Blog

, by Cédric Fontaine

Challenges of e-commerce for small business owners

Money is still not the deciding factor for the success of an e-commerce project in Quebec today.  A good idea, stand-out products and a little will power can get you even further. To start up a project, there are many reasonably-priced solutions available, such as PrestaShop or Magento for open-source solutions or Shopify for a hosted solution.

Compared to projects costing hundreds of thousands of dollars that major players develop, a small e-business will have to invest more of its percentage of sales down the line. So, if you are a small business owner like me, and you want to make it in online retail, you need to figure things out and find some good resources.

Since it is impossible to know everything and online selling requires a combination of several web skills, start by creating a network of resources around your project—such as search engine optimization, graphic design, development and marketing—or hire a  web agency. Sites such as Agent Solo or Elance can help you quickly find freelancers and consultants for many different projects.

Hard to get economies of scale

With small volumes, it is difficult to negotiate the main costs of e-commerce. If you sell tangible products, your largest expense would most likely be shipping. The VentureOne Program from Canada Post provides member discounts on express shipping and you can not negotiate a better rate until you reach 750 shipments per year. In many sectors, small volume means having to pay basic fees or minimum monthly billing fees.

For an independent online business owner, the day-to-day challenge is to increase sales volumes so as to negotiate better costs for expenses that cannot be cut. To do so, you need to stand out and think outside the box. The advantage of being an independent business is that you can stand out and react swiftly. You need to disseminate your offer and products using the web and seek out low-cost solutions.

There are at least two options that are seldom exploited by small business owners: price comparison websites and affiliation.

In mature markets—which is not yet the case in Canada—a simple e-commerce site is no longer enough for online selling. Pending the arrival of semantic commerce, consumers are now turning towards price comparison sites to search for products. Distributing your catalogue—though not the entire content!—through these types of tools is indispensible to obtain real visibility and attract visitors to your site.  Google understood it well and integrates its shopping offer, particularly in the U.S. and France (not yet available in Canada but coming soon!), to its search results. There are a few price comparison sites in Canada. Canada Post has one and checkout is usually done through one click—just like an ad on Google, for example.

An affiliation model can be a bit more complex. The principle of an affiliation is to pay a commission, a percentage of sales made by a business facilitator. Imagine a website that places a banner on its site pointing to your website or even a specific product. You would only pay a commission when the sale is actually made. The concept is interesting but requires the affiliate to trust your website.

There are a variety of external sales tracking solutions. Unfortunately, you usually have to have volumes in the hundreds of thousands of dollars per month range for Google Affiliate Network or Commission Junction, for example. Independent businesses thus have to use free source code solutions or modules such as iDevAffiliate for their stores. In some cases, larger advertisers may require their own tracking code on your website. Even if the affiliation does not bring much more in sales, it is still an excellent way to get better search engine optimization and many more inbound links.

The challenges will be greater for new independent players in the coming years, since Canada is gearing towards a more professional market. This has already been the case in countries such as the U.S. and France for a number of years now. The price of entry will become higher and technical knowledge will be indispensible for success. A good idea alone will not be enough—you will also need a very good grasp of e-commerce!

If you want to learn more or be kept posted, I encourage you to read my list of useful resources (in French only) or join the group of Quebec online merchants on LinkedIn.

, by Marc Poulin

Mobile and E-Commerce Strategy

The use of smart phones and other mobile devices is increasing rapidly. In view of this general trend, what mobile strategy should you focus on for your e-commerce site? Would it be worth it for you to develop an iPhone app? Would a mobile site be better? Should all your products and services be available on a mobile device or just a few? These are some of the questions we will try to answer here.

A few definitions

To make this document easier to understand, here are definitions for some commonly used terms.

Mobile application: A program that must be downloaded onto a mobile device before it can be used. iPhone apps are the best-known examples, but the number of apps available for other platforms is growing fast.

Mobile Internet user: A person who navigates the web using a mobile device.

Mobile site: A website designed specifically for use on mobile devices. The mobile site usually offers a portion of the content and functions available on the regular site.

Mobile solution: This generic term includes all mobile apps and sites.

The mobility context

Before deciding what mobile strategy to adopt, it would be useful to understand that a mobile user is in a different context than a user who is sitting in front of a desktop computer with a 23-inch monitor. The mobile user’s objectives, needs and motivation are also very different. For example, a mobile Internet user is not going to buy a sofa or computer from his or her smart phone. A mobile Internet user’s transactions are often made in response to an immediate need while on-the-go.

Should you have a mobile strategy?

You should ask yourself the following questions to determine whether or not a mobile strategy would be worthwhile for you:

1. In which circumstances would a mobile Internet user make use of your mobile solution? What would it mostly be used for?

2. How many mobile users would use your solution? Google Analytics can enable you to determine the number of visits to your website made from a mobile device.

3. Would having a mobile solution provide you with a competitive advantage? Would not having one be a disadvantage?

4. Would revenue from mobile users be additional income or would you have made this revenue anyway?

5. Would your mobile solution generate more profits than expenses?

Mobile app or mobile site?

Once you have evaluated whether you should offer a mobile solution, you will need to determine the type of solution. You can choose between a mobile website or a mobile app. If you are leaning towards a mobile app, you will have to decide which platforms to develop for (Apple iOS, Google Android, Microsoft Windows Mobile, etc.).

The advantage of a mobile website is that it can be accessed by all mobile phone platforms and can be easily upgraded. However, certain functions offered by mobile devices—such as GPS and camera functions—cannot be used by mobile websites.

The advantage of a mobile application is that it is built for a specific platform which enables tight integration (functions and interface) with the mobile device. However, development costs could make support for certain platforms prohibitive.

Mobility challenges

Developing a good mobile solution is not easy and several challenges must be met at the design stage. Here are some important elements to take into consideration.

• Mobile devices have very small screens. The amount of information that can be shown on a single screen is limited; this can impede comprehension.

• Bandwidth is still limited. Even though mobile devices have high theoretical speeds, variations in signal quality will reduce actual bandwidth.

• Mobiles devices lack physical keyboards thus text entry is difficult for most users.

• Mobile devices do not come with a mouse. Contrary to regular websites, hovering the cursor over an item to get more information is not an option.

• Platforms and screen sizes are numerous and varied.

• Rapid development of mobile platforms means that user interface elements are not yet standardized. A large number of icons are used to save space; many of them will not be understood by users.

Tips for designing your mobile e-commerce solution

• Put yourself in the shoes of an on-the-go mobile user. Is your mobile solution really useful for someone who is on-the-go? People do not purchase TV sets like they do 99-cent music tracks. Ideally, a mobile solution should provide instant gratification or resolve an immediate problem.

• Stick to the basics. Not all regular website functions or information are necessary or useful in a mobile context. For mobile, less is more.

• If you choose to develop a mobile app rather than a mobile site, make sure it will encourage repeated use. Users are less likely to download an app they will use only once.

