In e-commerce we can easily link a specific customer’s behavior to a specific sale, we can go through the customers’ shopping path over and over again, analyzing why they did or didn’t shop at our site. These are simple actions yet these actions are overlooked by millions of sellers each day. With product recommendations and systems that can provide us with everything from heat maps to click tracking, we have every opportunity in the world to get to know each and everyone of our customers like they are our close friends. And this is where the art of segmentation come into play, the days of simply dividing your customers into demographic and geographic segments are long gone (does it really matter if your potential customer is a high income earner if she or he isn’t willing to spend the big bucks in your shop?).

What you need to start looking at is dividing your customers into psychological online segments, i.e. find out what triggers their motivation and what their perception of the world is. Every high income earner with the same educational background doesn’t necessarily share the same triggers or personality features. (A company which has done this very well offline is Procter and Gamble, they sell multiple brands within the same product category, something which would have never been possible if they didn’t get their segmentation and branding strategy right, e.g. what makes a customer shop Gucci instead of Lacoste or MACH3 instead of Braun?)

So what you need to do is to turn the tables around, instead of starting with your product assortment, trying to figure out which kinds of people that might buy your products, ask yourself which kinds of personalities that will benefit from shopping in your store and why they would want to buy your products. And this is where product recommendations comes into the picture, recommendations help you extract the highest possible value from of all of your customers, no matter spending degree. With product recommendations you can cluster your customers into segments by just using behavioural, personalized data – no preconceived thoughts or categorisation based on income or gender, just pure actual actions.

However, you need to start acting on your segmentation as well, don’t stop when you have narrowed down your customers into psychological segments, this is where the real work begins:
Start connecting the segments’ behaviour with specific products. Doing so will not only help you to create better loyalty programs but will also force you to look at your assortment from new perspectives, making it easier for you to identify gaps that needs to be filled or products that simply won’t make you any money in the long run, i.e. you’re improving your most valuable customers’ experience of your site.

Psychological segmentation and investing in great CRM systems, be it product recommendations or loyalty programs, isn’t just for for small niche companies trying to survive, it’s a must have for every e-tailer that wants to stay competitive in today’s and tomorrow’s market - a winning segmentation model is always responsive to changes in the market climate.

Avail today announced the launch of a new personalized advertising solution, “Avail for Advertising”, built on its proprietary advertising and merchandising technology platform.

The new solution enables retailers to tailor their online advertising to each individual shopper, based on what they know about their interests. Instead of displaying the same ad every time, Avail’s technology is able to select which of the retailer’s products are most likely to interest an individual consumer and create a personalized advertising banner accordingly, in realtime. The benefit is higher click-through rates, conversion rates, and average order values, compared to unpersonalized advertising. As the shopper clicks through to the site, Avail’s on-site personalized merchandising continues to guide the shopper to the most relevant products, creating a seamless personalized shopping experience.

“We believe our ability to deliver both personalized merchandising and personalized advertising in one platform creates something entirely new in the marketplace – a complete cross-funnel solution for online retailers to attract, convert, up-sell, cross-sell and retain customers,” said Pontus Kristiansson, CEO and co-founder of Avail.

To ensure retailers are able to quickly take advantage of this new advance in e-commerce technology, Avail has also launched a new “Managed Avail Campaigns” service, where the company offers to design and execute complete advertising campaigns on behalf of its clients. As part of the service, Avail also procures all media space needed, and clients only pay a commission on the actual sales generated.

Avail also announced the company has already signed seven “Managed Avail Campaigns” customers across Europe. Said Freddy Sorbin, CEO of Consortio Fashion Group, one of the pilot customers: “Avail has delivered results that match or exceed those of any other retargeting vendor we have used. The results combined with the performance-based pricing model and the convenience of powering both onsite and offsite personalization from a single integrated platform makes the Avail offering very attractive to us.

Ads – can’t live with them, can’t live without them

I have somewhat of a love-hate relationship to ads. As a concept, I think it is great – give away some of my attention to the advertisers, get something good in return (like a good tech article). Unless you prefer to pay for every TV channel, newspaper or media website, ads are good.

The problem with ads, however, is that they quite honestly, on average, suck. Personally, I hate the laundry ads that plague our television channels the most, but there are plenty of contenders to the throne. The problem is relevance – I’m just not interested in knowing more about laundry detergents. I don’t care if I am in their target segment, or happen to be watching a TV show that they have connected to their target segment, and so brought it on myself. Being constantly annoyed by those ads is not worth the price.

The promise of personalized advertising

Let me take an example. This is Sweden’s largest daily news site, Aftonbladet.

The ad selection is just all over the place – two dating sites, some kind of premium content subscription, jobs to sell salami sausages, price-comparison sites for electricity. Who benefits from this mess? I don’t – I just find it annoying. Aftonbladet and their advertisers do not either, since I would never click these ads.

