Apple CEO Steve Jobs displays ATG OnDemand customer National Geographic’s Web site on the new iPad during its launch on Wednesday.

Like most folks, we sat on the edge of our seats on Wednesday afternoon, waiting to see the latest bit of coolness that Apple would unveil next. I was particularly excited to see National Geographic’s site featured with the iPad launch for two reasons: One, because National Geo is an ATG OnDemand customer, and two, because I’m planning a trip overseas and the National Geographic connection made me think about the benefits of having a device like that with me when I go and as I prepare for the trip.

The fluid connection between content and commerce really comes to life here. I could be reading the travel section of the New York Times on my new iPad (can’t wait!), click through to research something on the National Geo site, decide I need to pick up a book, or new pair of binoculars or some maps.  And when I walk into a luggage store and the associate on the floor is able to show me specialty items available only on their site, I may find that she is holding an iPad with that nice big screen.  This device, like the iPhone, helps the merchant and the publisher bring better information to the point of decision, and even extend the experience of value.

For consumers, devices like the iPad make life easier. The problem for online merchants is that it’s really hard to make things that simple. Online vendors are tasked with ensuring that their Web platforms are compatible with — and take advantage of — the myriad of tools and applications on today’s market, and with every new device comes new opportunities and challenges.

Forrester’s Josh Bernoff explains the hurdles that devices like the iPad present for Web-based businesses in his recent blog post, “The Splinternet means the end of the Web’s golden age.” Yesterday, he continued that discussion.

These posts serve as a friendly reminder that great Web sites just aren’t enough anymore. Consumer access to commerce will continue to evolve and online merchants should focus carefully on their cross-channel strategies, while learning to embrace new platforms as they arise.

• ERP systems are built upon one large monolithic data repository and one set of core application services that access that repository. Commerce applications are built upon many data sources that can reside both within internal legacy systems and external outsourced systems. Commerce applications leverage both internal (behind-the-firewall) services and external web services often delivered by 3rd party SaaS vendors. Applications like SAP are not designed to be a hub for other systems as required by a commerce application environment.

• The management of commerce applications is also very different from managing supply chain & ERP applications. Supply-chain/ERP vendors offer configuration solutions built upon a single data repository. Streamlining is key, but so is adaptability and responsiveness, which have not been recognized as strengths of traditional ERP systems. In this cross-channel world, executives need to manage their entire business spectrum as a single identity. They need a unified configuration and management tool that can deal with the distributed nature of data and services. Tools provided by ERP vendors focus on managing data that is local to the ERP system. They are not set up to manage data from external sources. They do not provide the merchandising and marketing tools needed to implement a unified cross-channel, multi-touch-point selling solution that is centrally managed by both IT and business users.

• The end-user interface and usability requirements are very different in commerce applications than ERP. ERP applications are used by trained business professionals who are forced to use the tools that are given to them to do their jobs. Commerce applications serve customers, often consumers, who have no training and who may abandon the application if needs are not met, since they have many other options for where they can shop and buy. These customer interfaces/devices aren’t under a company’s control. Unlike suppliers, customers are unpredictable and demanding – affected by the rapidly changing marketplace. You can’t negotiate an interface. You need to meet their needs and if you don’t, they’ll go elsewhere. That means providing cutting-edge rich media applications that are very interactive and easy to use, which is not a strength attributed to ERP platforms.

• Business processes for commerce applications are also of a very different nature than ERP and are becoming more complex as interactions with customers span multiple channels and touch-points. The selling enterprise, e.g. a retailer, needs to optimize the transitions between channels and optimize a customer’s current interaction to reflect valuable information provided in previous interactions. Context of where the customer is in the buying process is key to delivering a compelling and valuable buying experience.  Most ERP applications are not context-aware and are not personalized.  Without personalization, the experience of customers is not relevant. Customers are not treated intelligently based on past interactions with an ERP system.

• Lastly, the new commerce-centric enterprise that commerce applications are built upon has to help merchants expand into new geographies, add brands, deal with social networks and media and support new mobile devices. Today’s home-grown and legacy ERP systems are too complex and arcane and cannot meet typical needs of scalability, speed to market, cost-efficiency and manageability to serve this multi-site commerce environment.

