Blogs

A couple of weeks ago we touched the subject of social capital and that the potential to collect and structure social input is enormous. This social input is what collective buying sites are built upon. One of the biggest players is Groupon, a company which is based on the same notion of collective buying as many of its competitors: A daily deal on things to do, see and buy in your local city.

And while collective buying is getting hotter by the minute this is not a new commercial phenomenon. In the middle of the 90s many Asian retail players started bringing the offline behavior of mob shopping, also known as Tuangou, online. Tuangou refers to the consumer behaviour of connecting a network of people wishing to buy the same thing as you and approaching the local store together, aiming to get a cheaper price (trading volume for margin). For retailers this behavior offers an opportunity to increase brand awareness as well as revenue. Apart from the revenue coming from the deal itself (which with discounts landing on 50-70% probably isn’t all that much) it can lead to added in-store spending (the redemption rate for Groupon’s offers is stated to be about 90 %) – and for companies with high customer acquisition cost, this is of course extremely valuable business.

Each deal includes information about the minimum number of people that needs to sign up for the specific deal to be activated (a good way of ensuring social spread), and when the minimum is achieved the customer will be charged and sent a link to a site where the receipt can be printed. Most collective buying sites gain their revenue by charging a commission per sold deal, usually 30-50 % of the value of the deal. The shared revenue model assures the advertiser that their offer will be marketed in the best possible way.

So what can e-tailers learn from the success of group buying?

• Remember your core product: We’re moving away from a digital sphere with information overload, we’re now craving simple choices. Make it easy for your customer to make the right choice.
• Adjust your communication to where in the purchase funnel your customers actually are: Are they looking for information? Give them information. Are they looking for a great deal? Give them a great deal.
• In times of recession, focus on the win-win: Be the customer’s best friend, present meaning- and insightful offers. (This goes for the advertising industry as well: What’s up with still having CPM or CPC as standard business models? Be in business with people with the same goals as you and you will succeed.)
• Remember the social spread: If you are relevant you will get a high engagement level, no matter product or service. (Groupon’s customers get a $10 bonus when someone they invite start using Groupon.

As for the future of collective buying sites I expect to see some major consolidations happening in the nearest future, making some of the players (StealTheDeal, LivingSocial, BuyWithMe) even more powerful.

E-tailers will have to chose: Get inspired and give consumers even better shopping experiences or ignore the new shopping behavior and wake up a year from now with a increasing headache.

OK, it may not be “hot off the press” anymore, but this is still a very inspiring video with media researcher Johanna Blakley from the TED Conferences in February. The topic of her speech is “The end of gender” and it covers why demographical targeting is outdated, and what will happen once companies realize it.

A great quote on behavioral targeting vs demographic / segmented targeting: “Suddenly, our taste is being respected. It had been assumed before”.

Technology is often put out as the bad guy when it comes to environmental questions, which is not totally legit. Yes, technology has caused some nasty stuff, but it also provides us with the opportunity to make a better, greener tomorrow.

Many e-commerce companies descend from a world of print catalogues. Imagine the difference they could make by just putting their catalogues online. This would not only be great from a paper- & energy saving perspective but also from a economical one: it’s easy to figure out that printing and distributing millions of heavy catalogues costs a fortune compared to producing and distributing a online catalogue. The travel costs and CO2 output for actually making it to the physical store is another issue. The research company GreenLogistics found that on average, when a customer shops by car and buys fewer than 24 items per trip (or fewer than 7 items in the case of bus users), the home delivery will emit less CO2 per item purchased. Not to mention the “browsing”-trips potentially saved, as not all shopping trips will lead to an actual purchase.

However, there’s still the delivery process to consider – missed deliveries, for example. This is an area which can become more effective with quite simple means. For one, e-tailers can become better at offering their customers delivery options, and maybe even a estimated delivery time?

There’s still a long way to go. Even though e-commerce is a rapidly growing market, we continue to use our cars while simultaneously shopping online – not the ultimate environmental decision. And the time gained by using online shopping might be spent doing other activities that result in CO2 output, e.g. travelling or driving.

