December 20, 2006
Go Online Young Man (Woman)
To start with, a bit of techie jargon – the “digital divide” is slowing the achievement of a “knowledge economy”. Translated for ignoramuses like me, it means there are still an awful lot of people not connected to the internet, many through choice. This is allegedly slowing the pace of economic development on a global scale.
Dr. Simon Moores, managing director of Zentelligence and an adviser to the United Nations on internet related issues, no less, stressed the importance of making people aware of the value of going online and ensuring they have access to the internet. “There are people out there who see no value in going online… We have to get young mums and retired people online, for example,” he said.
So what does this have to do with retailing, you may well ask? That is precisely what I wondered when I recently read Jamie Doward’s We’re Wired…But Not Connected piece in the Observer.
So is it all about encouraging people to shop? Perhaps, it is to get more information from consumers before they shop or provide feedback on purchased items or the service they received (or not). Maybe it is about productivity and improving the quality of both front and back of house staff in the short, medium and long term?
In the article, Mr. Doward referred to studies that have shown education is improved through use of the internet.
Ultimately, it may not matter that the biggest users of the internet globally are middle-class young men. Will Davies of the Institute for Public Policy Research (IPPR), said, “Broadband access will become ubiquitous as the population ages and teenagers, weaned on the online world, become parents and then grandparents.” Perhaps all the world has to do is wait.
On the down side, Dr Moores reckoned there will also be tensions, particularly with regard to copyright issues (downloading music, as we have already seen) and freedom of information.
Tim Berners Lee is working with Southampton University in the UK and the Massachusetts Institute of Technology in the US to improve the quality of information available on the web. Mr. Berners warns there is a “great danger that it (internet) becomes a place where untruths start to spread more than truths.”
But, to get back to the link with retailing, it is all about knowing as much as possible and applying that knowledge to operational efficiency and profitability. It’s about innovation and improvement. It’s about globalization, equality and access. There is more to the internet than shopping.
Discussion Questions: How has the internet shaped modern retailing and what will it mean for the future? Does the quality of information online have
any implications for retail?
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Profitable use of the internet is a retailer IQ test. Look at any retailer’s web site. (Instant IQ test failure: no web site.) Higher IQ retailers leveraged a new medium promptly without overspending. They use their sites to sell merchandise profitably (when possible), improve recruitment, advertising and promotion, and enhance their market positioning. If the web site can’t load properly, has broken links, outdated information, and lacks job search data, it probably indicates the management is behind the times in many critical areas, not just their use of technology.
Clearly, the rise of the internet has enabled more and more consumers to learn, research, and shop. And, it’s provided retailers with another sales outlet and a way to communicate more effectively with potential shoppers. Two large obstacles to making this channel effective for both retailer and shopper that I see are:
RETURNS POLICIES – Too many retailers treat the .com end of their operations as a separate entity. Purchase something from a number of multi-channel retailers and you’ll find included with the shipping notice a disclaimer that items are NOT returnable to their stores, only via the websites. This really says to the shopper “We sell to you through various channels but aren’t smart enough to figure out how to integrate them”.
CREDIBILITY – Just as with printed matter, for some reason there are significant numbers of people out there who tend to believe something because they saw it on the internet or it was forwarded to them by a friend (i.e. your hard drive will be erased if you click on this e-mail). Combine this with ever more sophisticated phishing and spoofing and whatever other scams are out there and it potentially makes for some real dangerous situations. And then you get legitimate companies sending account update requests or other e-mails that look like scams but aren’t and it all erodes credibility.
Retailers need to synchronize their channels and do a better job of distinguishing legitimate communications from junk to build better long-term relationships with their customers.
From the December issue of Integrated Retailing:
The Internet has met the necessary and sufficient conditions for any consumer technology to become nearly universal: high levels of accessibility, affordability, simplicity, and utility. As a result the Internet is becoming ubiquitous, used extensively by those in any and all demographic, geographic or socioeconomic groups (young or old, rich or poor, urban, suburban or rural). In fact over half of all Americans now consider the Internet to be indispensable to their lives (Pew Internet and American Life Project). Not just useful or highly valued — indispensable!
Three-quarters of US households now have high-speed broadband Internet access, and an increasing number of Americans are becoming comfortable and competent using the Internet for information and commerce. Of the 80 million US online households, 75% have purchased products over the Internet. Concerns over privacy and piracy are still prominent, but will diminish over time as perceptions of security match the true level of safety now afforded.