The e-commerce platform and engine makes more sense as the foundation. It can better represent all the commerce-related IT systems, software and frameworks that are required to deliver a unified cross-channel commerce vision. It can transcend enterprise boundaries to integrate the right mix of applications, web services, and/or managed services to deliver the right commerce solutions anywhere, at any time. It makes it easy to integrate new information sources, such as social networking applications or analytics software, as well as access or consolidate information in existing systems. ERP on the other hand is not in the best position to integrate the range of customer-facing, back end and third-party applications, enabling companies to view and manage sales across channels. Most large enterprises will have both an ERP system and an e-commerce platform. Simply extending ERP with the ERP vendor’s e-commerce module will significantly limit what you can do to deliver a unified customer experience.

Most companies sell products and services through more than one channel… in stores, over the Web, over mobile devices, via a contact center, through resellers and VARs, etc. But managing a unified view of customers, orders and products across channels has been almost impossible to pull off both economically and organizationally. The complexity of back-end systems, cost of integration projects and deeply entrenched silo’ed business processes have made it prohibitive to deliver a truly unified multi-channel experience for customers. In the past, these limitations meant each channel must operate independently, without synergy or, in some cases, coordination.

The Challenge & the Opportunity
Without a doubt, the e-commerce industry is in a major replatforming cycle – many companies are replacing outdated e-commerce systems that were built before the internet bubble.  These e-commerce replatforms are getting CIO’s and architects rethinking how they can maximize the initiative to serve more than just the Web storefront. They are realizing that there is an opportunity to leverage their new platform to provide commerce services to other sites and applications.

In parallel to the drive to improve Web sales, there is also a drive to improve overall sales via a more consistent and effective cross-channel shopping experience.  But capturing information in multiple channels, aggregating it into an actionable view of the customer and painting the full picture of the enterprise operation is a significant undertaking that requires substantial integration of many disparate systems. It also requires flexibility to adapt to varying kinds of information, at different times and that take many separate actions. There is no single system in enterprise data centers today that choreographs all the elements that are needed, and a transformation is required from current architectures to a new approach suitable for delivering commerce services and unified customer, product and order information to all the applications that need them. Here’s where the e-commerce platform emerges and takes on a new role – as the commerce platform.

The Commerce Platform
A well-designed e-commerce system is positioned to provide the base of a true cross-channel commerce solution which delivers a unified view of the customer. This system must already interface with product, inventory, order management, financial information, customer relationship and transactional systems. It typically must adapt to different information availability and rules about what system is authoritative on which data. The site is built to aggregate information in a meaningful way for a high volume of visitor traffic and is capable of personalizing the view as a function of the audience. It is the most compelling place to aggregate customer-facing information.

The bottom line is an e-commerce platform is in the best position to integrate the range of customer-facing, back end and third-party applications, enabling companies to view and manage sales across channels.  e-Commerce is no longer just the solution for the Web channel… it can be the foundation for all customer-facing commerce applications.  Goodbye “e”, hello “commerce platform.”

In my next post, I’ll discuss why an ERP system is NOT the right foundation for a commerce platform.

These numbers were reported this week by Internet Retailer, as part of the publication’s new profitability and business development survey of 92 Web-only retailers, chain retailers, catalogers and consumer brand manufacturers.

This is more great news for e-commerce merchants and we’re glad to hear that a majority of online retailers are faring well in these difficult times. We are also encouraged to see that very few retailers are planning cuts to their technology theater of operations. As Gene Alvarez, vice president of e-commerce research at Gartner Inc., says in the Internet Retailer article, companies that continue to invest in their Web sites through tough economic times are best positioned and prepared to capitalize on the economic turnaround when it occurs.

