I was speaking with a friend today about the state of the economy and its impact on travel. This friend is a survivor of the travel industry’s catalog of crisis over recent years: 9/11, SARS, airline bankruptcies, soaring fuel costs. His view was that the travel industry has become complacent in its approach to crisis.
It’s true that one of the oft-repeated refrains I hear is “people still want to travel”. Several statistics announced last week render this hope like clinging to an untethered life ring.
According to the Association of Corporate Travel Executives, 71% of its member companies now plan to spend less on travel this year than in 2008. This is twice as many U.S. companies as they previously expected.
Convention travel is suffering from a rash of cancellation caused by diminishing budgets and the so-called “AIG effect”.
Demand for international flights – the most profitable product for airlines – is falling. ITA reports U.S. international air travel was down 5% in November 2008 compared to November 2007. According to USA Today, there will be 5.3% fewer international flights in March 2009 compared to last year.
Inbound tourism is facing challenges. According to the ITA, total international visitation in November 2008 was down 9% compared to November 2007.
All of this is happening despite the belief that “people still want to travel”. The issue is not desire. The issue is that an alarming number of people cannot afford to travel.
So I will offer a couple of short thoughts on an immense topic.
Travel companies must be developing scenarios for the next couple of years based on bad, worse and disastrous possibilities.
As we wrote about at the end of last year in a report called “Travel Advertising in a Slowing Economy”, travel advertisers are becoming less brand-driven and more direct-response focused. These marketers must address how this strategy will affect brand equity and the cost of recapturing it against the above scenarios.
I don’t believe the travel industry is complacent. Most travel professionals that I know are strategic, realistic and very concerned. Those who were optimistic may be a bit less so this week.
Micropayments are happening. Not everywhere, but in some promising areas.
The lessons of the iPod and iPhone apps store, Facebook Spare Change and Twitter's TwitPay all stand as notable innovations in a space littered with the remains of failed efforts to monetize "free" online content.
Beenz, anyone?
Yet on media sites, most low-value digital content remains free, even for mainstream media outlets. Two problems remain.
--First, how to process micro transactions cost effectively.
--Second, how to take something that has traditionally been free--like the Internet--and to add a price tag to it.
With that in mind, two recent encounters are worth note.
1) In a recent issue of Time Magazine and supporting TV coverage (including an admirably informative encounter on the subject with John Stewart on the Daily Show…way to nail it, John!), Aspen Institute President and CEO Walter Isaacson argues that a new model of micropayments is essential, if the newspaper as we know it will survive. He predicts that the decline in media could leave some major cities without a daily paper and major periodicals operating with limited full-time reporters ... despite having more active readers than ever!
The paradox is with young adults. As they migrate online they are accessing media content, but for free (the standard for most online outlets). This, with the economy, is contributing to the severity of recent profitability declines.
Isaacson, former Managing Editor of Time, then calls for, in essence, a system to remedy this -- an option that enables news organizations to get paid for content and services.
Whether charging a nickel for an article, a dime for the day's edition, or several dollars for a month's unlimited access, he argues the model should be able to support all of the above. It would also enable regular folks to get paid for supplementing their income via online value-add.
2) In addition, YouTube’s latest effort to monetize online video is noteworthy. On Feb 12 2009, YouTube posted a blog entry announcing that it is testing an option to enable video owners to download their videos from YouTube, either for free or via a small fee payable via Google Checkout. Partners are able to set prices and license details (ensuring "proper credit," the latter via Creative Commons Licenses. (http://creativecommons.org/about/licenses/).
And while it’s too early to tell, it’s an innovative way for long-suffering Checkout to open up acceptance, and visibility, at a time when it faces increasing competition and the recession’s punch on retailing, albeit less so online (see my recent Trends report here http://www.forrester.com/Research/Document/0,7211,48352,00.html
Market reaction from hard-core YouTubites has been mixed.
While several positive comments stand out, there have also been a number of criticisms, some explicit (the first comment under the blog entry announcing the decision contained both a slur and an expletive … it has since been removed).
Despite the continuing efforts, it is not technology, but the ability to successfully spur broad adoption that remains the primary stumbling block in the future of micropayments.