So what should Aftonbladet look like, in a perfect world? With a bit of copy-and-pasting, I give you my ideal Aftonbladet experience:

At the top – a cool dock for my smartphone, just what I have been searching for. Next to that, the just released updated Macbook Air to replace the old one I have. History books and audio books, because those are the only categories of books I buy. I might even care more for these ads than for the news on the site.

So this is all dreams, isn’t it? No. Just as we can personalize on-site merchandising based on what behavior tells us about a consumer’s tastes and interests, an ad could also be tailored to each individual viewing it. They could show only the retailers, categories, brands and products that you are interested in. They could actually become ads you would want to click.

Making this dream of relevant advertising come true is something that I and my colleagues at Avail are spending a large bulk of our time on, and I’m proud to report we are about to launch our first new solution in this space.

Relevant, respectful retargeting

Personalized retargeting, where you target people who have visited your site based on what they did on the site, is just one form of personalized advertising. There are many other use cases, making it possible even to target people who have never been to your site on a personalized level.

But it is a quick win – a significant improvement compared to the standard, unpersonalized retargeting – and so we chose to prioritize it. Personalized retargeting focuses on the on average 97% of all visits to your site that did not result in a purchase, but did leave you with enough information to tailor any subsequent ads to that person by promoting only products of interests to them. The benefit is much higher click-through rates and conversion rates (we have even seen higher average order values) compared to both generic banners and unpersonalized retargeting, resulting in a very attractive ROI.

Of course, personalized retargeting is not new. Many retailers already have pilots. But up until now, retargeting ads have been pretty stupid – i.e. irrelevant – focusing just on pushing the last products clicked, over and over again. But the last product clicked might not have been what I wanted, but what finally made me give up and leave the site. The richer the customer data you have, the more relevant you can make the ads. And when you’re already collecting and measuring every customer interaction on a site, you have a huge advantage.

Personalized retargeting campaigns have also generally been hard to control for the retailer. They have been tied into specific retargeting networks, and had limited control over how products displayed are selected. To ensure full control over their brand exposure, and the sometimes outrageous arbitrages currently collected by retargeting networks, retailers need to get back in the driver’s seat on retargeting.

And this is just the beginning of what is possible. Online advertising – including retargeting – still has a long way to go.

Show me the money

If you are interested in learning more about Avail’s new solutions for personalized retargeting, our new Managed Campaigns service makes it extremely easy and quick to get started.

Follow this link and we’ll contact you to set up a demonstration:
Request a demo.

When Amazon sneezes, retailers catch a cold

Normally, Amazon’s quarterly reports are happy occasions. In 5 years, its share price is up nearly 500% – an amazing achievement for a period marked by multiple financial crises.

But on October 25, the company shocked investors by reporting a sharp decline in income, despite continuing its strong revenue growth. In one day, the company lost almost 10% of its market capitalization.

Amazon’s challenge put the spotlight on what I think will be a major trend for 2012 in online retailing – the fight for profits. Up until now, the growth possibilities in e-commerce have stolen the spotlight. But it is becoming increasingly clear that in the 2010s, the question is not if you can grow your sales online, but how you can grow your sales online profitably.

Interestingly, while Amazon’s lousy results received a lot of attention, Amazon might be one of the companies that need to worry the least. Underneath the hood, their gross margins are stable, their sales are growing and their marketing expenses under control. Much more worrying are that other major online retailers, such as Overstock.com and Bluefly are reporting falling gross margins and much smaller sales growth.

What’s behind

The causes for the profitability problem are not hard to find:

• More choice as more retailers move online, borders to international trading are eliminated, and new business models emerge (e.g. private shopping clubs)
• More knowledgeable consumers who have learned how to shop around for a bargain (e.g. using price comparison sites and coupon sites)
• Increasing costs of advertising online
• Increasingly complex demands on the e-commerce platform
• Stagnant personal incomes in much of Europe and the US

The key question – which is hard – is what to do about it? None of the causes listed above can be reversed or battled. You have to cope with them.

Active retailing

I think the solution can be summarized as active retailing. The core concepts in online retailing – how we design and structure an e-commerce site – stem from a world where the key challenge was to get people to start buying online. Low prices, a wide assortment and a search box (because people always knew what they wanted to buy) was enough. In that passive retailing mode, people were expected to inspire and convince themselves what to buy.

Today, online retailers are increasingly competing against other online retailers, with similar cost structures and assortments. You can still win the customer by offering lower prices, but only if you can compensate the loss of profit in other ways. As more and more sources of new customers are perfect markets – traffic goes to the highest bidder or deepest discounter – the price for a new visitor is set, and the only thing that determines if you can place the highest bid is that customer’s lifetime value.

In other words, the path to profitability lies in actively extracting the most value from each new visitor to a site – converting them, up-selling them, cross-selling them and remarketing to them through emails and ads. It is a continuous, relentless process.

But unlike physical retailing – where you can force people around your store, the IKEA way – online retail sites must be geared to actively sell to the consumer at every chance while still making it entertaining. Pricing, product selection and visual display must all come together to make customers feel inspired, not forced, to buy more and come back for more. Sophisticated personalization will be key in this process, as the retailers which are able to service customers on an individual level will be able to outsell those that are stuck in one-size-fits-all approaches.

