The E-Retail Revolution1 Mar, 2015 By: Pat Cauley Response
The advent and increasing maturity of the Internet, with its ability to immediately connect consumers with their retail destination of choice — anytime and anywhere — has changed the marketplace forever. By following a few tried-and-true digital maps, the road to success in e-commerce retail may not be as far away as you thought.
One of Super Bowl XLIX’s most stimulating commercials last month began with a clip of Katie Couric and Bryant Gumbel reporting on — and completely bewildered by — the dawn of the Internet during a 1994 segment of The Today Show.
“What is Internet anyway? What do you write to it like mail?” a perplexed Gumbel inquired about what we all now consider to be a standard e-mail address. Then, the ad creatively transports the former anchors to present day, inside the new BMW i3, where they’re equally as puzzled about the car’s technological advancements. The ad’s tagline reads, “Big ideas take a little getting used to.”
All jokes aside, the ad’s poignant nostalgia begs the question of what the world looks like now — where practically any human transaction can occur online rather than in-person or in-store?
A Numbers Game
One thing most people can agree on is that the numbers don’t lie. According to eMarketer, business-to-consumer worldwide e-commerce sales in 2014 were up by 20 percent from 2013, with sales expected to top $2.3 trillion by 2018.
Domestically, U.S. e-retail sales are expected to grow from $263 billion in 2013 to $414 billion in 2018, a compound annual growth rate of 9.5 percent, according to a new online retail sales forecast from Forrester Research.
“It’s gone from a case where it was, in the early stages, only kind of niche products that were being bought online. Now, you can buy anything and everything online — and it’s made life that much easier. I just think as the buying power shifts to younger generations who are more trusting of e-commerce, more and more people will just be buying stuff online,” says Sam Kennedy, editor-in-chief at Techweek, a leading tech media and events company.
Techweek’s events bring together fledging startups, emerging growth companies and titans of technology, including: Facebook, Google, Microsoft, Uber, Dropbox, Dell, GILT, Bonobos, reddit, and Salesforce — to name a few.
One brand that has successfully harnessed the millennial generation online is Los Angeles-based clothing line Show Me Your Mumu. “Mumu is a great story,” says Louis Hoffer, vice president of e-commerce for the company. “When I first got access to the Google Analytics numbers, I was blown away by the amount of interaction and the amount of revenue coming out of the site for having almost no investment in digital marketing outside of organic mentions.”
The brainchild of two young entrepreneurs, Cammy Herbert and Cologne Schmidt, Mumu began as ambitious idea in 2009 that today has blossomed into a multimillion-dollar clothing empire. Mumu is a perfect example of a company that brilliantly utilized the Internet to grow a loyal following, brand, and e-commerce business.
“What you want is a core set of customers who are loyal,” Hoffer says. “The unique side of this brand is the passion that we’re getting from the core customer. I’ve never really seen this with any brand.”
Digital Hot Buttons
How does one convert evangelical brand loyalists into online sales?
“Because they’re so passionate, they definitely leave a customer service paper trail of what they want. We’re trying to get as much feed back as possible from all those users from social channels, online chat, and customer service e-mails, and then just taking a lot of things that make sense and reapplying, investing and implementing what customers want back into the site,” says Hoffer.
He notes that when you’re getting multiple requests or questions about the same thing, it’s probably worthwhile to invest in that change.
“Customer service is the way that companies are able to make up for and earn the trust of their customers, who are very used to buying things online,” says Kennedy.
However, not all e-commerce companies have a perfect handle on the customer service piece of the puzzle. “There are companies where the customer service department is off in the corner and they’re left alone and they’re just really only expected to issue refunds and kind of keep a customer happy from a monetary perspective,” says Hoffer.
For those who may be lacking in the customer service department but don’t have the internal manpower to handle, Hoffer recommends companies like Zendesk, which provides a cloud-based customer service platform that includes ticketing, self-service options, and customer support features.
