- 1-800-Flowers: "our brand investment is mainly offline, in brick-and-mortar stores and call centers..."
- AllHerb.com: "what's necessary is real-world branding, PR....but branding will shift from real-world to online....right now, only 2% of general population is aware of Yahoo!, and only 12-15% of Amazon...." (implying that will be changing)
- Estee Lauder/Clinique: (re: the power of an established brand) "...we got hundreds of thousands of Web visitors early on without even trying" (note: obviously, they displayed their URL extensively in their traditional and in-store media, but that requires little incremental cost or additional effort)

Email Marketing:

- 1-800-Flowers: "we're using it heavily, with success"
- OnSale: "we send 250,000 marketing emails per day--personalized and targeted"
- NetGrocer: "...a problem with email addresees--they tend to have a half-life of only about 6 months!"

Revenues/Success Metrics:

- OnSale: "we're now on a $250M annual revenue run-rate"
- iQVC: "our parent, QVC, is now the largest general merchandiser on the Web" ($2B total revs)...."iQVC itself now has 240,000 customers (70% female), with 2.7M user sessions in 8/98" (note: so a lot of lookers!) "...we'll do $50M in sales in '98"

Market Size/Online Consumer Shopping:

- Jupiter Communications: 4Q '97 was $1B, 4Q '98 to be $2.9B (almost 3X)
- Disney: "the pie is growing, it's a new market...so it won't cannibalize our existing business....but it has to be *impulsive*..."

Online Population Trends:

- Disney: "...20M homes now online, but 10M of them are 'techies'....we're dedicated to bringing 'the next 50M' online..."

Online Transaction Metrics:

- iQVC: "our average purchase is 2.8 items, vs. 1.2 for our TV channel"
- Post Communications: "studies show the current average purchase by a Web buyer varies between 1.5 and 2.6 items"
- Visa: "we're seeing 81% year-over-year growth in EC...two-thirds of our 200M cardholders will be buying online within two years..."

Customer Acquisition:

- Post Communications: some current figures are Amazon=$30, CDNow=$40, Barnes & Nobles=$89, AOL=$93.....the online merchant 'byword of the day' that he noted was: "Acquire with the intent to keep, keep with the intent to profit."
- N2K: "we've spent $35 million in new customer acquisition"

Conversion of Online "Lookers":

- iQVC: "...a lot of people are just looking, but our conversion rates are increasing...we have big hopes for Christmas"
- iQVC: "our TV customers watch 40 hours before their first purchase (av), so we're thinking it could be similar on the 'Net..." [note: but I really think he's expecting a lot less!]
- Clinique (Estee Lauder): "30% of our Web visitors were *not* product users when they first registered on our site....and we've been very successful in converting these newcomers..."

Advertising/Promotion Spending:

- iQVC: "more aggressive spending in '99"
- Netcentives: "look for a big 4Q push in promotional spending for 'Click Rewards'....$3.5 million"
- Priceline.com: as a huge spender in '98 (in both traditional & online media), I wondered, and you may, too--what did it get them? according to a study they commissioned, "we're now the second most recognized e-commerce brand in the world (65M adults)".....and why did they choose William Shatner as their spokesperson? specifically, the CEO said, "because of the recognizability of his radio voice" (since that was the centerpin of their campaign)..."but also because of his believability and identification with 'new worlds'...."

What's Necessary for Success Online (What Works)?

- AllHerb.com: "you can't be just a store, you have to be a destination for information...we have to make the shopping experience more interesting than at the mom-and-pops...that's our challenge"
- OnSale: "the Web is good at 'specialty retailing'...but difficult to tell yet who will succeed"
- 1-800-Flowers: "e-commerce doesn't necessarily mean the transaction has to happen online..."
- N2K: "you need in-depth data analysis & modeling, process & technical design....and you need a 'relationship czar'..."
- ImpulseBuy: "you need a business model that has the ability to make money with partners....and an affiliate management program is also a must-have: it used to cost $100K to get started, but now it's more cost-effective as companies like those in our Merch.net consortium are scaling--you can 'rent' it from them!.....look at what your core competencies are--if Web technology isn't one of them, then outsource!"
- Netcentives: "you must analyze your business, do a 'make vs buy'....you need a suite of programs, and collaboration..."
- Emaginet (eCentives): "we're seeing a shift to online promotions, more and more....because they work"
- Roxy Systems: "over-communicate, and deliver what you promise....there is a strong need for 'human infrastructure' in an online merchant business....customer service is critical.....we're always hiring 'one person ahead'...."
- Priceline.com: "as 'Net commerce moves out of the early-adopter phase, what matters is a 'compelling consumer proposition'...like a Wal-Mart's, for example--a vision....what are those? they can be transported from the real world--there are dozens!....but the ones that will succeed will start with the 'Net *in the center* of what they do...."

