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10/08/2012

Global Goes Local

No one succeeds in retail without relentless examination of key performance metrics such as sales, profits and shareholder value. But a different kind of examination also takes place that goes beyond hard numbers and factors in the impact of shifting market forces – things like customer behavior, the competitive landscape and long-term global trends. This kind of examination aims to discover opportunities for growth on one end of the spectrum and risk-laden challenges on the other.

A big challenge frequently cited today among retailers is the inability to recreate the shopper experience that was once so common on Main Street, the familiar “Hello” and name recognition found in mom-and-pop stores.

Clearly, the world has moved beyond these simpler times, and retailers today need to scale their businesses to adapt to a global economy and meet the demanding expectations of digital shoppers. The Main Street model can’t work efficiently in today’s world. Nevertheless, it is possible to identify the elements that made it once work so well and then embed these elements into current retail operations.

One retailer doing this is Rakuten Buy.com, an $805-million-dollar online retailer with a unique vision for online shopping that works hard at emulating the communication, discovery and entertainment experience of mom-and-pop stores. It does this by connecting merchants of all sizes, including many single-store and small entrepreneurial businesses, with shoppers around the globe – essentially taking local retailers to a global market.

The key to this approach is an innovative online platform and dedication to a mission to roll out digital tools and services that raises personalization to a new standard. “People buy from people,” says Bernard Luthi, chief marketing officer and chief operating officer of Rakuten Buy.com. “They don’t think of it as Internet retailing or an e-commerce channel. They like to think of it as buying from people, from human beings at a store. We are taking that concept and personalizing the shopping experience in ways that have never been done before.”

The Loyalty Effect

The kind of personalization Luthi is talking about includes a robust, leading-edge loyalty awards program, social sharing and social shopping, Facebook and Pinterest incentive programs, and smartphone apps that allow shoppers to search products by text, scanning, snapping photos and voice recognition.

None of these personalization approaches are exclusive to Buy.com, but what is different is how Buy.com takes them further than others and elevates them to a new level. Take the loyalty program, for example.

“Rakuten Super Points is a loyalty reward points program with tremendous flexibility,” explains Luthi. “For every dollar you spend on Buy.com you get one percent of the value in points. However, if you buy at a particular day and time the offer might be for five times the points. We had a 30 hour Super Sale recently where for every dollar spent you could earn up to 29 cents of value in points, which then reside in your account to use for your next purchase.”

The goal of the loyalty rewards program is not just to stimulate sales during promotional campaigns. Instead the goal is to “retain customers.” Points are earned for non-purchase activities like scanning products or writing reviews, and because the ecosystem of Rakuten is so large some of the rewards are for high interest items like travel.

The program is also designed to deliver a discovery-type shopping experience where customers check the site regularly to find limited-time offers for earning a thousand points for purchasing the video game Battlefield 3, for example, or getting 40 times the points for purchasing a pair of high-end headphones.

The reason Buy.com places such a strong emphasis on providing loyalty program benefits is that it gets a great deal of insight from the tracking data recorded for its most valuable shoppers.

“We learn a great deal about their shopping behaviors and how they share purchases with friends,” says Luthi. “To get this rich level of data we make sure we reward their purchases and also reward their interactions with the website and beyond. Our loyalty rewards program is designed to be very sticky and to incent shoppers to become involved in our entire ecosystem.”

Rapid Innovation

Today it is not enough for retailers to develop and launch innovative services and offerings. It is the pace of innovation that matters most, and the faster the better. A report by Accenture, which was cited in “Increase Your Innovation Cycles” (RIS News, April 2012), found that online-only retailers initiated more than 80 IT innovation releases per year compared to annual or semi-annual releases by traditional retailers. This pace of innovation produced a 25% growth rate for online retailers in 2011 compared to just 5% for POS-based sales and 15% for digital channel sales.

A short list of Buy.com’s recent rollouts include:
  • Launching Android and iPhone apps that set a new standard for search functionality. Mobile shoppers who want to search Buy.com’s 14 million products can do so using text search, image recognition (snapping a photo), barcode scanning and voice recognition.
  • On Facebook, Buy.com offers two compelling programs. While on Facebook shoppers can shop or share product preferences with their friends. A more cutting-edge feature is the ability to communicate with Facebook friends in real time while on Buy.com.
  • BuyTV is a high-energy series of videos produced in-house that offers product reviews, merchant introductions, trailers and a weekly roundup of news.
  • What’s Shakin’ is a home page feature that displays a selection of products with the highest rate of sales gains over the past 24 hours. Shoppers can see which products suddenly have buzz and become hot.
  • ShopTogether shows what others on the site are viewing at the moment. Updates occur in real time so you can see what others are looking at.
  • Buy From People Not the Internet is a series of promos featured in the hero box on the home page. When you click on them they take you to the storefront of the merchant where you  can learn more about who they are and what they are selling.
  • Pinterest contests incent shoppers to post Buy.com photos on their Pinterest pages. Luthi notes this is just the start of a more innovative program that will be launched in the near future.
  • The combination of these features and many more on the website creates an extraordinarily rich home page, but one that is also extraordinarily busy. Is it too busy? Not according to Luthi.

“We don’t leave much to chance,” he says. “What you see when you go to our website is the result of a great deal of testing, a great amount of trial and error. We look at customer heat maps and conversion rates. We want to see the patterns of shopper behavior on the website, where they land and what pages they go to. The goal is to provide the shopper with an intuitive process for searching, purchasing and discovery.”

Shopping Is Entertainment

Founded in 1997, Buy.com began life as a classic e-tailer with a strong focus on electronics products and IT development. Like most e-tailers it was a first-party seller. However, it began experimenting with a marketplace approach at the end of the last decade and then became a full-fledged third-party marketplace after being acquired in 2012 by Rakuten, Japan’s largest online retailer, with close to 80 million registered members, 90 million SKUs, 40,000 merchants and $5 billion in annual sales.  

In addition to Buy.com, Rakuten’s global reach includes Play.com in the UK and PriceMinister in France. Earlier this year, the company led a $100 million investment round in Pinterest. Rakuten’s goal, according to Luthi, is to create a merchant platform on a global scale where local merchants can be exposed to a global market. Rakuten’s philosophy is that shopping should be entertainment.
In addition to morphing into a retail marketplace, Buy.com has also shifted to become much more of a customer-experience organization for both its shoppers and its merchants.  

“We design our Web presence from the perspective of what is the best way to connect a seller to a customer,” says Luthi. “We provide personality and more info about the merchants than shoppers can get anywhere else. Merchants are typically offered a secondary role on most marketplace sites. But merchants get more than to just display a product on our website. We make sure the shopper knows the merchant story behind the product, and we empower the merchant to bring their personality to the shopping experience.”

Making it easy for merchants to become partners with Buy.com is an important part of the retailer’s success. Key to this effort is a seamless, easy-to-use, proprietary platform that merchants can use to manage their businesses. Merchant capabilities on the platform include: an e-mail function called BuyMail that allows merchants to run e-mail campaigns to customers who have made purchases on the site, marketing and branding options for both on and off the website, and the ability to fill storefront pages with personalized images, blogs and photos.

Clearly, Rakuten and Buy.com are large enterprises, but their approach is a digital analog to the kind of Main Street where tailors, bakers, grocers and small entrepreneurial businesses appear side by side, creating a more personal shopping experience than found online today.

“We want to pull as many of these kinds of entrepreneurial businesses into our platform as we can,” says Luthi. “Our approach is the opposite of a big business strategy. We may be a global organization, but we are small business supporters and we think local.”