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12FOR 2012

By Lauren Freedman, President, the e-tailing group | Sponsored by Acquity Group

Succeeding in Multi-Channel Commerce


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2011 Acquity Group, LLC | acquitygroup.com | 312.427.2470

NOW IS A VERY INTERESTINGAND CHALLENGING

TIME TO COMPETE IN ECOMMERCE. IN AN ECONOMY

WHERE CONSUMERS ARE IN THE DRIVERS SEAT

SEAMLESS, VIBRANT SHOPPING EXPERIENCES

ACROSS CHANNELS ARE A MUST-HAVE. RETAILERS

ARE REVAMPING THEIR APPROACH FOR MANAGINGAND EXPANDING THEIR CUSTOMER EXPERIENCE,

ADOPTING NEW TECHNOLOGIES AND TRENDS, WHILE

ENHANCING OLDER INVESTMENTS. EVALUATING

THE CROSS-CHANNEL EFFORTS (SUCH AS ONLINE,

IN-STORE, MOBILE AND SOCIAL INITIATIVES) OF

TODAYS ECOMMERCE MERCHANTS PROVIDES

VALUABLE PERSPECTIVE INTO THEIR PLAN FOR

FUTURE SUCCESS.


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32The Consumer 4

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9 101112

The Foundation:Org Structure &

Technology

Amazon

ProductAssortment

Multi-channelBrand Alignment

Merchandising

Personalization

Digital Assets

Social

Mobile

Brick N Mortar

Analytics &Testing

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THE CONSUMER

1Today, consumers are constantly connectedwith their iPhone at the airportto their desktop in the office, trips to the mall are becoming less efficient thansurfing the web. Retailers report that customers are seeking a new type of value.

They are more discriminating about when, and how much, they buy; reactingmore to coupons and promotions, particularly free shipping; and seeking outcomparable pricing on services.

Todays consumers are more tech-savvy, seek more value and seek it throughmore channels than ever before.


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More Tech Savvy Consumers are more techsavvy, treating shopping like a game they want to win.Retailers realize people will research, find a product ofinterest, and simply cut and paste the SKU number intoGoogle in search of the best price elsewhere. Merchantsmust sharpen their pencils to retain customers against adiverse array of competitors, emphasizes Peter Cobb,Sr. VP Marketing/Cofounder, eBags.

Interest in engaging with different technologies seesgreater adoption of tools among consumers, notes one

technology player. The younger generations moveaway from phone to chatting is just one of many shiftswe are seeing from the texting generation.

Our own e-tailing group 1Q11 survey saw chat becominga preferred way to communicate with retailers. When weasked 1,000 US-based shoppers, Thinking in generalabout shopping online, what is your overall preferred wayto contact an Internet retailer? Twenty-percent answeredlive chat, while 21% preferred the phone. Fify-eight percentmentioned email.

One merchant observed they are chatting with more people,and that ROI is higher for chat than for their call center.In post-chat surveys, 25-40% respond that if a chat box hadnot popped up, they would have left the site. This companyhandles chat internally, and its knowledgeable supportstaff view it as a sales channel, leveraging an integratedcustomer database.

More Value Consumer expectations increase withcross-platform access as shoppers expect the ability tointeract with a brand wherever and whenever they want.At the same time, it is important for companies topresent a consistent brand experience across channels,while optimizing each channels unique capabilities.

Value takes on many meanings. James Connell, VicePresident of eCommerce and Marketing at Roots suggests,Product differentiation is critical where retailers musthave unique, new, exclusive and/or discounted product;

otherwise they will find themselves competing only onprice. He, like others, sees that service can be thesource of that differentiation.

Brad Wolansky, CEO of The Golf Warehouse, agrees:Service can be a necessary differentiator that should beseen partially as a marketing expense in order to retaincustomers with greater value forthcoming relative to othermarketing spends. Today its important to price sharplyand pass on great deals to ones customer seizing a get itwhile it lasts mentality. That formula funds the service

cost of providing raving fan service and is not the hugeexpense many executives believe it to be.

At Abt Electronics, our mantra is yes to any reasonablerequest, knowing that if the first sale is not profitable thenext one likely will be, shares their President, Jon Abt.


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More Channels Mobile technology has changedthe shopping dynamics of todays consumer, empoweringthem to access information from the palm of their hand.Shoppers now are bringing competitive data inside theretailers four walls in unprecedented ways. They can scanbar codes to get competitive prices from Amazon andothers, which turns control upside down. This empoweredconsumer is two-clicks from ordering from somewhereelse while standing in your store; whereas in the past, theymay not have left your store without making a purchase,laments John Lazarchic, VP of eCommerce at Petco. Oure-tailing group 1Q11 research confirms such activity,indicating that one in four customers show this behaviorwhile shopping at retail stores (see chart below).

Look for competitive pricing at AmazonCheck for product ratings and reviews

Look for competitive prices on products

at retailers online other than Amazon

Look for competitive prices on

comparison shopping engines(PriceGrabber, Shopping.Com, etc.)

Access promotional coupons for

redemption at the store

Scan bar codes and compare prices to

other retailers

Scan bar codes to learn more about a

specic product (product information,

product images, video, etc.)

Look on a retailers website for product

beyond what they carry in the store

Check-in using ShopKick to receive

reward points for visiting retail stores

26% 23% 51% 20% 51%

Make a purchase on your phone at

another retailer

Customer empowerment via social media means retailersare looking for more meaningful ways to connect andrespond to their customers. While initial Facebook strategycentered on the number of fans one acquired, today itsalso about responding to issues within that environment.

Retailers indicate they are seeing customer service issuessurface in social media, from bad store experiences toproduct deficiencies; and the expectation for response timeis nothing short of immediate.

