A blog for students of Professor Kagan's Digital Marketing Strategy course to comment and highlight class topics. From the various channels for marketing on the internet, to SaaS and e-commerce business models, anything related to the class is fair game.
Hodinkee’s Ben Clymer: Flipping from advertising to commerce revenue is difficult
As a watch enthusiast, I have always been amazed at how a small site like Hodinkee became the leading voice of the luxury watch segment. Hodinkee started from humble beginnings as a watch review site. Still, between building a strategic digital marketing strategy and focusing on brand-building, they are now firmly positioned to push into the e-comm space. This is an article from 2018 but still very relevant to building a brand and understanding your audience before pivoting to newer opportunities.
With holiday shopping around the corner, sales are expected to soar, and an increasing number of those will be coming from e-commerce platforms.
Important to note as well, the devices that consumers will be using to complete their purchases: mobile has become increasingly important and m-commerce transactions are exceeding already strong forecasts. This is the result of increased trust and comfort on the consumer side, but also of technological improvements on the retail side: sellers now offer mobile optimized sites and shopping specific apps that facilitate the checkout process and the whole process in general. Retailers and marketers now have access to a wealth of information about their target consumers' preferences and by leveraging that data efficiently, they could lead them to the products they are most likely to be interested in, thus increasing the likelihood of conversion. Social networks offer new possibilities for brands: by offering loyalty programs to users who connect to their brands through their social networks, they can better expand their reach since individuals trust the opinion of their peers more than they do advertising efforts that come directly from the brand itself. Ultimately, by integrating the power of the social platform with the shopping experience, conversions and consumer acquisitions are more likely to occur.
Shopify lanched a new social commerce app called Sello.
This is an interesting move from the ecommerce provider Shopify. This move is not surprising given the rise we have been seeing towards social media ecommerce. Social network commerce gives the possibility of a lot more interaction between users, given that instant messaging can also be used.
This also implies a new business model for Shopify where it used to charge a fee or commission over sales, and now will leave payments between shoppers and business owners.
This week I stumbled upon an interesting article, that touches upon how analytics is improving for brands in the e-commerce space. Previously it was easy for brands to track their sales, representation, distribution parameters and many other metrics in stores, all thanks to Nielsen and other huge data collection and aggregation firms.
In online, however, where information is seemingly much easier to obtain, the analytics firms like HookLogic only began to emerge a couple of years ago and are only now becoming much more common. They collect data across multiple e-commerce platforms to make brands capable of comparing their performance vs competitors - an extremely useful tool, since the % of sales done online becomes larger every year.
I think such transparency and availability of data signifies the increasing maturity of the e-commerce industry as a whole. We have already seen a lot of M&A in the past years and my guess is that it's only going to intensify and we're going to see more price competition and consolidation in the industry.
Facebook has implemented several new products to help brands increase their advertising performances.
The first product—Carousel Advertisements, allow brands to show multiple images and ultimately a link to some actions. The Carousel Ads are 10 times better at getting people to click through compared to the static sponsored posts.Even the best of mobile banner ads garners only half of Click-Through Rate than that of a typical Carousel Ad.
The Carousel Ads also make users more likely to recall brands’ advertising campaigns. Compared with a 14-point lift from single-image ads, Carousel campaigns led to a 20-point boost in ad recall, as they allow for more of a conversation than a quick flyby.
In addition, Facebook announced earlier this week that it would feature on its mobile app a new video section, which would be populated with content that has been liked and saved by users, recommended by their friends, and posted by pages they follow. This approach would depart from Facebook’s current strategy of permeating users’ news feeds with non-targeted run-of-network videos.Facebook also plans to improve its “Suggested Videos” tab to offer videos according to users’ profile and past viewing preference.
This could allow brands to provide differentiated viewing experience on YouTube and Facebook. Brands could post popular contents on Facebook such as media credits and recent campaigns, while utilizing YouTube to feature videos about product details and tutorials to cater to brand enthusiasts.