As Winston Churchill put it, “If you mean to profit, learn to please”.

Just one month after the 2011 European Merchandising Forum was held, we’re already planning for the next. For 2012, our ambition is to make it larger, more relevant and more inspiring.

More attendees is not a goal in itself – we don’t want to create just another e-commerce conference. However, the feedback from 2011 was that you really enjoyed the networking opportunities. Twice the number of qualified attendees, the reasoning goes, twice number of great chats with someone facing the same challenges as you.

Relevancy and inspiration is something a conference can never get enough of. But to accomplish this, we need your help. Your help to identify what topics are on your agenda – which opportunities and which challenges that are keeping you up at night. And your help to identify great, inspiring speakers from the retail industry, who you’ve always wanted to listen to.

So if you have an idea for a great topic or great speaker – or would like to present yourself – please get in touch! Feel free to either use the comment function right here or email me at david.johansson@avail.com.

Avail, Europe’s leading provider of online merchandising solutions, today announced the company will be hosting the first pan-European conference for online merchandisers.

The conference will be held at Hilton Tower Bridge in London, on September 22, and features keynotes by e-commerce authority Ian Jindal and Aberdeen Group vice president Sahir Anand, as well as retailer case studies, workshops and technology demonstrations.

Said Pontus Kristiansson, CEO and co-founder of Avail: “In a market characterized by increasingly fierce competition, online merchandising will be a core competency for any successful online retailer. By creating this forum, we want to support and encourage merchandisers to realize their full potential – and meet their peers from all across Europe”.

The event is sponsored by 10CMS, Responsys, BazaarVoice and Venda. To learn more, please visit http://tcp-events.co.uk/avail2011/.

In the series “The Merchandising View” we have highlighted individuals working at the forefront of online merchandising. We have covered everything from leading retail practitioners to entrepreneurs and scientists. Now, we’re looking for more, fresh perspectives!

If you are doing something unique in online merchandising, and want the world to know, submit your opinion piece or case study to us. Maybe you have done a very successful relaunch of your retail site, maybe you are developing entirely new merchandising technology – or maybe, you know where online merchandising should go from here?

Every published columnist will win an Apple iPad 2.

To participate, simply email your text to david.johansson (at) avail.com with the subject line “The Merchandising View” by October 1.

For a long time, the “e-commerce market” has been synonymous with online retailers in the US and Western Europe. In terms of sheer quantity, online sales in Western Europe and the US still outstrip those of Asia – but not by much. With one out of every two humans on the globe living in Asia, the long-term outcome seems clear. Just as is occurring in so many other consumer industries, Asia will become the number one market.

However, talking of an Asian market is wrong. Just like in Europe, retailers are regionally fragmented and large differences exist:

• Industrialized countries Japan and South Korea are extremely mature markets, and dominated by strong local retailers such as Japan’s Rakuten.
• China is the real growth story, dominated by large eBay-like marketplaces such as Alibaba and a set of local retailers such as 360Buy, Joyo, and Dangdang fighting Amazon for share of the fast-growing B2C retail market.
• India and Australia are still surprisingly immature markets, given how developed they are in other aspects.

I believe Avail has a lot to contribute to online merchandising in this huge, emerging market – but also that we have a lot to learn. A brief comparison of the leading e-commerce sites in Asia with those of Europe and the US is enough to see how language, culture and consumer requirements influence online merchandising strategies.

And as always, you can only really learn by doing.

I’m proud to announce that we at Avail are now taking our first steps to enter this market:

• We have already signed up our first reference customers in Australia, India and New Zealand
• This summer, we signed an exclusive deal with a leading Asian e-commerce solution provider, who will become our local sales & service partner in South-East Asia.
• This autumn, we will open up a local delivery center in Singapore, making us able to offer low-latency, enterprise reliability delivery using AWS’ state-of-the-art infrastructure.

Looking forward to it!

In previous blog posts such as these ones, I have discussed filtering and what the output of collective intelligence might be, and as two of the areas I’m most passionate about is consumer behavior and behavioral economics, I will continue to go down that path.

I’ve recently finished reading the book The Wisdom of Crowds: Why the Many Are Smarter Than the Few by James Surowiecki and I can strongly recommend it to anyone that’s interested in how opinions are conformed, and why self-organization might be the key to success.

One of the core messages in this book, that groups don’t have to be dominated by exceptionally intelligent people to be smart, sparked a vast line of thoughts in my mind and I’ll try to serve some of the more uncluttered ones here.

Much of our thinking, intelligence and decisions are a bi-product of the impressions and thoughts served to us by the environment, if you surround yourself with people that challenge your thinking span, you will develop your thinking skills. My experience tells me that there is such a thing as thinking skills, which isn’t connected to the formal definition of intelligence or even communication skills, but simply a way of prioritizing, filtering and maximizing the use of our thoughts and every day impressions.

Our human core isn’t designed to make fast and smart decisions based solely on ‘intelligence’. To be able to make good and time effective decision in our everyday life we seek the help of our peers.

