By Mark Danzig
Reports of the demise of e-commerce were awfully premature. Since the opening of the 2001 holiday, we're seeing more traffic to e-tail sites and more people buying online then ever before. What's abundantly clear is that even if all consumers are not buying online they are certainly shopping online. The Internet has become another channel consumers use to research and choose products. Whether they are researching online and buying in stores or catalogs or browsing in stores and catalogs and buying online, it is clear that the Internet is an important retail channel. As a result, the average shopper is more informed and more demanding than ever before. While this is great for consumers, companies still have a long way to go to efficiently deliver the rich and up-to-date product information that consumers expect across all retail channels. Delivering the right information to the consumer is the key to successful multi-channel retailing.
We're all hearing how retailers are trying to improve the online experience for customers with CRM applications, jazzy web features, free shipping and more, but without a system for managing product information before it reaches customer touch points, they're skipping the most important step. Product information management is a huge drain on resources, time and money. It's a serious market ailment that needs a cure because the end result is frustrated customers finding inconsistent product descriptions on websites, at retail stores or in catalogs where they comparison shop. Most online shoppers have had a first-hand experience researching a product, visiting numerous websites, checking advertisements and so on, only to come away from it all with a maddeningly incoherent picture of their buying options.
Yet the market for online shopping is definitely there. According to Jupiter Communications, it is estimated that Web-impacted spending will exceed $830 billion by 2005. Already, 65 percent of the U.S. population has used the Internet to research a potential purchase, visiting an average of 2.3 Web sites in the process. Customers tend to shop by all three methods available: in-store, online and through catalogs. In fact, studies have shown that buyers who use all channels spend an average of 4.5 times as much per year as those who only go to bricks-and-mortar outlets. It's also been found that consumers who shop through more than one outlet - for example, at the department store and through a catalog - are vastly more loyal than people who purchase through a single channel. More importantly, according to Jupiter media Metric, multi-channel shoppers are bigger spenders than single-channel shoppers.
Throwing the Web into the channel mix heightens the potential for revenue. Because of such research, the prospect of getting a single customer to buy online, through catalogs and in physical stores - multi-channel marketing - has become one of the hottest pursuits for retailers and software companies. Therefore, integrating the online channel with catalog and retail stores is the smartest and most efficient way to run the business and offer customers different ways to shop that fit their lifestyles.
Multiple channels offer various ways of securing customers, but they also present more touch points where customers can slip away. Too many enterprises are ill prepared to deal with this reality for numerous reasons. There's been a lot of talk about general purpose applications designed for enterprise-wide content management to provide companies with consistent, unified interactions across multiple communications channels, but not only do the majority of these "enterprise-wide content management" systems cost up to three times the sticker price to implement, they can not address the unique requirements of product information, and many retailers and manufacturers are then faced with the incredible challenge of building their own. Most B2B e-commerce technologies focus on automating the physical aspects of a company's fulfillment and order functions. The real killer apps for e-commerce may be the ones that hone in on the heart and soul of the consumer: the flow of product information. Without establishing a way to manage the flow and maintenance of product information - between various internal departments and with outside partners and suppliers - companies are already at a disadvantage in their the ability to capture, service and retain customers.
When the Internet economy went bust earlier this year, many companies pulled back on their IT investments. They've also had countless layoffs of IT staff and have undergone disruptive reorganizations that have stalled e-commerce projects. In some instances, bricks-and-mortar companies that spun off standalone dot-coms folded those online divisions back into the parent companies. Examples include Kmart, Wal-Mart and Staples.
Kmart decided to bring its online e-commerce division, Bluelight.com, back in-house in July 2001. The news came as no surprise to many analysts who predicted that bricks-and-clicks companies would only survive as a function of the corporation, not as stand alone entities. When Bluelight.com was absorbed back into its corporate parent, Kmart executives explained that the future would be about further increasing efficiencies, thus improving operations and recognizing greater economies of scale. Staples.com seemed like a sure-fire hit when it was started in late 1999. It had first-mover advantage, a strong brand and a deep-pocketed parent. It posted revenues of $512 million in its first year and a net loss of about $100 million, far less than expected. But the Nasdaq took a turn for the worse, and Staples.com was forced to shelve its application.
The effects of these restructurings are rippling throughout enterprises, as they try to find ways of maintaining their e-commerce presence. They can't afford not to satisfy their customers' demand for multiple information sources. This includes managing product information across the enterprise and multiple selling/communications channels.
Despite unhappy endings for some dot-coms, the Internet is far from dead. Instead of using it as a storefront unto itself, companies today view the Internet as one more way to reach customers in an overall multi-channel strategy.
Companies sank a lot of money into online initiatives once before and are loathe to make the same mistake twice. While their intentions towards that end are laudable, they're missing the boat. What they need to do is spend their IT budgets wisely, on systems that solve problems and perform functions effectively and efficiently to deliver immediate ROI. As companies are reevaluating the Web site initiatives that have been created in recent years, the focus is now on cutting costs and bolstering sales.