Moreover, Facebook rolls out a test of a Shopping feed that aggregates posts and photos about products on sale from brands chosen by users. There will also be a “Search” bar and a “Suggestion” tab, which includes brands that are recommended based on friends’ preferences. In addition, the Shopping feed includes a Canvas function, which subsequently takes users to a full-screen experience within Facebook, allowing them to browse merchandises and peruse product information. The platform will eventually enable e-commerce, from which Facebook decides not to take a percentage of sales.
Besides Facebook, other social media companies have also undertaken initiatives to facilitate interactions between brands and followers. WeChat, the Chinese all-encompassing app, has developed its own commercial “Shop” feature, allowing verified brand accounts to converse with clients to provide customer services, and to display and sell merchandises on the transaction platform developed in collaboration with Alipay. Pinterest will also soon team up with brands to allow people to plaster their immediate to long-term shopping plans on Pinterest boards, based upon which brands could fire different kinds of creative pins to encourage actions. Pinterest is also expanding tech partnerships and developing functionality offered through the ad software program to improve its metrics measurement and to optimize its behavioral targeting.
Renowned fashion/tech unicorn, Farfetch, announced that they will provide brands with a white-label solution for brands. Farfetch started as a marketplace that connected consumers with multi-brand boutiques around the world. Mono-brand sites recently gained access to the site and with this move the company is leveraging a variation on their current platform to provide brands with better ways to expand their market access. The new platform called Farfetch "Black and White" gives brands the ability to easily develop foreign-language sites for international markets, omni-channel sales functionality and easy integration with a variety of third party sales channels. The API-based functionality of Farfetch Black and White allows brands to seamlessly connect their sites to WeChat in China or directly to the Farfetch site providing them with access to a large global network of customers. Details on how much this new platform is expected to drive their growth strategy have not been released but Farfetch has made it clear that they plan to be at the forefront of the future of retail.
"They’re creating a whole new business model by taking the mobile platform to its logical conclusion. Their app, which does a lot more than Instagram’s simple filters, works hand-in-hand with a business model to turn a T-shirt (commodity) into your own work of art (priceless.)"
This isn't quite my style and I certainly don't have the time or talent to design something that I'd consider wearing. I'd rather leave that for professionals who specialize in this sort of thing. Besides, I don't think they are targeting 30-somethings with this product. On the other hand, I can see how teenagers would like this product, and it is a great way to get them to interact with the brand on the platform they are most comfortable using, mobile. Uniqlo gets the added benefit of reducing inventory and unsold product designs further reducing costs. I have to believe other brands won't be far behind.
Cyber Monday presents a great opportunity for marketers to turn customers into an engaged audience and even more ambitiously, turn them into marketers. With millions of customers converting to online sales during the holidays, there is an opportunity to build a loyal social following by leveraging on this channel. The author of the article suggest five ways for marketers to make sure that new customers that come flooding into online stores have an even bigger long term impact on their business:
Focus on an exceptional customer experience: This first point include two main recommendations. First, make consumer experience as smooth as possible and keep in mind the tradeoffs between gathering consumer data and maximizing the customer experience.
Offer incentives: Reward the customers who provide personal information and survey with incentives.
Collect data carefully: Don't lose a customer in the attempt to gather too much information.
Deliver value on social media: Once you have turned your customer into a social media connection on an email newsletter subscriber give them content that is interesting, engaging and useful.
Be authentic: By being authentic in social media your quality content will travel further, your brand will attract more likes and your social media strategy will achieve a higher ROI.
Read the complete article: Marketers: Make Cyber Monday More Than a One-Day Deal
Source: Cooper, M. (November 26, 2014). Make Cyber Monday More Than a One-Day Deal. Ad Age
How consumers still believe retailers are dual pricing
In the early days of e-commerce having price differentials between online and physical stores was a common practice. However, in today's omnichannel world, it can be extremely harmful for a brand to charge different prices across different channels and therefore many retailers have abandoned this strategy.