Who is benefiting most? Integrated retailers are benefiting most — those who are combining their in-store and online environments both for consumer interface and for back office operations such as inventory and merchandise logistics. Retailers that use their web sites not just as a sales channel but also as a marketing opportunity to drive traffic to their physical stores are benefiting most. Retailers such as Best Buy, Circuit City, Home Depot, Office Max, Ann Taylor, Banana Republic, Talbot’s, Casual Male, REI, Pet Smart and Nordstrom are building income, profits, market share and long-term viability by driving traffic through both online and in-store channels.
Internet access, while almost universal, also has some tenable costs involved that have an impact on retired Americans. I have family members who track their investments, shop, and browse the internet for information on a dial-up line that is their only phone line in the house. They refuse to pay for a second line or are technology challenged and do not want to deal with any other way to connect to the web. They would rather spend their money on vacations, gifts for their grandkids, etc. than spend money on that extra phone line or for a monthly broadband charge. I still have trouble reaching them by phone on the weekend as their line is constantly engaged.
To Madame Hurst’s “it’s about” list, please add control of intimacy. While not referencing the #1 online business, pornography, online shoppers can choose the level of intimacy they prefer. They can be considered part of a closely-defined group, part of a loosely-defined mob, or an anonymous nobody. Their choice, as they go about their website safari. One can choose to use available customer service or eschew it altogether. One needs not shave or bathe to shop online.
One of my firms operates retail websites. We have considerable experience with the channel. Online retailing is about choice; of things you want and things you never knew existed. Research is an important part of “choice,” but is not the primary function. Not unless one equates “research” with “shopping.” There is no study that distinguishes online research from online shopping, especially when you understand that “shopping” does not mean “buying,” but means poking around to see what’s available at what price. That could be called “research,” but we all know it isn’t. “What do you want to do today? Hey, let’s go researching!” When consumers respond to questionnaires that they’re “researching” online, they mean “shopping.”
There is no downside for a retailer to have a professional, brand-consistent web presence. Just like there are still individuals who would rather deal with a bank teller than an ATM, there will always be consumers that avoid the online retail experience, though I agree, they will become few and far between in the coming years. Even teens graduating from low-income, inner city high schools with no computers at home are entering the world with internet knowledge and the ability to assemble a killer Power Point presentation. The retail experience, with automated check-out lines and scanners to check prices, is becoming more high-tech also.
Smart retailers will continue to strive to integrate the online and in-store experiences, while optimizing both.
It is vital for retailers to learn how each of their best customers uses the Internet. If the customer likes email, deliver your relevant promotional offers that way. Don’t deliver offers that are not relevant. If the customer likes to browse on the Internet and buy in the store, deliver your MYRETAILER.COM that way with incentives to the store. If the customer likes to give gifts on the net, make your site friendly to the gift giver.
Then there are the laggards, or tech averse, customers. Make sure you know them, too. Your promotional stance is dramatically different relying on direct mail and physical coupons.
How do you obtain this information? You ask. And you notice the types of transactions your best customers seem to prefer. You want to be a multi-channel retailer? Recognize that your customers probably prefer you in one channel.
The primary use of the Internet for shoppers is research. This is not an opinion, but a published fact. Previous sources of information about products and product choices have rapidly become passé when confronted with the ability of the Internet to deliver copious amounts of information, much of it objective. Advertising used to inform us as much as sell us. Times changed, the informational content dropped. Retailers used to be trusted to have chosen the best products for a given consumer niche in a given category. That credibility has been thrown aside as price and lifestyle image have been emphasized.
The online retail world began as strictly transactional. Combined with the availability of information, consumer behavior began to commoditize most products. If the consumer can learn enough to make a distinguished choice then all that remains is how low a price they can get. Both sets of information are available with relatively little work now.
Retail itself began as a social activity. Retail evolution brought the Mall…a place to congregate, socialize, and shop. Department stores built brand equity through community-building marketing events and activities. Target has created a community around the type of shopper it caters to. In-store merchandising, customer service…it’s all about creating a social community the consumer wants to participate in.
The Internet has spawned its own forms of social communities this past year or so, with MySpace and others forming the basis for online socializing. Retail, if it wishes to transcend the commoditization syndrome, must position itself to provide a social experience online. And no, I don’t mean create mini-MySpaces. Simply, recognize that as sterile as my generation thought the Internet is, it is NOT to large sections of the consuming public. Enhance, entertain, connect, excite and empower. These should be the mantras for online retailing.
