Google, Amazon, Apple, And Facebook: What eBusiness Executives Need To Know For 2012

Nearly 50% of web shoppers start their research process on Amazon or Google.  Over 40% of the world’s Internet traffic constitutes daily visits to Facebook and Google. Twenty-one percent and 49% of iPhone and iPad owners respectively purchasing products via these devices. Google, Amazon, Apple, and Facebook not only absorb consumer time but are quickly becoming gateways for other eBusiness traffic. This makes the Big Four critical in the product research and sales funnel.  In our recently published report, “Google, Amazon, Apple, And Facebook: What eBusiness Executives Need To Know For 2012” we help eBusiness professionals identify what’s on the horizon for these companies and what it means for them. Some key findings of the report include the following:

  • Google has broad ambitions to support (or displace) incumbent eBusinesses. While Google struggles to move beyond its paid search roots, eBusiness professionals will need to keep the company top of mind because it maintains a majority share of online marketing spend but promises to transform every industry from financial services to travel to health care and retail.
  • Amazon is disrupting retail economics. While Amazon has the smallest market cap of the four players, it is completely changing the dynamics of manufacturers and distributors.
  • Apps can be powerful tools to support eBusiness objectives. Companies that see apps as just extensions of web content are missing the many opportunities to enrich experiences with cameras, microphones, speakers, accelerometers, and location-sensing capabilities.
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Is Facebook Worth It? You Bet

I was called a Facebook hater last week.  No ambiguity.  "You're such a hater!" this woman, who happened to be a social media marketer at a large retailer, told me. I will admit, I have reservations about Facebook’s role in commerce which has no doubt made her job more difficult, but I must defend myself.  I’m not a hater.  In fact, contrary to all the tweets and blogs questioning Facebook’s purported $100B valuation, I actually think the company is worth all of it and probably more. (To those same critics, if Facebook with $1B in profits is overvalued, what does that say about Groupon with about as much in losses?  But that’s a discussion for another day.)  Here are some considerations:

  • 44% of the world’s internet traffic visits Facebook daily.  As the CEO of an internet company months ago hypothetically and brilliantly asked me in response to the question of Facebook’s valuation, “What’s half the internet worth?”  Whatever the right number is, it’s a lot and when framed like that, it makes $100B seem very reasonable.
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The Guts To Grow: What Amazon.com, Trader Joe's, And Westin Hotels Have In Common

I received a curious email from one of the founders of eBags the other day. In it, he said that by bringing customer service back to the US and away from an offshore vendor, the company actually reduced customer service costs by 34% (yes, reduced!) while still growing sales by double digits in Q4. It reminded me of another article not too long ago from the Wall Street Journal that cited Qantas as having one of the world’s best check-in experiences because the airline invested in RFID tags for passengers, a decision that the article pointed out no other airline has yet copied. These examples stood out to me because these companies managed to pull off a very difficult trick: to make contrarian investments that industry peers would consider hogwash that nonetheless pay off in spades. It’s more likely that such investments would backfire, but when they work, they succeed beautifully. Three cases in point: 

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Why Facebook Is Still A Tough Sell For Retailers

As the Facebook IPO nears, all eyes are on the valuation the company will command.   The vast majority of that valuation will come from the company’s digital advertising business.  As for commerce, don’t expect much.  About a year ago, I asked the question Will Facebook Ever Drive eCommerce? and the answer hasn’t significantly changed in the time since.  Not only has Facebook seemingly been much more focused on the display ad side of the business all but dismissing retail (they rejected a keynote slot at the annual Shop.org summit last year and rumor has it that they turned down the slot following Bill Clinton at this year’s National Retail Federation big show, the trade show in all of retail), but the numbers that retailers have shared with us are no more encouraging:

  • Stores or fan pages on Facebook have yet to generate any significant revenue for companies as few shoppers visit brand pages or Facebook stores after becoming a fan
  • Few shoppers buy after seeing information posted on Facebook; a holiday study we did with GSI Commerce showed that less than 1% of revenue from retailers was attributable to social networks
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Raining On Ron Johnson's Parade

Ron Johnson, the new CEO of JCPenney, had a dog-and-pony show in New York this morning to discuss the company’s go-forward strategy. The major change: fewer sales and a move toward an everyday low price (EDLP) program. He also mentioned some store redesigns that would create boutiques to make JCPenney more akin to European department stores. There was also an allusion to services (similar to Genius Bar). While that should help to weed out cherry-picking shoppers and improve JCP’s assortment and experience (which already has significantly improved before Mr. Johnson thanks to partnerships with Mango and Sephora), it is unlikely to reverse JCPenney’s downward revenue slide or to grow the challenged mid-tier department store sector. This is because the biggest problem with JCP is something that is very difficult to fix (the same challenge that Sears has, by the way) which is that it has over 1,000 stores mostly located in bad malls with declining foot traffic. The question I have isn’t so much, can JCP reinvent its stores or the store experience, but how will it drive traffic back to those stores? Only the small fraction of its stores located in prime locations will even have the opportunity to re-engage shoppers; in fact, by our count, only 84 of JCPenney’s 1,100 stores are co-tenants of Ron Johnson’s old employer and the premier retailer today, the Apple Stores. 

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2012 Online Holiday Shopping Highlights

As the online holiday shopping season comes to a close, we’re in the process of pulling together our final thoughts on this season.  Last month, we predicted that the season would grow 15% over the previous year and by all accounts, that number should more or less be in the ballpark of what actually happened. 