A report from Displaydata suggests that more than 76% of the shoppers research online before buying in a physical store. The report also showed that 48% of shoppers perceived that promotions offered online were not available instore. In an effort to build a seamless approach to omnichannel, retailers need to aligned the consumer experience through all the available shopping channels. Particularly, two factors have to be revisited:
Pricing strategy in offline and online channels
Product information: 28% of shoppers want more information about the product and stock availability in physical stores.
In a fast-paced retail industry, players have to quickly adapt to costumer's needs or face the risk to loose market share. Due to e-commerce growth and the industry's competitive context, creating a differentiated, valuable and coherent shopping experience in all channels must be retailers' priority.
Five Takeaways From Alibaba's Record-Busting $9.3 Billion Shopping Fest
Alibaba set a new record selling $9.3 billion in merchandise during the annual e-commerce holiday. The sales on Nov.11 exceeded the 2013 record of $5.8 billion. Approximately, 43% of sales came from the mobile channel. Alibaba's ambitions are growing bigger, more mobile and more global.
So what are the big takeaways?
Size Matters: Everything the company does is larger than life! The company invited more than 600 reporters to its headquarters in Hangzhou, offers more than 1 billion product listings on its platforms and had the record for the biggest initial public offering.
Jack Ma is the Steve Jobs of China: The big buzz of the night was whether Mr. Ma would appear.
Mobile has momentum: Every year Alibaba growths its mobile sales, the figure was 5% in 2012, 21% last year and nearly 43% this year. In China, many people are going online for the first time on a smartphone, not a desktop which gives mobile a big room for growth.
Chinese brands win: Even with many big western brands available, the top sellers were local brands.
Alibaba has global ambitions but is laying low in the U.S--for now: Joe Tsai, Alibaba's executive vice chairman, said the focus now is bringing goods from U.S. merchants to Chinese consumers, though targeting U.S. shoppers could be interesting later on.
How often do we see something on Instagram, Twitter or Pinterest and want to buy? I personally had a number of times when I wanted to buy something nice but couldn't do it easily and gave up. Entrepreneur and investor David Tisch has spent a year and a half building a startup that is betting that mobile shopping would be easy.
“People love social media, but when brands come in, it gets awkward,” Tisch says. “We think that the best shopping experience is not user-generated content and brands then jumping in, but how to capture that feeling of walking 5th Avenue or your favorite mall.”
The new Spring app connects to the company’s own back-end system like Shopify and Magento and takes a cut “much less” than the 8-12% typically for affiliate fees. Offer free shipping and that fee gets cut in half, and Spring takes a smaller cut on exclusives, too.
Every item on the app has to be for immediate sale. You can browse for fun, but if Spring’s working, you’ll actually act on what you see. That means it’s critical to be able to check something out quickly and move on. Dissatisfied with that process, Tisch got his engineers to add a feature late in development: a Tinder-like swipe-down function that immediately takes you out of a product and back to the main group. It’s quick and impulsive to look at in item and move on, but you’re always a touch from buying.
That said, Spring looks a lot like Instagram but slicked-up. Tisch says he doesn’t want the app to be a repository for discount deals or clearance items–the hope is for pushing new launches and exclusives. Eventually, the app will have personal customization within the brands you follow as Spring learns what you like.
More important than those features will be the group of brands committed to the app. Spring’s name is inspired by the diversity of stores on Spring Street in New York’s SoHo neighborhood, and its launched with 100 brands that run the gamut from Alice + Olivia to Carolina Herrera, Everlane and Citizens of Humanity. Stalwarts like Hugo Boss, Levi’s and Theory are on board, as well as trendier companies like Rag & Bone and Warby Parker. Another 350 are in the pipeline; for some, it’s their first way to sell direct.
As it currently stands, Spring has a few issues:
First is the infrequency of content flowing through the app
They are missing the kind of community that Instagram has attracted, a lot of which stems from people and brands sharing a much wider range of content than product imagery alone
The seasonal schedule on which most designers operate. Even with the rise of pre-collections, there is going to be downtime and Spring will have to work hard to keep its stream fluid during the off-seasons
Finally, an immense challenge for Spring: convincing brands that their best shot is to let Spring control their customers’ shopping experience on mobile, which is undoubtedly the future of e-commerce. For brands to cede this kind of control to Spring seems like a huge leap of faith, especially in an industry as creative and fast-paced as fashion.