Big e-commerce brands are finding themselves environmentally challenged by niched and small e-tailers. These smaller companies can often be more flexible in stock volumes, which leads to potential savings of both energy and money. There are however some big brands, e.g. Dell and Amazon, that are trying to position themselves as green heroes – and doing quite well I might add. Dell doesn’t even order some of their products from their distributor before the item is actually purchased by a customer. Dell themselves says that they do this in order to avoid the production of unnecessary goods that, if not purchased, otherwise go to waste. The company also has an extensive environmental policy. And Amazon provides consumers with information about the greenhouse gas impact of their business: Amazon and our planet.

Another big market trend is to shop second hand items online, and when it comes to green commerce it’s hard to argue against that not producing new items at all is the most energy and environmental friendly way to go. Organizations such as Freecycle (non-profit movement) and Lauritz have applied the trend to their online offers, and the later can brag about 10 million page views per week and over 2 million sold items. While second hand isn’t something that fits every business model it will become increasingly important for companies to communicate what they’re doing to from an environmental perspective and how they will incorporate a green touch on their current business.

During 2010 Apple sold almost 15 million iPads worldwide and so far the release of iPad2 have been a success – the tablet has sold out everywhere. When the iPad was initially launched the market questioned Apple’s decision to make the screen as big as 10 inches (1024န768 pixels) but they stood their ground and e-tailers all over the world can thank them for it. One can argue that those 3 inches, going from 7 to 10, was the inches that took the iPad from a fun-to-have device to the excellent online shopping experience it is today.

While the iPad is in the cutting edge of the market it still have some heavy competitors to take on, Motorola Xoom, HP’s TouchPad, RIM’s BlackBerry Playbook, not to mention Google that recently launched the latest Android version, Honeycomb, a version dedicated to tablets. What makes the iPad different from many of the others is the interface. While iPad basically is a larger version of the iPhone’s home screen, Honeycomb, for example, resembles a computer desktop more than anything else.

There’s a ongoing discussion about in-app shopping (using a application to do the actual transaction) versus web shopping (shopping via your browser, regardless of platform) and the opinions differ. Personally I’m stuck between the two. iPad apps represent a great way of building brand, while giving the consumer an updated and easy to use online store. However, even though revenue streams from in-app shopping are increasing, I don’t believe that the main part of the e-commerce shoppers are ready to do their actual purchases inside the applications. Applications might be where the content is delivered and branded but the web is still the main shopping arena. As for Google, this is not great news: The Android market has no support for in-app purchases. However, it is expected to be launched in May and it will be interesting to see if they’re able to pick up revenue speed.

“Our iPad app is actually easier to use than our web site.”
Han Yuan, Director of engineering and mobile at eBay inc.

If we take a look at the top 100 application list for iPad, we find both branded corporate applications such as H&M and eBay, and social commerce sites as TripAdvisor. Evidently e-tailers are starting to move into the iPad application market, but are the consumer going for actual transactions in applications? I’m not convinced.

If we look to the numbers, in-app purchases on free applications accounted for 15% of total application revenue on the iPad (up from 7% June 2010) and in-app purchases on paid apps accounted for 14% of total app revenue (up from 5% in June 2010), according to analytics company Distimo. The report also shows that development of free applications, with in-app purchasing, seems to be the main revenue stream of the future.

The iPad is a great shopping device for a number of reasons. For one, it has no fixed handling orientation – it flips and shifts and adjusts to your own personal way of handling it. For e-tailers this is great since it allows the customer to be in charge of their own shopping experience.

It also brings the true online catalogue experience. The behaviour behind the touch screen resembles the catalog behaviour (where you flip and swipe through pages), and as the tablet offers better graphics it’s easy to provide the same complete shopping experience and imagery as in a product catalog. Not to mention the green aspect that comes with papers saved.

Some advice on the way:

- Beware of small font sizes and tiny links. Make sure that as much as possible of your page is viewable without zooming. Even some e-commerce stars such as Amazon have made mistakes here: their product pages were for example hard to read without doing a extensive amount of zooming – not good for conversion rates.

- Drop-down menus are a drag. If you use drop-down menus on your regular site, make sure that a consumer visiting the site from a tablet has the possibility of browsing the site without using the drop-down. Without zooming, drop-down menus require plenty of both time and patience – not a good way to inspire the consumer to a potential buy.

