Category Writing

“€Tail – the ins and outs of Europe” [Editorial comment from the May issue of Internet Retailing Magazine]

A combination of carbon awareness, recessionary trends and a non-existent expenses budget have kept our Editor in Chief’s focus firmly on Europe this month – just a well, since the rest of the world’s focusing upon Europe too…

The European bloc is the third most attractive global market – after the US and China – and, despite the differences in culture, language and infrastructure, this agglomeration of consumers is at least held together by the twin factors of relative affluence and a consistent legal system – the pre-requisites for trade.

The UK is well-positioned to be at the heart of international moves into Europe: the relatively well-advanced broadband and computing infrastructure, the credit card penetration levels, the enjoyment of shopping (online and off) and the ready acceptance of brand imports from across the pond makes the UK a natural ‘beach-head’ for US aspirations in Europe (or “rest of world” as our cousins so often term it).

The well-developed markets in France and German also hold attractions but outside the big three markets – each with its own idiosyncrasies – any hope of an homogeneous, easily-addressable marketplace evaporates.

Leaving aside language and culture (which of course one can’t) the plain sailing of the ecommerce front-end so often comes to grief on the jagged rocks of logistics and distribution. While it’s easy to present an ecommerce front-end to any market (indeed, we often scour the websites of US-only retailers and ponder the costs of delivery and import duty) it’s a totally different matter to get the goods to the customers. Legacy national carrier networks, cross-border delivery issues, the siting of warehousing, management of credit cards and returns… Ah – all of the problems of real ecommerce, but with a combinatorial level of complexity. Software alone cannot solve this, nor can marketing. Hence we see GSI’s European team investing in local logistics companies and partnerships, and the growth of ‘end to end’ commerce offerings that can provide a complete ‘click to doorstep’ service in-country.

What is the cause of this sudden interest? At a high level there’s a combination of a search for new growth outside the US and UK, a feeling that the technology allows a foray into Europe, and the growth of the indigenous etail markets growing to a critical, attractive mass.

Within this there are five main categories of activity (based unscientifically on my conversations last month):

  1. existing master of the large-scale play who look to extend their efficient supply chain and volume retailing to other territories
  2. niche or specialist etailers for whom a global market might exist and who now look to replace lost domestic volumes
  3. Global manufacturer, facing demand for their products in many territories, and juggling global marketing/brand ownership with a variable quality of local distributorships
  4. a domestic power-house looking for “near-shore” opportunities to support growth.
  5. companies who form the local part of a global group coming under pressure to operate in a unified, global fashion.

We will be tracking these developments with interest in these pages in the coming months.

The challenge of Europe is not just one of plugs, pipes and trucks: there’s a ‘selling’ challenge too. While it’s trite to note that customer behaviour may differ in regions and markets, what can we learn from this? Furthermore how can etail professionals move beyond obvious promotional mechanisms and enhance profitability? These questions will be occupying Europe’s leading multichannel retailers in Amsterdam this month for the inaugural European eCommerce Forum (ECF).

ecf-logo-smallThe Forum is an invite-only, expert peer group for etailers with €70million+ in etail sales, and will provide a confidential space for discussion, experimentation, benchmarking and networking. A joint initiative of Internet Retailing and Joris Beckers (CEO of FredHopper), we aspire to improve in-country selling capabilities as well as a broader European view.

ACSEL logoA fortnight later our colleagues at ACSEL, the French association for eCommerce, will be launching their book – “Europe – an Opportunity for eCommerce ” by Jean-Christophe Defline – at a conference in Paris where I’ll be expanding on the European view from the ECF and the UK perspective on eCommerce.

Most etailers will not welcome further complexity when the focus is upon the likely consumer downturn in the UK, so “Europe” may appear an untimely distraction. However, this syzygy of interest in Europe highlights topics of interest to us all: improved brand and customer communications; dealing flexibly with multiple partners and carriers; learning responsiveness to smaller, niche markets and, of course, driving for growth in a tough economic climate.

“99% pregnant” – misleading percentages in retail (Editorial from Internet Retailing Magazine, February 2008).

InternetRetailing‘s Editor in Chief, Ian Jindal, has been shopping hard this month and his experience at the sharp end of retail (handing over cash, rather than writing strategies) has made him ponder how retailers should respond to anticipated ‘percentage declines’ in sales.

Thanks to client engagements your Editor in Chief has had the opportunity to pound the malls, boutiques and ateliers of Hong Kong, London, New York and Manchester – all in the space of high carbon-footprint month. During my travels I’ve been both demonstrating best practice rich internet applications and spending times in some truly extraordinary retail venues – from the highest end of luxury outlets and malls in Hong Kong through discount and scale retailers in NYC, where luxury and mass-markets collide, and niche, one-outlet custom retailers in the UK. As a backdrop to this till-gazing my newsfeeds have kept me in touch with the statistics: ongoing fears of a consumer recession; growth in online sales over the Christmas season that show the channel taking an ever-greater proportion of retail sales and a mix of retail results, with some winners and a few losers whose sales have declined.

In my conversations with retailers there’s a general agreement that the “consumer situation” is going to be difficult through 2008 and that spring trading won’t help fashion retailers enough (after all, Spring/Summer goods have a lower cash value that the big winter coats and back to school outfits) and the electronics retailers lack a compelling product – no Xbox/Wii launch, no new operating system, no radical shift in computer power or screen technology. Even the DVD format war has fizzled to a conclusion.

In all, retailers are looking to proceed with caution, eye promotional activity and keen pricing as their lodestone in the difficult currents ahead – looking to steady sales or have a ‘managed decline’ while protecting margins. In a word – incrementalism.

I fear, though, that such stoicism and incrementalism will not serve retailers well: there’s no such thing as an average decline.

