The Retail eCommerce Playbook
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  • 1. HeadquartersForrester Research, Inc., 60 Acorn Park Drive, Cambridge, MA, 02140 USATel: +1 617.613.6000 • Fax: +1 617.613.5000 • www.forrester.comFor eBusiness & Channel Strategy ProfessionalsWhy Read This ReportAs retail eCommerce sales continue to explode, eBusiness executives must check all the boxes to ensurethat they are not missing opportunities in this critical channel. This playbook provides insights for allcompanies — from those just beginning their eCommerce journey to those extremely experienced inthe industry that are looking to optimize their already successful presence. We will explore the overallstate of the industry, best practices in site execution, technology partners that can support web growth,benchmarks to evaluate various aspects of an eCommerce business, and recommendations to continuedriving growth in an environment that has ever-changing shoppers.The Art And Science Of Retail eCommerceExecutive Overview: The Retail eCommerce Playbookby Sucharita Mulpuruwith Patti Freeman Evans and Douglas RobergeOctober 9, 2012eCommerce is driving growth in retailAs more consumers than ever have access to the Internet and own a variety of devices, such assmartphones and tablets, that enable them to access web content continuously, the shift to web-basedtransactions will continue. Already, 7% of total retail sales in the US are transacted online, a figure that iseven higher if we exclude underpenetrated categories such as grocery.1The force of eCommerce promisesto dominate the retail sector for years to come for a number of reasons:■ The Web is altering channel preferences. While total retail sales are growing at a low single-digitrate (if at all), the retail eCommerce world promises to continue growing at a double-digit clip for thenext several years. Consumers increasingly have a “web first” mentality in their shopping journeys.Many shoppers begin their research online, supplement their research with web resources, and oftencomplete transactions online. In categories such as PCs, more than half of all transactions are alreadycompleted through the web channel.■ Firms are realizing that a powerful transactional presence can be a weapon. Retail has historicallybeen constrained by retail square footage in stores and inefficient inventory management systems.Effective web tools now enable retailers to pick web orders from stores where inventory may not bemoving quickly or save the sale of a shopper who may not be able to find the particular item they arelooking for in-store. These features help boost overall sales, increase margins, and drive customersatisfaction and loyalty.■ New retail forces are shifting industry dynamics. The growth of large pure-play powerhouses suchas Amazon.com has also shifted focus to the web channel. Not only are companies like Amazonincreasingly a gateway to product research but they have also introduced new ways to think aboutretail success: introducing on-site advertising modules, selling competitive goods through lucrativemarketplaces, and leveraging shipping as a marketing program.2
  • 2. For eBusiness & Channel Strategy ProfessionalsThe Art And Science Of Retail eCommerce 2© 2012, Forrester Research, Inc. Reproduction Prohibited October 9, 2012eBusiness Executives Need To Continue Gathering Resources To GrowGiven that eCommerce is now nearly two decades old, best practices are now broadly understoodand a strong ecosystem of technology partners exists to support eBusiness executives in mostdetails of their websites, such as product detail pages, search boxes, and checkout pages. But to groweffectively, companies need to dedicate the appropriate resources to ensuring that they put their bestfoot forward. That means:■ Funding to support site development and marketing. Retail IT executives are often regardedas secondary to merchandisers, but because the Web depends on efficient performance, strongweb development support is essential to driving success. This means that retailers must notonly engage the appropriate technology partners but also ensure that they have hired strongtechnology talent (and gained budget for securing that talent). Additionally, in a web worldthat is far more crowded than any physical retail destination, even the most popular brandedretailers need to consider the importance of interactive marketing budgets to ensure that theircompany is top of mind when consumers are at an early point in the purchase funnel for a givenproduct or category.■ Organizational talent to manage an effective eCommerce presence. While eCommerce websitesare often regarded as relatively inexpensive — compared with rolling out a flagship store in anexpensive retail destination, for example — companies nonetheless need to invest in key areassuch as site design and development, usability testing, content creation, and interactive marketing.Each of those capabilities often also requires dedicated headcount, even for relatively smallorganizations that may be achieving less than $10 million in revenues; for large organizationsdriving $1 billion or more, dedicated web teams can be several thousand employees.