From destination to distribution – new paradigms for the networked customer [Editorial in July 2008’s Internet Retailing]

This was my Editorial from the July 2008 issue of Internet Retailing magazine.

The paradigm of the web channel being a vast shop with elastic walls has run its course. As Ian Jindal packs his bucket and spade for the summer holidays, he considers a new etailing paradigm: active selling in the network age. Retailers have managed the web for too long – our customers want it back!

The web channel was initially regarded as an infinite warehouse without the costs of shops or space constraints, but customers’ early enthusiasm for clicking through many pages of turgid descriptions soon waned. Dimensional navigation and richer imagery sped filtering and improved product presentation, but where there existed a surfeit of information (electricals, mobile phones and computers spring to mind) the customer runs out of steam after a few clicks and has either reverses or abandons their journey.

“Personalisation” has been the always-just-out-of-reach panacea to these problems for at least a decade: matching the perfect product to the individual customer. Unfortunately, the effort of profiling customers’ requirements requires ESP and clairvoyance as much as raw data and we now see that customers’ behaviour is modal, inconsistent and based upon needs and attitudes as much as upon past activity.

We are in a complex world, with an increased overhead of analytics, data and profiles – yet no increase in conversion rates! While the arms race to improve and tweak algorithms, heuristics and approaches, there is a natural limit to the web’s selling capabilities at present, based upon pixels and time. I’ve been reliably informed that one cannot walk to the back of a supermarket and out again without seeing 300 products (the average family buys some 250 different products in a year). On the web it’s entirely possible to get in and out of a site seeing only half a dozen items. The average supermarket shopping visit is about 25 minutes’ duration yet if a web session hits 2 minutes we worry that customers are lost or have had a narcoleptic episode.

Just as the stretching of elastic walls has given reducing returns on-site, retailers have sought to stretch them via other means: the growth of search the rise of affiliates (based, broadly, on either discounting, search cunning or niche expertise) and site syndication have pushed the retailers’ messages further afield, while also creating a ‘blast radius’ of new sites – whether signal or noise is a matter of opinion and context.

Hitherto it is the retailer who’s been notionally in charge: setting a sales and acquisition agenda – attracting, engaging and monetising customers.

Now, however, there is the start of a shift in power from the retailer to ‘the network’. This is not a redressed “web2.0” pitch to implement geegaws and widgets on our sites, but rather a qualitative shift – where the data, the discrimination, the added value all reside in the aggregated activity of customers.

The first move comes from portable data – microformats and XML – that allow customers to take and use standardised data off-site. Next, a customer may record their computer usage in a portable, machine-readable format: Attention Profiling Markup Language (APML). Customers may offer to share this with retailers (thereby improving site suggestions and conversion) – in return for incentives.

Another move from the individual retailer to the network comes from review and ratings systems, like Bazaarvoice and Reevoo. Each of these suppliers works for retailers and enrich their sites. However, their reach is greater than an individual brand or site and the insight and value shifts from being retailer-centric and controlled to one based on the network.

Similarly, product recommendations (once the preserve of the on-site retailer systems) are now driven by external and, soon, network intelligence. ChoiceStream, Aggregate Knowledge and others can suggest cross- and up-sell options to customers. If they connect their insight across retailers then their systems would have more insight than any of their individual clients. Phorm, via its arrangements with so many ISPs, can see the aggregated browsing, ad-clicking and product-viewing behaviour of more customers than any one retailer or individual ad network. Finally, let us not forget that Google Checkout can ‘see’ every product purchased, at what price and thereby get a better view of ultimate conversion and effectiveness than any retailer – all the while retaining the closest relationship with the customer. In time this insight could power new forms of performance advertising, pricing models and as-yet-unformed commercial opportunities. For Google!

Unlocked data, information exchange, the network effect and new access to hitherto-private stages of the sales cycle mean that customers (and new service providers) have more power than ever. The implication for retailers is that they need to consider ever more carefully the uniqueness and value of their proposition and how they can work within this networked, amorphous world. As we unwind on the beach this summer we should keep a small part of our brains mulling over our approaches: contributive, expert, open and distinctive – hopefully in time to engage in the Christmas season! This is a topic to which we’ll return, but in the meantime “Happy holidays”.

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