As a result, perhaps brands will invest more seriously in their own e-commerce initiatives for mobile. This will generate some healthy competition for Spring, which will keep both parties on their toes.
Packaged-Goods Marketers Wade Warily Into E-commerce
In 2013, online buying comprised only 1% of the $666 billion in consumer-packaged-goods sales in sales in 2013. Online sales of food and beverages will account for only 2.3% of the $304 billion that will be spent on e-commerce retail in 2014, according to projections from eMarketer.
By looking at this data, the relevant question is why have the big brands been so slow to implement e-commerce strategies? Three main factors have influenced this behavior:
Executional challenges of online grocery selling: The e-marketer operates in a world where search is the new shelf space and the online retailer controls the consumer relationship.
Low price points: Home delivery only becomes economically feasible once price points hit $20 to $30, which is a lot higher than the average grocery item
Planned vs. impulse purchases: A significant portion of CPG sales come from impulse purchases.
However, on the retail side, players have demonstrated commitment to boost packaged goods e-commerce. National giant Amazon and regional players such as Fresh Direct and Peapod are investing heavily in grocery delivery. While the bricks-and-mortars stalwarts such as Wal-Mart continue to invest on their online business. Ready or not, CPGs companies would have to focus their efforts on implementing e-commerce strategies. Players that fail to do so, would face a risk of stagnation, loss of share and even shrinking sales. Early movers would have the opportunity to establish positions that will be difficult to dislodge.
What's next for CPG companies in e-commerce?
On the next years, I would expect huge advertising investment switching from the traditional distribution channels to e-commerce. Digital investment would be no longer perceived only as an awareness and brand loyalty strategy, but also as a robust revenue generator tool. This phenomenon would be accompanied with the development of exclusive SKUs designed to meet online buyers needs and address some of the channel's challenges (higher price points).
The biggest challenge ahead is the shifting balance of power towards retailers. As the search ranking on e-commerce is considered the new "shelf space", online retailers gain more power on determining the potential revenues of packaged goods. So it is critical for marketers to get their brands to display on the first page of search results, which accounts for 81% of consumer clicks, according to One Click Retail data published in a recent report by Sanford C. Bernstein.
However, marketers run the risk of upsetting their traditional retail partners such as Wal-Mart and Target if they invest too much in Amazon. So an integrated multichannel strategy (offline and online) would have to be implemented simultaneously in order to leverage the opportunities that e-commerce has to offer, while revisiting traditional offline channels' potential.
Twitter is going to to add one more function to its options and become more than a form of communication or an ad — it will be an invitation to buy. The San Francisco-based microblogging company is testing a “buy” button so consumers can purchase directly from tweets posted on its service.
“We want to be a bridge between a consumer wanting something and getting it,” Hubbard said. “Conversations are happening every second on Twitter with artists and charities and consumers, and many of those conversations are leading to transactions already.”
According to Nathan Hubbard, Twitter’s head of commerce, Twitter is partnering with payments company Stripe Inc. to save a person’s credit-card information so users can make a purchase with just a couple of clicks.
The opportunity to buy alongside reading the updates from the people you follow, is just the first step in a larger strategy to engage Twitter users to shop spontaneously. Apparently, the company is pursuing two main goals by testing the service. First, to increase its revenues as investors put pressure due to slowing user growth. Second, the buy button will also help demonstrate the influence of a tweet in directly driving sales for businesses.
The main idea is that the offering would be build in line with the immediate consumer demand and realized by major delivery services such as EBay Inc.’s EBay Now, Amazon.com Inc.’s Amazon Fresh and Uber Technologies Inc.’s cab-hailing application.