Source: Coffee Table/the e-tailing group Mindset of the Mobile Shopper Survey, 2011

WHEN VISITING PHYSICAL RETAIL STORES HOWLIKELY ARE YOU TO PARTAKE IN THE FOLLOWINGBEHAVIOR WITH YOUR SMARTPHONE?

29%15% 13% 72%

13% 12% 75%27% 20% 53%

Frequently/Often Sometimes Rarely/Never

26% 21% 53%

20% 18% 62% 31% 20% 49% 24% 17% 59%

22% 17% 61%


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2THE FOUNDATIONOrganizational Structure, Technology

Competing in an omni-channel environment often requires investment inorganizational and technological infrastructure. We discussed with manyretailers the initiatives they are working on, and the challenges they have faced.

Organizational Structure In the past two years,

Belk, a regional department store, has seen significanteCommerce growthfrom $20M to $35M, and associatedmargins are also higher than planned. Belk has committedto support its e-initiatives with a growing workforce, oftendifficult to come by in larger organizations. This includesboth rebuilding the IT infrastructure to fuel eCommerceand adding 24 positions to support the rapidly growingeCommerce business. Ivy Chin, SVP of eCommerce atBelk, acknowledges they are in a catch-up mode, and

recognizes the challenges of getting the team to work

effectively while continuing to on-board new positions,particularly when trying to accelerate growth.

Coordination across channels has been a long-standingtopic of interest at the e-tailing group. According to our2011 Merchant Survey, 10% of merchants already have aseamless shopping experience in place while 46% plan todeliver one by next year as the chart below indicates

WHAT IS YOURTIME FRAMEFOR DELIVERINGA SEAMLESSSHOPPINGEXPERIENCE?(CHANNELS ARE WELL INTEGRATED FOR

SHOPPERS) ACROSS SALES CHANNELS

(INTERNET/WEBSITE, EMAIL, MOBILE,STORE, CATALOG, TV, SOCIAL)

Source: the e-tailing group Merchant Survey, 2011

Already have seamless shopping

experience in 10%

This year 20%

Next year 26%

Not currently planned22%

Will always remain

separate or siloed6%

Dont know 16%


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Understanding ones vision for cross-channel executioncan certainly impact organizational design. Steve Wentzell,Director of eCommerce for LIDS, speaks of aligning somefunctions as customer care has been elevated acrossthe organization, now being addressed at the corporatelevel. In order to focus more on eCommerce, the teamis reaching out to the store operations group and socialmarketing team to ensure a tighter integration with thestore calendar.

James Connell, Vice President of eCommerce andMarketing at Roots, notes that he has taken over all ofmarketing (digital spend vs. traditional spend) to achieve

better integration. This centralization allows them tocreate unique landing pages based on online promotions,along with differentiation strategies that drive morecost-effective marketing spends.

Scaling the Technology John Rogers, VP/GMof eCommerce at Under Armour, marvels at the rate ofadoption of new technologies: With multiple shoppingplatforms, including mobile phones and tablets, multi-channel has reached a new dimension; and as merchantswe need a platform that is device-agnostic.

Mature multi-channel players with legacy systems andtraditional merchandising organizations are continuallytrying to reconcile systems developed separately. Oneretailer spoke of spending two years completely integratingchannels, which ultimately spun off more infrastructureprojects. One multi-channel party retailer sees thepower of automating processes as they need to scalequickly. With 30,000 SKUs, she references the ability totest for optimal performance as being critical to properdecision-making.

Discussions of infrastructure development naturally leadto discussions of in-house versus outsourcing options.Several retailers, like Petco, continually evaluate theirinternal processes. Subsequent to such an evaluation,Petco undertakes an RFP process, looks at searchagencies and affiliates, and explores which is the optimalsolution for the company.

Content Management Significant discussion surroundscontent management systems as many retailers arestrapped with legacy systems although merchant needshave evolved. Reflecting back, one early to eCommercedepartment store, and now omni-channel retailer, believesthat content management systems will be their next biginfrastructure investment. Despite development of astate-of-the-art management system in 1999, times havechanged and there are better tools available that canaccommodate our asset needs including video. A moredynamic solution is required today given the growth ofboth channels and assets.

Hybrid Solutions Now providing products for 20 differentsites, eBags lays out the challenge from their vantagepoint. It is essential that they have standard protocol toachieve efficiencies where possible. Others are addressedusing tools like Channel Advisor or Commerce Hub, anddelivered to respective merchants.

Petco also takes a hybrid approach, sharing assetsacross the corporation. Although it is not always seamless,they continue to work with the advertising departmentto take advantage of other parts of the organization.While copy is set up internally, additional asset creation

is often contracted out, and India is used for massproduction needs.

Outsourced Models Whether digital or not, using third-partyvendors can be difficult, because all have to work in syncwith the site as well as each other. One large apparelretailer explains that their content management tool ispart of their ATG platform. Via Scene 7, they can hostimages and do some production work, streamliningpromotion and product setup. No matter the scenarioone faces, digital asset creation and maintenance iscritical and should be continually monitored, payingattention to efficiencies and scale.


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In our 2011 Merchant Survey, Amazon was often mentionedby retailers for its amazing growth, domination of the digitallandscape, and sophisticated personalization. Its dominancehas resulted in many smaller merchants being forced out.Amazon is currently on track to do $16B in revenue thisyear, a 40% increase, and is often the place manyconsumers start a product search instead of Google.Traffic via mobile apps to check prices from inside retailstores is also an important dynamic playing in Amazonsfavor. Its Prime loyalty program locks in customerswho get hooked in a way thats difficult to decouple,

prompting loyalty program evaluation and optimizationin other retailers.

