I just got back from the Shop.org Annual Summit in Las Vegas, where we, Cactus Commerce, launched our new CommerceLive solution.  Billed as the conference requiring ‘Mandatory Attendance’ it certainly was the mandatory event to be at this year.  This blog post is a bit long, but there was really so much valuable information at the show, I wanted to capture and share some of it.

According to Rich Last, Chairman of Shop.org and VP at JC Penney, there was a record crowd, with more than 2600 attendees and 150 exhibitors.  Interestingly there were 16% more retail attendees, backing up his statement that ‘e-commerce is still the shining star … the growth channel in retail … also it’s the channel that has the most dramatic game changing industry out there’.

During the second address by Scott Silverman, Executive Director, Shop.org, an informal audience poll was conducted.  It was encouraging to hear that the results revealed, retailers are in general optimistic about the upcoming holiday season (62% were optimistic, 10% pessimistic, and 28% neutral).

Keynote:  Macy’s 3.0: Our 360° View of the Customer

The most anticipated keynote this year was the address by Terry Lundgren, Chairman, President and CEO of Macy’s, Inc.  One blogger even referred to him as the ‘Marlboro Man of retail’.  With a comment like that, I had to include a picture.

He certainly didn’t disappoint the crowd with his speech.  The keynote started with an inspiring video of Macy’s and Bloomingdales, which prompted me to note down that I have to check out those sites again and keep a closer eye on them from now on. 

Lundgren then opened by stating that the secret of their success has been the integration of physical stores and the on-line, focusing on a 360° view of customer.  He then shared an interesting view of the history of Macy’s:

• Macy’s 1.0  - Macy’s first store opened 1858 with no electricity.   The first Bloomindales opened in 1872 with electricity, but still no telephones.  By 1995, there were 149 Macy’s stores and 18 Bloomingdales stores.  By 2005 they grew to 423 Macy’s stores and 36 Bloomingdales stores. Today they currently have 810 Macy’s stores and 40 Bloomindales stores.
• Macy’s 2.0 - Macys.com launched in 1996.  Bloomindales.com launched in 2002 but was solely a marketing site.
• Macy’s 3.0 – This is the stage that brought the stores and the web together for a dynamic shopping experience.  Macy’s has long stopped looking at stores as silo’s, and in 2009 DTC (Direct to Consumer) web sales are expected to exceed $1 billion (up 13% from last year).  However, he went on to state that the Internet is as much of a marketing tool as a sales channel and in fact believes that another $5 billion of in store sales are influenced by online.

Lundgren went on to describe the on-line channel as the hub of the brand, providing customers with a store locator, ability to pay bills, view TV commercials, find event information, resolve disputes and access the company’s catalogs.

In fact, Macy’s believe that it’s multi-channel customer is worth twice as much as it’s store only customer and have found that every dollar spent online influences $5.77 spent in store in the next 10 days. As such, Macy’s has invested more than $300 million in infrastructure in the last year. 

Lundgren also mentioned that the company was planning to launch a major mobile app later this year and said it would be ‘one of the most advanced iPhone apps of any retailer.’

As an illustration of how Macy’s is successfully using the on-line channel as a marketing tool, Lundgren talked about some specific social strategies and campaigns:

• Bloomingdales sells merchandise on-line before it hits the stores.  Sort of a trunk store on-line, to test out new merchandise.
• Social media – Macy’s is active on twitter about events and to interact with customers.  Similar interaction is held on facebook.
• Dozens of Macy’s videos have found their way on YouTube.  They post some themselves, but customers do as well.  It is not uncommon for these videos to get 1/4 million views.
• Macy’s Make Over America campaign partners with Clinton Kelly of “What Not to Wear”.  They travel to 15 Macy’s stores over 9 months and pick 15 customers in each location for a makeover.  So far this year, more than 30,000 women applied, the company published videos of the make-overs and also hosted a runway show in each store that was streamed over the internet on the associated microsite.
• Macy’s Thanksgiving Day parade – Last year 5.5 million watched the parade on the street and more than 50 million more watched on-line or TV.  The parade website had more than 800,000 visitors last year.
• Macy’s Come+Together initiative is their feed America campaign.  The campaign asks customers to host their own dinner parties and then encourage their guests to donate money to the cause instead of bringing a hostess gift. Macy’s will then match the contribution.  The goal is to provide 10 million meals to those in need.  The microsite contains advertisements and videos featuring celebrities informing it’s consumers about the campaign, events, sample menus, a tool to create invitations, and sweepstakes.