• Store user information securely so they do not have to enter it every time they make a transaction. Imagine your customer struggling to enter a credit card number on a virtual keyboard. Amazon‘s 1-Click function is an effective way around this problem.

• Make sure that links, buttons and other controls can be easily pressed with a fingertip. Make it easy for your mobile customers to correct typos.

• Remember that it is easy to scroll items vertically on a mobile screen but virtually impossible to do so horizontally.

• Test the design of your mobile solution. This is important for websites and even more so for mobile sites or apps. Thorough pre-development user testing is essential.

Further tips and information can be found at the following links:

• EBay CEO says mobile sales will reach $4 billion by year-end (April 2011);
• The secret of Amazon’s $1 billion sales over mobile (July 2010);
• Mobile commerce Wikipedia entry.

Conclusion

Despite what certain “experts” say, having a mobile solution is not mandatory. Your answers to the questions in the “Should you have a mobile strategy?” section will help you shed some light on this issue.  If you choose to offer a mobile solution, you will have to decide which type. Like any other financial decision, your choice will be guided by a cost/benefit analysis for each of the various options.

And remember, make your mobile solution truly useful!

, by Nicola Navratil

How to optimize your SEM

In order to assess the impact of various web tactics on your online sales, we have seen in my previous article that web analytics must be the focus of your interactive marketing strategy. My next postings will deal with these principal interactive marketing tactics and break down the most important strategic elements of each one in order to maximize your online sales.

One of the web tactics most often used to boost online sales is search engine marketing, also known as SEM.

What is SEM?

For interactive marketing newbies, SEM provides visibility on the first Google search result page when someone searches using a strategic keyword for your brand. For example, if you own a spa or hotel, the keyword “spa package” may prove strategic for you. SEM uses a previously created advertising, thus allowing you to get a position in the top search results.

SEM operates on a cost-per-click (CPC) basis. This means that you only pay for click-throughs (visits) that you get. In respect to web banners on content sites, you are often charged a cost per thousand (CPM) impressions. The cost of a click varies depending on keywords; it may be as low as $0.08 or over $20 for extremely competitive markets.

Important factors for SEM

In order to maximize your online sales and minimize your acquisition costs, three essential elements must be taken into consideration: your SEM campaigns, your destination pages and your payment solution.

Firstly, your SEM campaigns must be solidly built in Google AdWords in order to maximize your cost per click (CPC). Following that, it is crucial that the various destination pages be optimized to maximize the conversion towards the payment solution. Finally, the steps for online payment must be quick and easy. Obviously, you must analyze each of the above elements to get the most out of your SEM campaigns.

SEM campaigns

From the Google AdWords interface, you must first ensure that your SEM campaigns are well optimized to position you in the first profitable results, while incurring the least expense for your clicks. The ranking of your ads is determined by four main factors:

1- The maximum amount ($) that you are ready to pay for a click

2- The Click Through Rate (CTR) for your ad

3- The relevance of your ad based on targeted keywords

4- The destination page of your ad

It is therefore not necessarily the advertiser who pays the most that gets the top rank. The following nine-minute video  produced by Hal Varian, Chief Economist at Google, clearly explains how AdWords works:

Here are a few tips for optimizing your AdWords campaigns.

1- Use a family of keywords (a theme) per group of ads (AdGroup).

2- Avoid, as much as possible, the use of broad match keywords.

3- Select negative keywords.

4- Re-use, in the title of your ads, targeted keywords in your ad groups.

5- Add targeted keywords in your ad group at the end of the displayed URL (the displayed URL does not necessarily need to match a real URL).

6- Optimize destination pages based on keywords targeted in your ad groups.

For your reference, the average CTR for an AdWords campaign is about 2% according to Google. Furthermore, it is important not to limit oneself to the CTR or CPC when it comes time to analyze the performance of your SEM campaigns. These two indicators may in fact be misleading and lead you to make the wrong decisions. Let us take the example below…

No. 1 SEM campaign: CTR 7.05 % and CPC $0.53

No. 2 SEM campaign: CTR 1.03% and CPC $0.95

Considering only these two indicators, campaign no. 1 seems to perform better. However, despite a higher CTR and a lower CPC compared to campaign no. 1, we noticed that campaign no. 2 yielded a better return when we add the Google Analytics data.

No. 1 SEM campaign: CTR 7.05%, CPC $0.53, conversion rate 0.2%, sales $100

No. 2 SEM campaign: CTR 1.03%, CPC $0.95, conversion rate 4.5%, sales $3,500

Destination pages

As mentioned in the previous section, the destination page is one of the factors that affect the quality of your ads. It is therefore directly linked to your cost per click. In addition to its influence on your SEM campaign, the destination page has a direct impact on the conversion rate of your site and thus on your online sales. Here are the principal elements to include to make the destination page optimal.

1- Descriptive title repeating the keywords targeted in your AdWords ad
It is important to recall that before reaching your page, the Internet user may have previously clicked on one of the ads for your SEM campaign for a specific keyword. The user would therefore expect to find information related to the keyword. Since the title is the first element that the Internet user sees when he or she lands on the page, be direct and effective and insert the keywords in question. Just cut to the chase.

2- Useful content

The most important information must be at the beginning of the page. The following is the optimal order for presenting your product pages:

1- Brief description of the product, as well as the targeted clientele

2- Benefits of the product in point form

3- Comparison chart of features/functions of the product

4- Comments/testimonials/assessments in the form of user-generated content

Inserting images of your products and demonstration videos would increase the visual attraction of your product pages as well as their conversion rate.

3- Call to action

It is of utmost importance to prompt action (e.g., Buy Now or Add to Shopping Cart) at several spots of each product page since some Internet users will act as soon as they land on the page while others would want to read all the information on the product before going to the next step. 

In order to highlight the various prompts to actions compared to the rest of the content, several techniques may be used to attract attention: size of buttons, colour of buttons, empty space around buttons, etc.

Steps for finalizing online purchase

When an Internet user browses your product page to make a purchase, he or she must select the chosen items to add them into his or her shopping cart. Once the shopping cart is filled with all the desired items, the Internet user is led to click on a button to make his or her payment. Most often, that is when the Internet user is asked to enter the shipping address (sometimes different from the billing address indicated on the credit card statement). In order to make the payment process quick and simple for the Internet user and to avoid discouraging him or her along the way, make sure your payment solutions allows you to:

- collect only information that is essential to processing the transaction: name of cardholder, credit card number, expiry date, card verification value (CVV2), billing address

- insert a refund and warranty policy (provided by the merchant)

- avoid any superfluous steps that would needlessly draw out the purchasing process

- insert security icons to reassure the consumer

- integrate payment and delivery information, and the refund policy on the payment receipt confirmation

Continuous analysis and optimization

As indicated in my previous article, and at the risk of repeating myself, web analytics must be the focus of your interactive marketing strategy to prioritize and optimize your actions.

As part of an SEM campaign, the most relevant Google Analytics data relate to the performance of keywords purchased. It is possible to know the sales, the number of transactions, the average value of each transaction and the value per visit for each keyword.

