The Next Wave of E-Tail: Considered Commerce

The products that fueled first-generation e-commerce — books, software and music, to name a few — are all simple to understand items that can be easily shipped to consumers.

Today, we are at the outset of a second wave of online growth, as consumers push beyond these simple transactions to research and purchase more complex products online. This second wave of growth — considered commerce — represents a seismic opportunity for retailers who are prepared to catch it.

What Is Considered Commerce?

The term “considered commerce” may not sound familiar, but it will soon enough.

In categories like furniture, appliances, flooring, big-screen TVs and building supplies, consumers are researching and purchasing online, having gained confidence in the online channel through years of buying more commoditized items.

In the last 18 months, retailers have mobilized to meet this demand, for the first time effectively offering these goods online through sophisticated multi-channel efforts, embracing the unique requirements of these complex transactions.

This convergence represents a new wave of e-commerce: considered commerce.

Despite the bleak retail outlook, considered commerce experienced robust 52 percent growth in the latter part of 2008. It is projected to be the largest, fastest-growing segment of e-commerce in the next five years, according to Forrester Research.

Considered Commerce Challenges

Profiting from considered commerce growth presents new set of challenges for retailers. That these categories are some of the last to move online is not coincidental — considered products like home furnishings and appliances are inherently challenging to sell online.

These products are often “big-ticket” items, considered purchases that consumers must be made comfortable transacting. Shoppers may not know brand or model numbers for these items (do you know the manufacturer brand of the last sofa you bought?), making it imperative that product information presented online be compelling in its own right. Shoppers are likely to want to see products in person or consult with a sales representative, meaning online, store, phone, chat and email experiences must be seamless. If all this is done perfectly and a consumer makes a purchase, these products often have complex shipping or installation requirements that can quickly become a nightmare for any retailer.

Nonetheless, retail chains, with their local presence, trusted brands and quick delivery, have significant advantages pursuing this new e-commerce opportunity. Customers are waiting for them online — certainly to research products and, increasingly, to buy them. Retailers can profit by meeting them there, if they follow a new set of rules.

Rules for Considered Commerce

There are any number of rules for e-tailing. Clean usability, compelling calls to action, data integrity — these guidelines apply to all e-tailers, regardless of size or what they sell. True since the early days of e-commerce, these imperatives have been well-documented.

We focus here instead on five rules for considered commerce, and how they differ from first-wave, e-commerce 1.0 practices. More often than not, considered commerce problems occur when retailers apply first-wave e-commerce solutions to second-wave challenges.

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1. E-com 1.0: E-commerce Island — A common considered commerce mistake occurs at the outset of an online effort — retailers organize their online business as an “island,” isolated within a department or wholly outsourced. A departmentalized approach, isolated from a company’s overall retail operations, is typical of (and may work for) simple “first wave” e-commerce categories, but the multi-channel complexity of considered commerce makes this structure at best ineffective, and more likely detrimental to the chain.

   Considered Commerce: Embedded E-Com — Launch your e-commerce operation as a coordinated, multi-channel selling effort, ideally with the head of e-commerce having a seat at the management table. This structure allows e-commerce to become what it should be in considered commerce categories — a force multiplier for chain-wide initiatives — and optimizes online results.

2. E-com 1.0: Duplication — Stranded on E-Com Island, e-commerce teams often build redundant staff, processes and infrastructure. Perhaps through lack of understanding of a chain’s existing processes or thinking they have a better way, they create new procedures and datasets for critical retail operations. For first-wave categories, this may not be so bad — the processes are simple and the risk of customers seeing multi-channel inconsistencies minimal. Capturing the potential of considered commerce, on the other hand, requires an integrated rather than duplicative approach.

   Considered Commerce: Integration — Leverage existing people and their retail expertise wherever possible. Use the same data and procedures as the rest of the chain, simplifying coordination. Once you’ve identified existing assets, then (and only then) evaluate and augment these assets, adding resources only as needed to fill e-commerce-specific gaps.

3. E-com 1.0: E-commerce Rules! — Inhabitants of E-Com Island often focus solely on one metric — online sales — to the point of becoming competitive with the “rest” of the retail operation. Internal competition may work for first-wave markets where multi-channel upside is limited, but it hamstrings considered commerce efforts.

   Considered Commerce: Chain-wide Impact — Take a more holistic view of the potential the online channel has for your retail chain. Set chain-wide key performance indicators (KPIs) and track interactions across channels. It’s every bit as big a win for your considered commerce efforts when a customer sees your TV ad, goes to your site and is convinced to buy in your store as when someone clicks “Place Order” online. It takes additional coordination to drive multi-channel results, but in considered commerce categories, they represent the majority of your upside. Recognize this, and measure and reward a holistic set of metrics.

4. E-com 1.0: World Wide Web (Only) — Typical e-commerce does not accurately reflect how chain retailing is done in-store. Just as “all politics is local,” all chain store retail is local, too. Through local selection, local prices and local promotions, stores battle local competitors for local customers. Most e-commerce solutions aren’t built for localization — one site offers the same thing to every visitor, regardless of where a customer resides. Retailers who adopt this approach for considered commerce hamper both their online efforts and their stores.

   Considered Commerce: Localize! — Remember that e-commerce supports your overall retail strategy, and your Web sites should be as localized as your stores. Some considered commerce retailers have hundreds of localized, micro-branded sites with content that resonates with local consumers. Others use IP (Internet protocol) mapping to localize prices, offers and product selection, directing customers to local stores with products on display. All have checkout processes that reflect that delivery times may be 48 hours in one area, two weeks in another. Make sure your Web site platform embraces this complexity — when done correctly, it’s a powerful sales tool online and in your stores.

5. E-com 1.0: All Store, No Stuff — E-commerce efforts often focus on technology, particularly in e-com 1.0 categories. Decisions on what text or button goes where or removing a field from a checkout form (the “store”) can make a difference in convincing someone to purchase a simple, well-understood, impulse item. In more complex categories, however, obsessing over these areas while ignoring basic retailing is perilous.

   Considered Commerce: Content, Content, Content — Start with the big questions: Do you have the right products? Richly and accurately merchandised? At the right price? Are you solving a customer’s problem (an installed floor in a week, a sofa in two days, removal of an old refrigerator)? Like you do in your stores, focus on your offering (the stuff) first, then optimize your online store around your offering. In considered commerce categories, if you get the “stuff” right, customers will work with you on the store.

Implementing an e-commerce strategy opens endless possibilities for your business — increased sales online and in stores, more efficient marketing and direct one-to-one communication with your customers, to name a few. If you are a retailer who thinks your business is too complicated for e-commerce, think again. The upside of considered commerce may dwarf that of first wave of e-commerce, as long as you play by a new set of rules.