Several retailers noted that they seek to stay ahead ofAmazon on selection, pricing, and service, as competingon logistics and one-click is virtually impossible. As manyof us already know, Amazon does not always provide thelevel of service some shoppers need, so retailers feelthat they can beat them on that score. Many customershave questions and service needs, so this is a place forthem to differentiate with service above and beyond what

is provided by Amazon.

Backing up such a Retail 101 strategy is another merchantwho emphasizes, We want to gain more brand loyalty byoffering a huge, well-priced selection with the bestcustomer service around. Were a small company andcan provide the one-on-one personal attention thatcannot be experienced at the big companies.

Ivy Chin, SVP at Belk, makes an important point thatnot all businesses are directly competing with Amazon.In Belks case, its customers tend to primarily visitcompetitive departments stores, making Amazon lessdominant in its space.

Lenovo is the first major manufacturer to implementCheckout with Amazon, and views Amazon as a way toexpand their global presence. We will partner to offer aconvenient and familiar checkout experience. In additionwe can better target and segment, taking advantage ofAmazons personalization prowess, onsite and via email,reports Lewis Broadnax, Executive Director of Sales andMarketing at Lenovo.

Loyalty programs, another excellent way to circumventAmazon, are suggested by several multi-channel players.For some like Moosejaw, a model of engagement servesas a differentiator coupled with their Super AltitudeLoyalty program, according to Harvey Kanter, CEO.John Rogers, VP/GM eCommerce, Under Armourconcurs, We must look for ways to give our customers

something to come back for versus the convenience ofgoing to Amazon. Its certainly a challenge and we believethat loyalty programs will become more important underthis scenario.

3 AMAZON


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4 PRODUCT ASSORTMENTBeyond branding, assortment strength should not beunderestimated. The different dimensions of the brand

strategy come to life in assortment decisions, and arerepresented by the size and diversity of the assortment;the amount of information that accompanies differentproducts, categories, brands, or styles; and productextensions.

Consumers have embraced broad online assortmentsfrom basics to luxury goods. They are justifying theirchosen retailer through pre-shopping behavior patterns,where they desire comprehensive information to makeinformed buying decisions, reports Karyn King, SeniorManager of Site Development & Operations at Staples.com.

Dennis Hernreich, COO/CFO at Casual Male RetailGroup (CMRG) emphasizes: Its important we developour Destination XL for the big and tall man, which ispredicated on a wide selection of clothing. This breadthof selection and inherent knowledge of their demographicis what allows CMRG to compete against larger players.

Advance Auto is another SKU-intensive business with100,000 SKUs today, conscious that broad assortment isan important part of their model. They are also in the

process of rapidly expanding assortment as consumersadd more electronics, garage controls, and generalcomfort to their cars.

For Under Armour, this means being more disciplined asa company by going deeper with SKU proliferation andproduct extensions. We need the breadth to be more

forceful, and such an approach will deliver a strongerpoint-of-view online, suggests John Rogers, VP/GM

eCommerce at Under Armour. eBags is changing theirassortment strategy through two major companyinitiatives centered on growth. Private label, given itsmargin contribution, is a significant effort along withcreatively carving out distinct businesses as seen in theirHandbags.com program.

There are multiple ways that assortments can beextended. Retailers like Jos. A. Banks introduce newproduct lines built off current success, while anothertechnology merchant drives assortment changes basedon profitability, evaluating performance at the item level.

Exclusivity can be vital from both a margin and marketingperspective. Roots plans to devote more effort to limitededition runs and higher-touch leather products, versusmass-oriented merchandise, while providing brand fanspreviews to product catalog and limited edition productsvia Facebook.

One specialty department store is looking at organicgrowth from product extensions (additional sizes, colors,and drop-shipping). One example of such an effort is

their Sports Fan Shop, capitalizing on past sales andinterest from this enthusiastic customer base. Theyoutsourced this marketplace to create 200,000 teamproducts. At the same time they are advantage ofinteractive tools, developing customer initiatives such asBalis custom window program or diamond ringconfigurators, and are looking for outsourced capabilitiesfrom nontraditional partners to support these efforts.


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Leading retailers recognize the differentiation a well-managed customerexperience can deliver, and are working to ensure that they engage their customersin a manner that is appropriate to the customer, the brand and the channel.

5 MULTI-CHANNELBRAND ALIGNMENTRetailers realize that competing is all about differentiation.At Crutchfield we are focused on what we can do uniquelyand smartly from a communication standpoint, explainsTodd Cabell, Sr. Manager of Web Strategy, Crutchfield.com. Paying attention to best practices and trendsalong with spending our resources and time smartlygoes a long way.

We begin with brand alignment, as proper experience,tools and merchandising sets the stage for the successor failure of the brand. With digital channels rapidly addingnew dimensions and platforms consumers expect brands tounderstand how each channel contributes to the experience,and in some cases how the experiences overlap.

Nordstrom supports a long-term value proposition oftaking care of customers by knowing them. Websiteand store experiences are tailored by location, and asingle voice dominates all communication. The abilityto buy online and pickup in-store remains core to manyretailers. Powerful product locators make retail inventorymore accessible, and extend their reach beyond a single

location without further inventory exposure. From aspecialty perspective, Sephora keeps the customerexperience consistent with their Beauty Insider loyaltyprogram, which has seamless deployment across channels.


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In our Annual Merchant Survey, 74% of respondents strongly to somewhat agreed that consistent branding wasdeployed across channels.

Our discussion with Churchill at Patagonia emphasizedthis challenge. With all these new channels, he recognizesthat companies must work much harder to make a singlebrand statement. Patagonia has recently hired an ExecutiveVP to oversee all channels. There is much to be addressed

as they hope to develop social media initiatives and testLookbooks on Facebook and Twitter, while expandingwholesale.

