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Unformatted text preview: July 29, 2010 The State Of Retailing Online 2010: Marketing, Social Commerce, And Mobile by Sucharita Mulpuru for eBusiness & Channel Strategy Professionals Making Leaders Successful Every Day For eBusiness & Channel Strategy Professionals July 29, 2010 The State Of Retailing Online 2010: Marketing, Social Commerce, And Mobile by Sucharita Mulpuru with Peter Hult, Brendan McGowan, and Benjamin Zeidler Exec ut i v e S u mmary The annual fielding of “The State of Retailing Online,” a Shop.org study conducted by Forrester Research, asked Web retailers to share levels of interactive marketing spend, effectiveness of social commerce initiatives, and investment in mobile activity. This report is the first of two parts of the series produced by Forrester in partnership with Shop.org. tab l e of Co n te nts 2 Web Retailers Continue To Experience DoubleDigit Year-Over-Year Growth Search Persists As The Top Tactic In Interactive Marketing Spend Social Commerce Evolves To A Mix Of Established And Experimental Mobile Remains An Early-Stage Initiative But Is On An Investment And Growth Path recommendations 23 Tried And True Beat Fancy And New 23 Supplemental Material N OT E S & RE S O U RCE S This report uses data from the “The State of Retailing Online,” an annual survey conducted by Forrester Research and executed in conjunction with Shop.org. Respondents include online retailers that transact with consumers by selling products via the Internet. Related Research Documents “Industry Innovation: Retail” July 28, 2010 “The State Of Retailing Online 2009: Profitability, Economy, And Multichannel” October 23, 2009 “The State Of Retailing Online 2009: Merchandising And Web Optimization” August 14, 2009 © 2010, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. To purchase reprints of this document, please email [email protected] For additional information, go to www.forrester.com. 2 The State Of Retailing Online 2010: Marketing, Social Commerce, And Mobile For eBusiness & Channel Strategy Professionals Web Retailers continue to experience Double-DiGit Year-Over-Year growth This report, produced in partnership between Forrester and Shop.org, focuses on industry benchmarks pertaining to interactive marketing spend, social commerce adoption, and mobile commerce. One hundred and nine companies participated in the survey. For these retailers, annual growth rates outpaced overall retail (see Figure 1 and see Figure 2). Where relevant and feasible in terms of sample size, in this report, we also break out metrics and responses by category of respondent (e.g., apparel, accessories, and footwear). (See the Methodology section for specifics regarding the survey participants.) Figure 1 Annual Growth Of Web Divisions Percent increase in Web sales in 2009 over 2008 by type of retailer 78% 48% 29% 25% 27% 22% Large† Webbased‡ Storebased‡ 20% Medium† 27% 11% All companies Young* Medium* Web tenure Mature* Small† Web revenue Channels of operation Base: 104 online retailers Source: “The State Of Retailing Online 2010,” a Shop.org study conducted by Forrester Research *Note: Young, fewer than four years in operation; medium, four to 10 years in operation; mature, more than 10 years in operation † Note: Small, less than $10 million in annual revenue; medium, $10 million to $100 million in annual revenue; large, more than $100 million in annual revenue ‡ Note: Store-based, majority of 2009 revenue from stores/wholesale (B2B); Web based, majority of 2009 revenue from the online channel (including mobile) 57249 July 29, 2010 Source: Forrester Research, Inc. © 2010, Forrester Research, Inc. Reproduction Prohibited The State Of Retailing Online 2010: Marketing, Social Commerce, And Mobile For eBusiness & Channel Strategy Professionals Figure 2 Web Growth By Vertical Percent increase in Web sales in 2009 over 2008 by type of retailer 32% 28% 20% 7% Sporting goods and accessories General Apparel, Beauty and merchandise accessories, personal care and footwear 5% Home Base: 73 online retailers: 30 apparel, accessories, and footwear; 7 beauty and personal care; 15 general merchandise; 8 home; 13 sporting goods and accessories Source: “The State Of Retailing Online 2010,” a Shop.org study conducted by Forrester Research 57249 Source: Forrester Research, Inc. Search Persists As The Top Tactic In Interactive Marketing Spend In spite of retailers constantly looking for the next silver bullet to acquire new customers and grow online sales, traditional Web marketing tactics remain the most popular and most effective tools. The key findings of the survey this year were that: · Interactive marketing budgets vary, with the lion’s share still going to search. Marketing budgets range from less than $1 million on average for companies with less than $10 million in revenue to more than $10 million on average for the