Customer service aside, packaging is another way that e-retailers can stand out to consumers. Kennedy says, “I’ve heard of companies spending more money on packaging than the cost of the product that they’re shipping. Receiving that package and opening it up kind of replaces the in-store experience, so some companies have been willing to spend a lot of money on packaging.”
Moreover, another cross-promotional marketing hook Kennedy has seen is surprise gifts in packages. “Let’s say you order a set of eyeglasses from Warby Parker, and they stick in a razor from Harry’s — the two companies share founders, so that’s the type of thing that doesn’t necessarily cost them. It’s something that’s a little bit cooler for the customer to open up a package and have a surprise gift or something extra that they didn’t necessarily order,” says Kennedy.
In fact, this is a tactic that Mumu is actively pursuing right now. “We’re looking into partnering with like-minded sites that aren’t necessarily direct competitors,” Hoffer says. “We’re thinking about doing stuff around music festivals like Stagecoach and Coachella, perhaps offering a ‘Mumu Survival Kit’ and branching out with other brands that aren’t selling clothes, but are selling other products like sunscreen or fanny packs. If they scratch our back, we’ll scratch theirs, and then we open up that complimentary piggybacking and mentioning across each other’s social channels.”
Payment processing is another key factor that online vendors need to be mindful of. “Make sure you’re using a payment processor that not only has secure payment processing, but also advertises it,” Kennedy says. “Your customers are more apt to make the purchase if there are Norton Antivirus and trusted merchant logos displayed. It just makes you more comfortable to punch in your credit card when you see icons that signify that the merchants you’re making purchased from are trustworthy,” says Kennedy.
When it comes to e-commerce payment solutions, PayPal is still king, but others are certainly nipping at its heels. “PayPal is obviously the current monster when it comes to integration and offering that payment method of one login where you never need to enter your address information again,” Hoffer says. “At every single channel, it seems like Amazon has been fighting to add their checkout to compete with PayPal, but I think they’re a little late to the game. I definitely see the benefit of having Amazon on the checkout screen because it’s one-step checkout. It’s trying to eliminate the user from hesitating. But, I really feel like what would completely put the nail in the coffin or explode that idea is having something pre-installed on a browser that a user never has to open.”
Hoffer argues that advances in payment processing would be good news for a lot of retailers and bad news for others. “Some retailers really want to capture as much customer information as they can for re-marketing purposes, and who knows if, with a unified shopping plug-in, all that information just floats out of your hands? But, it would be one wallet to kind of knock out PayPal and knock out Amazon. We’re talking about never taking out your credit card. And that’s a killer app in e-commerce — really trying to make these purchases as ‘impulse’ as possible,” he says.
Regardless of how the payment processing landscape shifts, it doesn’t take away from the fact that Amazon is the biggest e-commerce force in the world.
Kennedy says, “When Amazon first came to be, it sold books on the Internet. Now you can go on Amazon and quite literally buy anything under the sun. It’s finding ways to go from a very specific vertical. They built the brand by cornering and owning a particular market and they probably saw it was cheaper or more cost effective to sell books online, so they hooked their customers that way first and they earned their trust. That’s one way that the e-commerce companies have sort of done it right — the giants out there are selling everything. They’re not married to one industry or product or another.”
While Hoffer applauds Amazon’s ability to hit so many different markets, it appears he believes it’s an anomaly. “You can’t be everything to everyone — that’s when things get diluted,” he says. “You look at a company like Uber or Airbnb, and you look at those applications and they’re so good because they’re doing one thing and they do it extremely well.”
Kennedy echoes those sentiments. “Start by doing one thing very well and that’s how you build trust in your brand,” he says. “Once you have the traffic and the customer base to sort of spread your wings and do everything, that’s when you’ve nailed it. But the barriers to entry are pretty immense, so you’ve got to know that your customers are going to follow you when you start by selling books and then start selling groceries 10 years later.”
But, the truth is, not every brand needs or even wants to become an Amazon. For those entrepreneurs simply who want to polish up their e-commerce presence, there are few surefire things keep in mind when bolstering a site.
