Ten Themes for 2009: eCommerce Technology

[posted by Brian K. Walker]

If the last year has taught us anything it is that none of us have any idea how to predict the future. I think we can all agree, the year was full of surprises. But one of the great luxuries of the job we have at Forrester is that we talk with lots and lots of people in and around the industries we cover. In my case I am lucky to have the opportunity to talk shop with eCommerce business leaders, multichannel retailers, IT leaders, eCommerce technology vendors, industry media and thought leaders, and (last but not least) my colleagues at Forrester.

 

I am not going to venture out with any “predictions”, but based on all those conversations I want to touch on some eCommerce technology themes I believe we will see in 2009.

 

So, with that, and in no particular order:

 

1. SaaS & hosted/managed platforms go mainstream. Increasingly online and multichannel retailers cut-to-the-quick and point out at the top of my conversations with them that “we are really only interested in something we do not need to support internally or host in any way.” While true SaaS products still leave some enterprise-class customers queasy, they are increasingly interested in looking at these offerings. And nearly all are open-to or motivated-to hosted/managed offerings. Look for incumbent software offerings to add hosted/managed and SaaS offerings to the portfolio and for business models to be tweaked all around to overcome obstacles in both traditional license and revenue-share models. We will be publishing a Wave report on the top 10 world-wide B2C eCommerce platforms very soon in January 2009.
2. Social shopping picks up steam and the experiments begin in earnest. Over the last couple of years we have all seen and participated in the proliferation of the social platforms. Look for retailers to seek out ways to participate. Email is maturing for many, and Search is annualized, time for the new pony. ROIs may be elusive, but the experiments will be many and interesting. Look for affiliate marketing, RSS, comparison-shopping, and web-services to all be used in various combination.
3. B2B eCommerce platform demand picks up. For years platform vendors have waited for the tsunami of B2B deals to come rolling in, and it really does make so much sense… efficiency, customer experience, CRM, globalization, multiplying channels, and traditional distribution channels under threat. Well, it is not a tsunami, but rather gravitational pull of another planet. Subtle but there. We will see demand for B2B eCommerce applications developing, and it will be lead but forward thinking organizations who are looking to do it right and who are not in any hurry. This is why, in this economy, it is going to build slowly. I will be covering B2B platform offerings with a market overview in Q2 2009.
4.  B2C eCommerce platform demand moderates but remains healthy. If you are a client, I wrote about this recently here, but in summary - and in honor of Spinal Tap - we are seeing the volume going down from eleven to eight. Many multichannel retailers are seeing an eCommerce beacon if light in the terrible retail storm. And branded manufacturers need to replace eroded demand in their traditional retail distribution models – making the channel conflict questions much easier to navigate. All that though needs to be mixed with a very challenging overall economic environment, hence the moderation. Many initiatives may stall at signing as companies wait for the situation to improve, while others will not hesitate.
5. Predictive merchandising becomes ubiquitous, and the crowd begins to separate. “Predictive merchandising” is also referred to as “automated merchandising” or “personalized product recommendations”. Whatever term you like (or are marketing) we will see this area are the “product reviews of 2007”, where we go from stepped up interest and demand to a default feature. The incumbent concerns and cultural hesitations of merchants and marketers will be replaced with an enthusiasm for the improved customer experience and ROI. Many retailers (and the vendors) will be picking off low-hanging fruit and seeing some good results even from the lesser solutions (to start). Meanwhile the crowd of solutions will begin to separate as the vendors with traction and profits outlast, out-market, and out-invest the start-ups. For more on personalization see Sucharita Mulpuru’s great research on this from December 2007.
6. Multichannel features and services pick up momentum. This is an interesting area. Will the challenges faced by retailers lead to further multichannel integration or are the costs and challenges too high? Many retailers will simplify this down to key features and services that really meet the customers’ needs – in-store pick-up and ship-to store. Upcoming research in January will explore the customer trends and opportunities for retailers to make this easier to accomplish.
7. Google Analytics picks up share, and the incumbents fight to retain customers. As we covered in July, nearly everyone is dissatisfied with their analytics package. Google Analytics has two advantages key to this theme, 1) it is simple and 2) it is free. As budgets come under pressure, and online retailers evaluate what is working and where they are spending their money it will be hard to justify the spend on analytics even if Google Analytics is limited in eCommerce-oriented capabilities.
8. We finally begin to learn what Omniture is up to, but continue to puzzle over Amazon's enterprise solution offering. Speaking of analytics, why did Omniture buy Visual Sciences (including Atomz Search) and Mercado? Is there a “platform” in there somewhere? Maybe next year the answers begin to emerge. As for Amazon, no word on what kind of enterprise eCommerce platform offerings will re-emerge, except we know it will include “services”. The assets are too great at Amazon not to seek to monetize them in an enterprise-services context, but the garage door is down and the mechanics are busy.
9. Oracle, SAP, and  Sterling begin to figure out what to do with this eCommerce-platform -thing. Demand from the vast Oracle, SAP, and Sterling Commerce install-base for eCommerce solutions is growing from a small crowd to an Obama-sized rally. The time to offer a well formed response is now, or be clear there is no product aimed at addressing the B2C online merchants and marketers’ needs. B2B solutions are more attainable and make more sense with the tight ERP and order management requirements, but the customer experience and business facing merchandising, content management, and marketing tools still lack maturity. Acquisitions would make sense here, maybe in 2009.
10. The walled gardens begin to break-down. We will talk less about platforms and more about “eCommerce technology environments’. Keyword: begin. More on this in 2009.