There will be immeasurable challenges and opportunitiesfor this new position, but the company hopes the positionwill be valuable.

Ben Viscon, eCommerce Manager of Merchandising andMarketing at REI, discusses goal alignment between thestore and the web, and the importance of having asingular set of goals across the company. Today, 80% ofweb traffic is looking for stores, thus shared revenue

allows us to do more than sell on the website. This meanspotentially doing something different, as we will be lessconversion-focused and more cross-channel andmarketing-driven. By observing our visitor interactionsand the competitive landscape, our website can bestdeliver against customer expectations where we willcontinue to differentiate in customer experience andservice on which we pride ourselves.

Source: e-tailing group 2011 Merchant Survey

Branding is

consistently

deployed across

channels

74%

Cross-channel

compensation

structures are inplace

37%

Inventory is shared

and similar across

channels

60%

Promotions are

consistently

marketed across

channels

60%

Marketing and

advertising programs

are led by one team

59%

IT directives are

headed by one

individual across

the organization

59%

Management has

a strategic cross-

channel lens

55%

Merchandising is a

singularly focused

initiative that setsdirection for the

entire company

45%

Benchmark and

KPIs are in place

to measure cross-channel inuencers

and performance

43%

RATE YOUR LEVEL OF AGREEMENT WITH EACH OF THE FOLLOWING

STATEMENTS RELATIVE TO YOUR COMPANYS CURRENT INTEGRATIONOF CROSS-CHANNEL INITIATIVES.(STRONGLY TO SOMEWHAT AGREE CHARTED-TOP 2)


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6 MERCHANDISINGOur Annual Merchant Survey asked merchants to rank favored merchandisingand customer retention tactics. As charted, aggregated responses run parallelto many of the initiatives shared by retailers interviewed for this report.

One should start with simplicity; todays consumer isdemanding more, basically looking for you to get out of myway when it comes to shopping, observes John Rogers,VP/GM of eCommerce at Under Armour. This meanspaying attention to key elements that remove buyingobstacles, starting with making it easy for consumers tofind what theyre looking for. Guided navigation andproduct attribute-driven approaches serve mostmerchants well.

Everything needs to be easily understood, from clarity ofoffers that peak shopper interest to streamlined cartcheckout (ideally in four steps or fewer), whichencourage completing the transaction. Karyn King,

Senior Manager of Site Development & Operations atStaples points out, While we might understand whatcurrent customers are doing, we need to know whatmay be inhibiting potential new customers fromcompleting a purchase.

Many merchants also cite avoiding website clutter,aiming efforts at convenience. This also means having areliable and fast site, with the less clicks the better,according to Howard Blumenthal, Advance Autos Directorof eCommerce Platform Solutions. Hes emphatic thatwhile shoppers might put up with slow performance for aproduct emergency, they might not ultimately return.


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TOP RATED MERCHANDISING/NAVIGATIONAL AND MARKETING/

CUSTOMER SERVICE TACTICS FOR CUSTOMER RETENTION WITH 5BEING THE MOST IMPORTANT TO YOUR STRATEGY AND 1 BEINGTHE LEAST IMPORTANT.

Search engine marketing 90%

Faster site load time 70%

A/B, multi-variate or other 56%usability testing

Exemplary customer service 88%

The right in-stock assortment 69%

Emails to minimize cart 53%abandonment

Analytics evaluation to see 88%what works

Email that utilizes an array of 69%tactics sent on pre-established

frequency

Retargeting/display ad 53%

Site redesign or enhancements 85%that improve the customer

experience and navigation

My Account features like stored 66%addresses or shopping lists to

encourage return visits

Social media elevation 49%

Making it easier to nd products 78%with enhanced onsite search

relevance, sort options, and/or

landing page optimization

Faster fulllment/shipping to 66%the customer

Alternative payment methods 48%

Targeted and/or segmented 77%email marketing campaigns

Rich media or related tools (zoom, 66%alternative views, audio, video, etc.)that engender consumer condence

Inventory stock status notication 48%

Pricing or promotional strategies 74%from free shipping to private sales

directed to current customers

Editorial content, expert reviews, 62%user-generated content, and/or

other helpful tools to position your

site as a go-to expert

Elevated brand differentiation 43%

Streamlined checkout 73%

Personalization strategies 61%including placement of

up-sells/cross-sells

Frequent shopper programs 31%Proactive chat 30%

Source: e-tailing group 10th Annual Merchant Survey, 2011


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7PERSONALIZATION

Personalization is vital for customer experiencemanagement. Merchants realize this, as 25% of respondentsto our Annual Merchant Survey report that their emailsare very personalized, and 36% intend to add it this year.

REIs Viscon mentions the recent creation of a CustomerInsights team. By composing rich data on co-op

memberssuch as where and how they shop, and whatthey buyREI can take advantage of analytics and cross-channel behavior, with a goal of being more relevant andpersonalized to all customers.

James Connell, Vice President of eCommerce andMarketing at Roots, believes the customer wants to bespoken to on a one-to-one basis, making personalizationvital to their growth. This could include using customerprofiles to create different experiences in browsingpatterns. Every person is an individual, and as suchwe try to understand that customer, including use oftheir spend pattern and social graph to incorporate thatexperience into the site. For example, we might look atsomeone who liked us on Facebook and provide a muchdifferent perspective. Ultimately we take advantageof trigger-based communication (abandoned cart;automated recommendations) to drive conversion, whichis a very targeted approach to selling.

Awareness and correct use of relevant customerinformation, such as personalization, segmentation,and targeting can deliver strong results. In the case ofLenovo, knowledge of certain information may pushout a promotion of a particular product or service,with the timing of merchandising also derived frompersonalization information.