American Banker published an article last week that Mint.com and Wesabe were adding "unwanted fee finders" as a part of their services. About a week later, I received the following notice from Mint related to my Wells Fargo account (BTW - it is a bill payment fee)
I always have to laugh when I see new services like this. I laugh not so much because it is a bad idea (quite the contrary in fact), but more because so many services and sites we see that are popular and useful are born out of a consumer need or desires that companies fail to see or more likely don't want to address. What firms fail to recognize is that their unwillingness to recognize and meet a need doesn't make it go away - often they become companies onto themselves.
Here are some of my favorite ideas that come directly out of customer needs:
Bankrate.com, Creditcards.com - For year's Forrester has surveyed consumers on how they research financial products. Always topping the list is the obvious "product information", but the second and third items usually have to do with information to compare products and providers. Yet only a handful of times over the years, have I seen any recognition of this clear customer goal on financial firm Web site - Progressive Insurance is one. Today, firms like Bankrate.com and Creditcards.com are filling that need by allowing consumers to compare products and providers. The result is commoditization of financial firms - precisely what firms have tried to avoid all along.
Mint.com/Wesabe - Figuring out and delivering smart and well integrated financial management tools has been a struggle of many a financial services sites. The 90s were filled with failed experiments around aggregation and eWallets. Yet getting a better sense of "how am i doing" is a goal for many financial services consumers - especially today. The result is Mint.com and Wesabe who have taken the financial information financial firms have held so dear and actually made it useful to consumers to track and improve their spending habits.
Esurance/Geico - Auto insurance was (and to a large degree still is) sold by your local broker or agent. Many traditional insurance firms turned a blind eye towards the Web - assuming it was just a fad (I guess). Just like discount brokers a decade before, Esurance and Geico recognized the cost benefit and potential reach of the Web channel. But they did not just offer products via they Web, they instead understood the Web's ability to deliver product faster and more conveniently than traditional channels. This goal is perfectly aligned with consumer's goals, who use the Web more for convenience today in financial services than trying to save money. The result are products and more importantly processes that are the envy of the industry.
eBay/paypal - Ten years ago, there were dozens of attempts to crack the ePayments market. Anybody remember C2IT from Citi or Flooz? These services missed one important element, they tried to create a need where there wasn't any. Paypal on the other hand recognized the need of payments as a part of the auction process. They recognized that there was a clear benefit for integrating payments with auctions. The result was an enhanced the auction buying experience both for the buyers and sellers.
Are there any other stories out there like this? If so, please share.
Over the last two days leaders in online retail and the vendors who support them gathered in Orlando, Florida to discuss the state of eCommerce.
Some key thoughts:
1 - A glass half-empty is also half-full. Business is tough for some, and good for others. These times are full of opportunity and will lead to innovations. This was a resonating theme from Bob Thacker’s absolutely terrific keynote Wednesday morning, and reinforced by our forecast for 2009-2013. Many online retailers I spoke with reflected a relative strength of the online channel in an otherwise very challenging retail environment. 2 - Focus on the customer. Alfred from Zappos shared some key insights in the operating philosophy and culture at Zappos and how this has translated into a value proposition and loyalty for their customers. The metrics and results from this laser-focus on customer service and satisfaction speak for themselves. Much of what they do is common-sense, but requires commitment and courage to execute. 3 - A healthy eCommerce technology market. Our data and level of client engagement on this topic was reinforced by the retailers and vendors at the forum. A show of hands in my session on “The eCommerce Platform of the Future” was yet another data point, with 25-30% of retailers in the room indicating they intend to replatform in the near future. Point-solution providers have also shared that they have been pleasantly surprised by the market this year. 4 - International is still not a real priority. The complexity, cost, and distractions of operating international eCommerce remain a barrier to companies. This is still not easy. Payments, logistics, content, marketing, talent, and technology all add up to a challenge. As Jim Okamura said in the international session, it requires a commitment over the long-term by companies to get this right. It is great that Shop.org is getting behind this topic, helping retailers solve this, and I know Forrester is looking forward to supporting that as well.
I encourage you to check out the Shop.org blog for more coverage of the sessions.
And some personal notes and observations:
I am thinking that the Gaylord resort concept may be an indicator of what it will be like to live in space. No one left the bio-dome for 3 days, living is a faux-reality complete with “outdoor squares”, 17th century forts, and alligators. Will we have space-ports themed after every state in space? When I finally stepped outside today if was as if I have been living without gravity and was trying to get into the helicopter harness to be spirited off the waiting carrier (my rental car).