 

You can therefore invest more in the keyword families that yield the best results in order to maximize your return on investment.

Conclusion

Anyone can open a Google AdWords account and launch an SEM campaign. This is a tactic that has very few barriers to entry. However, in order for your SEM campaign to generate an actual return on investment, all the elements presented above need to be optimized, based on the data collected using your web analytics solution.

, by Simon Lamarche

New Google Analytics to help your online business

A few months ago Google announced the launch of version 5 of Google Analytics. This release contains many new features that will be useful for online merchants, though the most anticipated feature that was previously unveiled, multi-channel funnels, is still not available for the vast majority of users. 

Before examining the usefulness of multi-channel funnels in greater detail, let’s first look at dashboards and custom reports—two of the new version’s strengths.

Dashboards and custom reports
One of the major weaknesses of the old dashboards was that you couldn’t really customize them for your needs. That made it difficult for online merchants to create a dashboard that would allow them to know for sure what contribution search engine optimization or social media made to their online sales. Version 5 not only lets you rapidly obtain this kind of information, but you can also create different dashboards in which it is easy to navigate by tab. This feature is very useful when you want to dig more deeply into difficult-to-analyze data. The four types of widgets (metric, pie chart, timeline and table) are also easy and intuitive to customize.

As an example, the image below represents a dashboard specific to the purchase of keywords (CPC).

Multi-channel funnels
Multi-channel funnels finally fix (at least in part) a problem for many marketers who couldn’t attribute the right source to the conversion data. The current version of Google Analytics only uses the last source to attribute conversions. For example:

An Internet user searches on Google for the word “bicycle.” She clicks on a merchant’s AdWords advertisement and visits the site but doesn’t purchase anything. The same Internet user visits the site again the next day by searching for the merchant’s name on Bing, clicks on the organic results and makes a purchase. 

Currently, Google Analytics doesn’t consider the contribution of the AdWords advertisement, which is unfortunate because it is the source that initiated the sale. The new multi-channel funnels feature allows you to consider all sources and analyze them in terms of their contribution: first interaction, assist interactions and last interaction.

While waiting for it to show up in your Google Analytics account, you can see what this feature looks like for Google Store.

You can see that there are quite a few Assisted Conversions from the address images.google.com, while it generated very few final sales (Last Interaction Conversions). For merchants not using this new feature, Google may have considered the contribution of images.google.com to be very weak, while the table clearly indicates the opposite. A simple way to assess whether a source is underestimated is to check the ratio in the “Assisted/Last Interaction Conversions” column: the higher the number, the better the source performs early in the purchasing process.

With these new features, Google Analytics gives merchants an analytical Web solution that performs better without having to pay a cent in licence fees. So there’s no reason not to analyze your numbers!

, by Cédric Fontaine

Security and conversion rate

The increase in online sales volume has required international issuers (Visa, MasterCard, American Express, etc.) to offer some protection to prevent fraud.

When there is a card-not-present transaction, the current system basically protects the buyer.

Some protection, such as PCI DSS certification, was developed to ensure the security of banking information and prevent the merchant’s client database, containing all bank card numbers, from getting stolen. Yet all this precaution has not prevented some major breaches. Depending on the transaction volume, there are different levels of security to implement, although it is not mandatory for merchants processing less than $1,000,000 in transactions per year.

The procedure for handling a sales dispute, largely unknown to e-merchants, is relatively simple.

  1. The credit card issuer sends the merchant a document contesting payment.
  2. Since the credit card did not physically go through the seller’s hands, and the buyer did not sign for his or her purchase, the merchant must prove that it delivered the merchandise and that the buyer did indeed receive it (signature upon delivery). Only deliveries to the credit cardholder’s address is allowed; deliveries to an address other than the cardholder’s will not be considered.
  3. If the buyer contests the proof, the merchant may go to arbitration; minimal expenses of $500 are incurred for losing in arbitration.

In all cases, the funds are frozen by the credit card issuer at the start of the procedure. It is up to the seller to clearly show proof of the transaction.

International bank card issuers have therefore developed the 3-D Secure protocol (Verified by Visa and MasterCard SecureCode) to increase online payment security. When making a purchase online, the buyer is redirected to the credit card issuer’s website and must enter a personal password to validate the transaction. This additional protection provides a significant advantage to the seller who would benefit from the liability shift, whereby the risk of outstanding payments is shifted to the bank.

It could be the ideal solution: the buyer is protected by a unique password for its transactions and the seller is protected against most claims. But it’s not so simple…

When an e-commerce site accepts online payments it needs to jump through a series of complicated hoops that varies between ensuring the validity of the payment, while avoiding turning off buyers with excessively stringent security practices.

There are many examples in Europe and in the US where a great number of merchants have seen their sales drop after 3-D Secure was implemented. Some mention a 6% decline while others, such as this seller, estimates that sales have dropped 60%. In the UK, where the program is mandatory, Amazon – a major e-commerce player – still refuses to adopt the system, as it also refuses to do so for its US site.

This program may continue to expand quickly and might even become mandatory. In France, only 11% of bank card payments are completed with 3-D Secure, versus 65% in Belgium, 69% in Germany, 92% in the Netherlands and 95% in the United Kingdom. In Canada, the system is in place but seldom used.

What’s all the criticism about this technology? Two comments are often made: bad communication with buyers who do not understand the technology and an awkward password entry interface. In France, banks have even initialized passwords, without any action from users, with their date of birth. Admittedly this is not the best way to ensure enhanced security.

Finally, after having clearly noted that a certain number of orders were being abandoned at the 3-D Secure password entry stage, I decided to deactivate 3-D Secure on my own online sales site. Some clients have even told me that entering their password online was not reassuring to them. I therefore decided to make life easier for buyers and just live with the risk of outstanding payments. This technology is not fundamentally bad and is likely adapted by certain sectors with a high level of fraud. Until an option that would allow 3-D Secure to be activated upon request, e.g., for a high-value or risky transaction, each merchant should have the choice on whether or not to use 3-D Secure on its online sale site.

, by Simon Rouillier

The Golden Rule for E-commerce Site Search Engine Optimization

US e-commerce site sales posted 14.8% growth in 2010, compared with 1.6% in 2009. Growth forecasts for 2011 call for a 13.7% jump with sales of $188 billion, resuming a trend of slower growth that signals a maturing sales channel (source: Emarketer).

There are good times ahead for e-commerce sites. Unlike the US market, the Canadian market—and the Quebec market in particular—has yet to reach maximum growth, as can be seen from this article. This bodes well for Quebec e-commerce, notably in terms of traffic to the site, whether organic or paid. Here are a few suggestions for optimization and good practices for your e-commerce site.

As an e-commerce site owner, it is in your interest to make sure your site is SEO-friendly. This means optimal indexation of your pages and traffic acquisition through positioning on organic generic and trademark keywords.