largest Web retailers. Paid search is the single biggest allocation of marketing spend across all types of retailers (see Figure 3 and see Figure 4). · Affiliate marketing surfaced as a strong customer acquisition tool. While affiliate marketing received only a fraction of the spend allocated to paid search, retailers overwhelmingly gave it high marks as an effective tool for acquiring new customers (see Figure 5). Retailers cited as drivers of success both the performance-based nature of affiliate programs and the diversity of affiliates now available. · Retailers are actually focusing significantly on the site experience. When asked where they were investing, not quite half of retailers cited improved navigation and improved content on product detail pages (see Figure 6). This focus points to retailer efforts to improve the “consideration” part of the shopping funnel and to ensure that key elements of interactive marketing such as landing pages are as effective as they can be. © 2010, Forrester Research, Inc. Reproduction Prohibited July 29, 2010 3 4 The State Of Retailing Online 2010: Marketing, Social Commerce, And Mobile For eBusiness & Channel Strategy Professionals Figure 3 Marketing Budgets In 2009 Small* $0.6 million Medium† $3.2 million Large‡ $11.0 million 31 45 25 Paid search 37% 38% 39% Email (house and prospecting) 17% 14% 11% Affiliate marketing 11% 13% 13% Comparison-shopping engines and marketplaces 10% 10% 7% SEO/natural search 8% 5% 3% Behavioral targeting/remarketing 3% 6% 7% Traditional portal deals 1% 2% 7% Social (blogs, social networks) 5% 2% 1% Other 8% 10% 12% 30 41 20 Average budget Sample size Allocation of total budget Sample size Source: “The State Of Retailing Online 2010,” a Shop.org study conducted by Forrester Research *Note: Small, less than $10 million in annual revenue † Note: Medium, $10 million to $100 million in annual revenue ‡ Note: Large, more than $100 million in annual revenue 57249 July 29, 2010 Source: Forrester Research, Inc. © 2010, Forrester Research, Inc. Reproduction Prohibited The State Of Retailing Online 2010: Marketing, Social Commerce, And Mobile For eBusiness & Channel Strategy Professionals Figure 4 Marketing Budgets By Vertical Apparel, accessories, Beauty and and footwear personal care General merchandisers Home Sporting goods and accessories $204 million $300 million $51 million $67 million $4.9 million $8.7 million $7.4 million $1.4 million $2.7 million 30 6 15 9 13 Average online revenue $128 million Average interactive marketing budget Sample size Allocation of total budget Paid search 42% 43% 39% 34% 44% Email (house and prospecting) 15% 23% 8% 19% 12% Affiliate marketing Comparison-shopping engines and marketplaces 13% 13% 10% 11% 9% 6% 4% 3% 5% 7% SEO/natural search 5% 4% 2% 12% 4% Behavioral targeting/remarketing 7% 2% 9% 2% 4% Traditional portal deals 2% 3% 9% 6% 0% Social (blogs, social networks) 2% 3% 2% 3% 2% Other 7% 4% 20% 8% 19% 27 7 12 8 12 Sample size Source: “The State Of Retailing Online 2010,” a Shop.org study conducted by Forrester Research 57249 © 2010, Forrester Research, Inc. Reproduction Prohibited Source: Forrester Research, Inc. July 29, 2010 5 6 The State Of Retailing Online 2010: Marketing, Social Commerce, And Mobile For eBusiness & Channel Strategy Professionals Figure 5 Search And Affiliates Are The Top Acquisition Tactics “Which of the following were your top three most effective sources used to acquire customers in 2009?” Search engine marketing 90% Affiliate programs 50% Organic traffic 42% 16% Comparison-shopping/product shopping engines Remarketing/retargeting of shoppers 14% Offline advertising 14% Direct mail 12% Online marketplaces 11% Email to prospecting lists 11% Social network presence 7% Base: 102 online retailers (multiple responses accepted) Source: “The State Of Retailing Online 2010,” a Shop.org study conducted by Forrester Research Source: Forrester Research, Inc. 57249 Figure 6 Navigation And Product Detail Pages Are Key Investment Areas “In thinking about the following site development initiatives planned for 2010, please tell us the two areas that you will prioritize most heavily” Improved browse/navigation 44% Improved content on product pages 42% Search results 39% Checkout 33% Home page Redesigned help/FAQs 16% 2% Base: 108 online retailers (multiple responses accepted) Source: “The State Of Retailing Online 2010,” a Shop.org study conducted by Forrester Research 57249 July 29, 2010 Source: Forrester Research, Inc. © 2010, Forrester Research, Inc. Reproduction Prohibited The State Of Retailing Online 2010: Marketing, Social Commerce, And Mobile For eBusiness & Channel Strategy Professionals Social Commerce Evolves To A Mix Of Established And Experimental Overall, Web retailers are allocating just a sliver of overall marketing spend to social tactics, but smaller companies are more likely to invest more heavily in it than