 

Happy New Year everyone and I look forward to more of those conversations in 2009.

 

Cheers, Brian

Fair Isaac - A Truly Innovative Online Banking Function

[Posted by Brad Strothkamp}

For years now, every new secured site function has had a business case built on getting users to access their accounts more often. So much so that you'd think every online banker would now spend half of their day checking out their accounts online. The reality is that there are just a few functions that can really drive incremental increases in activation.

I am happy to say, I have found one. Here the story.

Everybody is painfully aware how much accessing credit reports is becoming a common desire among consumers. Television commercials from companies like Experian with their FreeCreditReport.com Web site are raising the awareness of this important piece of financial information. A few weeks ago, Fair Isaac briefed us here at Forrester about their service called FICO Scores on Statements. The poor name they choose for this function overshadows how innovative of a function this really is.

The gist of the function is simple. Financial services firms can integrate a user's credit scores into their online banking session so that every time the user logs in they can easily get access to their credit score. Credit scores are updated on a monthly basis (as they are for other services), and the user can pay to get more detailed access to their credit history.

Why do we think this is such an interesting function?  Because it:

·       Is relevant and related.  Credit scores and account balances go hand in hand. It makes sense to access credit scores through online banking because both reveal the financial health of a consumer. Having these two functions integrated brings together two pieces of highly relevant financial information.

·       Makes for better educated consumers.The more consumers see their credit score the more educated they become. Washington Mutual and the Consumer Federation of America have conducted at study the last two years that consumers are becoming more educated about the credit scores, but could save billions if they knew more.

·      Is revenue generating. Not only will consumers visit a site more to view their credit scores, but also they will pay to view more detailed information about their credit. The opportunity to generate incremental revenue is easy to see.

·      Leads to cross selling opportunities.There is a very good chance that a consumer accessing their credit scores is doing so in preparation of a purchase they want to make. Firms could use this fact to target their products like loans and cards to this group.

What Keeps People Shopping

Forrester recently released our 2008 Customer Experience Index, a ranking of 114 companies by consumers who responded to an online survey asking how useful, easy to work with and enjoyable the various companies were. Get this, six of the top eight were retailers. The top retailer on the list? Barnes & Noble. So, what does this mean for retailers?

1. A great customer experience is a must-have in brutally-competitive, margin-thin industries that comprise most of the retail landscape.  It is not an option. Not surprisingly, the ten worst performers in the index were TV, wireless and web service providers and health insurance companies--regulated industries that give consumers no choice but to interact with them.

2. A great customer experience is needed just to keep you in the game. Companies like Borders, Toys R Us and Circuit City also scored very well on our list in spite of the fact that they are all in poor financial predicaments. Can you imagine how much worse off these companies would be if they didn't have a great customer experience? We know that good customer experiences drive loyalty, and those loyal customers are often the ones that keep store traffic robust and inventory moving. A personal example-I was at a local shopping complex this weekend and needed to kill some time. So I went to one of my favorite stores, Barnes & Noble and ended up spending money I hadn't planned on spending when I first walked into the store. That sort of impulse revenue creation is the direct tie between customer experience and sales. This of course is all the more imperative in an economic downturn.