Customer behaviour is binary: they either buy or they do not. It’s not as if – faced by a reduced amount of free cash – a customer simply decides to spend £97 instead of £100. Clearly, retailer discounting may give that appearance (ie if we reduce prices) but the more worrying situation is that customers simply do not buy at all from us: a 100% discount!

This was obvious to me as I eavesdropped on the faithful in four different Apple stores fondling the new MacBook Air. Even early adopters acknowledge that the machine is underpowered but its impact is clear: it makes other options look undesirable and customers will wait for the ‘version 2’ rather than spend now or on an alternative. The message for rival products is “we don’t want it” not “we can’t afford it”.

Likewise, for clothing. Recent reports show that customer aspirations remain high even when cash is tight. The observed behaviour is that they’ll continue to buy high-end goods, but in lower quantities, and would fund the purchases by eschewing other non-essential purchases (ie reduced overall sales for the high end, zero sales at the lower end: no ‘average’ in sight!).

Luxury etailers, however, should not take this custom for granted. A quantitative survey by Conchango this month (covered on our portal) shows a catalogue of basic errors and shoddy customer experience. 30% of ordered goods did not arrive, and from a total score of 190 Estee Lauder (the best) only managed 109 and Dior held up the bottom with a lowly 56 (goods didn’t arrive).

The lessons from this are clear, obvious – and generally ignored. Back your products and marketing with great logistics.

The more difficult lesson though is to look through the aggregate behaviour of 100 customers and consider the unique experience of each of them: if we fail to communicate, inspire and delight then the customers’ wallets will stay firmly in their pockets. Aggregate percentage shifts in the market will disguise the fact that some retailers will take lots of money and others will see sales fall off a cliff.

A gynaecologist friend once remarked, one cannot be “99% pregnant” – you either are or you’re not. Likewise with retail in 2008: there’s no ‘99% successful’ – you’ll either make the sale or you won’t. In 2008 etail sales will need to be personal, and etailers must act accordingly.

“Chief Electricity Officers”: Editorial from Internet Retailing magazine.

This is my Editorial piece from November’s issue of InternetRetailing magazine.

A plague of recruitment calls has set Ian Jindal to musing about what we can learn from the reign of the Chief Electricity Officer.

The phone’s been ringing to the point of melting at IR Towers recently and invariably the opening phrases are either “Hi, I’m looking for a new eCommerce Director – could you help?” or “I work for an exective search firm and a client’s looking for an eCommerce Director – can you help?”. Anecdotal evidence indicates that we’re in a boom in ecommerce – the late adopters (sorry, those with “second mover advantage”) are competing with the pureplays and early-starters for a small pool of talent. Actually, for “talent with experience”.

Such is the clamour for talent that in January’s edition we will look in more detail at the state of skills in the industry – how to grow and retain talent, as well as poaching it.

I’ve had cause to consider the skills we require in senior ecommerce folk: major change management, technical literacy, sales-focused customer marketing, trading experience and if possible some understanding of buying product. Oh, and while you’re chatting to this Superhero, ask whether they have board level gravitas, significant expertise in your sector, a desire to work somewhere lost in the bowels of the company bureaucracy and the self-discipline not to use their x-ray vision other than on company business.

This stringent recruitment requirement – out of kilter with market supply – sent me into the bowels of IR Towers, to the musty library, to research when last there was such an intrusion upon the board hegemony of Managing, Sales and Finance directors (at least, since the invention of Marketing in the 1960s, loosening Sales Director’s grasp on the executive washroom key).

The IT revolution put IT Directors on the Board (now they report to the COO – the morphed, ever-resilient FD in many cases); the people-are-our-capital boom of the late 80s put HR Directors on the Board (they too now find a place within the COO’s domain) and the MBA explosion of the last decade had Strategy Directors and Business Development Directors duking it out for the freshest PowerPoint [tm] templates (now everyone on the board is expected to have an MBA). Of course there are strong HR/IT/Strategy Directors on major Boards. However, if you were to prohibit three directors travelling together on a rickety plane you’d select the CEO, COO and CMO, would you not?

Whither then the eCommerce Director, often batted between Marketing, the COO or as a digital adjunct to B&M? Few today would doubt either the importance or transformational responsibility given to the eCommerce Director, yet a permanent position at the Board table is not a given. eCommerce is still seen as “other”, “different” and something to be dumped on someone else’s desk.

Some dusty research offered up by our nonagenarian archivist reminded me of the brief but important tenure of the Chief Electricity Officer. Electricity defined the modern era, yet was an expensive and immature technology. Once standardisation (voltage, plugs etc) was in place the industry entered the mass-marketing phase – but adoption was slow. In 1902, Niagara Falls alone could generate a fifth of all the electricity used in the United States, and by 1907, only 8% of American homes had electricity. eCommerce is just leaving an analogous phase – with broadband now having reached all of the most commercially-attractive homes in the UK, and browser compatibility and stability taken for granted – customer are now looking ‘through’ the technology and assessing the proposition, the price and promotions.

In order to thrive at the Board table our eCommerce Directors will need every one of the formidable skills that the headhunters are seeking. Alongside them, however, so will their Board colleagues. Which FD can today say they ‘don’t do marketing’, or which CMO could blithely claim to be financially illiterate? Of course this no longer happens. In short order, therefore, we’ll see eCommerce Directors with the full range of skills needed to make a contribution to a savvy, supportive and challenging group of Board colleagues.

This temporary bubble should not relieve Boards of the imperative to fully embrace ecommerce any more than the temporary scarcity of talent in eCommerce should lull specialists into an arrogant separatism. The eCommerce Director has no permanent place at the Board table unless and until she manages to “drop the ‘e'” and become, simply and gloriously, the Commerce Director.