Groupon: Scourge Or Phenom? Our Vote: Phenom. Here’s Why…

A Rice University faculty member just published a study on how effective merchants find Groupon. To Groupon critics, it was honey because a whooping 40% of participants wouldn’t repeat the experience.

But here’s the catch and why I’m still a huge proponent of the “group buying” model that encompasses Living Social, Buy With Me, Tippr and now the Yellow Pages and local radio stations and newspapers too: most of that 40% thought the Groupon customers were cheap and tipped badly. 

If that’s the worst of the problems, this model may actually be worth much more than the billion-dollar valuations already placed on the space.  Here’s why.  First, businesses like restaurants can prepopulate the “tip” field.  I went to a restaurant in Charlotte called Zebra which has done multiple group buying offers and they include a 15% gratuity in the bill.  Any business not already doing that could and should be.  Second, and more powerful, is that the group sites could capture information on who is a good and bad customer from the merchant.  Every redemption has a unique code associated with it (see image). None of the group buying sites are doing that now and merchants, at least according to the few that I’ve interviews, are keeping track of redemptions in rudimentary excel spreadsheets. The first company to provide a merchant tool that allows the flagging of particularly good and egregiously bad customers will be the winner in this space. By eliminating the “bad” customers from the offer, a merchant is much more likely to experience profitability or service issues that strain these small businesses. 

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New “State Of Retailing Online” Doc To Be Released On Shop.org Next Week

The findings from part two of Forrester’s annual survey conducted in conjunction with Shop.org will be available on the Shop.org site next week.  This installment of the "State Of Retailing Online" series will delve into the world of key metrics as well as multichannel and global strategies.

 Some highlights include:

  • Identifying improvements in performance and customer retention
  • Developing strategies for successful global expansion
  • Avoiding the pitfalls that many multichannel organizations face

 We look forward to sharing the full version on Forrester.com near the end of October.

Will Collecting Online Sales Tax Really Make The Difference?

Okay, so it’s no Brown v. Board of Education, but for those in retail, the 1992 U.S. Supreme Court case of Quill v. North Dakota could be considered just as landmark.  For the uninitiated, it spelled out the regulations surrounding collecting sales tax for states in which they have no physical presence – in short, that they weren’t allowed to do it.

With elections around the corner, many politicians and associations are stumping on this very issue.  They believe that many retailers are exempting themselves from paying the sales tax that the state ultimately deserves.  After all, 45 states in total collect sales tax from brick and mortar stores, which end up accounting for roughly 25 percent of their total income.  Sensationalism abounds in the discussion of this lost revenue: "Some of the things that have gone on in this recession would not have happened if sales taxes had not gone uncollected," said Scott Peterson, executive director of Streamlined Sales Tax Governing Board.

Since 2003, a majority of the remaining retailers have followed suit in collecting tax, leaving pureplays, many of whom are mom and pops who in this economy are at least earning income. Assessing taxes on these businesses won’t really help anyone except Walmart. And let’s be realistic here: Even studies like the one by the University of Tennessee say only 25% of eCommerce sales taxes that are “due” go uncollected. And we know from our surveys that 65% of people say that Web sales taxes (if increased) would cause them to decrease their online spend. With these facts that chip away at the supposed billions that supposedly go uncollected, this appears to be a much less pervasive issue than once put forth. 

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Toys "R" Us Throws A Hail Mary Pass With Pop-Up Stores

On Wednesday of last week, Ann Zimmerman of The Wall Street Journal reported on my former employer, Toys “R” Us, which is planning to open up 600 temporary “pop-up stores” in anticipation of the holiday shopping season.  The WSJ describes it as a super-sized bet while the company maintains it is a proven strategy.  Like most prospective retail decisions in this uncertain economic period, it is likely a mixture of both.

Ann certainly has some legitimate weight behind her assertions:

  • The space in which the pop-up stores will reside is distressed for a reason.  Who can guarantee that a watered-down version of Toys “R” Us will be able to overcome inherent issues such as poor foot traffic or a bad location?
  • Toys “R” Us has historically experienced issues with inventory; the majority of it never turns and Toys "R" Us often sells out of its best sellers before the season comes to a close.
  • While trends show improvement, there is no guarantee of economic rebound for the holiday seasons.  This could spell disaster if Toys “R” Us moves forward with 600 new shops.
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This Year, US Online Holiday Retail Sales Will Be Up 8%

Sucharita Mulpuru

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How I Got Hooked On Twitter

Lessons from P&G's Digital Day

As regular readers of Forrester's blogs already know my colleagues Lisa Bradner, Shar VanBoskirk and I (Sucharita Mulpuru) were part of last week's Digital Hack Night at Procter and Gamble. (If you missed the story can read about the event in detail at Ad Age here ). In four hours digital experts and P&G employees were divided into teams and challenged to sell as many Tide shirts as possible using their social networks and digital skills. Proceeds of the Tide shirts benefit Tide's Loads of Hope charity. The objective of the event was to give a hands-on experience for traditional brand marketers at P&G the impact of social media. While debate about the event has raged online we thought it worthwhile to step back and take a look at the longer term lessons we observed from this event. These lessons aren't P&G specific-they're food for thought for every marketer trying to get smart in social media. So, what did we observe? For starters:

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A CPG Company Not Afraid To Experiment

So I'm in Cincinnati right now at P&G's self-described "Digital Hack Night" where the goal is twofold: to get their brand managers to understand a bit more about digital marketing strategies and to raise money for their "Loads of Hope" charity which is tied to Tide. For the next 2 hours, nearly 100 people--P&G brand managers, bloggers, Twitterers, authors and agency folks--are trying to use every social network--Twitter, Facebook, MySpace, YouTube--we have at our disposal with the ultimate objective of getting as many Loads of Hope tshirts sold on their eCommerce site as possible. We have a big leaderboard screen, QVC-style, that shows exactly how many unique visits we've received, what our conversion rate is and how many t-shirts we've sold (5,000+, 6% and 1,000+ by the way, respectively, at the moment).  What a great way to get non-believers in the channel to see quickly, in real time, how rapidly an idea can radiate through a network and drive sales.

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How A "Tiny" Company Is Winning Online

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.

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