■ Senior-level support to ensure the absence of channel conflict. Companies with the strongesteCommerce organizations tend to have C-level executives who champion that segment of thebusiness and are willing to allocate resources to drive success in that channel. As shipping costshave compressed margins for many web retailers in recent years, innovative retailers haven’tpassed those costs on to consumers; rather, they have sought out creative accounting solutions(such as making shipping a marketing expense) or allying with retail consortiums to drive someeconomies of scale (such as fee-based shipping clubs).A Rock-Solid eCommerce Presence Is Now Table StakesWhile most retailers now have more than a decade of experience in selling online, holdouts continueto enter the fray every year; these are often new, growing retailers that were busy managing thehypergrowth in their physical stores, such as Zara. Because consumers are constantly connectedand use the Web prior to completing more purchases in every sector, it is imperative that eBusinessexecutives have the appropriate tools and knowledge to execute a strong web presence that not onlyshowcases their brand but also enables shoppers and store associates to research and buy. We craftedthis playbook to address all the key elements of success; this playbook will help you (see Figure 1):3
  • 3. For eBusiness & Channel Strategy ProfessionalsThe Art And Science Of Retail eCommerce 3© 2012, Forrester Research, Inc. Reproduction Prohibited October 9, 20121. Discover the importance of a best-in-class eCommerce business. This playbook will provideeBusiness executives with insight into the opportunity for eCommerce, its growth trajectory,and the current landscape that retailers face as they continue to navigate this channel.2. Plan to deliver retail eCommerce excellence. We will help you determine which features andfunctionality are most critical to success, what metrics are most effective for measuring a strongchannel presence, and what elements are most essential in not only getting started but also incontinuing to grow in the web channel.3. Act effectively to deliver retail eCommerce success. While getting started is a challengein itself, maintaining success and continuing to execute effectively in a constantly shiftingretail landscape is equally critical. To this end, we will provide overviews of the eCommercetechnology stack, the vendors that best help support those goals, and the organizational bestpractices that drive success in best-in-class eCommerce companies.4. Optimize for continued eCommerce growth. For several years, Forrester has collectedindustry benchmarks to support executives in their road maps. We will lay out the mostcritical benchmarks as well as how various companies in different sectors should think aboutinterpreting those figures so that they are relevant to their businesses. We will also address newand emerging components of eCommerce strategies, such as responsive design and “mobile first”initiatives that take into account the evolving landscape of devices and Internet connectivity.
  • 4. For eBusiness & Channel Strategy ProfessionalsThe Art And Science Of Retail eCommerce 4Forrester Research, Inc. (Nasdaq: FORR) is an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology.Forrester works with professionals in 17 key roles at major companies providing proprietary research, customer insight, consulting, events, and peer-to-peer executive programs.For more than 29 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. For more information, visit www.forrester.com.© 2012 Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, RoleView, Technographics, TechRankings, and Total Economic Impact are trademarks of ForresterResearch, Inc. All other trademarks are the property of their respective owners. Reproduction or sharing of this content in any form without prior written permission is strictlyprohibited. To purchase reprints of this document, please email clientsupport@forrester.com. For additional reproduction and usage information, see Forrester’s Citation Policylocated at www.forrester.com. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. 84941Figure 1 The Retail eCommerce PlaybookEndnotes1 eCommerce sales continue to grow rapidly, having topped $200 billion in 2011. Forrester expects that onlinesales will grow from 7% of overall retail sales to close to 9% by 2016. Key drivers of this growth includeconsumers’ greater comfort level with purchasing various categories online, broader web shopping capabilitieswith mobile and tablet devices, innovative new shopping models that divert spend away from physical stores(e.g., flash sales, subscription models), online loyalty programs, and aggressive promotional offers from webretailers. See the February 27, 2012, “US Online Retail Forecast, 2011 To 2016” report.2 For more information on how Amazon will affect both online and offline retail, see the July 26, 2012, “WhyAmazon Matters Now More Than Ever” report.3 Please refer back to the online document to see the associated reports in the playbook. See the October 9,2012, “The Art And Science Of Retail eCommerce” report.Source: Forrester Research, Inc.84941PerformanceManagementAssessment OrganizationVisionStrategicPlanProcesses BenchmarksLandscapeRoad Map Tools AndTechnologyContinuousImprovementBusinessCaseDISCOVER PLAN ACT OPTIMIZE