Twitter is a major topic of conversation. I was amazed by how many conversations started with “oh, I think I am following you on twitter”. But, relatively few people are really participating, and many talk about not knowing if this is really a useful and meaningful tool. I do think it is a great way to keep a conversation rolling, and it will be interesting if all the new follows from the forum develop into that.
We have great people in this industry. I was again reminded by the genuine, down-to-earth, smart, and creative people we have in this industry - retailers, vendors, and thought-leaders. It was great to connect, share stories, and learn from each other.
Now, back to my debriefing after returning from space,
Phew. After many months of analysis
and hard work we are very pleased to have published the B2C eCommerce Platform
Wave report. Clients can access the full report here: The
Forrester Wave™: B2C eCommerce Platforms.
eCommerce Platforms
Are In Demand
Our recent survey of our eBusiness
panel shows 35% of companies are looking to replatform in the next two years.
This is very healthy demand in an otherwise dour economic climate. Why? There
are many factors, among them:
eCommerce is among few bright-spots for retailers and can
be a way to offset diminished demand while closing retail stores, cutting
retail staffing levels, and cutting back on inventories,
Wholesale-brands
and CPG’s are looking to eCommerce as way to offset their wholesale-distribution
channels’ lost sales and it is a much easier conversation around
channel-conflict now when starting a direct relationship with consumers,
Established online retailers are dealing with aging site infrastructure and
technology as they look to innovate around content management, product
discovery (wide group of technologies here), and social commerce,
Integration to enterprise or legacy systems such as BI, CRM, ERP, OMS has become more and
more important as the business matures and becomes a more significant component
of the business, and contemporary eCommerce platforms are much more compatible
with these requirements.
What You Must Do Before You Select A Vendor
Do not make the mistake of taking the top vendors in this, or any, evaluation
and talking only with them. You must work to identify your business goals, brand
and service differentiators, desired customer experience, realistic technology
environment, operations capabilities and goals, and 5 year strategic goals
before making a thoughtful and confident vendor selection decision. You will be
living with this decision for 5 to 10 years. Forrester and others provide
services in support of this effort. I encourage you to explore that.
Over 75 Vendors in
the Platform Space
I am tracking 75 different companies
in the eCommerce platform space. I know there are very likely to be others out there not yet on my radar. Many of them do not cater to the same clients –
some focus on SMB, while others on B2B, etc. – but nearly all of them will say “yes”
when asked if they can help an enterprise-class eCommerce retailer or brand
with their eCommerce platform needs. We worked hard to focus on ten vendors who
we felt focused on enterprise eCommerce businesses doing over $100 million in
online revenues. We accomplished this through an RFI process and by relying on
our own client-interaction data. Sadly, there were a few vendors who just
missed the cut.
Key findings from
the Wave Report
Art Technology Group (ATG)
and IBM led the pack with their comprehensive eCommerce features, effective
business tools, and flexibility. Fry and hybris represent strong solutions with
varying models and key differentiators. Demandware, iCongo, Escalate Retail,
and Intershop each represent unique solutions at different stages of maturity
and are focused on midtier eCommerce retailers. MarketLive and Microsoft’s
Commerce Server 2007 round out our evaluation.
Look beyond the
surface
Now, as I say to our clients
all the time, each of these solutions represents a fit for a segment of the
global B2C enterprise eCommerce platform market. The wave reflects a specific
filter we apply which we believe best reflects the requirements of an online
retailer doing over $100 million in online sales, who has a typical enterprise
integration scenario, and typical B2C eCommerce merchandising and marketing
requirements. But, as you know, each company is different. (More on that below.).
It is also important to look at the eco-system around a platform selection,
such as system integrators, consultancies, and access to development talent
when making these decisions.
I want to make sure to thank
a few people. Brendan McGowan for his attention to detail, focus, and for
keeping me on track with the process. Nicole Lesperance for some great editing
in the heat of the Q4 rush. Jens Kueter and Ad'm DiBiaso for the always high
quality graphics, and Rebecca Anzalone and the production team for quick and
accurate work on these large projects. Carrie Johnson for her seasoned,
reasoned, and insightful editing and leadership during the process. And let’s
not forget the vendors’ staffs who spent countless hours themselves responding
to our requests for information, preparing demonstrations of their products
against our specific and unique scenarios, traveling to meet with us, and in
their (sometimes) reasoned and active discussions over why a score or comment
was what it was.