My thoughts, which may be somewhat different than most you get:
Online shopping is still too hard/takes too long and can be extremely frustrating. It’s in part why for many retailers, most of the online business still comes from customers who find what they want from a catalog first. And frankly, it can be just as quick and maybe even less painful then to just pick up the phone and call in the order. So, online adoption may just have some ceiling of usage….
The whole digital divide discussion just reinforces to me the multichannel nature of most markets these days, especially retail. I think for a long while we will need to be able to interact and transact with people in the way they want, either generally or for this specific transaction. So, as long as you have non online paths, the impact is minimal for the non-digital.
Unless, for cost economics alone, retailers — and others — simply drive everyone online whether they want to go there or not. As voice response systems and going online become the only way to interact with a company, these now do become problems for the more digitally challenged, and certainly we are seeing this in other areas (e.g. growing charges in the airline industry for daring to make a reservation over the phone with a human being).
So in the end, for retail at least, I think it is mostly about the viability of the store front format, both generally and for specific retailers. As long as that model works — and of course it will forever and must in many categories, but probably somewhat diminished over time from online — I think the digital divide impact in retail is minimal, especially if retailers provide kiosks or other facilities — with in store help — for walk-in customers to see what is available only online, etc.
I think the digital divide issues are bigger in areas outside of retail….
A great deal of retailing has functioned in a passive manner relative to shoppers. However, online retailing has taken a much more active role, through learning who is clicking those screens, what their interests are, and how best to expedite their purchases. Notice how when you buy a book at Amazon, there is an IMMEDIATE offering of other books that other people buying “your” book have been buying. This is an outstanding example of active retailing. Taking the merchandise to the shopper, rather than expecting the shopper to search and find the merchandise.
This process will be occurring in stores in the very near future. I could name three cutting edge initiatives by the most forward thinking retailers in the country, that are pursuing this objective. With or without technology, any retailer COULD participate in active retailing. However, the ultimate will be to bring context based selling to EVERY shopper in the store, not just the few techies, early adopters, in our midst.
Until a few weeks ago, I expected that it would be 5 – 10 years before we would see this development, but we are about to have the internet deployed on every cart, at least in some stores. And the screens continuously offered will be context based, whether the shopper chooses to interact or not. This will mean that shoppers who are never otherwise on the internet, will have an up-close and personal experience with it, with or without their own “clicking” to make it even more personal.
I’ve said here before that retailers need to think online as a model for offline shopping. The revolution that is upon us will be far more significant than the introduction of electronic scanning technology in the 70s. Then it was mostly a matter of creating efficiencies in the checkout process. (What a passive process, as far as selling.) This time it will be skillful context based offering. It’s possible that late adopters will simply not be able to get into the game, later.
I think the Internet’s biggest impact on retailing has been to make a global marketplace accessible. A retailer selling online can draw customers from all over the world. However there are too many retailers that are America-centric. They need to design their websites and purchasing process to accommodate customers who aren’t from the USA. (For example, being set up to handle non-US billing and shipping addresses).
I am not very sympathetic to the conversation about internet laggards. Yes, they are out there. But, for the most part, it’s their own choice not to have access. Getting connected to the internet is not a lot more expensive in relative terms than getting a television used to be. And only the most poverty-stricken households could not own a TV. The internet offers the kind of access to knowledge and information that the public library could. It has the potential to be one of the greatest equalizers of all time. In addition — making the connection to retailing — it gives people access to products they might never have known about or have been able to find.
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Profitable use of the internet is a retailer IQ test. Look at any retailer’s web site. (Instant IQ test failure: no web site.) Higher IQ retailers leveraged a new medium promptly without overspending. They use their sites to sell merchandise profitably (when possible), improve recruitment, advertising and promotion, and enhance their market positioning. If the web site can’t load properly, has broken links, outdated information, and lacks job search data, it probably indicates the management is behind the times in many critical areas, not just their use of technology.
Clearly, the rise of the internet has enabled more and more consumers to learn, research, and shop. And, it’s provided retailers with another sales outlet and a way to communicate more effectively with potential shoppers. Two large obstacles to making this channel effective for both retailer and shopper that I see are:
RETURNS POLICIES – Too many retailers treat the .com end of their operations as a separate entity. Purchase something from a number of multi-channel retailers and you’ll find included with the shipping notice a disclaimer that items are NOT returnable to their stores, only via the websites. This really says to the shopper “We sell to you through various channels but aren’t smart enough to figure out how to integrate them”.
CREDIBILITY – Just as with printed matter, for some reason there are significant numbers of people out there who tend to believe something because they saw it on the internet or it was forwarded to them by a friend (i.e. your hard drive will be erased if you click on this e-mail). Combine this with ever more sophisticated phishing and spoofing and whatever other scams are out there and it potentially makes for some real dangerous situations. And then you get legitimate companies sending account update requests or other e-mails that look like scams but aren’t and it all erodes credibility.