NRF president and CEO Tracy Mullin finished the session with a short Q&A where she asked Lundgren questions that had been submitted in advance by attendees. 

On global retailing, Lundgren indicated that in February of next year they are opening their first international Bloomingdales in Dubai.  When asked if it makes sense in current climate to do that, Lundgren responded, ‘if you start today it will take 2-3 years and you must look forward for success.’  They don’t have a on-line site in the plans yet for Dubai but are thinking about it.  Lundgren noted, ‘do it successfully, do it big’ … much like their Come+Together campaign approach.

On Tweeting, Lundgren mentioned that he was asked to tweet, so he registered his name and he follows, but has never tweeted.  Lundgren commented that he is fascinated that people have that much time.  On that note, he also commented that if it remains authentic it’s interesting, but worries that if people are hired to maintain the volume it will not remain authentic. 

On the power of reviews and the implication of bad reviews, Lundgren noted, “if you get 10 bad reviews on a product, well then guess what?  The product is bad, get rid of it.”

This led to a discussion on ‘obvious value’.  Of course value is always important, but consumers are looking for ‘obvious value’

Keynote: The State of Retailing Online 2009

Forrester’s Sucharita Mulpuru, delivered the second keynote, outlining why e-commerce is “the bright side of retail” and what online retailers are doing right.

She pointed out that many assume e-commerce is growing because of lower prices or smaller bases to work with, but she claimed that was wrong and that multi-channel retailers are the least likely to compete on price.

Mulpuru then honed in on 6 things that web retailers have done well to be successful:

1. Reset goals as needed - Initially many retailers such as Amazon focused on such things as customer service (e.g. gave away $500 game console when a customer called to complain that the item did not arrive), but times have changed.  ‘To arrive alive at the end of this downturn is the best way to grow in the long run’, she said.
2. Redefined the competition – ‘While bricks and mortar are fighting the competition in the rear view mirror, the competition is looking years ahead.’
1. Starbucks was originally dubbed the ‘McDonalds of the middle class’.  McDonalds struck back with an ad, ‘4 bucks for a Starbucks is nuts’ and introduced premium coffee where the price is in the middle.  McDonalds is now the Starbucks of the middle class.
2. Netflix realized that their business model is dead and put together a team dedicated on long-term growth.
3. Respect IT – Web retailers invest heavily in IT (retailers overall spend about 2%, all industries about 3%, and web retailers 7%).  The delta probably lies in innovation (e.g. Paypal, zoom, RIA technologies).
4. Reinforced partners – Store retailers have alienated manufacturers by moving away from brands to knockoffs. but the truth is 62% of web buyers are brand loyalists. The web empowers manufacturers.  About 1/3 of all e-commerce spend is generated on manufacturer sites or influenced by them.  The smart retailers know that and take advantage of those relationships.
5. Reacted to people power – Over half of the retailers who participated in the State of Retailing Online have been engaged in social commerce tactics.  The reasons why are less defined (66% say ROI is unclear, 50% have engaged just because there is buzz, 34% say social marketing strategies have helped grow their business).  Earlier in her discussion, Mulpuru pointed out that click through rates on social network ads are 0.04%, compared to 22% on email.  However, it’s not about driving sales tomorrow, it’s about engaging and learning.
6. Recognized the mobility revolution – The one product that was recession proof was the iPhone, but the reality is that the number of consumers accessing the web thru mobile is still relatively small (15%).  However, those people are actually buying, so there’s an opportunity in the multi-channel experience to leverage that.  Email still works, but it’s not the future.  She offered an interesting statistic to support that theory … there are more seniors over the age of 65 (67%) that use email than there are gen Yers (65%).  The gen Yers are texting but not using email.  She noted later in the session that the iPhone is only part of the story, there are more people accessing the web through Blackberry and Motorola than the iPhone.