As such, we wanted to provide a couple of tips to help online retailers continue this growth in sales and power through these shifting times. The time to be a little creative and try new tactics is now, so you are well prepared as we head closer toward the holiday season:

• Deploy automated recommendations: Personalized merchandising services help quickly lift revenue by recommending the most relevant products from the catalog to each shopper. If your recommendations engine understands your catalog and gives you the control to balance automation with your merchandising strategies, you can use it to personalize merchandising across the site and across channels. Why not automate and personalize your top-seller pages, a slot on your homepage, or even create new pages such as gift guides or “just for you” sections? Our data shows that customers who extend recommendations across their site and across channels have a much greater revenue impact than those who use them for cross-sells alone.
• Implement live help with click to call and click to chat: These technologies can help quickly and measurably increase conversions, reduce Web site abandonment, increase order values, and improve customer loyalty and contact center efficiency. A recent report from Forrester Research finds that firms that are successful in implementing interactive help features like click to call and click to chat are quick to move shoppers from the Web to the phone. The more you can do to make experiences satisfying and consistent across channels, the more new and repeat customers you will earn.
• Try re-marketing techniques: One of the most recent trends we’ve observed with our customers is the growing use of re-marketing or “winback” features that proactively ask site visitors to provide their e-mail address when their online behavior indicates they may potentially abandon a transaction. You can easily do this with a proactive rules engine that you control, so you can offer this “winback” feature only to select visitors who exhibit common signs of abandonment, such as hovering on a page for too long. You can then re-market to those who opt-in, providing links back to carts and reminders to complete orders.

It was surprising to see that just eight out the 100 e-tailers included in the fourth quarter survey scored an 80 or above on a scale of 100, although, Lauren Freedman, president of the e-tailing group, noted that it can be quite difficult for merchants to excel across all three categories.

Considering these stringent requirements, we’d like to offer our congratulations to those eight merchants who have continuously shown their dedication to providing an exceptional experience to their customers, and offer a particular note of praise to the two ATG customers who received this distinction.

The eight retailers scoring an 80 or above along with their scores this year compared to last and the percent increases are as follows:

• Sears, 88.25, 67.90, 21.48%
• Golfsmith, 82.25, 75.50, 8.94%
• Frontgate, 80.75, 70.00, 15.36%
• L.L. Bean, 80.50, 76.00, 5.92%
• Discovery Channel, 80.50, 76.00, 5.92%
• Amazon, 80.50, 73.00, 10.27%
• Best Buy, 80.50, 68.50, 17.52%
• Orvis, 80.00, 75.50, 5.96%

Kudos to these merchants who are also committed to improving their customers’ experiences while shopping online. Keep up the great work.

Although overall spending for online advertising is down – interactive video is actually on the rise. According to a recent report from eMarketer, 67 percent of all Internet users are viewing some form of video advertising at least once a month. The report also discusses that the audience for video ads has reached critical mass as a viable video advertising market has grown. But, even with the increase of video advertising viewers have mostly only been able to passively engage. That’s all about to change. Now with the launch of eStara Video Connect advertisers can take advantage of the market trend and ensure the monetization of video with active participation.

Beginning today, we will be demonstrating eStara Video Connect at ILM 08, the Kelsey Group’s annual conference devoted to digital media with a local focus. Also at the event will be Dallas-based Media Distribution Solutions, one of the first companies that have already implemented eStara Video Connect. If you’re attending the ILM 08 event please feel free to stop by our booth – #122; we’d love to give you a live demonstration!

In the meantime, check out some of our recent coverage:
Direct Marketer Magazine
LocalBizBits
Online Video Watch
Xconomy

eStara Video Connect

ATG: Patti, tell us about the research project and its major findings.

FREEMAN EVANS: We surveyed retailers – both multi-channel retailers as well as online-only – and wanted to find out what factors were most responsible for improving business results. What analytical tools and measurements are the best? What areas of the marketing process are likely to deliver the best returns? What returns on investment can be achieved? And so on.

And one of the key findings was that fully half of the retailers we spoke to – that is, 50% – are getting either no return, or a negative return on investment on their use of metrics. So, they may be spending money on a Web metrics package or even using Google Analytics for free, but have not been able to derive business benefits from these performance metrics. At the other end of the spectrum, we found that 22 percent of retailers are actually doing a very good job, driving some very significant gains using their metrics. In the middle, about 28-30% are getting some benefits, but have lots room to improve. And these percentages haven’t really changed from two years ago when we did a similar study.