Many begin with point of entry, then transition tounderstanding previous browse and purchase patternsconfirms John Rogers, VP/GM of eCommerce at UnderArmour. This, along with information from open-graphpreference like behavior onsite, helps turn the websiteinto a value-add and even better experience. Followingsuch a formula, the site acts based on multiple datapoints and many sources drive how the site experience isdisplayed. We have several disparate customer segmentsand we must act differently with each to be relevant.


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DIGITAL ASSETS

8The growth of web technologies requires merchants to beconscious of how they create and manage their digitalassets. As part of our merchant survey we asked, How areyou utilizing digital assets internally and throughoutsourced vendors, and what if any challenges are youfacing in streamlining these efforts?

Todd Cabell, Sr. Manager of Web Strategy at Crutchfieldreinforces the importance of common standardsregarding digital asset management. They work withvendors to consistently deliver across all platforms,controlling most of their content production in-house toensure it meets brand standards. Although happy to relyon partners to help enhance their assets, they do not seethat as a substitute for their own participation anddirection.

Several retailers secure some of their assets through

third-party services like Web Collage, which automaticallyplaces them in other merchants systems. Others mentionthat smaller vendors often lack the necessary imagery, ordo not meet merchant standards for supplying assets.Because of this, retailers like LIDS have increased theircapabilities internally by investing in equipment to deliverdesired imagery.

At CMRG, Hernreich discusses the need to updateimagery particularly for better wardrobing, a growingarea of differentiation for their customers.

James Connell, Vice President of eCommerce andMarketing, says Roots has an internal photo studio,and copy is now written across the entire organization,which allows them to disseminate data quickly andcost-effectively. The automated sharing of ratings andreview content with designers helps improve product mixand customer satisfaction. Access will be both valuableand streamlined.

As retailers want greater control and desire for productsto look consistent across their channels, many find theymust create digital assets for that product themselves.As brands make changes to their voice, digital assetsmust also change, and one merchant suggests lookingfor new talent to assist with this undertaking.

One manufacturer is changing their copywriting group towrite in a more direct tone. Currently operating in anisolated environment, they are making asset changes acompany-wide initiative. Merchants will spend more timestyling outfits and complementary items. They will alsobe able to take advantage of these assets, using imageryfor wholesale accounts to be consistent in their brandingand better aligned with channel partners.

Patagonia is investing in a photo studio, expanding photoshoots so every product can be seen on a model, along

with delivering incremental alternative views. Increasedsales and decreased returns are already being seen fromthese efforts. This is all supported by a central warehouseof assets controlled by their content management system,according to Churchill.

Ben Viscon, eCommerce Manager of Merchandising andMarketing, reports REI has also built a studio to betteraddress digital asset needs, and in some cases can tapinto vendor assets, including video, for campaigns, althoughmost are handled internally. They have developed aprocedure to handle video where cleanup is done

internally. Like several others, they use partners tocreate 30-second pop-up videos. At their current pace,50 streams can be produced in 90 minutes. The videopublishes itself, is automatically delivered to the site, andwe find significantly greater ROI on video-centric pages,he notes.


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Video The way in which customers seek and retaininformation has changed immensely in recent years.Customers want more information in an easily accessiblemedium and with stimulating visuals. Hence theincreased demand for video. Many of the merchantsinterviewed were strong advocates of video, citing thevisual aspects and personalized approach as key factorsin its usage.

The shift to video usage as an eCommerce tool is apparentwith an 88% penetration among our EG100 sites. Accordingto data, the product page is the dominant location for videoto help with conversion, based on its ability to guide theshopper at a timely decision-making juncture. Its usage,however, is seen across the landscape, in everythingfrom branding to category content, often supplied viamanufacturer and third-party content delivery engines.

Well conceived video exploitation begins with brandingpower, as Patagonia describes renting a helicopter tocapture their brand essence while at the same timecreating a how to stuff a down jacket into a pocketvideo, shares Kevin Churchill, Director of Merchandising.Lenovo is pursuing video to help shoppers betterunderstand complex products where it serves as aconfidence builder and can also help to drive click-throughs to the product pages. One specialty apparelretailer emphasizes the many great things happeningin their stores including events, fashion directorappearances, and the need to talk about and integratethese into the site experience. These same videos can

also serve as an excellent tool for sales training so itsusage is certainly multi-faceted given proper execution.

Under Armour emphasizes the importance of video,with just under 100 productions on their eCommercesite. Their outsourced model allows them to scalequickly without resources. Petco launched videos in4Q10, though they are now just making them more

prominent on the site. John Lazarchic, VP eCommerceat Petco, knows they need more focus, but also knowsthat content generation doesnt come cheaply. Despitethat admission, he still expects to see value in theirproliferation. Merchants are also addressing how toput their own stamp on creative from both a brandingperspective as well as a desire to meet design standardswithin their own organization and as a single voice.

Peter Cobb, Sr. VP Marketing/Cofounder at eBags notesthat on their videos of private label product, 52% ofpeople are still watching at 200 seconds. He believesthis gives potential customers a better feel for the

product instead of debating in their minds why theywould pay $179 for a particular bag. Cathy McManus,Marketing Director at Stacks and Stacks reports a 25%lift with video, and viewers 144% more likely to buy afterviewing. Despite such performance results she stilladvises fellow merchants to make choices about whichones make financial sense.

