2007 Trends: Consolidation, Customer-Centric Promotions By Michelle Megna
March 7, 2007
Customer-based product promotion, Web-site optimization, alternative payment methods, mergers and "product discovery" are the big online retail trends for this year, according to a recent Forrester Inc. research report by e-commerce analyst Sucharita Mulpuru (with Carrie A. Johnson and Peter Hult).
In the executive summary of "Trends 2007: Ecommerce and Online Retail," Mulpuru states, "Specifically, we expect significant efforts in 2007 to focus on the improvement of Web site operations, the integration of non-credit-card payment vehicles and the enhancement of the product discovery process. Additionally, the coming year will reflect the voice of the customer as a sales tool for products more clearly than ever before."
Here are the highlights of the report:
Web site operations will receive overdue attention. Monitoring Web site performance, (download times and such) is no longer just for large businesses. Dropping price points, with some companies offering metrics services for as little as $500 a month, is allowing small e-tailers to incorporate these tools into their business operations.
Non-traditional payment methods will continue to grow. After steady gains in 2006, non credit-card payment is slated to continue to grow this year. Though credit cards are still used for the majority of non-eBay purchases, alternatives such as Bill Me Later, Google Checkout and PayPal will gain market share as they give customers "flexibility, float, and even credit," according to the report. "Likewise, retailers are also likely to experience a boon by potentially converting consumers who otherwise would not have made a purchase and by paying lower merchant interchange rates to alternative payment processors, versus the hefty rates that online merchants pay to networks like MasterCard and Visa."
Product "discovery" will become a new buzzword. The thrill of finding a product that you either didn't know existed or exceeds expectations because it's super-personalized or or uncommon is fueling the niche/discovery trend. Forrester estimates that there are 650,000 sole-proprietorship online stores that sell roughly $13 billion of merchandise and that consumers love the vast selection offered by these sites, with nearly 60 percent of Web shoppers saying that the Internet gives them an opportunity to find products that they would not find elsewhere. While niche sites continue to thrive in part by advancements in organic search and a more mature market, the report says companies such as Gifts.com and Zafu are also playing a role by offering tools to facilitate "discovery" search, providing more guided, personalized searching and results.
More manufacturers will sell online. More manufacturers will venture online, selling directly to consumers, according to the report, which cites Callaway Golf as an example. This company takes orders at its Web site, but fulfills them through one of its retailers to solve the shipping problem, resulting in a "win-win-win for the manufacturer, retailer and customer."
Consolidation in the long tail is imminent. Small e-tailers currently comprise roughly one-fourth of online retail revenues, resulting in a profusion of small Web sites eating up margins and valuable shelf space on key marketing pages, states the analyst in the report. This will likely spur consolidation, "by aggregating small players in key categories, larger companies could consolidate their lead, learn some of the secrets of scrappy marketing and boost margins," according to the study. "Two such consortiums that exist by executing exactly this model are NetShops and Niche Retail, the latter of which owns sites like Joggingstroller.com."
The consumer voice will be louder than ever in the online shopping experience. Customer reviews are no longer the only shopper-centric content driving sales. "Blogs, podcasts, tags and even user-generated products and product configurators all promise to push user-generated content above and beyond the current product testimonials," states the report. Examples of successful initiatives include Buy.com, among the first sites to post video testimonials of products, and Threadless and Metropark, which invite customers to submit product designs for items like t-shirts, the best of which they make and sell online.
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