This is not something that we make an active decision to seek for, but simply something that we do – some better than others – by simulating social and collective intelligence, or what we perceive to be intelligence, from the people around us. Non of us are as smart as we think, however the human race has developed the skill of canalizing the collective intelligence from the people around us.

As you probably know making use of the collective intelligence is what Avail’s behavioral merchandising is all about, applying the collective intelligence used everyday and turning it into e-commerce sales. We all live our lives under the assumption that the more information we have, the better decisions we will make. This, combined with the fact that human beings are lazy by nature, is part of what make recommendations so successful – the more information we get in the shortest amount of time, the better.

The way to success within this field often lies in handling big data in an efficient and insightful way, that makes use of the collective intelligence yet still take the diversity of the input into consideration. In order to product and business develop in a future orientated way, Avail acknowledges and listens to what not is working as well as what is working. With that data we can figure out which collective guess that will be the most accurate and produce recommendations that will make both our customers and their consumers happy.

Much of our software’s cogency is based on avoiding to put forward irrelevant products, an aspect which from an outside perspective can easily be forgotten. However, when you present a irrelevant product for a consumer you aren’t just hurting your direct conversion and sales, you are also strongly communicating that the customer’s needs come second to your sales, one of the most fatal messages you can put out there.

Consequently: Analysing less successful products is as important as putting forward the successful ones, as it is ultimately the less lucrative products that will define the notion of ‘success’.

I must warn you that this will probably end up being my most personal blog post yet, however reading it might also end up being your most well spent minutes in a long time.

Everyday a market more than twice as big as China and India combined is being overlooked. The population of this market is often e-commerce savy, high spenders and brand loyal. Every day this market stands for missed commerce opportunities in the region of 600 million Euro.

Yes, I am talking about the women.

When women and e-commerce are being discussed, the message often ends up somewhere close to ‘Yes, of course women are e-commerce savvy – now they get an opportunity to spend even more!’, often followed by condescending laughter and a number of agreeing smiles. But nowhere in my line of business experience would it ever considered okay to patronize a buying customer.

The technology and consumer electronics sector could greatly benefit from reading this post, as the situation there seems to be just getting worse and worse. Women are being addressed with more discriminating, embarrassing advertisements than ever before. My screens keep filling up with commercials telling me to match my gadgets with my manicure or changing my iPhone shell to match the outfit of the day, and all I’m filled with is aversion to ever buy something from that brand. This goes for e-commerce sites as well – when directing product ranges towards women you don’t need to color code the section in pink or even include unwanted software telling me how many calories I have consumed in one day. Instead I suggest that you focus some of that energy on creating better usability, no matter gender, I promise you that sales will follow.

Let’s have a look at some tech facts:

• Apple has been said to spend over 70% of their research time focusing on women and optimising their UI for women and it has obviously proven to be lucrative time spent for them
• 91% of women are involved in home electronics purchases
• Women account for just under 50% of the Internet population in the U.S., however they generate 58% of e-commerce dollars

To overlook this target group is to deprioritize not just your own future ROI, but the market progress and spendings in total.

Women are interested in e-commerce, women are browsing more frequently than ever before and we’re willing to spend. For retailers it shouldn’t matter whether it’s a man or a woman sitting behind the screen, what matters is the relevance of the products being displayed. To define target groups by wide categories as gender or age isn’t relevant, instead we need to narrow down target groups to segments such as purpose driven shoppers, price sensitiveness and brand preferences, attributes we work with at Avail every day. Perhaps it’s easy to assume that a woman is looking for a computer to match her manicure, I am however not one of them and if you personalized your products towards my previous shopping patterns and interest you would know that and instead present me with the latest high tech product on the market, gain a loyal high spending customer and use my data to enhance another customer’s shopping experience.

All of the above are reasons why I take pride in being a part of the revolution that’s taking place within the field of personalization, through it we can all take one step forward and strive for true equality. Whether it applies to gender, ethnic origin or simply comes down to our color preferences doesn’t make any difference, as long as we can enjoy the opportunities that digitization has brought us instead of getting caught up in biased communication.

One of the most essential success factors to launching a behavioral merchandising strategy is the quality of your implementation – technically as well as merchandising-wise. And while we are more than happy to support you, sometimes self-service is just the easier, faster way.

That is why I am glad to announce the upcoming launch of our new Customer Portal. This site, which will be available to all of our customers, will bring together

• Product documentation and APIs
• Merchandising best practices
• Troubleshooting & support information
• Updates on new product releases

and much more, in one place. Starting July 1, we will launch a beta with a selected group of customers. The full launch is planned for mid August.

If you would like to become a beta tester, please email Client Services at support@avail.com and we’ll help you set up an account.

Online retail is in a transition period, moving from being considered a supplementary channel with separate processes and procedures to a truly complimentary sales tool, integrated with other multi-channel operations.

