E-tail Competition and Sales are Heating Up

Demonstration videos, 3-D photos and a new focus on abandoned carts are among new approaches to boosting sales on the Web.

By Jim Ostroff, Associate Editor, The Kiplinger Letter

Laura Kennedy, Researcher-Reporter, the Kiplinger letters

March 11, 2008

Selling and shopping via the Internet is going to get easier as merchants turn to new tools and marketing techniques and consumers grow more comfortable buying online.

Look for online sales to soar 16% this year to about $200 billion before growth slows, leveling off at around 10% per year by 2012 as e-tailing matures. The number of shoppers will rise only 2% a year, but they'll buy more -- some, much more. Half of online shoppers account for two-thirds of sales.

Big gainers in the next few years: Luxury goods, ranging from jewelry to fancy bathroom fixtures. The success of Web-based jewelers, Ice.com and Blue Nile, are spurring more traditional jewelers to sell online. "The Web is ideally suited for having a broad-based selection [of items]," says Jim Okamura, a senior partner at JC Williams Group, a retail and marketing consulting firm. "Retailers are able to fit some deep niches."

As high-speed Internet connections grow more ubiquitous, retailers will utilize new tools, which include videos for product demonstrations, 3-D photos and other multimedia page designs to better describe and display their goods. Sizing charts for clothes will be more accessible and easier to use. And as competition intensifies among the online retailers, customers will see service improve, too. For example, a Web feature that allows shoppers to converse with sales associates in real time via a live chat tool is quickly gaining ground.

But perhaps the biggest puzzle left for online retailers to solve is this: Why do so many would-be customers fail to complete their purchases? Only about 2.6% of online shoppers actually buy something after spending time on an e-tail site.

Better Web design can quadruple sales. Helpful moves include using software that takes shoppers to product reviews and gives shipping information and pop-up ads that offer discounts when the shopper is taking too long to commit. Improving paid-search links and banner ads on others' Web sites can also help. Ads and links for a product or service should be as detailed as possible to attract those consumers most likely to buy.

Multiple ads and links with slightly different messages work best in appealing to consumers with vastly different backgrounds and interests. "This segmentation is vital because it allows a company to offer a unique landing experience that's tailored to consumers' interests, [making them] much more likely to buy," says Scott Brinker, president and chief technology officer with Ion Interactive Inc., an online marketing consulting firm.

One caveat on multimedia page designs: Merchants should make sure they don't get in the way of closing a sale. Tracking software is a must for figuring out what works and what doesn't, and it will also give insights about customers that companies can use to tweak their ads and products, says Brinker. Medium- and large-size e-tailers can turn to firms such as Coremetrics, WebTrends and Ion Interactive for help with monitoring consumer clicks and learning how to optimize their ad, Website and checkout procedures. Google Analytics offers such help to small businesses for free.

Monitoring software also can be used to give waffling consumers a nudge. "Software that recognizes consumers at the checkout cart haven't clicked on anything for 60 seconds can [trigger] pop-up windows that asks them if they'd like to talk with someone in customer service by phone or instant messaging," says Jeffrey Grau, a senior analyst with eMarketer, an online marketing consultancy.

Messing up on "Retail 101" can turn off many buyers at the checkout, too, says Grau. Consumers hate to wait whether they're buying online or in a store. Merchants should resist bombarding consumers with checkout questions and make sure products sold online are in stock, or consumers will abandon carts and likely never return. It pays to add another server or two during busy holiday shopping periods.

An integrated online and offline shopping experience is a big help in boosting sales as more consumers shop across channels. More retailers will make it easier to buy a product online and return it at a store. About half of all merchants do so now, and a similar percentage lets shoppers buy gift cards at bricks-and-mortar locations and redeem the card online. More apparel retailers will make it possible for shoppers to buy a product online and pick it up at the store, a service already touted by hard-goods vendors like Circuit City and Sears. And consumers soon will be able to check more stores' Web sites to check if a product is available at a bricks-and-mortar location. In fact, Forrester Research estimates that the money spent by consumers who research products online but buy them offline will grow by about 25% this year.

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