Video/Audio Features 4Q10 4Q09 4Q08

Type

Location

Source: the e-tailing group Mystery Shopping Survey, 4Q 2010

Videos/Audio 88% 64% N/A

Home Page 16% N/A N/A

Category Page 36% N/A N/A

Brand Boutique 41% N/A N/A

Product Page 73% 55% N/A

Other 75% N/A N/A Branding Content 69% N/A N/A

Manufacturer Content 47% N/A N/A

Category Content 53% N/A N/A

Guides/ How Tos 33% N/A N/A


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SOCIAL9Social is quickly changing the eCommerce landscape. Our Annual Merchant Surveyand discussions with retailers helped us understand the opportunities andchallenges merchants face transitioning to social strategies.

The outdoor gear retailer Moosejaw has found greatsuccess expanding their brand virally. The Michigan-based retailer is perceived as fun and irreverent, andtheir customers, like most, use new technologies forenjoyment and efficiency; experiences with Moosejawdeliver both.

Merchant sentiment regarding Facebook is mixed. Mosthave not yet found it to be a meaningful revenue stream,but merchants realize the need to establish a presence.Many are investing in Facebook without certainty of ROIpotential.


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Regardless of a merchants positioning or customerbase, Facebook will be an undeniable eCommerce forceover a five to eight year horizon. While today it is moreabout engagement, one retailer believes it may eventuallyreplace email, and views it as a marketing channel.

Abt has a dedicated social media expert, and findsinformation shared on its page valuable for customerservice. They want to be liked more, and hope to see

time spent with their brand grow via Facebook. Lenovohas a successful pilot with 100,000 fans, and is lookingto test Facebook Commerce. For two years, LIDS hasbeen using Facebook emphasizing brand awarenessand customer engagement. A team, including field reps,meets weekly to address promotions, develop strategies,and define goals. One specialty department store hireda social media manager and held several store eventswhere bloggers participated. We gave them $50 giftcards and introduced visual merchandisers plus ourfashion team; the buzz was forthcoming from Facebookto Twitter. So for us its clearly about great engagementand pushing [the] brand, not sales.

Facebook and Twitter are also avenues for streamingvideo. We see more exposure, new visitors, and anopportunistic avenue for shopping where the viral impact

is powerful, says Cathy McManus, Marketing Directorat Stacks and Stacks. eBags looks at it in a similar way,with one person monitoring social efforts, updatingFacebook, Twitter, and blogs. We rotate through 400videos, and can see great success from products that goviral, such as our airline flight lunchbox cooler, whichgets posted on many [Facebook] walls, observes PeterCobb, Sr. VP Marketing/Cofounder at eBags. Its earlyand today its more about branding versus revenues,

though we view it as a distinct sales channel.

American Greetings Interactive fosters interaction bychoosing topics for discussion and listening for ideas andfeedback. Strong believers that what you can track youcan measure and optimize, they are testing and analyzingsocial technologies along these lines, reports Dawn Wayt,VP of Marketing.

Ivy Chin, SVP of eCommerce at Belk shows how socialmedia strategies can vary by region. Fashion in the

South demands a different level of editorial engagement,where we must be careful how we introduce commerce.This can mean starting conversations on Facebook, thenmoving to Belks website to go where the customers arecongregating. Additionally, we have good relationshipswith designers and brands and enlist their support inparticipating on the page, using keyword and linked-based strategies to optimize.

Our Annual Merchant Survey results show the main reason firms invest in social media is increased engagement andrelationship building, rather than focusing on ROI.

RATE YOUR LEVEL OF AGREEMENT WITH EACH OFTHE FOLLOWING STATEMENTS RELATIVE TO YOUR

COMPANYS ROI FROM SOCIAL MEDIA INITIATIVES.Strongly Agree

Social media is all about

engagement and building

stronger relationships with

our customers

We are testing social media and

see our efforts to date as mostly

R&D

Social media tactics are growing

our ecommerce business

We have seen substantial or

signicant ROI from our social

media efforts to date

44%36%

16%2% 2%

25%

47%

16%8% 4% 12%

29% 30%17% 12%

4%14%

37%

23% 22%

Somewhat Agree Neutral Agreement Somewhat Disagree Strongly Disagree

Source: the e-tailing group Annual Merchant Survey, 2011


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10MOBILE

Our Annual Merchant Survey findings on mobile adoption show that mCommerceis already employed (with more planned for the future), with iPhones receiving

the most attention.

WHICH MOBILE AND SMS CAPABILITIES DOES YOURCOMPANY EMPLOY OR PLAN TO EMPLOY?

Source: the e-tailing group 10th Annual Merchant Survey, 2011

mCommerce site

Android application

Blackberry application

iPhone application

SMS

Mobile usage within the retail stores via associates

Mobile as an opt-in preference via email or checkout

Opt-in promotion codes in print advertising

25% 34% 22% 19%

9% 22% 23% 48%

8% 14% 22% 56%

20% 20% 26% 34%

14% 22% 24% 40%

5% 13% 18% 64%

10% 19% 24% 47%

7% 12% 24% 57%

Employ

Today

Plan to

Employ in

the Next 12

Months

Considering

for the Future,

Beyond 1 YearNo Plans

to Employ


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Investments and planned spending break down as follows:One-half of investments in mobile will be under $26,000 this year; one-third plan to spend more than $100,000,showing a divide in strategic approaches38% of merchants report traffic to websites from mobile greater than 2%, with 41% reporting traffic via mobile lessthan 2%17% of merchants report website revenue from mobile 2% or greater, with 48% reporting website revenue via mobileless than 2%

Numerous merchants are still debating mobile plans,with some managing the project internally and othersoutsourcing. Those not choosing to invest are eitherworried about the lack of ROI, or are not sure whether

mobile or social technologies will deliver.