I worked with the great team at Bizrate Insights again this holiday season to survey online holiday shoppers and their attitudes and here were some of the highlights from that research:

  • The web is cannibalizing Black Friday sales; 80% of online buyers we surveyed agreed with the statement “I prefer to shop online rather than go to crowded stores during the Thanksgiving weekend.”
  • Email is very much alive; shoppers said they find out about holiday deals through email more than any other marketing channel including search, social networks and mobile texts combined.
  • Approximately 12% of web buyers now say they belong to shipping clubs (e.g. Amazon Prime); that is up from 9% last year.
  • Sixteen percent of online buyers said they shopped with their mobile devices over the Thanksgiving weekend this year, up from 9% last year.

While mobile shopping is the most notable difference this year, retailers that mastered the basics of great values, extensive assortments and effective marketing campaigns should have fared best. We’ll be releasing a holiday post-mortem in January as well as our 2012-2017 online retail forecast in early Q1; stay tuned for final figures. 

What You Need To Know About The Online Sales Tax Debate

As the debate around mandating an online sales tax rages on, Forrester remains convinced that 2012 will see no significant national change to the current tax structure.  As stated in my new report, “What You Need To Know About The Online Sales Tax” and a previous blog post around the issue, some are framing the debate in such a way that online-only companies like Amazon and eBay are tax-shirking delinquents; they’re not. Not only are they in compliance with current law, Amazon, who was at one point resolutely opposed to any new legislation, has made concessions to voluntarily start collecting tax and in fact, physical retailers may soon regret their staunch stances as the balancing act that Amazon avoided around nexus kept them squarely away from physical stores to date.  Now, that may change and create yet another headache for retailers as Amazon reportedly ponders stores.

So what does this all mean? There is likely to be a few more years of heated debate around the issue followed by a number of possible outcomes. eBusiness professionals should stay abreast of situation, but realize that this is not likely to be a game changer for the following reasons:

  • Tax has a negligible impact on online shopping behavior.  In a survey that was conducted in partnership with Bizrate Insights, we found only 8% of consumers said that tax was a priority consideration. Furthermore, only around one quarter of buyers said that the introduction of a sales tax would cause them to switch retailers.
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US Online Holiday Sales To Avoid a Double-Dip Recession

Forrester’s “US Online Holiday Retail Forecast, 2011” launches today, revealing strong growth despite a shaky economy.  November and December alone are expected to pull in nearly 60 billion dollars in online revenue, a 15% increase over 2010 and about one-third of overall online sales volume for the year.  Much of the growth comes as a result of web shoppers doing more of their holiday shopping online and is enhanced by:

  • Customers hunting down deals.  The web has always been the channel for finding value, but as shoppers are more likely to have their smartphones in hand, and as the US unemployment rates continues to approach a double-digit percent, expect even more browsing online for great values.  Deal-related keyword searches spike around the holidays and many opportunistic customers actually look to load up on products from their own personal wishlists given the ubiquitous availability of offers. 
  • Key dates getting bigger.   The trend for the last several years has been that Cybermonday is the biggest shopping day of the year for web retailers.  This has become a self-fulfilling prophecy as retailers now provide rich sales and offers on those dates, further driving customers to expect fabulous values at the same time.
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For Groupon, The Really Hard Work Starts Now

After months of drama, Groupon finally had its IPO last week, concluding perhaps the most anticipated event in the daily deals space.  Now, however, is the even bigger challenge of actually proving out its valuation. The obstacles aren’t small and we lay them out in a report out today called Myths and Truths About Daily Deals. We define daily deals as both the purveyors of prepaid vouchers like Groupon and Living Social as well as the flash sale sites like Gilt Groupe and Woot. Two of the biggest challenges for prepaid voucher companies are the following:

  • Little incrementality especially for core Groupon businesses like restaurants or even national retailer deals. The majority of consumers who redeem prepaid vouchers (80% in the case of clothing or shoe stores, for instance) were already customers of the brand, and more than half say they would have purchased anyway without the voucher. 
  • Email won’t drive growth moving forward. While Groupon vaunts the size of its “subscriber base” (i.e., email addresses), all evidence points to the medium becoming less important. A significant portion of people who once subscribed to these emails no longer do, and many simply don’t want to because they have no need for more clutter in their inboxes. On the other hand, we’ve heard anecdotally that revenues for these sites are increasingly coming from organic traffic, which can be good so long as a daily deal company can continue to keep its brand top-of-mind for consumers. Marketing and sales, however, are two of the expenses that Groupon has loudly vowed to reduce.
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“State Of Retailing Online 2011” Part Two Launched On Shop.org Today

Forrester recently published the “State Of Retailing Online 2011: Merchandising, Headcount, And Global Strategies” report in conjunction with our friends at Shop.org. It is available on Shop.org (with a subscription) now.

Some of the reports highlights include:

  • Online retail continues to steal market share from other channels. “The State Of Retailing Online, 2011” survey shows an average growth rate of 28% for online retailers over the past year — this has been driven by improvements in retail execution including higher conversion rates, higher average order values, and strong repeat shopper revenue.
  • Investment in site merchandising drives conversion increase. While some tactics such as “ratings and reviews” are perennial merchandising investment favorites, more retailers now also are investing in merchandising through new channels, such as mobile. This report categorizes each of the 80 tactics reviewed as an industry standard, area of opportunity, investment area, or unproven tactic.
  • Headcount growth lags as overall eCommerce growth charges forward. Retailers maintain conservative growth plans — less than 10% — that largely don’t match up with the year-over-year growth of web retail overall. Focus currently is on mobile, marketing, merchandising, IT, and analytics.
  • Global expansion will be an investment focus, but not top priority. While 37% of retailers cited international commerce as very important, most global businesses still haven’t fully committed to that lofty title — remote management of global services, accepting returns shipped only to their home country, and English-only sites and customer service are still common practices for these “global” online retailers.
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