Keynote:  The Pathway to Profitability

Dawn Lepore, CEO and Chairman of the board for Drugstore.com, shared some very interesting facts and insights on how consumer shopping behavior has been affected by the the downturn in the economy.

A customer survey of Drugstore.com customers revealed the following results:

• 20% indicated no change in shopping habits
• 33% shop online more frequently
• 55% are comparison shopping more
• 30% using more coupons

Coupons have been especially successful for the company.  On their own coupon site where they offer manufacturer coupons, the number of coupons offered was up up 26% in the first half of 2009, but redemption rate went up a whopping 198%.

Lepore also talked about what she refers to as ‘promos gone wild’, where they are seeing more shoppers who are researching, coupon hunting, and combining promos to get significant discounts on products. 

What was most interesting was the trading up/trading down consumer behavior.  By tracking baskets across the years they were able to see the trend for consumers to trade down in some products but still adding prestige products that are of perceived value or are offered at a discount.  The question is, are these changes temporary or are they a deeper change in consumers attitudes that are more permanent?

Lepore’s view was that choice, anonymity and convenience has changed the way consumers shop today and forever.  Traditionally, the brick and mortar consumers got dressed to shop at Saks and wouldn’t be caught dead carrying a Kmart bag containing dog food into that store.  However, today Drugstore.com is seeing just that kind of mix in their carts.  The lesson is don’t assume your shoppers can be categorized as they used to be (e.g. bargain hunter, label conscious, impulse buyer).  ‘At Drugstore.com we’re seeing women put a $95 facial peel in a basket beside a special offer Pampers, and buy one, get one at 50% off Maybelline mascara,’ she said.

Keynote: Address by John Donahoe, eBay, Inc.

 John Donahoe, President and CEO eBay, led off with the first keynote on day two of the summit.  I overheard someone make a comment on the number of times Donahoe stated ‘We are not a retailer’ during his speech. But I have to admit until I saw a similar address on the eBay Marketplace platform at IRCE earlier this year, I hadn’t given much thought to eBay as anything more than an auction house, even though I typically have only bought from fixed price retailers on their site.

Donahoe, explained that eBay.com represents less than half of their total revenue and half of that is fixed price.  He went on to talk about that first focus of a marketplace platform, that will allow any size seller to use the channel as an online outlet mall

Their other focus is being “the best in the world at online payments.”  Donahoe claimed that he doesn’t believe e-commerce is mature. It’s about 5% of total retail so he believes it’s in it’s very early days and will grow to about 20%.  He went on to state, that the number one reason people don’t shop online is because they don’t feel safe paying. Donahue expects that we will see a lot of innovation in the payment world in the next 5 years and will be one of the key things that will take ecommerce form 5% to 10%. 

Next month they are having their first PayPal developers platform conference and they are going to be the first payment provider to open the platform to developers … the goal is to open it up for dramatic innovation, in the manner seen recently by the iPhone platform.  One example of innovation he cited was Twitter payment (TwitPay).  You can Tweet money from one person to another.  The only way to get the money out of Twitter is through PayPal.  He felt that his company would not have thought of this, so by providing the robust, scalable infrastructure, this is the type of innovation that they are hoping will be built on top of the platform.

Donahoe also mentioned that the company is focusing on mobile, as it is having ‘a powerful impact on commerce and payments.’  According to Donahoe, 4 million people have downloaded eBay’s iPhone app, and $380 million in sales had been transacted through the app in the first nine months.