The usual prerequisites for website optimization are: page titles, meta descriptions, title and ALT tag attributes, with page-specific keywords, found in the product description and page content. Beyond these, there are some considerations that are specific to e-commerce sites.

First and foremost, you must make sure that there are no obstacles that could hinder search engines when they index your pages and content. This means avoiding JavaScript, particularly for navigation menus and reviews.

Navigation and indexation

Insofar as it generates a breadcrumb trail, which will help with effective product indexing, classification or taxonomy is essential to e-commerce site architecture. Thus, you will need to determine whether visitors are more inclined to search for your products by brand or by category (Nike shoes vs. Running shoes). This needs to be thought about in terms of your search volumes, your inventory and your business objectives.

Creating a footer-accessible HTML sitemap listing the main categories and subcategories is recommended, along with an XML sitemap whose location is specified in robots.txt. You can thus opt for a segmented sitemap that will enable you to monitor the indexation of your site’s various sections.

To optimize your page titles, you can also implement an internal search engine that will enable you to collect valuable data on the search terms entered by your users. At the same time, you will be protected from indexing of generated URLs by specifying disallow in robots.txt for all internal search results parameters. You can also disallow indexing of URLs with more than two parameters.

Content duplication

The biggest sin that e-commerce sites commit is to allow duplicate content, which has the effect of diluting page rankings. Duplicate content implies that there are identical pages with different URLs. Use canonical tags and 301 redirects and monitor the results with Google Webmaster Tools to ensure there is a single URL for each page.

E-commerce sites also suffer from duplicates because of pagination caused by large numbers of items in each category. The pagination URLs are differentiated by a parameter, but their contents are not differentiated from the page without a parameter—i.e., the original URL for the category. A common solution to avoid this pitfall is to use the no index, follow tag for URLs with pagination parameters to prevent Google from amalgamating pages that are different despite the similarity of their content.

The ideal product record

It is optimized for referral, as explained below. It is possible to go even further by adding aggregate microformats: products/reviews to ensure it appears at the top of enriched search listings (rich snippets). This is also an excellent way to obtain a choice placement and optimized product placement in Google Merchant Center. As Google Merchant Center will obtain content from your site via the microformat, you can control your product description. It is up to you to provide as much detailed information as possible!

To ensure proper indexation of your images, without generating a URL for each image, you should add dynamic information to your ALT tags—by using the item name and brand, for example.

Paying careful attention to product descriptions is highly recommended as this impacts not only referrals but also facilitates conversion! A consumer who understands a product is more likely to buy online as he does not have to go to a store to get more information.

Interlinking

Linking pages to each other allows search engines to differentiate between main pages and secondary pages, such as category pages and product pages. You can add product suggestion modules which will help you increase the duration of site visits and the number of page views. These modules may be products in the same category, similar products or other products viewed by users.

By tweaking your interlinks, you can also push certain pages to increase hits with high-volume search terms or tweak a niche product.

A blog can also support your organic traffic by providing long-tail keywords and optimal interlinking, provided that you put your blog in a file on your site http://www.domainname.com/blog, which is preferable to using a sub-domain.

Google Merchant Center

Google Merchant Center was launched in 2009. It allows you to upload your product listings. Items listed in Google Merchant Center show up in universal search results and let you direct organic traffic to your site. You can track and optimize your strategies and performance.

You can set up promotions with or without coding modifications and display local product availability with your results or optimize your Adwords campaigns or create more attractive ads.

As we have seen, to acquire organic traffic for your e-commerce site, a significant part of the work is done on-site, by improving your site pages and your keyword positioning. To support these efforts, you can also launch Adwords campaigns. We will look at this in an upcoming feature.

, by Vallier Lapierre

2 of 2 Daily deal sites: retailers tell their side of the story

When we stop to think about the basic concept behind daily deal sites, they seem almost too good to be true for at least one of the three parties involved: the deal site, the consumer or the retailer, without whom the service couldn’t exist. At the rate these sites are springing up and given the rising value of the two major players in the field, Groupon, worth approximately US$25 billion, and Living Social, worth US$3 billion, we don’t have to worry about the leaders, at least for the moment.

If we take a closer look, however, we begin to realize that coupon buyers occasionally feel shortchanged, in all sorts of circumstances, yet their fate is far preferable to that of the third party involved, the retailers, who are far from being the winners in this game. There’s no need to dig very deep to find experiences that quickly turned to horror stories.

Poised on the edge of the abyss of too much success

 

The biggest mistake a business can make with sites like Groupon is to fail to set a limit on the number of coupons available to buyers (maximum number adjusted to the business’s ability to serve new clients). The case of Jessie Burke, owner of Posies Bakery and Cafe in Portland, Oregon, was the first story to surface. As she describes on her blog, the nightmare ended up costing her $8,000 to refill the shop’s coffers and pay her staff in order to honour the some 1,000 coupons that were sold. Largely blaming herself for this mistake—the second worst in her life, she says—she points out that she was never told to set a limit on the coupons.

Although similar to Burke’s case, I uncovered an even worse debacle that recently came to light in Belgium. Sylvie Pastur, owner of Escale Design, a designer furniture shop that also offers home decor coaching services, was forced to shut down after posting two promotions with Groupon that attracted a total of 1,000 customers. The case made waves on Twitter and Facebook (from which the tale of Ms. Pastur’s fiasco has since disappeared), before being featured in the pages of France’s L’Expansion magazine. Note that the terms of both promotions were agreed to by Ms. Pastur, who had hoped that the increased patronage would generate additional sales. Unfortunately, this never came to pass.

The L’Expansion article gives Groupon the benefit of the doubt. The company defended itself in the case of Posies Cafe in Portland as it did also in the case of Escale Design in Belgium. This last post came from Groupon France, which, along with Groupon Belgium, bore the brunt of the attacks on their reputations. Curiously, however, the article was illustrated with this photo:

Taken by Dan Miller, an American visiting France, this sign just happened to catch his attention as he was strolling through the streets of Lyon after attending a conference. The magazine no doubt picked it up on this site, which is obviously run by an acquaintance of Mr. Miller. This photo contradicts the tone of the article by suggesting that the Escale Design case is not isolated. In fact, on the same day as the L’Expansion article ran, ITespresso.fr reported the story of a retailer in Nantes who is accusing Groupon France of running a scam.

Recurrence rate: between 58% and 97%

It’s unfortunate that the editorial team at L’Expansion didn’t dig any deeper. Especially since the Escale Design case appeared online shortly after France 2 broadcast a 30-minute report on Envoyé Spécial on March 24. The show’s journalists uncovered a businesswoman highly dissatisfied with her experience with group buying. Margaret Usal, owner of a spa in suburban Lille (whose testimonial appears 20 min. 30 sec. into the report), says she called her service provider at noon to stop the counter, at which point 500 coupons had already been sold. Her request was ignored and the total rose to 1,659 coupons sold by the end of the day. The show’s reporter adds that he met with the owners of two massage therapy clinics who complained of a similar experience.