Online merchandising, the process of preparing and selling products online, is a strategic enabler to this transition, backed up by 21st century commerce framework technology. Although most retailers have recognized this reality, Best-in-Class merchants are leading the way in ceding control of day-to-day web site operations from IT to merchandisers, making functionalities such as promotions, pricing and content management an enterprise-wide operation.

In 2009, Aberdeen Group surveyed over 100 retail enterprises to determine the pressures that compel retailers to implement new merchandising-based e-commerce functionality.

Using their unique research model, they determined the key merchandising capabilities and enablers that set best-in-class retailers apart from the rest.

Read the report

Lately there’s been a lot of focus on the pros and cons with online personalization and whether our more and more personalized (some might say narrow) view of the world is limiting us rather than enhancing our every day experiences and impressions.

We are constantly exposed to targeted content on social networks (ads as well as personal status updates), targeted products in our online shopping sphere and our search words are most likely to deliver result that’s within our own concept of what’s true, thus: Our perception of the world is becoming more and more narrow.

But as usual when it comes to personalization and online behavior, I refuse to address these behaviors as ‘online’ behaviors. Regardless of platform (online, offline, Facebook or Twitter) we are human beings before anything else. Much has changed the last couple of decades, but our human core and Pavlovian behavior, however, have not. It is not an online behavior to categorize content, or people for that matter, it is a human one – one that we use every minute of our day, online as well as offline. People have always made decisions based on social categorisation and trust capital. Online we might do it by clicking the ‘Top news’ instead of the ‘Most recent’ button on Facebook (as we have learned that the ‘Top news’ are personalized to give us a quick glance of what we probably perceive to be most relevant for us) while offline, in a case of time shortage, we chose to spend time with the people that matters the most for us. Same behavior, different platforms.

Every day we make a active choice: Do I chose to take the easy and recognized path (confirming what I already know to be true, content- or perception wise) or do I chose to expand my horizon to see what is happening outside my own closest circle?

For an e-commerce company the recognized path, showing relevant products for each specific consumer is very lucrative, though the truly savy e-tailers chose to use the input they have to define cross-selling areas as well (increasing the order value and ROI). However, you can’t break the rules before learning them, and as we move into the next phase of e-commerce I believe that today’s narrow focus on the e in e-commerce will decrease, and the time spent on understanding the behavioral filters of the consumers will increase. You can even argue that the attention spans of an online user are in direct correlation to their perception of the world:

The shorter amount of time the user spend on searching for content outside their world view, the more restrained their view will be.

A smart e-tailer realizes that any action is bound to have a counter-action and that consumers will soon be in search for networks, web sites and online shops that can expand their world view. Cross-selling is where the ROI of tomorrow will be found. Go grab it.

(If you are interested in hearing another take on this subject I can strongly recommend Eli Pariser’s TED speech in which he argues that this behavior is bad for democracy as well as for evolution.)

As merchandising technology becomes more capable, it also becomes more challenging for retailers to master, leaving them struggling with how to use it to accomplish their business goals.

At Etail Europe 2011, three online retailers will provide their perspectives on how to best put merchandising technology, such as recommendation engines, to practical business use. The panel is called “How To Capture The Business Benefits of Personalization”, and the panel members will be:

• Jan Mehmet, Director Ecommerce, Urban Outfitters
• Nick Doran, Web Marketing Executive, Direct Golf UK
• Gunnar Ulle, Head of Website Development, Neckermann

The panel will take place at 1.55pm.

About eTail Europe 2011

Launched at the dawning of retail E-Commerce, eTail is the one-stop-shop for top-level marketing and e-commerce executives focused on optimizing the multi-channel customer experience. eTail has been running in London since 2007, bringing together senior-level marketing and e-commerce executives from leading British and European Retailers. This year’s event takes place The Park Plaza Victoria, June 20-22, and includes keynote speakers from, among others, Tesco.com, Kiddicare, Boots, Shop Direct, and eBay. For more information, please visit the eTail Europe website at http://www.wbresearch.com/etaileurope/.

The Economist recently published a very relevant and interesting article on the astounding growth of data: http://www.economist.com/node/18741392

Called “Building with big data”, it summarizes both the benefits and challenges associated with the huge amount of data available to today’s decision-makers.

Starting with the benefits, here are some quotes related to retail:

• Tesco collects 1.5 billion nuggets of data every month and uses them to adjust prices and promotions
• Amazon, an online retailer, has claimed that 30% of its sales are generated by its recommendation engine
• [McKinsey Global Institute estimates that] properly used, big data … could also enable retailers to increase their operating margins by 60%

After 10 years in this business, the numbers are not surprising, but still worth repeating. Yes, properly used, recommendation engines can drive large sales increases and, more importantly, boost profits in a business characterized by thin margins.

More interestingly, and something that gets lost often, is the challenges related to big data. “Big data has the same problems as small data, but bigger” as the article puts it. Humans are not well equipped to handle huge amounts of data. True, your web analytics platform can collect millions of “atoms” of interaction per day – and present it in a graph. But can you make sense of it, and act on the insight while the opportunity is still around?