When asked during the Q&A about any concerns with the Walmart market place as a competitor, he responded quite carelessly that ‘Walmart has a great reputation of helping their retailers … it’s in their genetics’.

Keynote:  Recession-Rewired:  Moms and Millennials in Consumerism’s Crosshairs

The final keynote of the Shop.org event was Resource Interactive’s Kelly Mooney. Similar to some of the sentiments expressed by Dawn Lepore in her earlier keynote, Kelly Mooney talked about how the recession has changed the shopping habits of consumers, in particular of teens and ‘digital moms’.

Mooney compared current opinions and shopping patterns of teens to those of “digital” moms, and insight into how retailers can compensate to the change in their behavior.

‘Today’s consumers are wearing this new frugality as a badge of honor,” she said.  A McKinsey study revealed that 55% of Americans are cutting back not out of necessity, but by choice.

As an example she noted that coupon sites are the second most visited web sites after job sites, so Mooney advises retailers should use that kind of knowledge to look for opportunities to help their consumers.

As a final piece of advice to retailers hoping survive the recession, “If you fail, fail quickly, learn, test, and launch … being agile is going to be the key.”, Mooney said.

You can also check out her blog, as she mentioned in one post that she was going to post a link to her presentation after the conference.

And the rest of the show …

It was hard to beat such informative and thought provoking keynote presentations, but I have to say the sessions for this summit were just as good. A couple of themes seemed to pop up again and again, mobile and social commerce.  In general I found it went something like this … a few retailers have already entered into one or both of these spaces in some capacity, and the remaining retailers were anxious to hear the stories of these innovators, as they want to get in the game as well.  During one packed session on Mobile, an informal poll of the audience revealed that most if not all retailers, had plans to do so in the next 1-2 years.  Still you can see that most are being cautious and looking for the best approach and an understanding of the real value or ROI. 

Ted Hong, Chief Marketing Officer, Fandango advised in one session, ‘be focused and practical … nvest in utilities have a staying power.’  He cited a statistic from Greystripe’s Consumer Insights Report released earlier this year, that the average iPhone app is accessed just 19.9 times over it’s lifecycle before it is discarded.

I thought about this, along with John Donahue’s speech on how opening up their PayPal platform will drive innovation.  There is such an overwhelming adoption by consumers that it is just too compelling for a retailer to ignore these spaces.  Even if we’re not sold right now on the retail value or ROI, we are surely going to see a lot more innovation in the near future, that will really step up the value of these channels in the retail space.

Notable Quotes:

“The best retailers view their stores as a show” – Susan Lyne

‘E-commerce is still the shining star … the growth channel in retail … also it’s the channel that has the most dramatic game changing industry out there’, Rich Last, Chairman of Shop.org and VP at JC Penney.

‘Do it successfully, do it big’, Terry Lundgren, CEO, Macy’s, Inc.

“If you get 10 bad reviews on a product, well then guess what?  The product is bad, get rid of it.”, Terry Lundgren, CEO, Macy’s, Inc.

‘E-commerce is the bright side of retail’ , Sucharita Mulpuru, Vice President, Principal Analyst, Forrester Research

‘To arrive alive at the end of this downturn is the best way to grow in the long run’, Sucharita Mulpuru, Vice President, Principal Analyst, Forrester Research

‘Promos gone wild’ – shoppers who are researching, coupon hunting, and combining promos to get significant discounts on products, Dawn Lepore, CEO and Chairman of the Board, drugstore.com

“If you fail, fail quickly, learn, test, and launch … being agile is going to be the key.”, Kelly Mooney, President and CEO, Resource Interactive.

‘If you build it they may not come – make sure you have a reason for being in mobile’,  Ted Hong, Chief Marketing Officer, Fandango

Finally, here’s a link to a Facebook food for thought video with some really interesting stats played between keynote sessions on the first day. 

All in all, a great show!