Retailers need to synchronize their channels and do a better job of distinguishing legitimate communications from junk to build better long-term relationships with their customers.
From the December issue of Integrated Retailing:
The Internet has met the necessary and sufficient conditions for any consumer technology to become nearly universal: high levels of accessibility, affordability, simplicity, and utility. As a result the Internet is becoming ubiquitous, used extensively by those in any and all demographic, geographic or socioeconomic groups (young or old, rich or poor, urban, suburban or rural). In fact over half of all Americans now consider the Internet to be indispensable to their lives (Pew Internet and American Life Project). Not just useful or highly valued — indispensable!
Three-quarters of US households now have high-speed broadband Internet access, and an increasing number of Americans are becoming comfortable and competent using the Internet for information and commerce. Of the 80 million US online households, 75% have purchased products over the Internet. Concerns over privacy and piracy are still prominent, but will diminish over time as perceptions of security match the true level of safety now afforded.
Who is benefiting most? Integrated retailers are benefiting most — those who are combining their in-store and online environments both for consumer interface and for back office operations such as inventory and merchandise logistics. Retailers that use their web sites not just as a sales channel but also as a marketing opportunity to drive traffic to their physical stores are benefiting most. Retailers such as Best Buy, Circuit City, Home Depot, Office Max, Ann Taylor, Banana Republic, Talbot’s, Casual Male, REI, Pet Smart and Nordstrom are building income, profits, market share and long-term viability by driving traffic through both online and in-store channels.
Internet access, while almost universal, also has some tenable costs involved that have an impact on retired Americans. I have family members who track their investments, shop, and browse the internet for information on a dial-up line that is their only phone line in the house. They refuse to pay for a second line or are technology challenged and do not want to deal with any other way to connect to the web. They would rather spend their money on vacations, gifts for their grandkids, etc. than spend money on that extra phone line or for a monthly broadband charge. I still have trouble reaching them by phone on the weekend as their line is constantly engaged.
To Madame Hurst’s “it’s about” list, please add control of intimacy. While not referencing the #1 online business, pornography, online shoppers can choose the level of intimacy they prefer. They can be considered part of a closely-defined group, part of a loosely-defined mob, or an anonymous nobody. Their choice, as they go about their website safari. One can choose to use available customer service or eschew it altogether. One needs not shave or bathe to shop online.
One of my firms operates retail websites. We have considerable experience with the channel. Online retailing is about choice; of things you want and things you never knew existed. Research is an important part of “choice,” but is not the primary function. Not unless one equates “research” with “shopping.” There is no study that distinguishes online research from online shopping, especially when you understand that “shopping” does not mean “buying,” but means poking around to see what’s available at what price. That could be called “research,” but we all know it isn’t. “What do you want to do today? Hey, let’s go researching!” When consumers respond to questionnaires that they’re “researching” online, they mean “shopping.”
There is no downside for a retailer to have a professional, brand-consistent web presence. Just like there are still individuals who would rather deal with a bank teller than an ATM, there will always be consumers that avoid the online retail experience, though I agree, they will become few and far between in the coming years. Even teens graduating from low-income, inner city high schools with no computers at home are entering the world with internet knowledge and the ability to assemble a killer Power Point presentation. The retail experience, with automated check-out lines and scanners to check prices, is becoming more high-tech also.
Smart retailers will continue to strive to integrate the online and in-store experiences, while optimizing both.
It is vital for retailers to learn how each of their best customers uses the Internet. If the customer likes email, deliver your relevant promotional offers that way. Don’t deliver offers that are not relevant. If the customer likes to browse on the Internet and buy in the store, deliver your MYRETAILER.COM that way with incentives to the store. If the customer likes to give gifts on the net, make your site friendly to the gift giver.
Then there are the laggards, or tech averse, customers. Make sure you know them, too. Your promotional stance is dramatically different relying on direct mail and physical coupons.
How do you obtain this information? You ask. And you notice the types of transactions your best customers seem to prefer. You want to be a multi-channel retailer? Recognize that your customers probably prefer you in one channel.
The primary use of the Internet for shoppers is research. This is not an opinion, but a published fact. Previous sources of information about products and product choices have rapidly become passé when confronted with the ability of the Internet to deliver copious amounts of information, much of it objective. Advertising used to inform us as much as sell us. Times changed, the informational content dropped. Retailers used to be trusted to have chosen the best products for a given consumer niche in a given category. That credibility has been thrown aside as price and lifestyle image have been emphasized.