On the other hand, computers are not everything. “There is no substitute for sound intuition and wise judgment”. In the future, computers might eventually be able to replace humans fully even in retail. But we’re not there yet. Big Blue may win the chess games these days, but humans still know shopping best.

Experienced merchandisers and marketers, empowered by a new generation of software tools that can analyse and act on data in real-time based on their supervision and instructions, is the recipe to turn Big Data into a strategic asset for your retail organization, online as well as offline.

Ecommerce solution provider Ecommera’s “Trading Intelligence Quarterly” (inspired by my alma mater’s “McKinsey Quarterly”?) publication has quickly become a favorite source of quality research and opinion.

Among the articles in their most recent issue is one called “Choosing and managing competencies for online growth”. It is based on research from some 200 UK and French retailers and surveys what they consider core competencies and how they plan to build their skills. It’s refreshing to see an opinion piece from an e-commerce supplier that focuses not only on technology, but on the equally important human resources aspect.

The report contains several interesting conclusions backed by the data:

• “As ecommerce moves into a profitable phase in its evolution, online retailers will prioritise competencies that drive both differentiation and growth.”
• “All functions are currently regarded as high priority, reflecting an industry which is challenged by the breadth of the agenda and is still struggling with how best to resource activities.”
• “Online retailers are shifting towards an outsourced approach, either fully or partially. This allows them to focus on activities which differentiate them – such as product range development.”
• “Increasing online competition makes understanding key metrics and optimising efficiency imperative. Despite this, there is an apparent lack of consensus as to how the analytics function should be managed.”

It’s surprising to me that technology and customer service are considered more critical than analytics. Analytics is a customer service function. When empowered to make realtime decisions on how to best guide customers, analytics solutions can replace those sales assistants that are missing online. To prioritize technology over customer service or product management, seems highly questionable when you are in the business of selling goods to consumers.

The question of moving analytics inhouse vs outsourcing it is actually less important. Smart, experienced online merchandisers are hard to find, so I can understand retailers who decide to outsource even while considering it a core capability. The key approach to a core competency is to prioritize it, and make sure it is both of world-class quality and leveraged strategically. Build – or buy – may not even be an option, after having screened the suppliers available and the cost and time of building an organization.

If you are determined to make something your core competence, the right partner can add value in either case. If you choose the inhouse option, select suppliers that can act as training & sparring partners for your organization as you build it. If you feel the only way is to outsource, then the organizational and strategical capabilities should be front and center among your supplier selection criteria.

In our series of interviews (part 1, part 2) with people at the forefront of online merchandising, we now turn to James Brooke, the CEO and co-founder of visual merchandising expert company 10CMS.

What is the story behind 10CMS?

10CMS was founded in January 2008. There are four of us co-founders, and we had spent the previous ten years building online channels for some of the largest global brands. The core innovation behind 10CMS, the ability to create very rich media without programming, came from our frustration at the time and cost of building and managing rich online experiences. Our initial customers were large global brands like Shell and GE, as well as well known UK lifestyle brands like Heals and multi-channel retailers like Tesco.

In December last year, we completed A-round financing of 2.4 million euros. We are putting that money to good use in many ways. First of all, we have invested a large amount of resources in re-engineering our platform based on the feedback from our enterprise retail clients. While our product started more like a software development kit (SDK) for building rich merchandising templates, we have now turned it into a complete on-demand, SaaS based merchandising solution.

Merchandisers can now execute their campaigns without having to rely on IT assistance. We have also added support for workflows – supporting organizations where one department may be responsible for creating the base templates, and other teams or people do the design work and re-merchandise the display. Another area we are looking at is international expansion, both to the US and further into Europe.

What are some of the key trends in visual merchandising today?

The online retail market is becoming more and more competitive – it is just so easy to jump from one store to the next, and consumers have a really short attention span. You can tell by the conversion rates, which are very low in general online.

That means retailers must now work even harder to build an engaging and compelling user experience – something to make visitors “stick” and persuade them to buy. To accomplish that, brands are becoming more editorial and more content-driven. Instead of presenting products in the old-fashioned “grid”, online stores are looking more and more like magazines with attractive and inspirational product presentations.

Speed is also becoming more important – to be able to catch customers’ interest, you need to be able to quickly create new campaigns around current themes. We’re moving from cycle times of 2 weeks to something closer to 2 hours.

Finally, visual merchandising is becoming more business-driven. It is not just about creating stunning designs – the primary purpose is after all to generate more sales. For example, the ability to let customers add an item to basket immediately, without having to click through to another page, is becoming standard.

If merchandising is becoming so fast-paced, how can merchandisers keep up?

More user-friendly technology is obviously an important enabler – the ability for merchandisers to create, publish and update campaigns anywhere, any time is a great help.

One upcoming feature we are really excited about is the ability to connect 10CMS’ presentation layer to product feeds. Instead of manually selecting which products to merchandise, retailers will be able to use behavioral merchandising technology like Avail’s to personalize the product selection to each visitor – and still present the products in a rich and engaging way. That will make a major difference in merchandiser productivity.