Groupon has admitted that mistakes were made during posting of the promotion and emphasized that measures were taken to rectify the situation. In a bid to hold onto its golden opportunity, Groupon went into full crisis management mode. Groupon has also pointed out on many occasions that 97% of retailers who have used the service were very happy with the results and would repeat the experience.

However, according to a survey conducted in September by Utpal M. Dholakia, professor at the Jones Graduate School of Management at Rice University in Houston, 42% of businesses would not do another daily deal, as opposed to the 3% reported by Groupon. The results were compiled from a sample of 150 businesses (among the 360 who had done a Groupon promotion) who answered the survey.

Two-thirds of the businesses said they made money from the promotion, while a significant 32% said the experience was not profitable, even given the new clients kept after the promotion, albeit minimal. Only 8% of them would be willing to do another deal. Moreover, one in every five businesses that considered the promotion to be profitable would not run such a promotion again; 42% of restaurants deemed the return to be too low, whereas 82% of spas thought the spinoffs were positive.

Concerned restaurant owners

 

Another survey, conducted by the restaurant supply distributor Tundra Specialties, identified discontent among restaurant owners. This survey showed that 41% of restaurant owners feel that Groupon is the single-most detrimental outside factor to their business. “The major damage comes from the fact that restaurants’ participation in these grouped purchase programs whets the appetites of bargain hunters, who jump from deal to deal. I’ve definitely heard more horror stories than success stories,” states Joel Cohen, employment specialist for RestaurantMarketing.com, in the press release reporting the survey results.

Professor Dholakia’s survey identified employee satisfaction with the promotion as the main factor in its success. If the employees are prepared for the ensuing rush of customers, which will require them to work overtime for fewer tips (because coupon buyers are frugal by nature), they are more likely to serve the new customers courteously, thus ensuring they come back in large numbers.

While admitting that his sample is not necessarily representative of all establishments that have done business with Groupon (he was unable to access the full list), Mr. Dholakia notes that the 41.7% response rate indicates that a large proportion of merchants are concerned about the sustainability of social promotions as they currently exist. “We believe these promotions are structured in such a way that they give too much value to consumers and not enough value to the small businesses than run them,” he writes in conclusion.

Groupon of course rejected these conclusions based on the sample being non-representative.

Regardless, warnings against the dangers of this approach have started to crop up everywhere. The harshest critics of the formula boil it down to a matter of marketing principles or reject it outright based on simple calculations. Incidentally, the need to diligently crunch the numbers is emphasized in all cautionary tales.

More contentment than discontentment on the ground, at least on the surface

What about here, where the trend has already been buoyed by over twenty daily deal sites? After interviewing six or seven retailers, both referred by the major service provider or uncovered on my own, I finally came across a dissatisfied merchant. The case of La Grand-Mère Poule chain of restaurants once again illustrates a situation in which too many coupons (1,755) were sold to consumers.

Sébastien Abrieu, owner of the restaurants in question, estimates that he lost about $20,000 on the promotion. “We would have been happy selling 300 coupons. I fell victim to my own success. The coupon sales barely covered the food costs. The coupons were supposed to have been redeemable at only one of our four restaurants, which the consumer had to choose at the time of purchase. Instead, people showed up at whichever restaurant they chose, and made a scene when they were told that their coupon wasn’t valid there. To prevent things from turning ugly, we ended up giving in to them. There should be a limit of two coupons per client; we had some clients who purchased eight,” states Mr. Abrieu, who is not sure if he’ll ever do another deal.

A spokesperson for the service that ran the promotion—who will remain nameless so as not to single out one party when this situation could just as easily have occurred with any one of them—told us that the case of La Grand-Mère Poule resulted from a technical glitch that prevented the display of the maximum number of coupons available. I was also told that the service’s representatives contacted restaurant management to rectify the situation, which must be true otherwise Mr. Abrieu would have been much more upset.

The other retailers I spoke to were all very pleased with their experience. Their situation explains why this type of promotion can be positive in some cases.

Antoine Desson, owner of the new restaurant La Bulle Au Carré on Saint-Denis Street in Montreal, explains, “You shouldn’t think of group buying as a way to make sales, unless you have an enormous profit margin. In our case, it’s a good way to get our name out there. And it’s always better for a new restaurant to be as full as possible in the beginning.”

Since being one of the first to try Tuango (and selling 147 coupons) last June, when this first local group buying service was introduced, Mr. Desson has since tried two other services, I Love Montreal and AubainesEnVille.com, a new player that escaped my radar the last time.

In the latter case, La Bulle Au Carré benefited from the fact that AubainesEnVille.com, which had to fight more aggressively than the major players to carve out its niche, charged a very low commission for a first promotion. This was confirmed by François Claveau, one of the two promoters for AubainesEnVille.com, who says they offer restaurants an appetizing format in which the restaurant owner pays only a 5% commission to AubainesEnVille.com, on the condition that he/she runs a second promotion, this time with a 40% commission on the coupons.

As you can see, the market is redefining itself as it evolves.

Tuango has the upper hand

Marc Bertrand, Revenue Manager for Hôtels Gouverneur, has used group buying on three occasions to increase patronage at Hôtel Le Chantecler in the Laurentians. With no set maximum, these promotions sold 350, 1,150 and 230 coupons, respectively (the Tuango promotion prevailed). He is very happy with the results, stating that these promotions help to fill the hotel during quiet periods. “Even if we sometimes have to add staff to meet demand, we do it to avoid posting a loss. Given that this is essentially free advertising, we’re very satisfied,” he states.

Roberto Ramos, Marketing Director at Maison du jazz, says he also uses the approach as a publicity strategy. When we spoke, he had just run a new promotion on Tuango the previous day that had sold 844 coupons; his first promotion, six months prior, had sold 460 coupons. “We make sure to cover our costs. We’re very satisfied. We want people to come in and see us. They walk by and see a fancy place and think that it must be expensive. We’re trying to change this perception. And it’s working. Many people are coming back,” he explains.

Lorne Rodin, massage therapist, is also satisfied with the customer retention rate. “Many people have come back more than once at full price.”

Having run a total of five promotions, Marco Simard, president of the O2 Spa Beauté at the Four Points franchise by Sheraton Quebec Resort, in a Quebec City suburb, is very satisfied. He explains that he uses the approach to promote the new spa. “Before, we used the local newspaper. You paid for the ad, but you never knew whether it was having any impact. With this type of promotion, not only is it free to try, but you can see how many new clients it’s bringing you.”

But, the best story I came across purely by chance. While chatting with a competitor of Tuango, I learned that Restaurant L’Académie had sold over 10,000 coupons on Tuango. Sensing disaster, and unaware that the St-Denis Street establishment had opened up a half-dozen other restaurants, including one in Quebec City, I contacted management at Restaurant L’Académie.