Jos A. Bank sees potential in SMS/texting promotionsto business customers, and is hoping to support theseinitiatives. Mobile accounts for 9% of eBags traffic, and7% of its sales. The iPad alone now represents 5% ofsales; additionally, the iPads AOV is higher than for PCand smart phones, by 14% and 29% respectively.

Staples aims to provide a pure multichannel offering,incorporating Staples.com, mCommerce and retail

locations to make it easy for customers to shop wheneverand however they want. Consistent with a number ofexternally-run surveys, Staples finds that their cross-channel customers are significantly more engaged andgenerate more revenue and margin than single channelcustomers. That data has been consistent over the yearsand remains true today, says Karyn King, Senior Managerof Site Development & Operations at Staples.com.

Crutchfield views mobile as a key strategic area and isseeing successful traffic growth after one year. Theywill continue to improve the UI as they learn what usersexpect from the mobile experience.

One department store is witnessing the power of drivingstore traffic and mobile couponing. They are capturingmobile phone numbers on the web in hopes of increasingtheir database. Ideally they want an internal platform tohandle mobile initiatives that are currently outsourced.

Though their traffic today from mobile browsers is fairlyhigh (with 5-10% month-over-month growth), Petcopredicts future growth in the mobile channel. JohnLazarchic, VP of eCommerce at Petco, predicts that it

will represent mid-single digits by 2012. He expects acombination of mobile tactics to reach the customerpre-shopping and while in the store, encouraging themto be more aggressive on the transaction front. He alsoacknowledges the efforts required, having started tosecure mobile phone numbers on their website, and lookto ready their platform for spring selling.

WHAT LEVEL OF INVESTMENT WILL YOU MAKE INMOBILE THIS YEAR?

More than $350,000

$201,000 - $350,000

$151,000 - $200,000

$101,000 - $150,000

$75,000 - $100,000

$51,000 - $75,000$26,000 - $50,000

$1,000 - $25,000

None

6%

2%

4%

4%

6%

7%10%

22%

39%

Source: the e-tailing group 10th Annual Merchant Survey, 2011


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Mobile investments serve as the connection betweenthe web and in-store traffic. Mobile also gives retailersanother way to communicate with customers.Localization grows in importance as consumers accessavailable inventory, respond to promotions, and takeadvantage of advertising at the local level. Research

completed on mobile phones on product information,inventory and/or reviews play a role in confidencebuilding. Customers continue to come to stores wellprepared, and mobile facilitates that knowledge.Merchant platforms must therefore be able toaccommodate all of those needs.

Visibility into inventory is becoming a customermust-have. In recent surveys that the e-tailing groupconducted, many customers are taking advantage offeatures to access inventory across the enterprise, so

stores can ship desired products as directed. One retaileris integrating a platform with the ability to understandwhich store is most cost-effective as a shipping base.

Point-of-sale systems are another topic of discussionas everyone seeks to have the best technology. Thesesystems are neither inexpensive nor easy to implement,and require training. Insights gained through POS toolsacross channels will shed better light on consumerbehavior and allow for more effective targeting.

Moosejaw notes that they already have state-of-the-art

computer terminals in their stores where they can accessboth online and store-based inventory. With the growthof tablets, retailers are assessing how to use thesedevices as both self-service and associate-enhancedtools. Abt talks about wiring their stores for web access,which becomes important as more individuals look toaccess the web via their own mobile devices or for testingproducts in-store. Dennis Hernreich, COO/CFO at CasualMale Retail Group cites the use of iPads in Destination XLto assist the impatient customer in reviewing outfits priorto making selections.

Patagonia has created an app that will allow customersto scan a product to see if it is available online and in-store.They understand this means bringing competition intotheir own store, but believe that staying on top of mobiletechnology is a priority, given that sales from the iPadrepresent 1% of their business. In support of drivingtraffic to retail stores, REI has iPhone and iPad tests

in place where customers can scan a product code onthe shelf for more information from the web, along withstore availability and an option to purchase. eCommerceexecutives continue to remind their store counterpartsthat they are significant traffic drivers, says Ivy Chin, SVPof eCommerce at Belk.

Portable checkout is another convenience, alreadycommon in Europe, expected to grow in the UnitedStates. One retailer also hinted at customers being ableto buy via digital in-store kiosks.

As mobile technology continues to improve, merchantswill continue to find new applications. One party suppliesretailer envisions that a customer might see an adand then, through the right mobile device, be able towatch a related video. Focused on technology products,

Staples foresees a convergence of the web and retailexperience, with more information on in-store productsavailable via mobile, or through other in-store devices.This information will give the customer confidence tobuy, and influence them at point-of-sale. Digital softwareand technology service strategies will also be part of thediscussion.

In response to our inquiries about a series of newcross-channel technologies, adoption levels appearto vary based on the merchants channel composition,eCommerce sophistication, and overall progressive

nature. HTML5 has some interest, particularly asit relates to tablet growth and influence for certainretailers. Shopkick and Foursquare are being played withand on the radar of a handful of forward thinkers, butmany honestly say it is an area they will address oncemobile is in place.

QR coding is a tool that one-half of these merchants havein their consideration set. Efforts range from retail floortesting on tags and redirecting to web pages, to access ofvideo in-store that embraces both catalog and digital ads.One retailer honestly reports that they cant really say ifits buying them anything. Adoption is forthcoming, withyounger audiences embracing the technology but ROI isnot yet being discussed.


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ANALYTICS AND TESTING12Our Annual Merchant Survey reveals that when merchants rate their top

merchandising and navigation tactics for customer retention, cited first andforemost is analytic evaluation. This means having in place a robust database,analytics tools, and resources to assist in analysis. Such a process allowsretailers to make informed decisions rather than taking a seat-of-the-pantsapproach to their business, adds The Golf Warehouses Wolansky.