3. Good customer experiences mean different things for different retailers. Knowing the core attributes of your brand (e.g. low prices, value, quality products, product support, product selection) and then choosing to deliver most aggressively against those factors that matter to customers (and ignoring those factors that do not matter) in a particular retail environment are critical. Let's take Wal-Mart as an example. Their core value proposition is everyday low prices. So an "enjoyable" experience at Wal-Mart is finding those unbelievably low prices during every visit, not talking to a knowledgeable sales associate or finding deep product selections. Wal-Mart gets what matters most to their shoppers, as do all the best retailers out there.

Compass Bank: Allowing truly customized accounts

[Posted by Brad Strothkamp}

Forrrester recently conducted a teleconference where I presented and spoke about what I considered the top best practices in financial services in 2008 to be. Many of the best practices I have written on in the past, but one that stood out is a tool developed by Compass Bancshares, a bank with 166 branches in Texas, Alabama, Arizona, Florida, Colorado, and New Mexico. 

The tool allows customers to build a truly customized checking account. So why is that so interesting?

I recently published a brief that discussed how consumers choose checking account providers. The key thing I took away from the research is that different segments of consumers value different things from their bank. Younger consumers care about fees and the convenience of ATMs, and older consumers care more about good customer service and competitive rates. But in today's world most banks (with a few exceptions) offer a one-size-fits-all account.

NOT SO WITH COMPASS.

The tool from Compass is the first one I have seen that lets shopper choose exactly what elements of a checking account are important to them. If they use foreign ATMs a lot, then they can have those reimbursed. If earning extra rewards is important, they can earn double rewards. Shoppers are allowed to select two options at no cost. Beyond that, each selection the shopper chooses increases the monthly cost of the account.

It's not that bad out there

Can we please put a moratorium on all the gloomy news?  Duke just released a study of CFOs where the key finding is that we're in for at least another 12 months of stagnation.  Will someone acknowledge that there is a glimmer of hope in, of all places, at least one part of the retail world which according to conventional wisdom, should just be getting pummeled?  I've been maintaining that eCommerce is insulated from the worst of it because there continues to be channel shift because it's just easier to shop online and perhaps most compelling, it's a channel where consumers can easily find the best price for anything they want to buy. I have two sets of datapoints to support this.  The first is the Chase Paymentech Pulse Index which captures actual transactions from 25 of the top web merchants. Through Tuesday, December 9, the last 33 days of online shopping have actually been great. In fact, consumers have, when measured on a YOY calendar basis, spent 15% more this year than last year. This is remarkable given that Thanksgiving fell later in November this year and we've had fewer days to build upon the momentum that Black Friday always creates. Our second set of datapoints come from a survey that Forrester did last week with Shop.org.  About 90 retailers responded, and over half of them said that sales have been up in November (including Cyber Monday which happened to fall on December 1 this year). The average November increase for these retailers was actually a hair over 7%--again, remarkable given that we had a very late Thanksgiving this year and we're just now in the heart of the online holiday shopping season.  As for the winners in all this, it's not surprising that the better performers tend to be larger retailers with multichannel operations. Also, sellers of certain products like the iPhone and iPod no doubt experienced better sales than otherwise because of the popularity of those items.

Now if I had a dime for every time someone asked me if we were going to revise our forecast downward (back in October, we said that holiday sales would be 12% higher than last year), I'd be very wealthy.  And after looking at these figures, we feel vindicated for sticking to our guns.   

Air Canada's Holiday Baggage Policies Show Some Consideration

Home for the holidays. It has a melodic ring to it, but the idea of lost baggage can be wincing.

Air Canada has announced some customer service initiatives around baggage that are truly responsive to travelers needs.

Workers in Alberta's oil region have been carrying their tools home to Newfoundland, and then flying them back to Alberta. Air Canada has partnered with some companies to provide storage for these tools. This saves the travelers the inconvenience while freeing up cargo space. Win win.

Employees travelling during the holidays will have their bags placed on lower handling priority than paying passengers. (I appreciate this as several of the premium seats on my Thanksgiving flight were filled by airline staff, which did nothing to enhance my impression of the carrier — if, for nothing else, because they didn�t bother to tell employees not to wear their uniforms. But that is another rant)

If Air Canada bags do not arrive, passengers can park for free in short term parking to retrieve their bags. This may seem small, but it is like lemon juice in a papercut to have to hand over dollars to pick up something that should have left the airport with you the first time.

There is a lot of talk about improving airlines brand favourability, providing responsive service, and demonstrating customer care. It was only a decade ago that Air Canada's baggage service was so deplorable that the CEO took out a full page newspaper ad apologizing. My, how times have changed. US carriers — look north.