Instead of meeting someone who was quaking at the prospect of financial ruin, I encountered Lawrence Auger, a marketing director rather happy with the results and proud to report that he repeated the experience with Groupon, but with only 3,000 coupons sold. Added to those of Hôtel Chanteclerc, these results clearly show the edge that Tuango has over Groupon in Quebec. Mr. Auger pointed out that Tuango’s strength is its presence in Quebec City, which Groupon does not have. A portion of the 10,000 plus coupons sold by L’Académie on Tuango came from Quebec City, where the promotion also applied.

Mr. Auger’s satisfaction becomes clearer when he explains himself in more detail. With its “bring your own wine” format, L’Académie banks on volume since it can’t count on alcohol sales to increase its profit margin. Therefore, it needs a steady stream of new customers. Calculated to avoid a loss, the Tuango promotion was distributed over seven restaurants in the space of a year. It was valid for up to 50 additional seatings in most of the outlets on Mondays, Tuesdays and Wednesdays. In some cases, extra staff had to be called in. According to Mr. Auger, penny-pinching coupon holders are not a problem since the Tuango promotion clearly states that tips are calculated on the price of the meal before the rebate.

No two cases are alike in this game, even though the basic issue is always the same. What it does prove is that, in many individual cases, the exercise can be well worth it. However, merchants need to beware of the pitfalls of the approach, because they do exist. The total impact all of these promotions is another story altogether. However, it is worth considering whether buyers’ acceptance of this format will have the same impact on the service sector as Wal-Mart had on the consumer goods sector.

Local services play the proximity card

Local group buying players are cashing in on their superior knowledge of the sector and, as such, their ability to better serve clients. Aware of foreign critics’ comments about their approach, they point out that their proximity to clients helps to shape the sector, which will surely lose momentum if retailers fail to see the benefits of the approach.

Leading the pack since last June, Tuango is the service present in the most cities in Quebec: Montreal, Quebec City, Gatineau, Sherbrooke, Trois-Rivières and Saguenay. Swann Freslon, Marketing Director, reports that Tuango has sold over 160,000 coupons, helping consumers to save $9 million.

“To date, we haven’t had any negative comments from retailers. If necessary, we help them calculate their maximum capacity. It’s of absolutely no benefit to us if they are overwhelmed by the demand,” explains Ms. Freslon.

Tuango’s leader status allows it to choose the most attractive promotions given that businesses have to line up to run their promotions. “We have to turn them away. The product or service has to correspond to what most of our subscribers are looking for and the rebate has to represent a real savings compared to the regular price,” Ms. Freslon says.

Despite every precaution, at least one case slipped through the safety net. “One of the participating restaurants went bankrupt before being able to honour the coupons. We reimbursed everyone who had bought coupons,” states Ms. Freslon.

Tuango has over 300,000 subscribers, most of whom are women between the ages of 25 and 54. This client profile is similar to that of major U.S. services like Groupon and LivingSocial.

Located only in Montreal for the moment and planning to expand shortly to Quebec City and the Laurentians, GoYub was launched last December. The service already has 10,000 subscribers, with 1,000-2,000 new members joining every month.

“It’s going to run out of steam quickly if retailers don’t get on board. Many feel that it’s the website that comes out the winner. We have to remember that the approach is still trying to find its target. There’s flexibility on our part. We’re willing to negotiate,” says Dominique Vachon, cofounder of GoYub, of the commission charged by the service.

Mr. Vachon also pointed out that the spoils are not as vast as one might think for the promoters of group buying. While the technical component is no problem, countless person-hours are needed to operate the vast machine. A large proportion of transactions are difficult to conduct remotely because merchant recruitment requires onsite representation, if only to realistically monitor the number of coupons sold.

Making its appearance last January, the group buying service Vie Urbaine has taken a more connected approach to stand out from the competition. The site was launched gradually (over 50 promotions in just over two months), at a pace sufficient to whet the appetites of active young people open to new experiences.

In mid-March, Jean-Claude Renaud, President of Vie Urbaine, announced that the site already had over 30,000 subscribers. He says that he became addicted to online marketing while managing the corporate site for an Old Montreal clothing boutique. When he saw the group buying phenomenon take off, he recruited silent financial partners (angels) and jumped headlong into the fray.

“I’d be lying if I said the competition didn’t worry me. But, I still believe that this is a great opportunity for us,” he concluded.

, by Vallier Lapierre

1 of 2 Deal-of-the-day sites: consolidation in sight

The meteoric rise in Groupon’s popularity and the spawning of its clones (known as Groupies) have recently led some observers to question this frenzy which brings back memories of the Internet bubble phenomenon back in the late 1990s. For others, the spread of the business model— fostered by the sluggish economy that has spurred bargain-hunters—indicates that spiralling consumer prices will ultimately do more harm than good for retailers. I will be dealing with this topic in a second article.

After taking the United States by storm two years ago, the social commerce market reached us relatively quickly with local deal-of-the-day services popping up as of last June, before Groupon had even added Montreal to its list of 250 cities across the world last December—the coverage has since doubled. Tuango, owned by the Toronto Star and four Quebec entrepreneurs, kicked things off, followed by at least some twenty other deal-of-the-day sites. About half were local players and the remainder were services that were already available in Canada and the United States.

Staggering development

Following the example of Tuango, Promo du jour (French version of Deal of the Day, both owned by Yellow Pages Group) and GoYub are focusing their activities in Quebec as both are also established in Montreal, Quebec City and Gatineau. They will soon be joined by another contender, LaMégaPrise, a bargain site from Transcontinental covering only Quebec City at this time. Vie urbaine and I Love Montreal have chosen to operate in the Montreal market only for the time being.

Many of the approximately 50 Canadian players offer their service in Montreal. Among them are TeamBuy, Dealfind, SwarmJam (owned by Postmedia Group which owns The Gazette), WagJag, PriceDodger, Snaggies, and StealTheDeal. In addition to Groupon, there are also two other US players in Montreal, LivingSocial (in which Amazon recently invested US$150 million) and WebPiggy. US companies will not likely be entering into the fray in large numbers as the market is very tight—almost to the point of saturation.

Sébastien Provencher, an expert in local and social commerce and co-founder of Praized Media, already listed eight deal-of-the-day sites, that were established or about to be established, during a conference last August, two months after the first player, Tuango, came onto the scene. Before jumping into the fray himself in early 2011, Dominique Vachon, GoYub promoter, said the count was up to 22 sites by the end of last year.

This phenomenon is not exclusive to Quebec. Six months ago, Provencher had estimated that there would be around 100 daily deal websites in the United States and 500 websites globally. There are now over 500 sites in the United States and probably around 2,000 if not 3,000 sites globally, if we count the more than 1,200 sites in China alone back in December. There is virtually no place that has escaped this frenzy, Turkey was just as impacted as Australia.

Specialization and secondary market

 

While the more popular sites all pretty much offer deals in the same sectors (restaurants, beauty care, spas and other health care, resorts, dance lessons, yoga lessons, language lessons, etc.), there are now some sites, according to the market snapshot compiled by the New York Times early this month, that target very niche markets such as gay people (Daily Pride), blacks (Black Biz Hookup), Jewish people (Jewpon) and the gluten-intolerant (Gluten Free Deals). In Quebec, CouCoupon falls into that trend and is focused on family leisure activities.

