I have blogged before about the increased importance of eCommerce to the business of retailing as well as the resulting complexity of solutions retailers have attempted to buy and develop to deliver to the needs of the business.  eCommerce is no longer tangential to what it means to be a retailer but instead is a core part of strategy. 

The solutions available to retailers in this space have multiplied at astonishing rates in the last five years to the extent that there are broad ecosystems in solution areas today that didn’t even exist five years ago.  eCommerce platform, Web Content Management, Order Management, Email Marketing, Reviews and Ratings, Rich Media, Search, Recommendations, Call Center, Store Locator Services, Affiliate Marketing, Content Delivery Networks, Web Analytics, Site Design, SEM, etc are all examples of capabilities that now have broad vendor ecosystems attached to them. 

I often remark to my colleagues that there is an easy way to determine the “hot” solution space in eCommerce and that is to peruse the show floor at an industry event like the Shop.org Annual Summit. I remember about three years ago the floor was saturated with email marketing vendors, indicating that was a solution area where retailers were hungry for capabilities. 

Also in a previous post I commented on the parallels I have seen between the growth of the Retail ERP market and the current state of the ‘digital marketing’ space.  Looking back to the early days of Retail ERP, what moved both retailers and their technology partners to build out diverse but complimentary capabilities into an integrated solution offering was the growing complexity and cost retailers faced of integrating solutions that were built based on the vendors’ myopic views of their responsibilities in the ecosystem.  Each independent vendor built their applications based on the piece of the pie they wanted to build share and revenue in.  While they developed partnerships and alliances as a way of growing their share (as well as sought out opportunities to own more of the stack with additional functionality) most were incented to be highly functional in their area of specialty and to sell into a customer base on those merits.  One of the historical results of this paradigm was the ‘ERP vs best-of-breed’ debate. 

Well as the eCommerce space continues to grow its universe of vendors I see a changing tide in the way retailers are looking at the landscape of solutions they “need” to deliver high quality experiences to their customers.  While the vast majority of retailers are on a sprint to acquire the best features and functions in all categories of eCommerce solutions - and in some cases supported in their pursuits by analysts and industry experts - there is a quiet minority consisting of retail eCommerce executives beginning to see a potential advantage to simplification. 

The ‘Digital ERP’ narrative I started in a previous post serves as a good description of this emerging perspective.  The crux of the argument is that there is competitive advantage to be gained in the form of integrated solution capability and lower costs when considering eCommerce solutions that are from the same family so-to-speak.  As an example of this view take the following hypothetical scenario:

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A retailers needs to select an eCommerce platform and Web content management solution. 

Choice A:

• Choose best of breed eCommerce platform
• Choose best of breed WCM
• Complete integration of solutions through in-house IT or SI of choice

Choice B:

• Select eCommerce platform and WCM from the same vendor, with native integration of WCM and eCommerce platform.

Both choices have inherent benefits and challenges.  While in Choice A the retailer has selected highly capable solutions in their own right, both are highly horizontal, as each vendor typically sells their solutions into standalone deployment scenarios where their products compete based on features/functions.  Integration will be the focus of the implementation effort and both solutions represent the highest loaded cost.

In Choice B the retailer has saved itself a great deal of integration headaches and the solutions should be complimentary.  The retailer will spend most of its efforts on extending or customizing functionality of the end solution to meet their specific requirements. 

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In Choice B the Retailer is investing in capabilities that positively impact their customers, vs spending time on integration.  The real point of this hypothetical isn’t to devalue the best-of-breed decision, as there are clear circumstances under which best-of-breed is the best choice, but as this space matures expect many retailers to find ways to exploit a competitive advantage in their technology decisions by simplifying their solution landscape.

One of the really fun aspects of my job is the frequency with which I get to interact with retailers.  This enables me to have a good view to trends from a very grassroots perspective.  While I spend a great deal of my time working with retailers to develop B2C or B2B solutions, I am increasingly seeing an interest in the concept of “B2X”-types of solutions. 

