eSurvivor Commerce Challenge: Fierce Battle Favors Those Who Adapt Best to New Market Dynamics

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SURVIVAL OF THE FITTEST, that Darwinian credo, captures the state of the retail industry. In February, Borders--which has been in business since 1933, employs 17,500 people, and generated $2.8 billion in 2009 (its last fiscal year)--filed for Chapter 11 bankruptcy protection; the company planned to close about 30 percent of its stores and shift its focus to e-books and non-book products. In April, Dish Networks successfully bid $320 million to acquire the assets of Blockbuster, which was founded in 1985, operated more than 3,000 stores, had 125,000 movie and game titles, and served 50 million consumers a year. Other well-known brands, such as Macy's, Radio Shack, and Rite Aid, have struggled and have been linked recently to possible bankruptcy filings.

So, why are so many longstanding brands teetering on the brink of oblivion? Quite simply, the continued growth of e-commerce has dramatically changed how products are marketed, sold, and serviced. U.S. e-commerce sales grew by 12.6 percent, to $176 billion, in 2010, after an 11 percent increase in 2009, according to Forrester. Sales are expected to reach $279 billion in 2015, the research firm projects. In addition to gaining ground on brick-and-mortar options, e-commerce is changing how companies communicate with customers and what level of service is expected before, during, and after a sale.

While corporations like Borders and Blockbuster have stumbled during the transition from traditional retailing to ecommerce, other enterprises have thrived. Businesses such as Amazon.com, Cabela's, Consumersearch.com, Dell, Drugstore.com, Fogdog Sports, Lands' End, and South Cypress have raised the e-commerce bar. By interacting with consumers using simple presentations, product ratings and reviews, personalization, and consistently high-quality customer service, those companies have increased closure rates, grown their average sales size, expanded customer purchase frequency, and streamlined operations. As a result, businesses are thriving, not merely surviving.

a simple premise

In trying to deliver a positive online browsing and buying experience, where should a company start? "Consumers will not spend a lot of time sifting through long, complex sets of hyperlinks," says Gene Alvarez, a vice president at Gartner CRM Research. "They want to find the data they desire quickly and easily."

As a result, a major challenge that merchants face is taking their often-complex inventory and presenting it to customers in a simple way. In general, companies should boil down all of their wares, so they are displayed in a click or two. This process involves developing smart interfaces and search tools that help customers find what they want fast--ideally even better than any sales clerk could have. For instance, on the Fogdog Sports Web site, a consumer can go from the main page to half-finger football offensive lineman gloves in one click.

Such simplicity needs to extend to other areas, such as the checkout process. One reason for Amazon.com's success has been its 1-Click checkout. Once activated, customers can associate payment methods with a shipping address and complete purchases without having to fill out their name, address, and credit card details. The company extended that idea with its PayPhrase system, which lets shoppers enter a unique phrase and four-digit PIN to complete a transaction. With that system, shoppers don't have to be signed into the site with an Amazon account, a step that is necessary with 1-Click.

Drugstore.com has taken this concept and applied it to coupons. Its customers can clip, click, and save quickly. As a customer hits the Buy button, a coupon's value is automatically added to the shopping cart. Special promotion codes do not have to be entered.

MAKING THE MOST OF ANALYTICS E-commerce retailers now can collect oodles of information about online interactions. …