Hoffer explains that Mumu is trying to tailor and build more dynamic marketing efforts into its e-mail and homepage by better segmenting existing customer data and taking their browsing history from the site for retargeting purposes.
“That’s something Amazon does so well. If you come to that home page and you’re logged in, it’s a completely different user experience in terms of what products are in those main marquees. For a lot of other brands, maybe it’s not on their radar, maybe they haven’t invested in it, or maybe they’re just afraid it’s going to destroy the look or aesthetic they need for brand cohesiveness,” he says.
For Hoffer, the leaner and meaner that the site is, the better the conversion. “If you have a site that’s really cluttered and muddled and trying to do too much on the homepage, then the customer’s focus is broken up into too many directions,” he says.
Hoffer cites Warby Parker and Bonobos as stellar examples of brands that tailor their sites toward their customer. “But, that’s always the kind of push and pull, having a site a certain way because we need to brand the site and make it recognizable, or make it dynamic so that it caters to the customer based on what they want,” he says.
Kennedy agrees that many retailers struggle with finding the right online identity. “A lot of the luxury brands that have tried to carve out their niche of the e-commerce market have failed, and they’ve been replaced by new brands that sell luxury products,” he says.
He uses Trunk Club as a prime example. “Trunk Club doesn’t make clothes; it buys clothes that haven’t been sold in brick-and-mortar,” Kennedy says. “They’re new clothes, but they’re in the secondary market because they didn’t sell the first time around wherever they were. They’re still luxury brand items that are sold at a margin by a middleman. Trunk Club’s doing really well. But, I know DKNY, for instance, had this big social media push a couple years ago. They brought in an expert who was going to ‘technify’ that higher-end fashion brand, and I don’t know that it necessarily panned out for them. They’re being outpaced by the Trunk Clubs of the world.”
In general, he finds that the more you can create an in-store type of experience online, the better. That being said, perhaps the most ironic factor in this entire e-commerce equation is the former online-only retailers coming full circle —stepping out of digital and back into the physical world.
All Roads Lead Home
“There’s a frequent debate that I’ve seen within online companies — companies like Dorothy Perkins and Bonobos that are now opening up pop-up shops or brick-and-mortar storefronts. It’s like the reverse of trends that you saw throughout the late 1990s or early 2000s, where brick-and-mortar stores were kind of falling by the wayside,” says Kennedy.
He contends that an internal debate exists for Internet retailers about whether to open a brick-and-mortar location. Often, it’s not necessarily cost effective, but it can be a solid branding exercise.
“There’s a certain feel you get by entering a store that you can’t really recreate online,” Kennedy says. “Online brands opening up brick-and-mortar shops is a way to show their customers what they’re about in a physical sense. It’s kind of hard to measure that ROI, but there are people out there who really believe in brick-and-mortar as a good way to brand. For instance, TOMS was an online brand long before they had the coffee shop store on Abbot Kinney, so you’re really seeing somewhat of a reverse trend to a degree.”
Interestingly, another brand that’s had a pop-up shop on Venice, Calif.’s famed Abbot Kinney Blvd. is none other than Show Me Your Mumu.
Still, according to a new report from Americommerce, e-commerce is on track to outpace brick-and-mortar growth in the next five years. When it comes to Mumu, Hoffer looks to the future eager and optimistically. Roughly a year and a half ago, Mumu had only 10,000 followers on Instagram. Today, it’s at 82,000 and counting.
“At the end of the day, you’re trying to get consumers to adapt to a lifestyle. We’re trying to factor in things our customers already love — whether it’s the celebrities they love, the music they love, the events they love, certain holidays — and then take some of that insight and inject it into digital and give them a place to play outside of just shopping,” he says.
Looking back, it seems almost unfathomable that one-time brick-and-mortar giants would either go out of business or shut their physical doors to instead open virtual ones. But, with innovation comes opportunity for success. And nimble Internet retailers are finding it. ■