It will be important for the brand to understand where it fits from a customer's perspective -- whether they want to lollygag or discover, or whether the brand helps them get to where they want to go. Brands are struggling with that." He added that brands are trying to build online communities that allow customers to interact with other shoppers or celebrities.
Larkins said retailers can use new analytical tools to gauge the response they are getting online. "They don't have to guess anymore," he said. In addition to more traditional marketing metrics, such as focus groups based on demographics, new tools are available to measure Internet buzz and feedback from blogging communities, he noted.
"Whether someone has an experience in a store or online or mobile, they will come online and tell about it," suggested Capasso. "The one thing I think you can begin to measure is the impact of better branding, which comes down to how you run and understand the types of data you are collecting." Capasso said he is not a fan of focus groups because of the time lag in getting information. He pointed out that some brands are able to make adjustment and tweaks to their merchandising programs -- such as Internet promotions -- but "real-time feedback is crucial."
Larkins added, however, that despite the potential to enhance online sales with new marketing tools, retailers must still deliver value and remain mindful of their return on investment for new technology. "If you are investing $1 million in a branding program, you better have the measurements in place. If you don't, you are missing the point of [being] online."