A B2X solution is a platform with services that support standard B2B and B2C scenarios within a common framework and set of tools.  The advantages here are many:

1. A B2X solution enables IT to support a common framework vs a set of separate applications based on sales channel.
2. A solution that supports B2X implies a good level of operational integration with key internal systems like financials, product information/catalog, orders, supply chain, etc.
3. There is a growing set of evidence from analysts that B2B shoppers have grown to expect more of a consumer buying experience (i.e. product reviews and ratings, rich product imagery, cross-sells/up-sells, personalization, etc).
4. Agility in customer facing selling systems enables retailers to more nimbly shift sales channels and strategies as the business dictates.

Expect eCommerce vendors to attempt to merge these worlds more effectively than they do today in response to this opportunity.

As retailers continue to attempt integration of social media into cross-channel commerce strategies there is now a heightened awareness of the labor involved in ‘good’ social media monitoring practices.  In some retail and CPG organizations teams dedicated or shared that focus on social media are growing in size and importance.  These teams however struggle not only in terms of how to monitor social media but also in terms of how to operationalize this process and to make it part of their broader eCommerce business. 

Have a look at an early reveal of LookingGlass from Microsoft.  While in proof-of-concept stage today, going forward it signals an opportunity for retailers to make social media practices part of their day-to-day business processes.

http://adage.com/digital/article?article_id=139199

Microsoft will again be participating at Shop.org’s Annual Summit in Las Vegas.  The event runs from September 21st through September 23rd at Mandalay Bay Resort & Casino.  More information on the event can be found here:  http://www.shop.org/web/summit09. 

Microsoft will be participating in the Expo Hall at Booth #207.  At this year’s event attendees will have the opportunity to see a new Microsoft, showcasing a unique mix of enterprise technology and digital marketing solutions that enable retailers to deliver high-value multi-channel experiences to their customers.  If you are attending the event please stop by the booth to see what Microsoft is doing with some of the most progressive retailers in the world. 

RIS News recently published a report based on research from FitForCommerce indicating that 50% of online retailers plan to replace their existing eCommerce platforms in the next 12 months.  Here is a link to the article:

http://www.risnews.com/ME2/dirmod.asp?sid=&nm=&type=MultiPublishing&mod=PublishingTitles&mid=2E3DABA5396D4649BABC55BEADF2F8FD&tier=4&id=A03BB5F95281487AB6C2C589C684ED84

There are a couple of key points to be drawn out of this research:

• Lack of innovation/flexibility is the leading reason for re-platforming (48%)
• eCommerce teams are actively seeking and receiving support for major investments in the Web channel

Expanding on a previous post, I wanted to unwrap the discussion of "Digital ERP” a bit.  I likened the maturation of the Web business - from a disparate silo of business and technical functions, to a set of standardized business processes and tools acting in concert – to the rise of the ERP.  What gave rise to the ERP was the need for the business to bring business processes under control (read: standardization), to coordinate planning and execution of operations into a more centralized view, reduce complexities and disconnects from business and system integration challenges, and ultimately, to encourage the elimination (or reduction) of business and technical silos.        

I see remarkable similarities in evolution of the Web business.  Think about the silos that exist in the vast majority of organizations:

• Marketing/Digital Advertising

• Advertising

• SEO

• Traffic Analytics

• Campaign Tracking

• UX and Media Platform

• eBusiness/eCommerce

• RIA and Social

• CRM

• Search & Personalization

• Merchandising

• WCM & DAM

• Infrastructure/IT

• Web Servers/ Databases

• Hosting

• Security

• Storage

• Integration

While these three sample focus areas have a great degree of similar interests they are often owned very distinctly within large enterprises.  In some sense this is done because of practicality but also because there are no solutions available in the marketplace that help an organization holistically deliver digital advertising-eCommerce-Infrastructure in a cohesive fashion.  The ‘Digital ERP’ would seek to address this deficiency.  See a high level view of this type of solution below:

An article I contributed to in the Fall edition of RetailSpeak (starting on page 21):

http://www.onwindows.com/Portals/0/images/retailspeak-issue-25.pdf

As with any business that grows in significance and value, Web business is evolving.  I would argue that the developments we are seeing are positive for the industry and will usher in a corresponding evolution from technology and service providers.  Here are some thoughts that outline my thinking here:

Think about a traditional Web business in a few silos:

• Digital Advertising (& in some cases, Marketing)
• eCommerce
• Infrastructure/Operations

Each of these silos typically has its own key constituency.  In the case of Digital Advertising, typically the CMO and his/her organization focus on how to create and implement an overall digital marketing strategy, often leveraging one or more third party agencies (to assist and/or drive and/or execute).  They work in tools from Doubleclick/Google, Microsoft, Yahoo, etc.  In the eCommerce silo, the typical retail/CPG enterprise is growing an organization that looks after online commerce and all of the related solutions that enable Web commerce.  This is an area with many applications that need to be managed both from a core platform standpoint and also on the periphery (think email marketing).  Finally, the Infrastructure/Operations team is responsible for supporting the needs of the eCommerce (availability, development, security, etc) and Advertising/Marketing teams (in this case mostly around branding).  The Infrastructure/Operations team usually is spearheaded by the CIO/CTO organization. 

The three main silos that support the Web business often have divergent metrics and from a tactical perspective, have very different daily needs.  However, it is important to externalize these silos and think about their collective impact on the most important constituency in this ecosystem…the customer.  With customer acquisition and targeted marketing, shopping, personalization and overall experience all working in concert, user experience can be exceptional.  If any of these focus areas falls out of balance the customer experience is negatively impacted and the brand is damaged.

We have begun to see an evolution in how some organizations have dealt with the need to deliver a coordinated experience to customers.  In most cases, Version 1 of this evolution has resulted in the office of the CMO reaching down into bits of eCommerce and Infrastructure/Operations.  This has produced mixed results.  In some cases, this has given rise to the SaaS eCommerce providers and so-called turn-key eCommerce application providers.  The CMO believes she/he can “own” eCommerce and remove the silo between Marketing and eCommerce.  A problem that some organizations have seen however is that the office of the CMO does not have core competencies in technology and enterprise IT governance.  Further, organizations whose job it is to chart the equity and future of the brand aren’t often structured to run day-to-day, mission-critical applications like eCommerce whether they are in the cloud or in their own data center.  As another example, think about how eCommerce directors are chartered not only with impactful site merchandising and flawless commerce execution, but often don’t have all the levers to pull in terms of acquiring customers, measuring campaign effectiveness, and gaining insight into customer personas.

The reality is that a best practice for a successful Web business is inherent coordination between digital marketing, eCommerce, and Web infrastructure organizations.  To this end, I see a fundamental shift on the horizon for both technology and service providers to provide a role-based, coherent set of technologies, tools…and ultimately solutions..that enable advertising/marketing, eCommerce, and Infrastructure/Ops to work in a coordinated manner.  For lack of a better term, think about a “Digital ERP” that may arise, just like ERP rose up out of islands of information and applications by functional area or department.  One simple representation:

So I suppose this blog post might seem a little confusing to those of us thoroughly convinced of the march toward supremacy by the Web in the area of customer experience.  Without question we have seem some real innovation in the last several years by retailers looking to deliver rich, personalized shopping experiences on the Web.  To be sure, digital natives are experiencing a wave of new and more engaging shopping experiences at their fingertips (on all three screens).

I know my store systems buddies will be smiling broadly at what they are about to read….

The majority of shoppers still build intimate relationships with brands and retailers in the store.  Even for multi-channel shoppers (typically those who research on-line and buy in store), the store represents the all-important execution channel, and consequently a critical channel to exert a last-chance influence on the customer (retail pundits still contend that 70% of all purchase decisions are made at point-of-purchase).

Because of the importance of the store in the customer experience value chain there is an emerging focus on delivering experience innovation in the store.  Traditional kiosk strategies are being evaluated (most now agree the ‘website-on-a-stick’ model is officially dead), in-store TV networks and digital signage solutions are extremely hot and consumer mobile pilots are hitting a broad group of brands. 