- The flashlight doesn’t shine. The battle between Apple and Flash isn’t new and since the iPad doesn’t support flash, e-tailers using the plug-in on site need to find other image alternatives. It’s not a good sign when your site looks like one big empty box in the tablet’s browser.

- Satisfy your core target group. If building an application: Make use of the so far quite narrow target group, and focus on giving them what they want – if you succeed, they will promote your application and attract a bigger audience for you.

According to Nielsen’s 2010 study 65 % of iPad users are male and 63 % of them are under the age of 35.

Nearly a year ago, in May 2010, I wrote a blog post titled “Delivering on our promises”, announcing several new initiatives to strengthen the services side of our offering. It’s about time that post got a sequel.

We haven’t been idling since then, of course. Avail has continued to strengthen our merchandising services team, and standardized our sales & delivery process to ensure we always deliver solutions with the best possible return on investment for customers.

But there is another area which is of equal importance to the features and services – that the recommendations are delivered consistently and rapidly to every end user. As we see ourselves as a partner in business, and price our services on the success we deliver, our interest in providing a reliable, consistent service is not just good customer care, but goes directly into our profit & loss statement.

By basing our technical platform on Amazon’s Elastic Compute Cloud (EC2), we get much for free in this area, such as fully managed tier-1 data centers, high-availability infrastructure, and on-demand scalability.

I’d like to announce two recent initiatives in this area today:

1. New data centers

EC2 offers no less than five tier-1 data centers spread across the globe: EU (Ireland), US East (Northern Virginia), US West (Northern California), Asia Pacific (Singapore) and Asia Pacific (Tokyo).

Our latest upgrade to the system architecture and our back office system, Umbrella, now enables us to select which data centers to serve each customer from.

The first step has been open up the two US data centers. This will enable our growing client base in North & South America to get the same ultra-low-latency delivery we provide European clients. Going forward, it will also enable us to expand further into Asia Pacific.

2. New DNS architecture

We have also overhauled our DNS architecture, and have chosen recognized DNS expert Dyn as our new partner.

If you’re not into DNS, you may not recognize Dyn, but I’m convinced you have heard of Zappos and Twitter, who are two of their clients. Just as our clients choose Avail in a best-of-breed strategy, we have been very selective, and consistently chosen recognized leaders in each field for our architecture.

Scandinavian online payment solution company DIBS recently completed a survey regarding the state of the state of European e-commerce market. Eight countries took part of the study: Sweden, Norway, Finland, Denmark, U.K., Spain, Germany and France.

The survey results provides any merchandiser with high hopes of the future of e-commerce: The last six months, 141 million persons aged 15 to 75 (90% of Internet users) in the countries surveyed made online purchases. The percentage of online purchases direct correlated with the market’s Internet penetration (i.e. countries with high Internet penetration have a higher percentage of online shoppers amongst their population). Imagine the potential if we just increased the retention rate and order value with a couple of percent!

According to the survey the strongest incentive for shopping online is the time saving factor, directly followed by the potential of lower prices, ‘opening hours’ and the possibility to compare products and prices. Across the region, 78% expect to maintain or increase their online consumption. As for product categories, we can expect purchases to increase within categories such as computers, clothes and travel. Interestingly – the Ocado effect perhaps? – in the U.K., more than 80% of consumers expect to buy more food online.

There are no real surprises within the payment sector; the higher the income, the higher the likelihood of stating card as preferred payment method. So far only 5% have used mobile payments, with the highest number of users being seen in Sweden (9%), but consumers predict that they will start using mobile payments within the near future.

As we’ve mentioned before, and soon will write more about, social commerce and the notion of social intelligence seems to become increasingly important: 94% of consumers use either search engines or comparison sites to find their shopping opportunities – even though, gender-wise, men are more likely to be price sensitive, and women seem to put more emphasis on recommendations and ratings.

To finish off, people in the younger age segment (15-34 years old) see less differences between their offline and online shopping behavior, and have a more frequent shopping pattern, which sounds promising for the future growth of e-commerce spend.

The full report is available from DIBS – click here to download it.

