Tuesday, February 22, 2011
Retail ecommerce spending in Canada is beginning to catch up with the US. In 2011, spending is expected to reach $18.5 billion, a 12% increase from 2010. By 2015, online spending will nearly double in Canada, reaching $30.9 billion.
A complete report, Canada Retail Ecommerce Forecast: Measured Growth Ahead, is available with eMarketer Total Access.
Thursday, January 13, 2011
In 2010, mobile shopping activity began to have a noticeable influence on ecommerce sales. The momentum culminated in a coming out party during the holiday season. Consumers discovered that mobile phones helped them to stay within their budget and be more efficient in checking-off the items on their holiday shopping list.
According to a survey by SapientNitro, a marketing and technology services company, smartphone owners integrated their devices into their shopping routine by using them to find deals, research products, solicit opinions from friends and family on products of interest, share information about a shopping experience with friends on a social network and, of course, buy products.
“Portability is a game-changer in transforming the way that people shop,” said Chris Davey, worldwide head of commerce at SapientNitro. “Technology is causing some of the biggest shifts in human behavior that we’ve seen in years, and consumers are more informed and empowered than ever. This has a major impact not only on the way that consumers shop but also on the way that retailers need to market to consumers….”
More mobile shopping activity was reflected in the numbers reported by eBay, Google and ShopSavvy, among others.
While these statistics bode well for the future of mobile commerce, consumers still have concerns about using their device for shopping. The mobile shopping experience is somewhat awkward, and some consumers have concerns about credit card security when they order by smartphone.
Such worries are a reminder of similar objections people raised during the early days of ecommerce. However better engineered mobile devices and designed apps will improve the shopping experience. Also, as the uninitiated hear stories from friends and family about their accomplishments while mobile shopping, they will gain the courage to try it too.
Further, strong growth in new ownership of smartphones also bodes well. eMarketer expects the number of smartphone users to grow 22% in 2011, bringing the percentage of the population owning a smartphone to 23% this year compared with 19% in 2010.
The bottom line: Retailers who have invested money in building a mobile program but have not received a commensurate return will begin to see their efforts bear fruit in 2011. Retailers who have not invested are losing valuable time on the learning curve.
Tuesday, December 14, 2010
Groupon’s quick success has spawned dozens of copycat daily deal sites, but will these sites continue to flourish? Only if marketers become savvier to the new breed of consumer in today’s digital world.
From a consumer point of view, the problems with the Groupon model are these:
Problem #1: Deals aren’t targeted enough. Groupon subscribers are offered great local deals, but “local” doesn’t always equal “relevant.” A recent visit displayed discounts on everything from jewelry to indie film club subscriptions to colon hydrotherapy sessions. (And let’s face it, some things, like sushi and Botox, just shouldn’t be purchased at a discounted price.)
Niche deal sites—like Plum District for moms and Scoutmob for hipsters—seek to solve this problem, though right off the bat they’re limited by scale.
Although it spurned Google’s acquisition offer, Groupon is taking a page from Google’s do-it-yourself ad-placement playbook in the next iteration it is rolling out. Groupon Stores will allow local merchants to set up deals for themselves without going through a Groupon salesperson. Customers will have the option to follow stores they like, and be alerted to new deals as they’re posted, which if used will make the process more customizable and the ads—potentially—more relevant.
Problem #2: Merchants lose control. Do marketers really need Groupon to blast their own deeply discounted offers (especially when they’re being charged a commission to do so)? Furthermore, wouldn’t they prefer to have control over the deal than cede it to a third party?
Gap, for example, has received lots of buzz as Groupon’s first national partner. While most observers saw the Gap deal as a success, Augustine Fou, chief digital officer at Omnicom’s Healthcare Consultancy Group, said in a Mashable post that the Gap effort “is a prime example of when NOT to use Groupon.” He said that the more press Gap got the more money they lost, estimating that the retailer was out at least $7.5 million from the campaign. Unless that money is considered part of an advertising budget, it’s a dingy deal for big-name national stores.