I am a big fan of branded, self-service (read: next gen kiosk), large LCD, multi-touch environments in retail stores.  The value for the consumer is a highly functional, and immersive kiosk that connects to loyalty programs, customer information, special offers, etc.  It can present the digital catalog in an interesting way, and can direct customers to departments or the location of merchandise.  The value for the retailer is that it delivers on customers’ digital expectations, off-loads work from floor associates who usually seem invisible to customers anyway, and hooks into existing store infrastructure.  Now clearly a solution like this fits best in a large format store, or one where the availability of store associates can be an issue. 

Take a look at what Razorfish is doing in this area at their customer experience blog:

http://emergingexperiences.com/

I spend a lot of time speaking to customers about re-freshing their customer-facing Web experience. A hot topic is rich internet applications (RIA), including things like drag-and-drop check-out, embedded video, rich product imagery, etc. 

An objection I hear quite frequently, especially when discussing Silverlight-based shopping experiences, is that “we don’t think our customers are ready for that experience”.  That is a hugely important consideration.  Persona-based analysis of your customer base will likely indicate there is a mix of customers hungry for a richer shopping experience, and those resistant to any change that could impact their ability to simply browse your digital catalog.  Deep persona development aided by A/B testing is a good way to ferret out preferences like these.

One way to deal with this issue is to allow customers to dip their toe in the water and measure feedback.  Newegg.com has a great example of this with a Silverlight-based buying control they have deployed.  What is great about the experience is that it is optional, but proves out its value on its own. The page allows deep visualization of the products (digital cameras in this case) and a slider to narrow or expand product ranges.

Give it a test drive here:

http://promotions.newegg.com/silverlight/dc/index.html

Is it that time of year?  Is it merely an odd coincidence?  In the last 6 months there has been a major ramping up of seemingly happy and successful retailers looking to see “what else is out there” in the rapidly evolving universe that is eCommerce technology. 

Having been around the block, I know that some of this is a normal occurrence in the industry.  Retailers, more than in other industries, love to see what their peers are doing.  However this is more than that.  This trend in my view is spurred by a couple of key macro factors:

First, as I have said many times, there is increasing pressure on the eCommerce side of the house to continue to grow revenue to make up for lack of growth (or in some cases, contraction) in the traditional store business.  The old model of growing a retail business through the engine of new store openings is officially on sabbatical.  Retailers now are looking to harness the growth of the Web business to grow share and in many cases, to have significant impact on the top-line.  As such, marketers and IT shops alike are looking to see what capabilities they can leverage to drive conversion and revenue. 

Second, economic pressures retailers are feeling in terms of constrained or contracting revenue, reductions in available capital and a major push from the CFO to reduce op-ex.  For many retailers this is about doing more with less.  In this classic battle IT is being challenged to deliver to the needs of the business in areas like content management, campaign management, social, mobile, new site (micro-site) development and more.  On a much more tactical level, marketing is screaming for features.     

The result of these two key factors is a major push by retailers (in some cases driven by IT, and in other cases driven by marketing) to see what other eCommerce solutions are available with the following key focus areas:

• Current Pains – how does our current solution impede our business goals?
• Solution capability – what have now become the “basics” of eCommerce…i.e. what can I get in the box today?
• Solution cost – how much does a new solution cost from a hardware, software and hosting perspective relative to what I am paying for today?
• Operations – what does a new solution look in terms of a headcount footprint…i.e. how many people would be required to run the solution (where could I reduce or re-purpose headcount)?
• Futures – how does a new solution set me up for long-term business opportunities and growth?

The analysis that is going on today in many cases is being done without a defined budget but instead with the lens of assumed revenue growth and decreasing op-ex.  In this mode retailers can justify budget through cost savings and with the implied value of supporting their growth engine for the long term.

I am a huge fan of the Gartner Hype Cycle.  If you are not familiar with it, the Hype Cycle attempts to place in context where certain technologies and strategies exist, with the assumption that all appear, grow in popularity, mature, and decline, based on a predictable pattern.  It is based on the supposition that technologies are buttressed by “hype” that impact their demand and usage.  The model follows the following path:  Technology Trigger – Peak of Inflated Expectations – Trough of Disillusionment – Slope of Enlightenment – Plateau of Productivity. 

I often think about new technologies, or technology-related strategies using this framework when it applies easily. 

