E-Commerce Best Practices: Ten Rules of the Road

By James Maguire | Posted January 21, 2005

Since 1997, e-commerce consultancy the E-Tailing Group has been buying products from 100 Web sites a year. The Chicago-based firm records and tabulates the results of its shopping experience, using the data to help them advise clients and set e-commerce benchmarks.

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Each year, the firm's so-called "Mystery Shopping" project investigates many aspects of 100 top e-tailers. The sites themselves don't know they're being tested; yet they get a complete diagnostic check-up. "We behave the same way average customers do. We use the shopping cart, we order the product, we e-mail the site, and we return the product," explains Lauren Freedman, the firm's president.

The test e-mail, for instance, discovers how quickly and accurately a site responds to customer queries. They check the return process glitches. "We also test live chat — as trends evolve on the Net, we add new items to our test list," Freedman notes.

Take a look at the firm's research here. From among the sites the company put to the test, it found found:

  • 93 percent offered free shipping with a price barrier
  • 68 percent offered real-time inventory updates
  • 70 percent answered their e-mail correctly
  • 16 percent required authorization for a return
  • 8 percent offered the capability to shop in a second language

    (Final results for the 2004 holiday season will be posted by the end of January.)

Rules of the Road
While the statistics listed above are examples of the hard data that Freedman gathered, she also gleaned a handful of conceptual rules from her annual buying extravaganzas. These tenets might be referred to as e-commerce "rules of the road" — key concepts that will help online merchants of all sizes navigate the challenges of Internet commerce:

1) The best technology doesn't make the sale
"If someone has live chat but they have crummy products or bad prices, it's not going to make shoppers purchase," Freedman notes. Closing the sale is still all about product — rich content, virtual modeling or bulletin boards won't move SKUs that people don't want or that are priced too high.

2) The customer is more in control than ever before
"The consumer is incredibly demanding now," Freedman said. "They expect that anything's possible — they hit the submit button and expect that the FedEx guy is at the door." This is a big change from the frontier days of e-commerce, when merely receiving the product filled shoppers with wonder. Now, notes Freedman, the Internet lets shoppers be far more informed than the typical seven-dollar-an-hour sales clerk — the uninformed sales associate is at the mercy of the educated e-shopper. "Customers hold all the cards," she notes, which makes it harder for merchants to compete profitably in today's shopping environment.

"Merchants who combine a brick and mortar outlet with an e-commerce operation are positioned to move ahead of their competitors. Yet these two venues need to be fully integrated to truly romance customers."

3) Cross-channel selling is a killer app — if done right
Clearly, merchants who combine a brick-and-mortar outlet with an e-commerce operation are positioned to move ahead of their competitors. Yet these two venues need to be fully integrated to truly romance customers. "The customer demands a consistent experience from that merchant," Freedman said. "They don't understand why they can't use their gift card online and in the store — and why can't they pick something up in the store they bought online?" So while a cross-channel approach increases an e-tailer's possibilities, it also increases customer demands.

4) Smart merchandising leverages the old rules
While the Internet introduces a blizzard of new techniques into merchandising, many of the timeless rules still apply, Freedman notes. For example, presenting "Top Sellers" or "Featured Products" is still an effective sales technique, regardless of new-fangled merchandising approaches like automated push based on traffic patterns.

"The old rules still work because 'what's hot' and 'what's new' is still what shopping is all about," she said.

5) The Web is the ultimate efficiency model for consumers
It's a well-known fact, yet it bears repeating because it so fundamentally determines the online experience: It is remarkably easy for shoppers to get their shopping done online. Customers can find the best price at a store aggregator like PriceGrabber in 30 seconds. Amazon and other e-commerce outlets are increasing the prevalence of one-click shopping. E-tailers need to make sure their own site doesn't contrast with this: Is your e-business set to compete for shoppers who are used to a highly efficient experience?

"Amazon and other e-commerce outlets are increasing the prevalence of one-click shopping. E-tailers need to make sure their own site doesn't contrast with this."

6) Be aware of e-commerce's limitations (and don't forget the catalog)
"There's still a huge role for touch and feel," Freedman notes. "The [brick and mortar] store is not going to go away, contrary to what a lot of early venture capitalists tried to pretend would be the case."

For those sites that don't have a brick-and-mortar outlet, Freedman notes that catalogs are a version of touch and feel. The old-fashioned print catalog, once thought to be on the verge of extinction, has proven to be an unbeatable sales driver in the online era. "It's the portability element of it, and it's much more visual."

Part of the challenge for online merchants is showing all their merchandise quickly, especially when an e-tailer offers 5,000 SKUs. Here's where a catalog comes in handy. "You could browse a catalog in five minutes — but you could be online for 30 minutes and have found nothing," she notes.

7) Convenience and time saving often beat price — but the customer will only pay so much more
"People initially thought that price would be the only driver, but that's not true," Freedman said. Many online merchants make a tidy profit by tacking on a few bucks to a product that's delivered fast and hassle-free. Something that's not available locally or items that aren't fun to shop for can be safely marked up within reason.

On the other hand, the customer is willing to pay only a certain amount more to buy online, she notes.

Freedman tells a story from her own life: To avoid a trip out to a busy department store, she bought pajamas for her daughter online. "This item weighed about a half ounce, but they charged me $10 for shipping — I sent it back to them for .99 postage." She decided never to buy from that merchant again.

Moral of the story: a reasonable margin works, but a gouge will send customers fleeing — and they won't forget.

"A reasonable margin works, but a gouge will send customers fleeing — and they won't forget."

8) E-mail is still the greatest thing since sliced bread
Despite the deluge of spam on the Web, "being able to send an e-mail that gets a shopper to take action is very powerful because of the low cost," Freedman said.

Yet e-tailers don't use e-mail to its full potential, and they don't target it properly, Freedman said. There are countless instances where a shopper has bought an item and a merchant fails to send them a sales offer for a related item — with a discount — that might generate a second purchase. "We're not there yet on that kind of sophistication, but watch for innovations in 2005."

9) Personalization is in its infancy — but keep your eye on it
Early e-commerce futurists predicted that the Web would offer a one-to-one experience, yet we're still waiting for this. "When we surveyed merchants recently, they said, 'We are rudimentary when it comes to personalization,'" Freedman said.

Some merchants are pushing the envelope — note Amazon's quasi-functional capability to offer items based on past visits — but they're the exception rather than the rule. So far, personalization "has been lower on the radar screen. Businesses have focused on getting everything to work — the product shipping, the e-mails going out right — and only then do they think about getting more sophisticated in their marketing," she adds.

Expect personalization to be more of a sales driver in the years ahead.

10) On-site search is the crux of most online activity
Improving on-site search is clearly one of the hot topics in e-commerce today. Refining on-site search to the point that it quickly delivers the results shoppers want is seen as the Holy Grail of e-commerce.

"Over the last year and a half there has been a drastic improvement in the quality of on-site search," Freedman notes. As part of the 100 purchases her firm makes annually, they use misspelled words and descriptive searches (like "light backpack" instead of "Sierra Mega Pack"), and these terms now return better results.

Yet the technology has its limitations. "Because not all shopping is directed, if you don't know what you want it's a much more frustrating experience," she said. "The problem is that there's still a lot of impulse shopping, and we have to create interest in impulse buying to garner the next wave of business."

Adapted from ECommerce-Guide.com, part of internet.com's Small Business Channel.

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