The large number of players has even spun off a secondary market of data brokers who summarize the most enticing deals in a single e-mail, based on the subscriber’s preferences. Yipit pioneered this type of service at the beginning of last year. Its creator, a deal-of-the-day buff, got the idea from seeing a large number of deals piling up in his inbox. He was subsequently followed by a large number of imitators.

With little digging, we can find DealGator and Deal Radar, that have now included Montreal among their listed cities after having done well in the United States. Their results are much better than Yipit which provided only two sources, as at March 23. DailyDealZone, All Daily Deals and OneSpout, three aggregating services started in Ontario, also do a good job covering the Montreal market. The first one aggregates 22 Montreal sources. Group Buying Canada, a data and specialized research service in this budding industry, lists over a dozen deal-of-the-day Canadian aggregators.

These aggregators are funded by negotiating a commission on transactions made by group-buying sites through their referrals. The strategy seems to work since Yipit, which included 422 US services as at March 24 (by adding on average some 20 services per month and dropping a fair number of failures, which amount to almost a quarter of these start-ups), obtained an investment of US$1.3 million to literally ride the wave. If the trend keeps up, we will see soon a good Quebec aggregator pop up and raise the bar for others simply by listing their offers in a French version as well as an English version, which none of the aggregators outside Quebec are doing for their Montreal coverage.

Speculative success may last

The rampant growth of this market can be easily explained. The somewhat weak economic recovery prompts consumers and merchants to test the waters. The first ones on the scene found significant savings, much more than what they were used to with traditional coupons, where you rarely save 50% on the advertised price. Merchants saw them as a good way to reel in new customers without spending anything on marketing. However, they need to manoeuvre adeptly so as not to suffer any losses or minimize losses knowing that in the end they will only earn 25% of the advertised price, as they will need to evenly split their earnings from the sale of discount coupons with the service supplier. This situation is not so simple in most cases and practically impossible in many markets where profit margins are too thin.

Winning over a large number of customers in a short time leverages on how quickly the deals expire, which prompts impulse buying. Some devotees, who are more susceptible than others to network addiction, do not want to miss out on anything and end up making more purchases than they have time to use. It is estimated that between 10% and 20% of coupons remain unused when they expire.

Some shrewd people, more concerned about consumers’ interests than those of merchants, have even gone so far as setting up sites to hold clearance sales on coupons at the nick of time at a fraction of their price. When people know a few days ahead of time that that they will not be able to redeem the coupons, they can find buyers to take advantage of them. CoupRecoup and DealsGoRound fill that purpose in the United States.

Two studies recently assessed the US market with sensible figures based on the fact that Groupon alone would have reaped in, according to the figure most often cited, earnings of US$780 million last year. Recently reported by eMarketer, a study by Bia/Kelsey, a research firm specializing in local online media and advertising, estimated that the market is expected to jump to almost US$4 billion in 2015.

Business Insider had reported back in January a study by Needham and Company that was much more optimistic, with earnings of US$5.8 billion in the United States in 2015 and US$10.3 billion globally. In late 2010, after having learned from a reliable source that Groupon had finally reached sales of US$2 billion last year, with a market share between 60% and 65%, the editor of Business Insider said that these amounts could have easily been underestimated.

Influx of imitators

One thing is certain, the number of services will still continue to rise, before the inevitable consolidation that should happen any day now, which is what Provencher had already predicted last August when the numbers were still far from what the phenomenon has snowballed into. The proliferation of these sites was pushed by the technology used for setting them up. From the outset, it has been very easy for companies with a bit of Internet savvy to replicate it. The barriers to entry are very low. Going into the fray now is within reach of companies with minimal technical skills since very affordable software platforms are now available (some as low as $200) allowing entrepreneurs to easily set up a deal-of-the-day service.

Group Buying Site, Alstrasoft.com, StartAGroupBuy, Couponic and Group Commerce all have their deal-of-the-day website solution. The last company counts the New York Times among its clients. They are all wooing newspapers and printed city guides that know the potential clientele well as they are losing these customers from traditional advertising.

The scene has become rich and complex enough to justify the launch of specialized conferences: Daily Deal Summit which will soon be held in New York City and DailyDealMedia, an information site covering the new market, has chosen Chicago, the birthplace of Groupon, to hold its first conference in September.

Clash of the titans

Will Groupon continue to easily dominate the global market? The game is far from over. Its foray into Quebec did not have the hoped for results, as opposed to how things developed in most Canadian cities. The cultural barrier, partly to blame for this failure, could play also elsewhere. The company was so overzealous to dominate as many markets as possible before they got too crowded with imitators, that it cut corners by buying poorly recommended local players in Brazil and Chile.

Andrew Mason, the young founder of Groupon, had to apologize to the Japanese after the company provided rotten service as part of an offer to deliver a traditional New Year’s meal. According to some people, his mea culpa only made things worse by making the company appear insensitive to the feelings of the Japanese who place great importance on the holiday that should have been highlighted by this special meal. Groupon’s Super Bowl commercials already raised ire in the United States for trying to take commercial advantage of the Tibetan cause, and risk having a much more negative impact in China where its competitors won’t miss out on the chance to highlight this blunder to their clients. This is on top of the confusion that seems to have reigned over the company’s initial entry into the Chinese market.

Ultimately, the biggest threat could come from Amazon (which sold 1.4 million discount coupons on LivingSocial after having invested in the company), Google, Microsoft and especially Facebook. The deals from Google Offers are almost as greatly anticipated as a new Apple product. Google has just provided a first taste in Austin during the South by Southwest Interactive (SXSWi) conference. In partnership with aggregator The Dealmap, Bing, Microsoft’s search engine, will shower smartphone users with offers in proximity to their current location.

Facebook has a few tricks up its sleeves to break Groupon’s stronghold. Tests of its deal service, Deals, have just begun in five US cities. Facebook states that it will not charge businesses any commission for these tests, without specifying whether it plans to charge commission in the future or the nature of its commission scheme. One thing is for certain, it has little to risk to jump from a 0% to 50% market share since it is an open secret that merchants, taking advantage of this fierce battle among the deal services, have started to systematically negotiate the commission they would pay their customer provider.

, by Marc Poulin

E-Business and In-Store Pickup

The Achille’s heel of e-business has always been ‘the delivery.’  Customers don’t like paying a delivery fee and they want to start enjoying their new purchase right away. That’s why they go to online shopping sites that provide the option of in-store pickup. Large American chains including Toysrus, Sears, Walmart, Borders, Lowes and others believe that this feature gives them a competitive edge.

Added value for customers

The in-store pickup option is very interesting to online shoppers for a number of reasons:

  • It reduces the delivery time and costs.
  • It gives customers a chance to view the purchased goods at the store.
  • Customers can reserve an item in advance of purchase.
  • It allows merchants to increase the available products offering. (Long tail).