The emergence of the “Social Internet” has really impacted the entire world. How is it affecting visual merchandising?

I hear a lot about it, and not just from customers. Our Head of User Experience, Mo Syed, is a PhD in the psychology of online social interaction and is very passionate about this field.

The most obvious aspect is that the visual merchandising is becoming more social and interactive. For example, the Conran Shop has used 10CMS to create a way to you turn your wishlist into a scrapbook that you can then share with others – some may use it as a form of self-expression, if you’re into design, others just to show the spouse what they’re thinking of buying for the house.

New retail channels – like Facebook – also require that you need to be able to publish your merchandising there too. We see a lot of customer activity within “Facebook commerce” right now. One key aspect when you are merchandising outside your site, that Mo speaks about, is how important it is to facilitate the buying and require as few clicks as possible. Going from inspiration to execution needs to be quick – “lose the moment and lose the sale”.

Another big topic of discussion right now – HTML5 or Flash. How should retailers think about this?

Clearly, browsers are becoming much more powerful. There are still some things, like 3D animation, which requires Flash, but the gap is closing. Eventually, at some point in time, Flash will probably become redundant.

But right now, you can’t rely on customers to know some devices don’t support Flash – most people can’t be bothered to know what their computer or phone supports, and why should they? In the end, it’s the retailer’s problem.

The way retailers should approach this is to have multiple levels of support – starting with standards-compliant HTML5 and CSS. If the browser doesn’t support that, it should fall back to Flash, and if there’s no Flash support either, to standard HTML (HTML4). That way you give customers the best possible experience, and ensure your rich merchandising is always SEO-friendly.

What are some examples of retailers you think have put visual merchandising to smart use?

Fashion retailer Awear and design outlet TK Maxx are two of my favorite examples.

They are both in the “fast fashion” space, and need to create new merchandising content fast. For example, TK Maxx may very well get a shipment of 50 dresses and 1000 pairs of sunglasses that they need to move fast – it’s all about creating an inspirational display, and then updating it quickly as items sell out or new items appear. Awear designs a new editorial display every day – sometimes 2 or 3 a day – to introduce new products. Merchandising technology is an important enabler for their business model, in both cases.

But visual merchandising is not only about fashion. Halfords, the sports retailer, doubled their click-through rate by adding a carousel of current offers on their home page. On category pages, click-through rates increased fourfold. With a lot of traffic, such an improvement quickly adds up to ‘real money’.

How do you measure if your merchandising is successful or not?

Well, that has been a big dilemma in visual merchandising for a long time. Frankly, web analytics platforms like IBM Coremetrics or Adobe’s Omniture are not very good at measuring merchandising performance at the granular level that is required for it to be actionable. You can’t work on a page level – after all, you may have 2, 3, or even more widgets on the same page.

A merchandising display is always a hypothesis and a goal – e.g. “by displaying this hero product A, that will drive sales of secondary products B and C”. You need to be able to measure how it performs specifically towards that goal, and also how users are interacting with each part of the display, such as which hotspots they click or don’t click.

Metrics is an area that we at 10CMS have put a lot of emphasis on – we just added an analytics framework and will continue to develop it. Ultimately we want to enable our customers to create and deploy more compelling merchandising media more often, into ay channel and use the analytics to learn what really drives customer response, and then optimize that experience on a daily basis to deliver a more compelling and profitable user experience.

To learn more about 10CMS, visit their website at http://www.10cms.com. For example, there’s a great case study on Awear (no registration required).

At Avail we spend a lot of time analyzing and discussing on-site behavior, however in this post I’d like to address something that is equally important (if not even more so) in order to understand your customers’ behavior on site: Pre-site patterns and the traffic paths that makes your potential customers end up at your site.

The usual pre-site analysis (going through traffic sources, monitoring referring sites and seeing what your site visitors searched for in order to end up at your site) is valuable and necessary, but instead of getting caught up in numbers and statistics, which we can focus on later, let’s take time to analyze what these sites and search terms can tell you about your potential customers on-site behavior.

It still amazes me that many e-commerce managers seem to believe that their visitors behavior will dramatically change when the visitor has landed on their site, instead of realizing that they are sitting on a tremendous amount of information about the behavior their visitors are already accustomed to. I would recommend to be truly thorough when monitoring referring sites: Spending time on the sites that actually generate traffic to your own site could be the best spent time. This is where your visitors spent time before ending up on your site, this is where their urge to click their way through to your site was triggered, and this is the place where their perception and expectations on what to come across on your site will be formed.

It is about the art of understanding your customers, and you will have to understand your customers before you can talk to them with the right tone of voice, pursuing them to go your way (you might get a lucky shot once in a while, but this is not the customers that will be coming back to your site to continue shopping). If you have the possibility to use an eye-tracking tool I would recommend you to tailor it by traffic sources and see what on-site patterns that are connected to which consumer group. Now you’re getting closer to your visitors: What are they expecting to see on your site and what are they searching for? And how are these on-sites paths effected by the pre-site ones?

