10 Key Cross-Channel Trends
Retailers continue to aggressively integrate e-commerce into their cross-channel operations, because represents a tremendous opportunity for growth. According to the recently released RIS News/ AMR Research Cross-Channel Tech Trends Study (which is mailed separately with the September 2007 issue of the magazine and can be downloaded at www.risnews.com) the online channel represents a projected 34% of overall revenue in 2008 -- a growth rate of more than 42% since 2006.
The 2007 RIS/AMR Research Cross-Channel Tech Trends Study was conducted to assist the vast number of retailers embarking on nextgeneration e-commerce strategies, and to assess the industry's operational and technology priorities. It is based on a survey of more than 130 North American retail respondents across a wide range of segments, company sizes and business models.
Here are 10 key takeaways from the study. For more depth on these highlights refer to the full report.
1. Fast Growth Continues for Online Channel: The online channel for survey respondents represents a projected compound annual growth rate of more than 19% over the 3-year period of 2006 to 2008. When taking pure-play e-commerce retailers out of the equation, the online revenue represents 19% in 2006 and an anticipated 25% in 2008.
2. Focus Shifts to Online Advertising: Spending for traditional advertising such as print and television is shrinking dramatically from 70% in 2006 to 57% in 2007. Meanwhile, a focus on direct and measurable marketing strategies such as search engine optimization, shopping portals and comparison sites, and e-mail and affiliate marketing are taking center stage.
3. Consumer Shopping Hits Critical Mass: Online performance across segments appears to have no ceiling, with respondents reporting the average market basket for Web transactions between $200 and $299, and the average quantity of items per transaction between three and four. Specialty hardline retailers report the highest performance as compared to other peer segments with online orders ranging from $300 to $399 and average quantity per transaction between five and six items.
4. Fast Growth Brings Growing Pains: With increased sales, the number of merchandise returned grows. In fact, according to the survey, the average return rate for online orders is between 3% and 4%. Retailers are also experiencing fraudulent online transactions as part of their growing pains. While 38% of participants in the survey classify less than 1% of their online transactions as fraudulent, 41% state that between 1% and 4% of orders are fraudulent. A resounding 15% claim that more than 7% of transactions are known loss.
5. Dedicated Cross-Channel Teams Are Emerging: The burgeoning online channel is finally getting the attention it warrants with 47% of respondents elevating a dedicated business leader to the role of vice president of e-commerce or cross-channel to run the operation. Also, the resources that the vice presidents of e-commerce or cross-channel have at their disposal are growing. The average number of full-time employees dedicated to online operations in 2007 is between 50 and 99, and it is projected to grow to between 100 and 249 in 2008.
6. Outsourcing a Strategic Weapon in Cross-Channel Arsenal: While internal teams are expanding, retailers still outsource some of their core online business processes. Contact centers, an area that often doesn't exist prior to running a direct-to-consumer business, are outsourced initially -- to the tune of 36% for survey participants -- and then many times it is eventually brought in house. But only 19% of respondents contract with a third-party to manage fulfillment indicating that many organizations want to control this process
7. Web to Store Customer Convenience Drives Sales: An increasing number of retailers indicate they provide capabilities for consumers to order merchandise online and pick up in store. Ability to execute within each location for store pick up of online orders will be the defining factor of success. Also, the process for consumers to actually pick up products must be convenient and easy: 47% of respondents have a dedicated pick up center; 28% have products picked up at front-end register; and 23% pick up at customer service.
8. Store to Web Customer Convenience Drives Sales: Retailers never want to walk a sale, and increasing competition is driving them to expand product and service assortments. To accomplish this, retailers are providing access to virtual inventory for products not physically available within the four walls of the store. Kiosks will be the most prevalent device used for this purpose. By the end of 2008, 78% of retailers anticipate using kiosks to connect customers to the Web site for sales; 69% will enable inventory and ordering capabilities via the Web site at the point of sale by the end of 2008; and 52% will offer Web site access through store-provided handhelds.
9. Massive E-Commerce Refresh Underway: In the late 1990s through mid-2002, retailers invested in first-generation e-commerce applications to meet growing consumer demand. Because these rudimentary, stand-alone, and often times highly customized systems thwart retailers' efforts to meet evolving crosschannel consumer expectations, a majority of retailers are in the process of a technology do-over. This refresh has lead to significant investment growth in next-generation e-commerce platforms. This survey shows that 69% of retailers will replace their current e-commerce platform -- for order capture, catalog and content management, pricing and promotion management, and order inquiry -- by the end of 2008. An additional 14% of respondents are already using a next-generation system, representing early adopters in this replacement cycle.
10. Pace of Technology Change Is Fast and Furious: What was classified as progressive technology several years ago is now becoming the norm. For example, 96% of survey participants will have site search and 91% will have search engine optimization by the end of 2007. While interactive and 360-degree imaging is deployed in only 56% of respondents today, an additional 22% plan to invest in this technology by the end of 2007. RIS
Rob Garf (at right) is vice president and general manager of retail strategies. Fenella Sirkisoon is research director. Both are with AMR Research. They are the chief analysts for the 2007 RIS/AMR Research Cross Channel Tech Trends Study.