Site-to-store delivery is usually free and eliminates customers’ reticence towards delivery charges, especially for inexpensive items. It can also reduce delivery time when the product is already in stock at the store.  Finally, it eliminates the cat-and-mouse chase of the delivered goods when there is no one home to collect the package.

Ordering products online is already a sensitive issue, especially for items such as clothing or footwear. Unless you are purchasing an item that is identical to one you have already purchased in the past, you can never be sure of the size, color or texture simply by viewing the item on-screen. It is easy to change the product in-store or even to cancel the order (Simons department store for example has an excellent return policy www.simons.ca), and this represents an additional incentive for the buyer.

If the in-store stock of a certain item is low, the online purchase allows buyers to reserve it and  pick it up soon after. The same principle applies when new products aren’t yet available. The online purchase before availability in-store is another way of reserving the purchase (think of the iPad2).

Some products or product variations (colour, format, etc.) don’t have the sales volume needed to justify stocking them in-store.  Their online availability increases the product line offered by the organization, thereby making it more attractive to customers.

Multi-channel integration

In many organizations, the online e-business site is seen as a competitor to the store network.  Unfortunately, it’s the customers that end up with the short end of the stick in this case, usually because of return policies that refuse to accept returns at the store.  In the long run, it’s the organization that loses out.  The integration of the store network and the online shopping site is, in fact, mutually beneficial.  Otherwise, why would Jean Coutu and IGA offer low price photo print with free site-to-store delivery? The in-store pick up makes people to go the store and possibly shop some more.

On-line search and in-store purchase

This varies according to the type of product, but the more expensive the item the more extensive the online research. The term for this is ROPO (Research Online Purchase Offline). It is therefore befitting for the store chain to have a web site that presents the products carried well. The virtual and physical network are allies therefore and not competitors.

Conclusion

In closing, the more interesting the site, the better the site-to-store delivery option serves as a second chance to sell store items. Everyone comes out a winner: customer, store and online shopping site.

, by Nicola Navratil

Maximize your sales using web analytics

You have just installed an online payment solution on your website. Congratulations! You can now take advantage of the huge potential of the web to grow your business. However, your work is far from over. A transaction site without a data analysis system is like a plane without an instrument panel.

The online payment solution allows you to complete online transactions in real time. Thanks to the solution, you will know the number and amount of sales generated by your website.

However, by not integrating a web analytics solution such as Google Analytics (free) or Omniture (paid), you do not have any information about where your visitors came from, the most viewed products and the breadcrumb trail that led to the online purchase.
Without this invaluable information, it would be very difficult for you to find ways to increase your sales as you will not be able to identify the strengths and weaknesses of your website. Not to mention that you can not even seize marketing opportunities that present themselves to you elsewhere on the web.

Implementing a performance measurement system with the web analytics solution of your choice is indispensible for maximizing your online sales. Read on if you need more convincing! 

Define key performance indicators (KPI)

From the outset, you need to identify what you would like to have measured. In the case of an online shopping website, there is no need to search very far to find the relevant key performance indicators (KPIs) since the ultimate objective is… sales! Consequently, KPIs would mainly concern the conversion of visits into sales. Here are a few examples.

Visits to sales conversion rate
The conversion rate represents the percentage of visitors who have accessed your site and made a purchase online. Obviously, this is in excellent indicator as it is directly linked to the increase in sales for your business. For information purposes, the average conversion rate of transaction sites is 2%. 

However, in Quebec there is a significant lag in terms of e-commerce and many web users are still reluctant about making purchases online, often due to security concerns. Consequently, such reluctant shoppers usually end up completing their purchases over the phone or at the store after browsing online. Don’t get discouraged if your site has not reached the 2% conversion rate in the beginning. It is recommended that you not measure the conversions solely based on online sales, but also measure what are called microconversions:

-clicks on “Contact us” links
-clicks on “Print this product page” links
-request for additional information forms
-etc.

Churn rate
Conversely, to increase your conversion rate, you would need to reduce the churn rate. You will be surprised to learn the number of people who start the process for an online purchase but never end up finalizing it. In order to be able to make the right adjustments, it is important to understand at which steps of the purchasing process your visitors drop out.

Average shopping cart value
The fact that your conversion rate is rising compared to the previous year does not necessarily mean a growth in revenue for your business; this rate may in fact be misleading. For example, the conversion rate could increase by 10% while the average shopping cart value drops by 40%. Conversely, the conversion rate could dip down 20% but the average shopping cart value may go up 30%.

Let the analysis begin!

Once the performance indicators have been defined, it would then be possible to integrate them into your web analytics solution, whether it be in the form of objectives or personalized reports to track progression (I won’t go into the technical details).

It is now time to start analyzing data and discover real insights that will allow you to take concrete actions to maximize your online sales. Here are some elements to consider in your analysis.

Traffic sources
With web data you now know where visits to your website originate. You can therefore cross-reference your traffic sources with your performance indicators and see which sources generate the most conversions. It will be easier for you to evaluate the performance of your marketing actions or to identify attractive business opportunities.

 

Push traffic source analysis farther.

 

Search engines
When it comes to search engines, you have two tactics: search engine optimization (SEO) and search engine marketing (SEM). In order to maximize sales, one interesting strategy to use for an online purchase site is to launch a search engine marketing campaign and to analyze the highest-return key words. Once you have identified the key words that generate the most conversions, you can use search engine optimization on your website based on the same key words.

Referring sites
Thanks to your web data, you can also easily evaluate the performance—or rather non-performance—of the various media placement sites on which you maintain your banner campaigns.

In addition to this type of placement which you already know about, the analysis of referring sites via your web analytics solutions can help you discover sites/blogs which you did not know existed but which direct traffic to your site, thus generating sales. Based on this information, you may be tempted to maximize your visibility on these sites by setting up a new partnership.

Geographic summary
Each web analytics solution lets you know where your visitors originate geographically (city, country, and continent). For example, you may discover that visits originating from France have a better conversion rate than visits originating locally and it may be worth your while to further develop this new market.

Conversion funnels
To cut down on your churn rate, the analysis of conversion funnels is key as it helps you identify steps with problems. However, this analysis does not provide you with any real clue as to the reason for web user dropout.


In order to understand the reasons for which visitors drop out at these steps, you can collect qualitative data via a survey on your website when the user quits a session. Several free survey solutions are available on the market. I use 4Q myself. The idea is simple; you need to ask four questions:

-What was the purpose of your visit?
-Were you able to complete your task?
-If not, why?
-How satisfied are you with our site?

Conclusion

The purpose of this intro to web analytics article was to make you aware of the benefits that such a measurement system could generate for your e-commerce site. One of the web’s greatest advantages is the ability to calculate the return on investment for each of your online marketing actions. So why forego this advantage? In my upcoming articles I will cover various interactive marketing strategies illustrated with concrete examples that I hope will enable you to improve your online sales.