Let's Keep The Conversation Going
As Jeremiah Owyang mentioned
in his recent post
about his wave on Community Platforms, our Waves are snapshots in
time. While extremely detailed and as comprehensive as possible, they
cannot accommodate vendor changes which occur after the research is
complete. So, I'd welcome an ongoing dialog about this research, these
firms, your own vendor selection, and other vendors that you have worked
with.
And to those vendors who
were not included in this group of ten, please continue to engage. We often
refer clients to solutions not covered in the Wave or our other research as appropriate
and where we think there is a good fit.
And a reminder to clients,
we love to help you with your vendor selection processes. We can provide a
variety of input on the best-fit eCommerce technologies, including platforms. I
look forward to talking with you about your needs. We work closely with many clients
to help identify the right-fit solutions. The Wave tool also enables a
do-it-yourself aspect by enabling you to create custom weightings. I hope that
is helpful.
Best regards, and as I said,
I look forward to the continued dialogue,
Brian
Note: Please leave comments, I look forward to reading and responding as appropriate.
While all good things eventually come to an end, so too do endings lead to new beginnings.
It's in that spirit that I want to welcome regular readers to my new, role-based blog within Forrester. It's good to be back, and thanks to all of you who have reached out since the migration to the new platform.
The location of my blog may have changed, but the global financial crisis continues:
--Wall Street just finished its worst January ever;
--More than 100,000 job losses were announced last week alone;
--And the week to come is worth watching, with a variety of economic reports (including consumer spending, retail sales, housing and the January employment report) all in the wings.
In that light, it's appropriate that my first report of 2009 will be part of the FORR 2009 e-Business Financial Services e-Business Trends series. That report--"Trends 2009: US Online Retail Payments--Adapting to a New Spending Order"-- analyzes the factors driving this crisis, as well as the impact on consumers' multi-channel shopping and payments habits, with a particularly emphasis on online. We believe--and our survey data suggests--that payment habits will shift in some interesting ways as a result.
Beyond the impact of the recession and rising unemployment, the deleveraging from credit has increased the number of US online users turning to credit cards less, and debit-based or cash options more frequently. That number's up substantially in recent months. And while the Internet is buffering things for e-merchants--no channel has been spared, but e-Business looks somewhat stronger by comparison, and is becoming consumers' default research channel choice in tight economic times--choice proliferation and generational habit shift have already set the stage for a showdown. Plastic no longer refers just to credit, just as payments no longer are just paper. What's more, the available choices continue to grow--and will, as long as the VC funding holds out. (Look for at least two new online payment options to launch in the weeks to come).
Forrester expects this change to have several ramifications on e-Business and Channel Strategy professionals. Among these:
--A new order for credit. While still the top driver of online spend (in overall transaction value), credit cards are seeing a multi-year ceding of market share to debit and other alternatives. Forrester data suggests this process will accelerate, given tight credit access and the global deleveraging from credit that is now underway.
--Once bitten, consumers are migrating in large numbers to non-credit options. Prospecting, servicing and issuing standards will all be impacted as a result. And as consumers migrate to debit and other alternatives, it becomes important for e-Business managers to leverage payments at a more strategic marketing level, seeking to deepen relationships and enhance spend with transactions consumers are still making. The expanding number of payment options can assist, but is also a double-edged sword--those that are not able to thrive (in terms of networking broadly enough into consumer use and merchant acceptance) will be a drag for merchants, and will eventually consolidate or die.
--The likelihood of greater regulation. In 2008, the structure of the consumer payments industry was again in the spotlight. The Credit Card Fair Fee Act stalled in the US House of Representatives, but should in some version again see the light of day now that Congress is back in session. The Federal Reserve's industry rules, passed in December, seek to alter some of the long-held industry practices, in particular ones that have helped industry leaders offset the rise of fee-free and rewards cards. There may not be such a thing as a free lunch, but any changes to the current structure could add another element of discord to the consumer payments experience. Informed consumers will be ready for this, but for most, any changes to the benefits side of the equation will be a surprise. Issuers must be prepared, deepening relationships via cost effective means as a way of aligning (as best as possible) with consumers' values and needs.
There's more, of course. The changes we're seeing may not be the proverbial tsunami (as others have said), but will clearly bring significant changes to long-standing consumer habits, issuer beliefs and merchant relationships. Look for my report on the topic--"Trends 2009: US Online Retail Payments--Adapting to a New Spending Order"--over the next couple of weeks.
And let me know what you think of this analysis—email me with comments at ekountz@forrester.com.
[Posted by Diane Clarkson]
[Posted by 