So after months of speculation that this amazing music service was going to arrive to the US... finally the time has come and this week Spotify launched its service into the american market... The media and the business world are very excited cretting huge expectations... is it going to be the same success than in Europe...? Does this notion of renting music for 10$ a month will be translated into other industries ? What happened with the idea of buying music...? How does this affect Intellectual Property rights...? Itunes already revolutionized the music store concept globally... so I'm sure than Apple will give it a big fight back... so why it hasn't launched a similar concept of service yet with their available music rights.... Do they think it won't work and maybe European purchasing habits are different than americans...? Let's see what happens but if there's a clear sign from this launching is that the way content is been sold might change in the near future if Spotify is a big success.
Prior to business school, I was working at Rakuten (http://global.rakuten.com/en/), Japan's largest e-commerce marketplace. My department was in charge of expanding Rakuten's global e-commerce footprint. The Holy Grail for our team was developing a way to create a global, language neutral e-commerce website that had competitive shipping prices that were comparable with domestic alternatives.
This mind boggling trifecta of trouble bedeviled me for years. The first problem, the global reach of the site, was solved through legwork and lots of funding. We reached out to individual countries through joint ventures, acquisitions and a few local startups. The second issue, the language compatibility, was solved with a more legwork, keyword indexing and crowd-sourcing. The third problem, however, proved to be much more difficult. I will be very interested to see how FiftyOne solves this last problem. They seem to have the first two pretty much figured out, and a great global reach with premium brands (Barney's, Williams Sonoma etc…). They have amazing growth, with their annual sales growing 310%year-over-year, starting with $25 million in 2009 to $77 million in 2010. That sort of hyperbolic growth is very encouraging for the industry and serves as validation for the promise of a global e-commerce system.
Learning how to advertise in AdWords I noticed that there are some keywords that are a lot more expensive than others. For example, to reach the top position for “auto insurance” you will have to pay around $26.24 per click. On the other hand, for “bicycles” or “LCD screens” you pay less than $5 per click. This is consistent with the competition for advertisement that you see on Google. When you search “auto insurance” you get the maximum amount of ads (3 on top, and 8 on the right side). When you search for “bicycles” you get no top ads and only 3 ads on the right side. In the extreme, if you search “nasa” you get no ads whatsoever. This is due mainly to two things. First, the characteristics of the keyword people use to get to the product or service. For example, how broad or narrow is the keyword (e.g. a particular product reference vs. “clothes”). Keywords that unambiguously express and intent to buy (e.g. “auto insurance”) are more expensive than broader terms that might express different intents. I would expect narrow keywords to have a higher click through rate than broader terms and thus be more expensive. Second, the characteristics of the industry, in particular if consumers tend to buy the product or service on-line, drive prices of on-line advertisement. In industries like insurance where customers don’t switch as much as in other services, and where customers can get quotes on-line, there is huge competition for customer acquisition. Google’s preeminent position as the top search engine in most of the world, coupled with its auction based pricing for advertisement, allows Google to extract almost all the profit of an additional customer acquired on-line. This is particularly true in industries where on-line purchases account for a significant part of revenues. I look forward to seeing how companies respond in the future to avoid depending significantly on their position on Google.
It is interesting to study the path of some major e-commerce companies, such as eBay and Amazon in Asia. Back in the early 1990s, eBay entered the Chinese market and soon found themselves been slaughtered by another local Chinese company, Taobao (also known as “treasure hunting” in Chinese). One of the major reasons of its falls is because of the listing fees it charges to customers. Clearly, the Chinese online market at the time was not mature enough to accept customer service fee and it was more important to nurture the market than to charge listing fees. Taobao, on the other hand, understood the situation and started its advertising campaign among young college students who are the main drivers of online shopping. It focused more on building a shopping community by posting articles and offering discounts on popular online forums.
I could not help but wonder what is the appropriate marketing strategy for e-commerce. Although e-commerce center around the concept of promoting a no-boundary shopping experience, it could not afford to ignore the local culture and market. To some extent, e-commerce demands more interactions among buyers and sellers than the traditional retail business.