What was really interesting was that it didn’t matter what tool they were using, it didn’t matter what size they were, and it didn’t matter how many people they had thrown at their metrics efforts – none of these made the difference between who was good and who was not good. The real differentiator seemed to be their approach to using metrics, their process.

ATG: How is it even possible to have access to analytics, and yet not improve results?

FREEMAN EVANS: When we were doing research for this report, we interviewed an awful lot of retailers, and many of them said, “You know, I’m just overwhelmed by the information.” Now, as you know, the level of detail that’s possible to track can be excruciating, and picking out which metrics are going to be useful is really not that easy, necessarily.

But I would argue that it’s not simply a matter of too much information. In fact, we found that across the board, the best performers actually use metrics at a higher rate than the others. So the real difference isn’t an overabundance of data, it’s that the poor performers haven’t figured out how to approach and apply the information they have at their disposal in a strategic way. Because this is all new to them. Retailers in particular have, over the last 20 or 30 years, operated against a very straightforward set of metrics: gross margins, turns, dollars per square foot, same-store sales.

The retailers who have figured out how to make metrics work understand that you have to get out ahead of the wave: they actually approach the Web in a proactive way, where you come up with a hypothesis, test specific alternatives and then see what the numbers tell you. The poor performers on the other hand were far more likely to use their metrics in an ad hoc way – look at today’s click reports, and react.

We heard a lot of, “Well, that change we made – we didn’t measure it because it was clearly the right thing to do.” But if you don’t measure the effect, you don’t know how right it was, and you don’t know how to make better decisions going forward. And you can be sure that sooner or later your competition is going to start making those measurements, they’re going to get smarter about how they’re making their decisions, and you’re going to be paying the price.

ATG: What kind of ROI improvements are we talking about for those who adopt a more scientific approach to performance metrics?

FREEMAN EVANS: Our survey found that the top performers have extraordinarily better results in terms of moving the needle on conversion rate, on their ROI from search and e-mail marketing, on average order value, and so on, across the board. Our middle 30% of retailers, for example, earned a 5 percent increase in their return on investment from e-mail marketing. That’s good, but a 19 percent bump is an awful lot better – and that’s what the top performers averaged. The top performers also averaged a 24% increase in conversion rates, a 19% improvement in SEO, 13% in average order value – each a multiple of what the middle performers did. So clearly, even the mid-level performance could be doing an awful lot better than they are.

I mentioned that half of retailers have a negative return on investment. What we found was that the best performers averaged a 68% return on their investment performance metrics, and that investment amounted to .9% of their sales. Their ROI came from both improved sales and gross margin numbers. The mid-level performers achieved a 12% return on investment, but the impact on the business was even less given that their investment level was a third of the best performers.

ATG: All right, so for these 80% of retailers that still have a lot of upside on the table – How do they turn the corner? Sounds like analysts who know how to do this in retail aren’t exactly growing on trees.

FREEMAN EVANS: Well, for the most part, retailers give the job to a single mid-level or junior person; we found an average of 1.3 workers dedicated to metrics. And even though it’s the right thing to do to have a person devoted to analytics, these people tend to be report generators. And while generating reports is necessary, what really makes a difference is getting a senior person involved, who’s there saying, “Here is this problem, here’s what it means… Let’s try to think up some ideas of how we can get better results.” A senior level person, a VP or EVP, not a $50,000-a-year person.

Another thing that the best performers do is to bring together cross-functional teams to tackle the problems, with weekly review team meetings focused on getting results. This is quite critical because no single person knows all the questions to ask. So having a cross-functional team meeting – or better yet, a cross-channel cross-functional team meeting – will get people to start asking questions that can really impact the business.

For example, something like raising the issue “I don’t think that our free shipping offers are producing enough incremental revenue to pay for the bill.” That’s what Timberland did. In that case, it turned out that they needed free shipping to drive a 40 percent lift on incremental sales to be a worthwhile offer, and they found they were not getting anything like that. So as a result, they not only improved their margins on this particular issue, but they have a better sense of how free shipping impacts shopper behavior, and can use it in a more strategic way to impact the business. And they wouldn’t have done this if they didn’t have regular team meetings with the purpose of identifying areas for improvement, setting out hypotheses in advance, and then using metrics to figure out.

