It's the holiday shopping season, and stores across America are breaking out the tinsel, dressing up their windows, and stringing colorful lights to lure customers. Online, retailers are also breaking out their holiday goodies -- and while they aren't nearly as pretty as the magical window displays at New York's Macy's (FD) or Chicago's Marshall Field's, they're just as important.
Retail Web sites are putting up animated slide shows, as well as offering superior navigation, better information, and special promotions, all largely designed with one purpose in mind -- improving the online shopping environment, which has often paled in comparison with visits to brick-and-mortar stores. "Customer experience is clearly important, and e-tailers are trying to put their best foot forward," says Lauren Freedman, president of Chicago-based consultant E-Tailing Group (see BW Online, 11/18/05, "Where the Tech Buffs Shop").
It's about time: U.S. online retail sales this holiday season will hit $18 billion, a 25% increase over last year, according to Forrester Research. That compares to an expected 5% increase for total retail sales, to $435.3 billion, according to the National Retail Federation. Jupiter Research retail analyst Patti Freeman Evans says many retailers will offer free shipping, which will attract a lot of consumers. "But [free shipping alone] will not be enough to encourage them to spend more than last year," she adds.
PERSONALIZED PERKS. No wonder e-tailers are working so hard to make the online shopping experience much more fun and enjoyable. Naturally, gimmicks are big. Upscale retailer Nordstrom (JWN) has launched NordstromSilverscreen.com, an entertainment channel that offers free downloads of new music, fun films, and the latest in fashion. Currently, it has an exclusive video of a Fatboy Slim remix of Our Lips are Sealed, the Go-Gos song (see BW Online, 7/6/05, "E-Tailing: It's All About Service").
Such publicity stunts attract a lot of first-time users. Forrester says 2.5 million new households are expected to shop online in 2005. One way to entice these new shoppers is via online gift registries that have been established by several outfits, such as cosmetics retailer Sephora (LVMHF) and Wal-Mart (WMT), which allow people to make a wish list of gifts that friends and family can access.
It has always been hard to engage online shoppers, who click out of the site if they don't find what they're looking for. But some e-tailers are stepping up such efforts: BlueNile.com (NILE) started offering customers the ability to design their own rings, and watchmaker Fossil (FOSL) attracts a lot of teenagers to its online Watch Bar, where they can build their own watches.
IMPROVING NAVIGATION. Brick-and-mortar stores are known for spurring impulse buys through tempting product displays that play up brands and visuals. Online retailers are trying to do the same by featuring "what's hot." So, searches at e-tailers like Amazon.com (AMZN), WalMart.com, and Buy.com will reveal the top sellers, the newest arrivals, and the limited items within a given category. These steps are already getting shoppers to spend more online. In the third quarter, the average e-shopper increased each transaction by 9%, to $158, from $145 in the same period of 2004, according to VeriSign (VRSN), which processes Internet transactions.
What better example of intense holiday preparation on the Web than Gap (GPS), which shut down its three retail Web sites -- Gap.com, OldNavy.com, and BananaRepublic.com -- in September for a redesign. Among the improvements, more depth of information when you mouse over products. At the same time, a pop-up window for each item will give customers a product overview, available sizes and colors, and additional products -- all without leaving the page they're browsing, which previously has been a huge complaint among online shoppers.
Customers are also given an online shopping bag. "The bag stays with customers as they browse the site, so they no longer have to leave the page and item they're looking at to go to their checkout bag," says Gap spokeswoman Sarah Anderson (see BW, 8/1/05, "/magazine/content/05_31/b3945045_mz011.htm").
PHYSICAL EDGE. While Gap has improved navigation, others are luring shoppers with innovative come-ons, such as preorders, limited-time-only promotions, and special events. Wal-Mart, for instance, has signed an exclusive multiyear pact with country singer Garth Brooks and promoted a live chat with him. A $25 limited-series boxed set of his songs is available for preorder online, before its Nov. 25 release in stores. There's even a media gallery and slide show of Garth Brooks pictures (see BW, 11/21/05, "Watch Out, Best Buy and Circuit City").
Creating such sizzle to hold the customer's attention is already starting to work. Conversion rates, a measure of visitors who come to a particular site and make a purchase, has increased with 21% of online retailers -- twice as many as last year -- reports the E-Tailing Group.
Almost all retailers with brick-and-mortar stores are offering to take back items ordered online. And the online vendors are further taking advantage of their brick-and-mortar presence by offering free pick-ups at the stores. CircuitCity.com's 24/24 promotion, for example, guarantees in-store pickup of an online order within 24 minutes, with the promise of a $24 gift card if the order deadline is not met at the Circuit City (CC) location.
FUN TOOLS. That usually reels them in. "We know shoppers are especially busy during the holidays, and they need to be able to count on prompt service," says Fiona Dias, Circuit City's senior vice-president and chief marketing officer.
Some e-tailers are offering customers the ability to ship multiple products to different locations within one shopping visit. That helps keep people focused on finishing their shopping on one site.
Other sites are featuring tools that make the shopping experience fun. ArmaniExchange.com has a dressing room, so customers can mix and match tops and bottoms. And at the Coach (COH) site, shoppers can better visualize how a bag they like would look in person, with a feature called the Bag Scaler: Just select a height range, and you're able to view the bag on the shoulder or in the hand of an appropriately sized silhouette (see BW, 11/7/05, "Coach's Split Personality").
INNOVATION ULTIMATUM. Meanwhile, a greater number of retailers will use the traditional lure of free shipping to entice consumers to spend more. That's especially true because 25% of holiday shoppers last year indicated that they purchased more online to take advantage of free shipping on large orders. Jupiter Research says that might be even more alluring this year, with higher gas prices curtailing some shopping trips.
Yet, if almost everyone offers free shipping, and Main Street is dressed to the nines, e-tailers must become even more innovative to attract shoppers and get them to spend more.
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Gogoi is a reporter for BusinessWeek Online in New York
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