larger companies. Small companies in fact are investing five times more of their interactive marketing budget in tactics like blogs and social networks than larger eCommerce companies.1 The modest investment in social tactics, in spite of all of the hype and energy surrounding them, points to the following findings: · The ROI of social still remains unclear. Due to massive consumer adoption, social media marketing is growing in importance for retail brand-building campaigns and for driving traffic to stores. However, while interactive marketing continues to be a quantitative science with effectiveness of tactics measured at extremely detailed levels, few companies have managed to prove that social tactics generate positive ROI (see Figure 7). In fact, sales from social tactics are not even widely measured (see Figure 8). The most common metrics for measuring social tactics remain the growth rate of followers and the breadth of exposure to customers. That said, retailers are actively looking for the connection between social media tactics and actual sales to find a more direct ROI. While just more than one-quarter of retailers surveyed indicate that social marketing strategies have helped to grow their business to date, more than twice that number (59%) are measuring sales attributable to links on social networks. · Listening is the most significant objective for social. While increases in sales may not be a central benefit that retailers gain from social commerce initiatives, many of them find that there is some value in using social commerce tactics as listening tools. This makes social tactics such as blogs and social network pages more akin to new market research tools to help retailers hear and respond to customer feedback and engage through customer service initiatives. · Retailers look to invest in on-site social activities next. Because of the as-yet murky financial reward from off-site social activities, retailers cite being more likely to invest in the social tactics that are on-site and generally associated with direct revenues. More retailers say that they will therefore invest in the coming 12 months in user-generated content such as ratings and reviews (already implemented by two-thirds of retailers surveyed) as well as social recommendations, ask and answer, videos, and co-shopping/co-browsing functionality (see Figure 9). © 2010, Forrester Research, Inc. Reproduction Prohibited July 29, 2010 7 8 The State Of Retailing Online 2010: Marketing, Social Commerce, And Mobile For eBusiness & Channel Strategy Professionals Figure 7 Social Tactics Continue To Evolve In Their Relation To Commerce 7-1 Social tactics are still experimental “To what extent do you agree with the following statements?” (4 or 5 on a scale of 1 [strongly disagree] to 5 [strongly agree]) We are pursuing social marketing strategies because this is a great time to experiment and learn more about what they can do 80% 59% The returns on social marketing strategies are unclear We see the primary ROI from social marketing as listening to and better understanding our customers 50% We are pursuing social marketing strategies because we do not want to be late movers 47% We are pursuing social marketing strategies because there is tremendous buzz about them 41% We are pursuing social marketing strategies because our competitors are 33% We use a specific set of metrics by which to measure social marketing initiatives 31% Social marketing strategies have helped to grow our business to date We are pursuing a social marketing strategy because our senior management has pressured us to do so 28% 20% Base: 102 online retailers (multiple responses accepted) Source: “The State Of Retailing Online 2010,” a Shop.org study conducted by Forrester Research 57249 July 29, 2010 Source: Forrester Research, Inc. © 2010, Forrester Research, Inc. Reproduction Prohibited The State Of Retailing Online 2010: Marketing, Social Commerce, And Mobile For eBusiness & Channel Strategy Professionals Figure 7 Social Tactics Continue To Evolve In Their Relation To Commerce (Cont.) 7-2 Attitudes toward social commerce by type of retailer Apparel, General accessories, Beauty and merchanand footwear personal care disers Sporting goods and Home accessories We are pursuing social marketing strategies because this is a great time to experiment and learn more about what they can do 90% 72% 79% 78% 77% We have already launched, or will launch in the next six months, online video content on our online retail Web site 84% 71% 64% 56% 92% The returns on social marketing strategies are unclear 52% 57% 57% 56% 69% We see the primary ROI from social marketing as listening to and better understanding our customers 52% 57% 71% 44% 31% We are pursuing social marketing strategies because we do not want to be late movers 61% 86% 57% 44% 31% We are pursuing social marketing strategies because there is tremendous buzz about