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January 12, 2000 Event
Holiday Shopping 1999: Ho Ho Ho or Ho Ho Hum? The first big holiday season for e-commerce finally is complete, and early reports on performance are outstanding: a tripling of total transactions, a doubling of total traffic, and over $5 billion in sales. The results are impressive, but what really went on? Who were the e-tailer winners, and more importantly, how did consumers fare? While the numbers look great, this holiday may not have resulted in the watershed event many expected. Analysts had long warned e-tailers to be mindful of their distribution systems, cautioning online execs to maintain their sites, beef up customer service and soften return policies to keep customers happy -- vital steps to long-term growth. Many online retailers, however, incurred customer complaints about lack of service and late deliveries. For example, Toys R Us didn't win any friends when it sent out email to some customers saying their online orders would not be processed in time for Christmas. It offered $100 coupons to compensate for this not-so-merry setback. Some e-tailers were ready and waiting for the holiday rush. Amazon and AOL led the way (no surprise), and even portals such as Yahoo! and Lycos experienced shopping success. Interestingly, there appeared to be no correlation between the volume of television advertising and online dominance of a shopping category. Despite the billions of dollars in venture capital invested to start joe-etailer.com, hardly any of the new Internet companies gained traction this Christmas. Rather, many Internet affiliates of well-known chains (Toys R Us, Gap) surged toward the top of the ratings. Consumer dissatisfaction over slow order processing, inadequate distribution, and poor customer service may have prevented this year's Santa from reaching his full potential. In fact, Forrester Research believes that between 40 percent and 60 percent of intended purchases on line were abandoned this year when shoppers reached the checkout page. Overall, the lessons learned this holiday season indicate that e-commerce truly has blossomed in one short year -- but it still has a long way to go. A Very Big E-Commerce Christmas
Key Learnings
E-CUSTOMERS: WITNESSES TO THE EXECUTION
Successful online brands emerge because of execution in areas such as fulfillment and customer service, not just clever messaging and a pretty site. Earlier waves of e-tailing required focus on site speed and stability, but consumers now expect and demand more. Good site performance, prompt delivery of quality goods and responsive customer service are the current metrics for online retailers. While the media and customers coo at the front end of retailing, sites with robust back end supply chain management systems are best equipped to weather competition in the impacted e-tailing space.
MASSAGING MARKETING MESSAGING
E-tailers' messages were unclear and esoteric in the 1999 holiday season, and did little to reach consumers. Messaging needs to be clear, relevant and focused on differentiation from the competition, in more than an entertainment fashion. Billboards and radio ads trumped television ads for creating brand awareness and drawing people to a site. Considering the millions of dollars that went into dot com advertising and the painfully low return on ad-dollar investment, one could argue these dollars would have been better spent on product giveaways -- consumers love free stuff.
THE CUSTOMER IS ALWAYS RIGHT: THE GOOD, THE BAD, AND THE DEDICATED
The Good: Keys to customer satisfaction included responsiveness, interaction and excellent return policies. E-tailers need to shed the catalogue mentality; customers need more interaction, not more content in their shopping experience. The Bad: Broken promises were the biggest mistake online retailers made in 1999 (e.g., losing orders, missing shipping dates). Consumers will forgive a lot, but they won't forgive a broken promise. Companies must be proactive in admitting mistakes, work to correct them, and make conciliatory offers. The Dedicated: Customer service teams are disillusioned by low wages, lack of feedback, and underappreciation. Treat customer service representatives well and they will bend over backwards for the customer, site and company.
WHAT THE FUTURE HOLDS...
Three driving forces will keep us coming back in 2000: convenience, low prices, and better customer service from top tier e-tailers. Enormous consolidation in the online retail space will leave a handful of mega-retailers (e.g., Amazon, Yahoo!, AOL, MSN, etc) as an entry point for consumers' online shopping experience. E-tailers will increase their distribution networks via local delivery services in 2000. Brick and mortar businesses (e.g., Walmart) which use local stores as distribution centers will feel the presence of players such as Kozmo and Webvan, who are creating a powerful order fulfillment network by building out localized distribution centers. Such networks will allow online competitors to compete city-for-city with offline retailer juggernauts. Though retailers are commonly viewed as the ultimate winners in e-commerce, supply chain management and distribution enablers (picks & shovels) will be the real victors in e-commerce growth.
QUOTES OF THE NIGHT
"You can't tell a kid his gift is going to arrive on December 27th."
"It's unconscionable that at some retail sites you fill out a form, miss some data, go back to correct your mistake, and your data is gone."