A colleague shared with me the title of an upcoming book, soon to be released.  It is part of the famous “For Dummies…” lineage and is titled, “Facebook Marketing for Dummies”.  While I can tell you nothing about the book (it has yet to be released), I can tell you that its very publication implies to me a growing need in the industry for patterns and practices (read: “well-defined strategies”) for social marketing.  A few additional observations:

• Retailers are dedicating resources to social marketing
• Retailers have decided social marketing is important, but most have not decided how important
• Winners in the social marketing arena tend to understand the power of the crowd and how best to harness existing brand affinity
• Monetizing is still the challenge, but retail organizations (or their agencies) are starting to come to the understanding that social marketing is a lot like magazine or TV advertising at some level (challenges in direct monetization)
• However, mature social marketing campaigns are better able to link overall engagement of customer to behavior

Article I contributed to in RetailSpeak Magazine for the Summer issue:

http://www.onwindows.com/Portals/0/images/retailspeak-issue-24.pdf

There is a ton of buzz in the industry at the moment focused on enabling interaction between retailers and customers through the medium of a consumer’s mobile device.  While a fair amount of debate still rages with regard to exactly which types of interactions will be most compelling (some retailers have had some successes), many retailers and technology providers are attempting to develop technical standards for mobile device content/experience delivery in the meantime.

A growing number of small software providers have developed applications that seek to enable retailers to “integrate” their existing Web deployments to a version deployed on a mobile device.  These tend to focus on a re-factoring of the presentation layer, while adding another, separate application architecture (usually pretty thin) that seeks to deliver product and product detail pages in a manner that would be conducive to mobile Web browsing.  This type of approach is interesting in that it delivers a pretty compelling time-to-market.  Where it falls down potentially is in the ability to coordinate multi-channel strategies into a cohesive set of services delivered regardless of user interface.

As the mobile device channel matures however we will begin to see retailers and others seek to make mobile device content delivery part of mainstream technology strategy.  Instead of a separate application to support just the mobile Web experience we will see retailers develop “device intelligence”.  This capability will allow retailers to render content and experiences in a manner appropriate for the device, without sacrificing core integration and without creating yet another application environment that will need care and feeding.

Microsoft has taken a major step in the journey to support device intelligence with the Commerce Server 2009 Template Pack.  The Template Pack introduces a new “skin” that will support both standard desktop browsers as well as mobile devices (Windows Mobile and iPhone).  So instead of a completely separate application for mobile Microsoft is enabling a mobile skin on top of the standard Web deployment, that leverages the same services and capabilities of a Web experience. 

The Template Pack is available for download here:

http://go.microsoft.com/fwlink/?LinkId=147778

For many, the question posed in this post is not a question at all.  Many are fully bought in to the concept of eCommerce applications (or at a bare minimum, services) existing only is a SaaS delivery model.  To be clear, there are many ISVs that deliver enterprise-class services that surround retailers’ eCommerce applications.  Tax, payments, Web analytics, product imagery, A/B testing, customer support, etc all represent areas where ISVs are already delivering solutions in a SaaS delivery model. 

The question posed in this entry however is more complex.  There are eCommerce application vendors today that deliver their applications in a hosted model, basically allowing retailers to offload expensive infrastructure.  There are an even smaller number of ISVs that deliver what most approximates true SaaS,  The key differentiator is the ability to “customize” the application and “own” the application so-to-speak. 

Given the economics of Retail at the moment, there is more than a groundswell of support for any opportunity to buy an eCommerce solution without buying the infrastructure that is traditionally required to actually run it.  Furthering this movement is the reality that eCommerce buying decisions are now more than ever being driven by business constituencies inside of Retail organizations. Marketing and merchandising executives are much more willing to focus on rapidly-delivered features and capabilities at the expense of technical control and integration.

But can there be a compromise between the business and IT organizations inside of Retail?  Can marketing and merchandising executives get a highly functional application, complete with workflows and features that allow them to have a pseudo turnkey solution while at the same time providing IT with a scalable, standards-based platform that can be developed on top of, integrated to, and supported?  Perhaps. 

The answer may be a set of componentized, commerce-specific services in the cloud that allow for basic assembly and sequencing into a true application architecture. 

More on this topic to come…