The flow of information across multiple channels throughout the enterprise lies at the heart of e-commerce success. The inefficient, time-intensive management of product information is one area where companies can introduce improvements quickly and easily if they select the right technology system. Companies with mature catalog operations are a step or two ahead of those without, but to date, no technology system has been up to the entire job.
This problem began in the early days of e-commerce. Many retailers' first tentative online ventures consisted of order-processing systems that were either loosely connected or entirely separate from the databases that held most of their customer information. In essence, many retailers maintained two database and order-entry systems: one for their traditional retail operations and another for their Web ventures. Many retailers still operate with separate systems, or are just beginning to link their disparate databases.
In their efforts to rectify the situation, many companies have wasted considerable money, time and resources installing systems that don't work as they expected. Or don't work at all. The necessary expertise for evaluating enterprise applications has often been lost through corporate downsizing. That leaves e-commerce directors bearing the responsibility for digital asset and product information management across multiple channels (i.e., bringing greater efficiency to these areas). They're tasked with an IT challenge for which they lack the proper skill set, and the marketing and merchandising departments they're asked to collaborate with don't have expertise in this area either. Many organizations end up choosing content management systems not designed specifically for handling detailed product information or the IT department tries to build a system in-house. This can be even more problematic when the product information comes from multiple sources in various formats. Installations of content management systems tend to become extraordinarily expensive, complex and, ultimately, don't work as desired.
The ideal solution goes beyond mere content management, ensuring that the most reliable, accurate and complete information is presented throughout the enterprise and at every customer interaction. It must be geared specifically to the unique needs of retailers for managing, distributing and publishing this product information across multiple sales channels and customer touch points. Eighty-two percent of retailers rate product information management as a high priority when allocating project resources, so it follows that they could realize immediate operational improvements and efficiencies by implementing a system addressing this need.
There are three fundamental requirements, therefore, for a successful product information management system that lets companies manage complex data relationships at a granular level:
- It must be networked in order to feed other systems within the enterprise. In the current environment of multi-channel retailing, with dotcoms getting pulled back into the fold, companies have already invested significant amounts in content management for e-commerce. But they also have catalog departments using their own software system. These disparate applications need to connect and communicate, so that different groups within the company can capture the data they need and repurpose it.
- Content comes in both structured and unstructured formats, and the successful product information management system must be able to handle the combination. The XML programming language - especially native XML architecture - is the key. Native XML lets users leverage, repurpose and recombine information for all kinds of sales, marketing and support purposes.
- The system must be easy to use, implement and maintain. Most data consumers are not technical users, such as individuals in marketing and merchandising departments. Therefore, in order for the product information solution to be adopted and embraced, a friendly interface environment must mask the complexity of XML data elements and dynamically tailor views to each specific user. So many software licenses are never implemented because cost of deployment is too high. Solutions providers have to reduce the cost of implementation and simplify integration with other applications.
The benefits of such a system should be immediately evident. Eliminating the duplicated effort that comes from recreating information across multiple channels will save companies the estimated $1.7 million that's wasted each year. By freeing up limited resources that have traditionally been overloaded trying to manage product information and by automating the process, companies can beef up their sales and marketing activities without undermining productivity. They can put out more catalogs, more quickly, thus generating additional revenue opportunities. By improving the relevancy and timeliness of product information delivery, retailers increase customer satisfaction and loyalty. Finally, by making it easier for retailers and other channel partners to obtain product information and put it to work, this kind of system helps companies forge stronger relationships with the companies that market and sell their products.
So, the good news is that the Internet dream is alive and well. One recent study found that 72.3 percent of Americans are now online, up from 67 percent last year. Moreover, Web users have not abandoned online shopping, as had been feared when so many pure-play Internet endeavors shuttered their sites. According to eMarketer, online consumer spending will reach $10.7 billion in the fourth quarter of 2001-- a record quarter for e-commerce and a 20.2 percent increase from the same period in 2000. The effects of online shopping are spilling into other retail channels as well, with revenue-generating results. Jupiter Media Metrix recently reported its findings that a customer who spends $1 at a manufacturer's online site will likely spend $5 at the retail store.
With customers discovering the convenience of researching and/or buying over the Internet, the rewards are greater than ever for Web-savvy retailers. With these backend pieces in place, enterprises can get even more bang out of their e-commerce site buck. Conversely, if online product information is incomplete or lackluster, the customer may forgo a trip to visit the store. The answer is a solution tailor-made for product information - not general content management - that directly addresses the unique work practices and challenges inherent to this process. As e-commerce continues to gain momentum, retailers that have failed to implement product information management systems will see it reflected in their bottom lines.
Mark Danzig
Mark Danzig was most recently the Vice President, Creative Director of BlueLight.com, where he created the original vision, look and feel, and strategic positioning for the BlueLight brand across all consumer touchpoints, including retail and online environments. Prior to developing the BlueLight brand, Mark held similar creative leadership roles at retailers L.L.Bean and J.Crew. He also held editorial creative positions in the publishing industry at magazines such as Men's Journal, GQ, American Health and The Washington Post. Mark currently sits on the advisory council of Full Degree, a Web services company based in Palo Alto, Calif.
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