The online retail world began as strictly transactional. Combined with the availability of information, consumer behavior began to commoditize most products. If the consumer can learn enough to make a distinguished choice then all that remains is how low a price they can get. Both sets of information are available with relatively little work now.
Retail itself began as a social activity. Retail evolution brought the Mall…a place to congregate, socialize, and shop. Department stores built brand equity through community-building marketing events and activities. Target has created a community around the type of shopper it caters to. In-store merchandising, customer service…it’s all about creating a social community the consumer wants to participate in.
The Internet has spawned its own forms of social communities this past year or so, with MySpace and others forming the basis for online socializing. Retail, if it wishes to transcend the commoditization syndrome, must position itself to provide a social experience online. And no, I don’t mean create mini-MySpaces. Simply, recognize that as sterile as my generation thought the Internet is, it is NOT to large sections of the consuming public. Enhance, entertain, connect, excite and empower. These should be the mantras for online retailing.
My thoughts, which may be somewhat different than most you get:
Online shopping is still too hard/takes too long and can be extremely frustrating. It’s in part why for many retailers, most of the online business still comes from customers who find what they want from a catalog first. And frankly, it can be just as quick and maybe even less painful then to just pick up the phone and call in the order. So, online adoption may just have some ceiling of usage….
The whole digital divide discussion just reinforces to me the multichannel nature of most markets these days, especially retail. I think for a long while we will need to be able to interact and transact with people in the way they want, either generally or for this specific transaction. So, as long as you have non online paths, the impact is minimal for the non-digital.
Unless, for cost economics alone, retailers — and others — simply drive everyone online whether they want to go there or not. As voice response systems and going online become the only way to interact with a company, these now do become problems for the more digitally challenged, and certainly we are seeing this in other areas (e.g. growing charges in the airline industry for daring to make a reservation over the phone with a human being).
So in the end, for retail at least, I think it is mostly about the viability of the store front format, both generally and for specific retailers. As long as that model works — and of course it will forever and must in many categories, but probably somewhat diminished over time from online — I think the digital divide impact in retail is minimal, especially if retailers provide kiosks or other facilities — with in store help — for walk-in customers to see what is available only online, etc.
I think the digital divide issues are bigger in areas outside of retail….
A great deal of retailing has functioned in a passive manner relative to shoppers. However, online retailing has taken a much more active role, through learning who is clicking those screens, what their interests are, and how best to expedite their purchases. Notice how when you buy a book at Amazon, there is an IMMEDIATE offering of other books that other people buying “your” book have been buying. This is an outstanding example of active retailing. Taking the merchandise to the shopper, rather than expecting the shopper to search and find the merchandise.
This process will be occurring in stores in the very near future. I could name three cutting edge initiatives by the most forward thinking retailers in the country, that are pursuing this objective. With or without technology, any retailer COULD participate in active retailing. However, the ultimate will be to bring context based selling to EVERY shopper in the store, not just the few techies, early adopters, in our midst.
Until a few weeks ago, I expected that it would be 5 – 10 years before we would see this development, but we are about to have the internet deployed on every cart, at least in some stores. And the screens continuously offered will be context based, whether the shopper chooses to interact or not. This will mean that shoppers who are never otherwise on the internet, will have an up-close and personal experience with it, with or without their own “clicking” to make it even more personal.
I’ve said here before that retailers need to think online as a model for offline shopping. The revolution that is upon us will be far more significant than the introduction of electronic scanning technology in the 70s. Then it was mostly a matter of creating efficiencies in the checkout process. (What a passive process, as far as selling.) This time it will be skillful context based offering. It’s possible that late adopters will simply not be able to get into the game, later.
I think the Internet’s biggest impact on retailing has been to make a global marketplace accessible. A retailer selling online can draw customers from all over the world. However there are too many retailers that are America-centric. They need to design their websites and purchasing process to accommodate customers who aren’t from the USA. (For example, being set up to handle non-US billing and shipping addresses).
I am not very sympathetic to the conversation about internet laggards. Yes, they are out there. But, for the most part, it’s their own choice not to have access. Getting connected to the internet is not a lot more expensive in relative terms than getting a television used to be. And only the most poverty-stricken households could not own a TV. The internet offers the kind of access to knowledge and information that the public library could. It has the potential to be one of the greatest equalizers of all time. In addition — making the connection to retailing — it gives people access to products they might never have known about or have been able to find.