Pete Zophy, DVP of eCommerce at Jos. A. Bank, remindsus to listen to our customers. This includes looking atweb stats, survey data, and call center input. They takethis data and assess its ROI potential, always monitoringanalytics and their conversion rate. Conversion isalways their highest priority. Todd Cabell, Sr. Managerof Web Strategy, Crutchfield.com knows that watchingcustomers use the site can reveal much, and areinvolving customers to refine goals. Qualitative measuresincluding customer comments and survey feedback arealso factored in.

We examine web analytics + customer satisfactionmeasurements, and then utilize Session Replay to drilldown even deeper to better understand our customer,explains Advance Auto Parts Blumenthal. The visualrecord where one can see mouse movement is invaluable.In the end it is the combination of analytics, customerperception and visuals that allows us to see what reallyhappened and the marriage of the three is powerful.


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Petco sees great value from cross-channel customerknowledge. John Lazarchic, VP eCommerce at Petcoreports that customers buying both in-store and onlinespend significantly more than single-channel shoppers.We are being careful to understand what content is ofinterest, and to not force shoppers down poor paths, butengage them where they already are.

When using web analytics to track performance, profitabilityremains the highest priority. One department storetracks traffic generation and response rates, lookingfor high traffic and high return correlation. Often price

KPI Thinking

When choosing KPIs, retailers use many metrics. The chart below is not all-inclusive, but serves as a good starting point.

adjustments, assortment, or promotion exposure mustbe adjusted. As one merchant said, Good data is thebasis of optimization and it must be actionable to usewhere resources are available, to help our buyingorganization understand best whats working onlineand across channels.

ConversionAbandonment

Return RatesMarketing spend$ per transaction

AOV

Enter/exit points

Heat indexCost per click

Regular vs. markdown spend

Margin

Shopping Cart Funnel

Average display time(load time)

Return on Ad spend


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Testing

A/B testing is an important tool for every merchant.

Our research confirms that firms tend to be eithervery active (33%) or once in a while testers (38%).Merchants report that testing has the most impact onimproving the user experience (61%) and increasing siteconversion (57%). Not surprisingly, testing is being usedto improve many areas, from creative execution to copy,promotions, and marketing campaigns.

Analyzing load times and restructuring how the siteloads has been extremely critical, particularly whenusing third-party vendors for different site functions.

Having a custom platform means all must work in sync,and its a prerequisite for working with any given vendor,says Cathy McManus, Marketing Director at Stacks andStacks.

American Greetings Interactive (AGI) takes advantageof A/B testing, changing out variables based onperformance results. Dawn Wayt, AGIs VP of Marketing,cites the importance of good attribution management:exploring where traffic and sales actually come from, andwhich channels help close sales. At Belk, Ivy Chin, SVP ofeCommerce takes a holistic approach, where quantitative

and qualitative measures are both used.

17%

19%

19%

25%

33%

36%

41%

42%

43%

45%

46%

50%

65%Creative Execution(buttons, colors, fonts, etc)

Copy

Promotional Options

(% off versus $ off)

Marketing

Campaigns

Images

Key Page

(Home/Category/Product Pages)

UI

(User Interface)

Search Landing Pages

Category/Navigational

Taxonomy

Product Pricing Strategies

Branding

Tactical Use

(Video on a Product Page)

Tactical Placement

(Personalized Product

WHICH OF THE FOLLOWINGHAVE YOU TESTED IN 2010?CHECK ALL THAT APPLY.

Source: Amadesa/the e-tailing group Testing Survey, 2011


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NOW IS AN INTERESTINGAND VERY CHALLENGING

TIME TO COMPETE IN ECOMMERCE. MERCHANTS

CONTINUE TO JUGGLE THE NEED TO MAINTAIN ANDENHANCE SITES, WHILE CONTINUING TO EMBRACE

NEW TECHNOLOGY. THERE ARE MANY CHOICES TO

BE MADE, BUT TESTING AND ANALYTICS TOOLS

CONTINUE TO SERVE MERCHANTS WELL IN THEIR

QUEST TO OPTIMIZE CONVERSION. LEARNING THE

NECESSARY SKILLS FOR CUSTOMER OPTIMIZATION

MANAGEMENT IS ESSENTIAL TO SUCCEED IN THIS

EVER-CHANGING WORLD. AWARENESS OF IN-STORE,

MOBILE, AND ONLINE POSSIBILITIES WILL DRIVEMERCHANTS WHO DESIRE TO COMPETE IN OMNI-

CHANNEL COMMERCE. CONTINUED TESTING OF

SOCIAL MEDIA AND MOBILE TECHNOLOGIES IS VITAL,

AND LEARNING FROM EACH OF THESE AREAS SHOULD

HELP MERCHANTS BUILD THE FOUNDATION FOR

FUTURE SUCCESS.


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ABOUT ACQUITY GROUP Acquity Group is the worlds leading multi-channel commerce and digital marketing company,creating award-winning digital experiences for global brands. Our multi-disciplinary approach brings together strategy,design, and technology to create brand-unique experiences that build unbreakable customer relationships. AcquityGroup is headquartered in Chicago, with offices across the U.S. To define a unique perspective for your business,contact Acquity Group at www.acquitygroup.com.

ABOUT THE E-TAILING GROUP the e-tailing group is a niche e-commerce consultancy that helps merchants deliverthe right customer experience on their websites and across all of their channels while adeptly assisting technology

companies to create and execute go-to-market strategies that simultaneously educate the retail community anddeliver cost-effective thought leadership and lead generation. For more background about our research or for additionalinformation on the e-tailing group, inc. please contact Lauren Freedman via email at [email protected], by phone to773-975-7280 or visit the e-tailing group website www.e-tailing.com

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