While on the subject of behavioral patterns and conversion I have to give the ever popular ‘buy now’-button a slam! This simple call to action-button might sound appealing to many, but is the traffic coming from that button or those “buy now”- banners really converting? Many times the answer to that question is “no”. Although the ‘buy-now’-call to action triggers a click, it often attracts visitors that are on the outlook for scanning new content and incoming products, but aren’t necessarily looking to purchase (however you should of course optimize towards a purchase anyhow). These visitors would probably not have turned into buying customers where-ever they came from. More traffic to your site doesn’t mean more revenue, just as a high conversion rate doesn’t necessary mean good revenue.

Understanding the different traffic’s impact on your revenue is crucial: How do the different sources contribute to your revenue and why? What revenue per visit will your different traffic sources contribute with?

If you start asking yourself these questions you will not only gain crucial business knowledge, but also knowledge about who your customers are and what motivates them to purchase (which could be everything from social recognition to core metrics such as pricing). While comparing conversion rates and traffic with your competitors might seem alluring, this says nothing about your customer knowledge, retention rate or the behavior that’s driving your site forward.

At Avail we focus on personalization, and personalization is simply an outcome of knowing and understanding your customers. When you have gotten to know your customers you can personalize your KPIs, and leave competition behind.

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Lately I’ve received many questions about social commerce and particulary on how to handle the ‘loss’ of a brand. First off, your brand was never yours to begin with. You might have been, and hopefully still are, the manager of your brand but you have never owned it – and this is why I shudder when I hear statements such as ‘social commerce has changed everything’. Social commerce hasn’t changed anything, it has simply put the brand, the product and the communication around the brand on other platforms.

Yes, a brand manager’s role might have changed a lot the last few year, but the knowledge and insight on what to act and base the communication decisions on are the same.

While the consumer journey is affected by new drivers such as Google and Facebook, there’s still plenty of room for you to influence the consumer’s perception of your brand. You might not be able to control your brand, but you can certainly be the one directing and sparking the brand conversation on platforms which are close to your purchasing funnel. As I’ve mentioned before, the final purchasing decision is often pushed and encouraged by a social interaction (which is why I would recommend integrating social layers near the buying process). Whether that’s on- or off site shouldn’t make a difference.

The basics are the same: Solve the customer’s problems, answer their questions, make money. The key to making the social layer improve your conversion rate is the trust capital of the answers you’re giving, the product you’re selling, or the service you’re giving. This works the same way online as offline: No matter how good answers or insights you’re giving your customers, they will never trust you more than their peers. The market economy is forcing all of us to compete on new terms and no brand can consider themselves local anymore, which is why the brand communication is more complex than ever and why future revenues are nursed in simplicity.

Thus, this is what I believe the brand manager’s greatest challenge and opportunity within online social commerce will be:
In order to simplify your communication and buying process you must know your customers, not by target groups, gender or geography but as individuals. No matter how high of a social status your brand is sitting on, your customers don’t really care about your brand. They care about how other people perceive them when they are associated with your brand, and how this association will help them build their own social networks.

When you have understood what truly motivates your customers to be associated with your brand it doesn’t matter what platforms you act on, or which product you sell – they will buy into your brand.

As I have commented on earlier this year, personalized merchandising is just one part of a much larger personalization trend in retail. Another retail area where personalization is attracting a lot of attention is in production – a concept known as “mass customization”.

The mass customization paradigm stands in contrast to the currently dominant “mass production” paradigm, in which standardized items are produced in high volume and then distributed throughout various channels. Under mass customization, items are instead made on-demand in series of one and shipped directly to the end customer. This avoids the costs of warehousing, inventory reduction, and having to produce seldom-sold items, which can significantly reduce the capital needed. Customers also benefit from greater choice and the opportunity to “co-create” their own designs.

Of course, the trade-off is a more demanding production process, lead times in production, and typically higher per-item production costs. However, the Internet revolution along with innovations in production technology and logistics are doing a lot to overcome these barriers. For example, in apparel, European mass customization fashion retailer Tailorstore.com offers custom-made shirts starting at an attractive 40 EUR and custom-made pants from 49 EUR, which is not far from high-street prices. But this is not limited to apparel – mass customization successes cover everything from jewelry to muesli.

What does this mean for retailers? Initially, it challenges the retail business model, as it eliminates the need for distribution. Brands can now sell directly to customers, at much higher margins, and offer personalized products and much greater choice than their mass produced range.

On the other hand, the retailer – not the brand – owns the customer relationship. Retailers have a large accumulated database of customer preferences across multiple categories, and the personal relationship with the customer. Multi-channel retailers also have access to physical stores, in which customers can get much-needed advice and information, e.g. when selecting a fabric for a shirt.

Of course, while mass customization has significant momentum right now, the jury is still out on how much of mass production it will replace. But it is high time for retailers to put it on their radar screens. If you’re a European retailer, I would recommend that you attend the “Create Your Own” conference in Berlin, May 30-31, which will bring together a great set of names from retail, academia, and the supply chain.