them 48% 72% 43% 33% 31% We are pursuing social marketing strategies because our competitors are 52% 57% 43% 22% 0% We use a specific set of metrics by which to measure social marketing initiatives 32% 29% 29% 22% 54% Social marketing strategies have helped to grow our business to date 26% 29% 21% 22% 46% We are pursuing a social marketing strategy because our senior management has pressured us to do so 17% 29% 21% 33% 8% 30 7 14 9 13 Sample size Base: 73 online retailers: 30 apparel, accessories, and footwear; 7 beauty and personal care; 14 general merchandisers; 9 home; 13 sporting goods and accessories (multiple responses accepted) Source: “The State Of Retailing Online 2010,” a Shop.org study conducted by Forrester Research 57249 © 2010, Forrester Research, Inc. Reproduction Prohibited Source: Forrester Research, Inc. July 29, 2010 9 10 The State Of Retailing Online 2010: Marketing, Social Commerce, And Mobile For eBusiness & Channel Strategy Professionals Figure 8 Measurement Of Social Activities “How are you measuring the effectiveness of social media initiatives that you have implemented to date?” 80% Growth rate of followers 68% Total subscribers 59% Sales attributable to links on social networks 49% Click-throughs to the retail site 46% Total visits to a social tool 42% Unique visits to a social tool 38% Requested action taken Percent of products with more than one review 26% Improved search engine optimization 26% Media/PR/buzz 22% Base: 100 online retailers (multiple responses accepted) Source: “The State Of Retailing Online 2010,” a Shop.org study conducted by Forrester Research 57249 July 29, 2010 Source: Forrester Research, Inc. © 2010, Forrester Research, Inc. Reproduction Prohibited The State Of Retailing Online 2010: Marketing, Social Commerce, And Mobile For eBusiness & Channel Strategy Professionals Figure 9 Most Popular Social Tactics “Please indicate which social marketing strategies you have already implemented.” “Please indicate which social marketing strategies you plan to implement or enhance in 2010 or later.” Social network pages Microblogs (e.g., Twitter) 86% 15% 78% 12% Customer ratings and reviews 65% 30% Retailer blog or online community 64% 18% Product sharing on social networks 50% 29% Social recommendations 34% Other customer-generated content on site 42% 34% 27% Social shopping sites (e.g., Kaboodle) 21% 30% Customer-generated videos 26% 25% Widgets 24% 26% 24% 28% Customer ask and answer Online forums for communities 20% 20% Store associate networks 15% 19% Invitation-only sites 14% 19% Co-shopping/co-browsing 10% Open APIs 9% Mashups 9% Customer-generated outfitting 8% Currently implemented Future planning/enhancing 23% 23% 18% 17% Base: 102 online retailers (multiple responses accepted) Source: “The State Of Retailing Online 2010,” a Shop.org study conducted by Forrester Research 57249 © 2010, Forrester Research, Inc. Reproduction Prohibited Source: Forrester Research, Inc. July 29, 2010 11 12 The State Of Retailing Online 2010: Marketing, Social Commerce, And Mobile For eBusiness & Channel Strategy Professionals Mobile Remains An Early-Stage Initiative But Is On An Investment And Growth Path As smartphone adoption grows, explicit mobile strategies are certain to follow. Given the very recent entrance for mobile in the retail arena, however, most retailers surveyed still are either entirely without a mobile strategy or in the very early stages of developing a mobile strategy (see Figure 10 and see Figure 11). Web retailers with mobile strategies: · Are investing in features supporting the cross-channel experience. The most common features that retailers say they offer via their mobile site or app include product and price information, store information, and customer ratings and reviews to support the in-store experience (see Figure 12). Less popular features that retailers are beginning to invest in include store maps and in-store product availability. This early-stage evolution is also reflected in organizational structure, whereby 42% of retailers surveyed said that the marketing organization overall owns the mobile commerce experience (see Figure 13). · Have varied levels of investment. On average, the retailers that we surveyed reported investing an average of $170,000 in their mobile sites this year, but that average is skewed by larger retailers that anticipate the heaviest investments, some of which have planned investments approaching $500,000 (see Figure 14 and see Figure 15). By contrast, Web-based and small retailers overall reported negligible investments in the mobile channel for 2010. · Are experiencing modest gains. On average, retailers surveyed reported that their mobile browsers are generating 2.8% of overall site traffic and 2% of Web revenue. While some companies anecdotally report that as much as 10% of their traffic on key...
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