This is not an easy thing to do. Your internal structure, the sensibilities and culture all have to work together to make this happen. If you can’t get that level of commitment internally, it’s very difficult to make inroads. But you can make things work better by bringing external talent to the table. Maybe your commerce platform vendor has a strong analytics group, or your analytics package vendor has a consulting arm. Or even an outside consultant can help the company face up to the tough questions, and help change the culture of the organization.

ATG: Okay, changing the corporate culture takes some time. Are there some simple steps or areas of focus that can make a difference in the short term, while we’re working on the cultural sea change?

FREEMAN EVANS: We identified a couple of them. If you’re looking for the one place to start in terms of using your metrics most effectively, it’s checkout. We’re loathe to touch checkout because it’s such a critical component of the shopping experience, but it actually offers the largest ROI impact. Yet among the weak performers, fewer than half even look at checkout metrics, much less test variables strategically.

In addition to that, look at improving your “add to cart” rate – because obviously, the more that people add things to their carts, the greater likelihood they will check out. Another metric that the top performers are starting to use is their zero search results. Right now only about 30 percent of retailers are actually tracking or using zero search results to make decisions, but these metrics can be such a wealth of knowledge in terms of understanding how the public actually sees your product offering – knowledge you can then use in your search, in your merchandising, in your marketing efforts, and in your Web site copy. It can be tremendously valuable.

So those are all critical things, and each step can help put you on the right track. But the real kicker is to approach these issues not in an ad hoc way, but in a proactive way. And that’s easy to say, but not so easy to do. And ultimately it means breaking down the silos that naturally exist in our organizations, and implementing a cross-functional process that drives continual improvement. Start asking those “What If?” questions, setting hypotheses, and then being much more focused in terms of what metrics you look at and how you’re going to use them. But that’s how you move out of the ad hoc approach.

After years of incrementalism and “band-aiding,” many large growing e-Tailers are starting from scratch and redesigning their entire e-commerce website from the ground up.  Like any typical selection process, they document their vision, their requirements, their decision criteria, etc.  They then go on to create a short list and begin the vendor parade.The PowerPoints decks are impressive.  (Many are too large to fit in your e-mail inbox.)   Like most mature software categories, e-commerce vendors tend to copy each other and end up sounding very similar.  But unlike other software categories, e-commerce software solutions vary greatly and selecting the wrong vendor directly impacts the top and bottom line of a company.  You can pay as little as $100/month plus 1.5% of online sales for Yahoo! Stores and up to several hundred thousand dollars per processor for the best-in-breed.  The key questions: What are you really paying for?…and is that large premium in cost worth it? 

I can’t say it enough: It all depends on the size of your business.  You are indeed paying for quality and uptime in these high-end solutions, but you are also paying for “growth” tools.  Today’s high-end e-commerce solutions include very sophisticated tools for behavioral targeting, AB testing, real-time merchandising, searchandising, managing dynamic content, analytics, collaborative filtering and many others.  In fact, Omniture just paid $65 million for Offermatica, a vendor specializing in AB Testing, illustrating the value placed on just one conversion feature.  These new tools can easily improve your conversion rates by 50% to 100%.  A 10% increase is almost guaranteed.  The question is whether this increase in online sales pays for the investment. If you sell over $20 million online, the answer is most likely yes, invest in a best-in-class e-commerce Suite.  If you are much smaller, stick to a basic catalog and shopping cart.

One caution….beware of “smogging”.  I happened to come across the term “smogging” while reading. In sales, it means “blowing smoke” — a hype-laden pitch that makes promises the salesperson can’t keep. You’ll get your fair share of vendors claiming they can “do it all at half the cost.” Caveat emptor…do not take short cuts in your selection process. Get your hands on the software and even do a proof of concept. It’s only then that you’ll appreciate what you’re truly investing in. It’s an outdated cliché, but in software it’s almost always the case: you get what you pay for.

We couldn’t agree more!

[tags] SaaS, software as a service, nick carr, Nucleus Research, zoli erdos, McKinsey [/tags]