Social media and e-commerce isn’t a new equation, but the two are going through a shift: From integrating social media on e-commerce sites (helping people communicate on site) to integrating the e-commerce experience on social media sites (helping people buy where they connect). Consumers are moving away from the original e-commerce sites, onto other platforms, still eager to spend money though.

This behavioral shift together with the success and expansion of niche e-commerce markets results in many new opportunities for online shops to invent and grow a new generation of business concepts – Facebook stores, Twitter campaigns and so on. Some differ from conventional e-commerce sites and many of them are fundamentally based on the notion of social commerce.

Social commerce itself, however, is not new. Humans have always made decisions based by using social input (recommendations from other people) and then weighing in social capital (should I trust it?).

When we lived an analog life, the tools to get social input were few, but easy to use: If we needed help to make a decision, we asked other people around us. When it came to social capital, the case was more ambiguous. In order to determine which people we could trust, and which people to filter out of the equation, we considered the person who delivered the opinion – e.g. how he/she looked, spoke, even smelled, and whether we seemed to share common values. The human brain is well equipped to do this, but it was not always clear how we reached a decision on who to trust.

In the digital sphere, the potential to collect and structure social input is enormous. One search can bring me thousands or even millions of opinions on any topic. But how do we measure social capital in the best possible way? On the anonymous Internet, who should I trust and why?

There have been some ambitious initiatives to build online reputation systems, e.g. eBay’s seller profiles, but none has been able to become dominant.

In this context it’s interesting to see what Avail is doing with people recommendations. People recommendations, as opposed to product recommendations, help shoppers find “people like you” (i.e., people that have the same consumer behavior and taste as you) and guide them to the decision about which other consumers to trust: Putting the social behavior from the analogue world into a digital context. An obvious application is to use it to filter out ratings & reviews to show only those you might be interested, in travel or retail. There is no reputation system needed – we do the matching for the consumer, much like it was done in the analog era.

How to define and refine the notion of social capital in a digital world is something that we at Avail continuously work on improving. We will soon come back to this subject and share thoughts as well as examples of what the future has in store.

If you are running a social commerce project in your e-commerce store, and would like to understand how people recommendations work, email me at frida.sandin@avail.com.

Successful retailing is based upon understanding your customer. Whether online or offline their fundamental thoughts and behavior remains the same, and when you get your customers to interact with your products and brand, they’re more likely to remain loyal. Segmentation and relevant marketing is not only recommending the best product on your website, but making sure that you use the campaigns and the information you have to market your product and your brand the best possible way in all channels.

This is something that the people behind the booming start-up company Shopkick have based their geolocation application on. Their ambition is simple: Use mobile commerce to generate foot traffic to retail stores.

The Shopkick application encourages browsing and window shopping and by using geolocation technology the application provides a message to the potential buyer when it walks down a aisle or a daily deal. And if you are a frequent user of the application you’ll also get to enjoy the possibility of exchanging your Shopkick check-in points (kickbucks) for a gift card at a participating retailer or even Facebook credits.

A frequently discussed topic amongst online retailers is how the consumer’s value perception of online commodities stands versus the traditional offline channels. Price perceptions and quality can strongly effect the purchasing decision online and by connecting the two worlds Shopkick tries to overcome the potential purchase bar. (The New York times describes Shopkick as “the most persistent sales clerk you’ve ever encountered.”) But where do consumers draw the line between intrusion of privacy and a great shopping deal?

Shopkick is a great step for encouraging consumers to engage in mobile shopping and with the constant uplift in smart phone sales it won’t be long before we’ll get to take part of further offline-online shopping applications.

The latest Shopkick numbers include 750,000 users (10 % of those are daily users) and 100 million check-ins.

Even though Pontus has already introduced me and my background, I just wanted to take the chance to write a short greeting.

After all, much of the success behind Avail comes down to personalisation; not only the software itself, but also the company as a whole – how we treat our clients, how we work as a partner with them, and how we involve them in our product development. I hope to put much emphasis on developing this even further and support our customers, as well as the market in general, with insights and key learnings. One of the core principles I truly appreciate about Avail is how we measure ourselves on the basis of success delivered, and how it influences the way we work within the merchandising team.

I am very much looking forward to developing the way we work with our customers, and I’m also very inspired by the work that Markus has done during his year within the company.