Once large retailers figure out how to do it, there’s nothing to stop them from hosting their own daily deals. Neiman Marcus, for example, has already followed in flash sales site Gilt Groupe’s footsteps by launching its own branded “Midday Dash” sales. Local retailers with smaller marketing muscles, on the other hand, might find a one-time Groupon run worthwhile for drawing in new customers.
Problem #3: It goes against consumers’ natural instincts. What’s amazing about Groupon is that in a world where consumers have become accustomed to instant gratification, they’ve managed to get people to pay for goods and services they might not cash in on for months—or (as was the case with a spray tan I purchased on a whim) for goods they’ll never remember to use.
Although merchants benefit from this arrangement because they don’t actually pay for marketing until they get a customer in the door, how many times can we expect consumers to take a gamble with their money?
To make their offers more enticing for customers, some deal-of-the-day sites have shied away from the group-buying model. Instead of promising retailers a certain return, they give subscribers a passcode that will get them a discount at the time of check out, or when the restaurant bill is paid.
My favorite example of this kind is BlackboardEats, which sends coupon codes to users for 30% off to a pretty fantastic range of restaurants. No payment up front, no buyer’s remorse and a friendly reminder of the specials you’ve acquired.
Plus, BlackboardEats only features restaurants selected by their staff of experienced food editors, giving it a more exclusive feel. Wonderful for diners—not so wonderful for restaurants when the discounts cut into their slim profit margins (although BlackboardEats, unlike Groupon, doesn’t charge restaurants a fee to participate).
Problem #4: Whether merchants will see return customers is questionable. The success of Groupon tells us that consumers are willing to try new products and brands, but these types of deal sites don’t necessarily encourage brand loyalty. After a consumer has received a great deal on flowers from one vendor, will they return to that same vendor, or look for a great deal on flowers from a vendor of seemingly equal quality?
According to Crain’s New York Business, some restaurateurs are convinced daily deal sites don’t work in their favor. “A lot of them are like mosquitoes on your back,” said Tracy Nieporent, a partner in Myriad Restaurant Group. “They suck your blood and give you a little sting, and they all perceive us as a way to make money.”
And it isn’t only restaurant businesses that are displeased. In fact, in a study done by Rice University, 40% of merchants said they wouldn’t run a Groupon deal again. (However, Groupon CEO Andrew Mason maintains that 97% of participants want to be featured on the site again.)
For merchants whose goal is simply to bring in large numbers of new customers, Groupon-like deals work well. Scott Bankey, co-owner of the New York restaurant Nolita House can vouch for this. His “Buy $20 dollars worth of food for $10” deal with Groupon exceeded his expectations. His restaurant saw increased exposure through voucher-holders who brought friends, and he got to pocket the money from voucher-holders who didn’t show up at all, he told Crain’s.
Will Bankey participate again? Maybe, but he’s already begun running his own $10-for-$20 promotions, so what’s the point?
Problem #5: Groupon cheapens brands. Even if a consumer does become a fan of a product after purchasing it from a daily deal site, how willing will they be to pay full price for the jeans or gym membership the next time around? As Crain’s points out, Groupon feeds this kind of deal addiction, and as a result consumers will be unlikely to go where they can’t get a good deal.
That is, unless a brand has maintained prestige by never offering mass deep discounts in the first place.
The opportunity for marketers. As consumers become accustomed to never paying full price, merchants and retailers will need to react, without cheapening their brands in the mean time. Maintaining exceptional quality and providing great customer service will always help develop true brand advocates.
But smart brands that want to compete with Groupon will pay more attention to their returning clientele, and offer these best customers more generous and exclusive rewards. “You want first shot at deeply discounted unsold inventory? It’s all yours. A new coupon with every purchase? Here, have two. By the way, have you heard about our friends and family sale? Just keep the tweets coming, please.”
The bottom line: Consumers will always love a good deal. But they’ll also fall harder for their favorite brands when their loyalty is rewarded with great, exclusive deals.
Thursday, December 2, 2010
2010 is proving to be the first year for widespread mobile shopping. Consumers in greater numbers are using their mobile devices to assist in in-store shopping, from browsing retailer websites to scanning barcodes to get product and price comparison information to checking in to search for deals. Not for nothing is Google considering paying up to $6 billion to acquire Groupon.
