California Apparel News

A new report finds that big online retailers' wait-and-see approach may offer opportunityfor small players.

Depending on whom you ask, the term Web 2.0 is either overused, misunderstood or both. But as the rise and influence of Facebook and YouTube show, the evolution of the Internet into something more collaborative and community- based—what’s also called “social networking”—is undeniable.

In general, online retailers have yet to embrace this evolution, according to a study conducted by Boston-based Retail Systems Research (www.retailsystemsresearch.com) entitled “Playing Well With Others: eCommerce’s Evolving Role in the Customer Experience.” Founded in 2007 by four partners, the research firm consists of two former retail chief information officers, a retail analyst and a former journalist who covered retail. The Web site currently has 25,000 subscribers worldwide.

For “Playing Well With Others,” RSR polled 108 major national retailers, of which 28 percent came from general merchandise and apparel. Thirty percent of the participants came from specialty retail, including various apparel companies.

The California Apparel News spoke with RSR co-founder Steve Rowen about the report’s findings and what even small retailers can do to drive traffic to their Web sites and boost sales.

CAN: Why did you found Retail Systems Research?SR: We saw that other analyst firms were offering competitive intelligence, ranking different vendors and comparing their solutions. What we wanted to do is talk exclusively to retailers and understand their needs on a wide variety of issues—and not just provide theoretical best practices they can chase for the next 10 years but survey them and look at the data on what they’re doing right now.

One thing we decided to focus on is the problems retailers are facing with their multichannel environments. We see more large retailers shifting emphasis onto the e-commerce side because there’s a lot of growth there. But what we have found in our research is that, particularly in North America, multichannel retailers are sort of missing the boat. There are clearly lessons to be learned in how to integrate those channels better.

CAN: What do you mean by multichannel?SR: Actually, we’re trying to get away from that term and are using the term “crosschannel.” It’s like this: The customer has a multitude of ways to purchase. She can first research online and then go to the store, she can purchase online and return at the store, and sometimes she wants to use the call center. The customer doesn’t really care how the retailer services her needs; she just wants to know that the only channel that matters is the one she is shopping right now.

So she wants complete integration. If it says on the Web site that something’s in the stores, she wants to be able to go and pick it up.

The problem for large retailers [is] there are a lot of fragmented technologies and processes between the channels. They don’t work well with each other. People on the electronic side don’t know what’s happening in the stores, and vice versa. As a result, there are significant challenges for the customer to buy, sell and return the way she wants to.

CAN: Tell us about “BOOT,” the acronym for the issues you consider when conducting your research.SR: Well, the “B” stands for “Business challenges.” We find that all retailers regardless of their size and segment tend to face similar challenges. The first “O” stands for “Opportunities,” and we find that the retailers that are always doing well have a very different view on life. We call them “retail winners.” They achieve greater-than-average comparable-store sales from year to year, and they behave and react differently. The way these retail winners are able to convert challenges into opportunities is by overcoming “Obstacles,” which they do through the use of “Technology.”

CAN: What else do retail winners do?SR: To be a retail winner, you don’t have to be a great big retailer. We see small chains that are outperforming their peers, and they’re doing it by thinking outside the box. One of the things that separate retail winners is that they’re not just looking to cut costs. Because in a Wal-Mart world, you can’t cost contain your way to success. You need to keep the customer as the center of the focus, and that’s what retail winners really do.

Whether it’s the products winners offer, the service model they follow [or] the ease of shopping, it always comes down to a focus on the customer.

CAN: Did any findings in your research surprise you?SR: One of the things that really [stood] out is that when it comes to their e-channel challenges, winning retailers say their No. 1 priority is the ability to keep their online product information up-to-date. This includes the product information that comes from a manufacturer or that’s generated in-house. That was really surprising because that’s a core issue of retail to begin with, and we would have thought that at this stage of the game there would be a lot less emphasis on product and more on how to make the user experience more interesting.

CAN: How can retailers make their Web sites more interesting?SR: They can offer mobility, a way for customers to use mobile devices, which doesn’t seem to be a priority right now. There are also a lot of bolt-on applications you can put on your Web site, like product reviews, which are a tremendous bed of data for retailers to learn a lot more about their customers.

CAN: Aren’t retailers afraid of negative product reviews?SR: We have reason to believe that retailers making good use of product reviews are seeing a greater volume of traffic. Customers really like them. I think you’d be hard pressed to find someone who’d say they have a negative effect. It helps drive loyalty to a site. But there are only a small percentage of retailers using reviews to actually drive their product selection.

CAN: And what about social networking?SR: We’re all sitting around waiting to see what kind of impact Facebook is going to have on retail, and what it seems to be is that all these things fit into one category that retailers call the “wisdom of the crowd.” But even the winners are reluctant to move forward with any technology where it’s uncertain that customers are really going to react positively. So at the end of the day, we’ve got a pretty significant waiting game.

CAN: Are there any technological challenges as far as e-commerce software goes, or is the technology more than adequate for the needs of retailers?SR: That’s an interesting question as there are still issues with different browsers viewing the same Web site. A lot of little features, like suggested items, appear differently, including missing text and links, for Mac and PC users, for example. There’s definitely good reason for retailers to take a good look at the technology they’re using for their e-commerce platform.

CAN: What tips do you have for retailers?SR: We suggest that retailers get more innovative. They can’t simply wait for consumers to dictate what they haven’t figured out for themselves. Retail winners are the ones that invent something new. This brings some risk but also presents an opportunity.

Some quick-hit wins we discovered include simplifying the payment options. It takes a lot of effort to get a customer to show up at your checkout screen, and if there’s any difficulty there, it’s a tremendous loss to the retailer. A complicated or not fully functional checkout screen is every bit as bad for the online experience as out-of-stock is at a physical store.

Enhancing personalization options like advanced search functionality and special offers are also great. Free shipping is the offer that seems to carry the most weight at this point; [this drives] a lot of traffic.

CAN: And what about smaller retailers?SR: There’s a real opportunity for them right now. Big [retailers] aren’t innovating right now: They’re waiting to see. For a retailer [earning more than] $5 billion in sales, to roll out a whole new Web site only to find out it doesn’t work would be catastrophic.

For a smaller retailer that’s more nimble, there’s opportunity to recognize that the big guys aren’t doing much in the way of making the online experience more interesting. It’s a good time to be a small retailer with an online presence and differentiate [yourself] from the larger guys who aren’t being leaders in making the online experience exciting.

Try to build a community around your site because brand loyalty makes all the difference.

CAN: Who’s shopping online these days?SR: Everybody. My mother is in her seventies and shops online more than I do.