What Are Customers Looking For?

- Amazon: "focus on what *value* the customer will get...they're smart--and quite sensitive to 'giving' more than 'getting'..."
- ImpulseBuy: "try crazy and creative offers! they work....but you, as merchant, know your customers, you know what 'inspires' them--base your offers on that..."

Future Uncertainties re: Wall Street/Investment Community:

- AllHerb.com: "profitability is coming forward....people can't operate at 14% margins anymore....we see gross margins in our new online business of 48%, even higher with private label..." [note: but then, his site's only been up for two weeks]
- OnSale: "valuation metrics are changing...there will be a fundamental sea-change within 6-9 months...Amazon is a 'brand play', well beyond books....OnSale's focus now in on profitability..."

Costs to Do Business Online:

- Disney: "our online store is equivalent in revenues to 8 of our brick-and-mortar stores....but our staff is only equivalent to that of 5 stores..."
- 1-800-Flowers: "online is not cheaper anymore!....we do two major re-builds of our site a year, vs. a bricks-and-mortar store--which has maybe a 3-year life..."
- Post Communications: "the incremental cost of content online is basically zero" [note: once your Web infrastructure is built--and that doesn't take into account site rebuilds]

Price vs. Customer Service:

- OnSale: "there is more shopping for price...but the trend to focus on price above all else is hurting customer service...."
- Disney: "first and foremost, we're retailers....so we're not excited about pricing bots....in the end, we're a brand, and we believe the majority of buyers will *not* be looking for low price..."

Service on the Web:

- Post Communications: "on the Web, service is real-time....customers demand real-time attention..."
- 1-800-Flowers: "we like to 'wow' our customers with service...same-day delivery, weekend delivery, email response within 1 hour, etc..."
- OnSale: "we provide a lot of detail to our customer online....for example, you can watch your credit card transaction being processed....we 'kill them with service'..."
- The E-Tailing Group (consultancy): "an old adage we had at Marshall Fields was 'Give the lady what she wants'..." [note: the message to Web merchants being, take heed of what works in the traditional world!] "....the Web can actually *shine* in customer service today, because in-store service is becoming so hard to get, due to reduced staffing and so forth..."
- Streamline Inc. (home shopping & delivery service): "we're a lifestyle solution for the busy suburban family.... we see service as the ultimate differentiator on the Web....and we work hard to convert service failures into wins..."
- Roxy Systems (sells digital products, high-end AV, etc): "our sales in '98 will triple to $8-10M....and customer service has been the main reason for our success...." (note: they provide tons of information, since theirs is a highly 'considered purchase'...which works well on the Web, as they note: "pages and pages of it") "....20% of our sales comes from referrals....it's critical to respond to customers checking order process...confirming the order, etc...we've even built our own app to let customers get product information via live chat--they'll get their own customized answer from one of our product experts via a streaming audio file (Real Audio)..."

Pricing on the Web:

- Travelocity: "airlines have lived in a world of 'perfect competition' for years, so the Web is no different for them...."
- Priceline.com: "the notion of price is archaic--comes from the brick-and-mortar world....price will go away (the fixed price tag).....there are yet to be business models that relegate price to another level, but opportunities abound....essentially, price is nothing more than a package of features wrapped around a product...." [note: this a major concept coming forward in Web commerce, often being referred to as "real-time pricing"]

How to Improve Your Site/Ease-of-Use Issues:

- The E-Tailing Group: "we learn more for our clients by shopping their competitors' sites than any other way"....."but, until we have sites our mothers can use, our job isn't done!"

And Now a Word from Our Sponsor:

I hope this summary is helpful. Please let me know if I may be of further assistance in helping you understand the issues and developing best-practices in this exciting new world of online commerce.

Sincerely,
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Graeme Thickins, President
GT&A Strategic Marketing Inc.
*Minneapolis *St.Paul *Anywhere
612/944-1672, Fax 612/944-1673
"Branding & Marketing to Win
in the Knowledge Economy(tm)"
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http://www.gtamarketing.com
...A Resource for Online Marketers & 'Net Startups,
(VCs, CEOs, Founding Teams), and a Living Experiment
in Digital Relationships, Branding & E-Commerce...