May 18, 2009

E-Commerce Growth At Macys: Retail E-Commerce Strrategy

One of our loyal readers forwarded me this article about e-commerce growth at Macys. Their e-commerce channel is growing at a time when retail is imploding.

Retail e-commerce couldn't be more different than the business model that online brands manage, and is fundamentally different than what catalogers manage.

Strategically, the retailer must answer each of three fundamental questions:
  • Is the primary role of our website to function as a research tool for in-store purchases?
  • Is the primary role of our website to drive e-commerce sales?
  • Is the primary role of our website to function as an entertainment and social hub?
The answer to the questions drives the strategy.

Most of us were trained to "optimize" website metrics --- maximizing page views and landing page performance and shopping cart abandonment and conversion rates. Most of those metrics fail to capture the reality of a website-to-retail shopping experience.

Back in the day at Nordstrom, we had the "3-2-1" rule for best customers ... three website visits, two store visits, one purchase (mostly in stores) ... each month. Conversion was measured monthly, linking website visits with store purchases --- never assuming that the website visit caused the store purchase. You didn't care that you had a 4% conversion rate while an online or catalog competitor has a 11% conversion rate, so what? As long as your website facilitated a seamless shopping experience, kudos to you!

The secret is to measure future shopping activity. Once that customer purchases online, or once the customer uses the website to purchase in a store, you measure the "next" most likely behavior. Many retailers find that the e-commerce customer migrates into stores easily, but is less likely to migrate from store purchases to e-commerce. This is a guideline, not a rule --- your mileage may vary.

Retail brands eventually optimize around different parameters than the rest of us:
  • Create an entertainment and social experience online that fuels store growth.
  • Acquire e-commerce customers who live close enough to a store to eventually shop in a store.
  • Calibrate the website as an "information channel" to support retail customers who have no intention of shopping online, but want to use the online channel to learn about merchandise.
  • Be willing to accept sales from customers outside of a retail trade area, so long as it can be done profitably.
  • Ignore traditional metrics that optimize individual visits in favor of longitudinal metrics that demonstrate increased customer value.
You can throw a lot of money at technology, and you'll see sales increase.

You can also view the retail website via strategic options ... knowing how customers flow through the e-commerce and retail ecosystem coupled with a strategic purpose for the website can also result in a sales increase. That's the whole secret behind Multichannel Forensics.

P.S. For all of the web analysts out there --- the retail web analyst has a great job. Retail web behavior is all about art, not science. It's all about discovery and intuition, it's about learning that a 1.3% online conversion rate is really a 13.3% company-wide conversion rate. There's so much to learn, so many secrets. Enjoy!

2 comments:

  1. Hi,

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  2. Your post is pretty illuminating and practical,I completely agree with the above comment. Thanks for the sharing.Will you share more about it? I just want to know more.You are very talented.I guess, this site would be my farorite one. Thank you again!!!

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