Some recent headlines attest to this trend in mobile-enabled commerce:
As impressive as these developments are, it’s on the payments side that mobile still has the farthest to come. With some exception, most consumers are not yet using their devices to complete their purchases. eBay is the exception that proves the rule, if only because it is so far out in front of every other company aside from Amazon in the volume and revenues it generates from mobile. eBay projects that it will sell $1.5 billion in goods via mobile devices in 2010, more than double the gross merchandise value it saw in 2009.
PayPal is a big driver of eBay’s mobile success. The New York Times reported that it is on pace to handle upwards of $700 million in mobile transactions this year. That sounds like a big number, but according to the Times, it’s “less than 1% of the money processed through PayPal.”
On the other hand, it’s a big enough number to be threatening to a lot of the entrenched players in the payments space, mobile or otherwise. That includes the carriers as well as credit card companies, all of whom fear being cut out of the loop, particularly at a time when mobile transaction volumes are on a steep upswing.
Not surprisingly, then, there are many new mobile payment initiatives emerging. Just prior to the Thanksgiving holiday, Verizon Wireless, AT&T and T-Mobile announced they were joining together to form Isis, a system that will use near-field communication (NFC) to facilitate contactless payments (as well as offering credit, debit, prepaid and a potential host of other services). As Silicon Alley Insider noted, the joint venture is a big deal “because getting the carriers to agree on anything is generally very hard to do.”
However, uniting a trio of fierce competitors is only the first hurdle. Driving adoption and managing the differing needs of other participants in the banking and payments value chain are formidable challenges as well. The three carrier partners in Isis, with more 200 million subscribers between them, do have the advantage of a built-in scale and many established mechanisms for marketing the payment solution to subscribers. On the other hand, as the always astute Greg Sterling observed, consumers do not have a lot of trust in the carriers, which may work against uptake of a carrier-sponsored solution.
As I noted in my May 2010 report, “Mobile Banking: Financial Services Firms Look to Cash In” (full report available for Total Access subscribers only), much of the excitement and innovation in the financial services space is being driven by the desire to solve the mobile payments challenge. Consumer demand is there and an effective system would certainly help to encourage more sophisticated forms of mobile commerce. Whether Isis will emerge as a contender remains to be seen.
The bottom line: the mobile payments space need not be a winner-take-all scenario. Whichever service or services that offer security, convenience and scale have a strong change for success.
Tuesday, November 30, 2010
Cyber 5—the five days from Thanksgiving to cyber Monday—have hit record sales.
Online sales for the Cyber 5 grew 26% over the same period in 2009, for the customers active with ChannelAdvisor, which provides ecommerce software and services and tracks 129 of Internet Retailer Top 500 retailers. On Cyber Monday specifically, online sales surged nearly 20% from last year, defining the day as the biggest shopping day of the year so far, according to new data from Coremetrics, a unit of IBM Corp.
So, the 2010 holiday sales season is going to be a blockbuster, right? The answer is a resounding—maybe.
eMarketer had forecast online holiday season sales of $38.5 billion, a rise of 14.3% over last year. Based on unexpectedly high online spending over this past weekend, the forecast now seems low by a couple of percentage points. But that’s assuming that consumers haven’t already blown the bulk of their holiday budgets. A big unknown is whether consumers will continue to spend online (or offline) at the same pace that they did this weekend.
Retailers’ aggressive promotions enticed consumers to swarm online and spend early on in the season. But while this ploy worked over the Cyber 5, it could backfire in the long run. Retailers, traumatized by the recession, may be offering steeper discounts than they can really afford to lure shoppers and may end up reaping lower profits or even losing money.
Another scenario is that the retailers will cap their promotions, which would result in December online spending slowing down and having less dramatic impact on total online holiday spending.
Or, December could play out as the optimists are predicting: consumers who saved big over the weekend will be grateful for the early boost, so grateful in fact that they’ll return to those same retailers to complete their holiday shopping.
My prediction is that the online holiday sales will be steady and growth will continue on an upward trajectory. Though this month won’t be an extension of the Cyber 5 buying bonanza, it will definitely be a black December.
