During the heady days of the Internet in the 90s, e-commerce platforms featuring shopping carts were all the rage. But when the dot-com bubble burst, sales of e-commerce technology flagged. The market no longer could support the plethora of vendors that were out there, and even the survivors did little to enhance their platforms for several years thereafter.
These days, however, the big retailers are giving e-commerce a second look with an eye toward replacing aging technologies. "What we are really looking at is a complete do-over," said AMR Research senior retail analyst Rob Garf.
Surveying the Landscape
"Instead of just looking to bolt on another tool," he said, many retailers are searching for ways "to drive the new multichannel environment, whether over the Web, on a handheld device, or at an in-store kiosk." Businesses might turn to an existing vendor for a newer application, he said, "but because it is a full-on new system implementation, retailers at the very least are looking to understand the entire landscape."
The basics of any retail site begin with content management -- how to add and manage product information and images to make the product an attractive choice for customers. Close behind is order management, the component that enables customers to place orders and redeem promotions.
But retailers are looking for sophistication beyond any platform's baseline capabilities, Garf said. "There are other higher-value applications that are becoming more important to the overall platform. One of these is the search function."
Did You Find What You Need?
Just as consumers want to find products as quickly as possible within the walls of a brick-and-mortar store, they want to find them online even more quickly. "And that's where the more advanced search functions come in handy," Garf said.
"Web analytics is another piece, so that retailers can get a better understanding of how consumers are shopping [on] their Web sites," Garf said. "This is really helping the retailer to improve functionality based on what the consumer really wants."
In addition, search-engine optimization is increasingly important because so many consumers use online searches to find products, Garf said. Due to escalating online competition, he said, "retailers need to be prominently displayed in search engine results."
The final essential piece of new technology that the big retailers require involves self-service. "It allows consumers to track their product orders throughout the entire supply chain, to do things like check the status of an order, or even access a live person for a chat session during which consumers can ask questions of the retailer in real time," Garf said.
Minding the Store
"In just the last couple of years we've seen re-interest in investing in the technology because the Internet has long since proven itself to be a viable sales channel," observed Tamara Mendelsohn, consumer markets analyst at Forrester Research. "It's giving companies the opportunity to influence their consumers and to build brand loyalty, and that's spurred investment."
These days, big retailers are less likely to build their own e-commerce platforms from scratch, Mendelsohn noted. "To build that on your own is to put yourself at a disadvantage."
Many off-the-shelf e-commerce platforms now have the core applications required for handling inventory -- making modifications to product descriptions either individually or across multiple Web pages, and in multiple languages, Mendelsohn said. "The packaged functionality of platforms today is very strong," she said, which is why "most start with packaged applications and build features on top of that."
The Endless Aisle
"Retailers are also seeking to broaden their product assortment in the store, while recognizing that there's limited shelf space available to display and store products," Garf noted. "So they are using online technology to create an endless aisle.
"For example, Staples will carry an HP printer in white, but it may also come in five colors, and with three or more variations in styles," he added. Physical store shelf space might be limited, "but by placing a kiosk in the printer department," Garf said, "[retailers] can help their customers locate whatever different choices they may have available."
The big retailers also are using the Web to establish themselves as experts in their respective fields, Mendelsohn said. "Home Depot is no longer just a place to buy floor tiles, but rather a place where you go when you are planning tile projects. They have all this prepurchase content online, which enables their customers to feel more confident about the purchases they are making.
"Then there are things like virtual models," Mendelsohn added. "While these are pretty basic right now, they still give you a good idea of how the products really look in a 360-degree perspective."
Reinventing the Kiosk
Another valuable component to e-commerce is customer service. Big retailers are exploring in-store kiosks as a way to meet the expectations that their newly informed online customers bring into the store.
"When the customer enters the store with more complex questions, the retailer must be ready to fulfill those online expectations, so there's a new pressure," Mendelsohn said. "The sales rep can do research with the consumer at the kiosk, or use a handheld device" to access additional content while out on the floor, she said.
"If a customer walks into the store and needs a new printer cartridge, the consumer oftentimes can't remember which printer they have," noted Garf. "But a kiosk can store their purchase history, and the customer can look it up at the kiosk to see what exactly they need."
In a macro sense, e-commerce technology is heading into full integration with other sales channels so that retailers can have a comprehensive view of the customer, no matter how they shop.
"There's going to be more real-time integration, which is as much of a process issue as it is a technology issue," Garf said. "Store managers also will be spending more time educating their personnel about the many policies and procedures in play for the different channels so that the retail workers understand them."
One Fly in the Ointment
However, increased consumer concerns over fraud and online identity theft potentially could derail future e-commerce growth unless something is done to turn perceptions around. A recent survey from Consumer Reports Webwatch claimed that as many as 25 percent of consumers might avoid online shopping altogether. Another 30 percent of the respondents said that they were reducing the amount of time they spend online.
Heightened anxiety over identity theft is a huge concern, Mendelsohn said. A recent study by Forrester Research reported that 62 percent of consumers no longer are willing to give out their personal and financial information over the Internet. For women over 55, that figure rises to 72 percent.
The good news is that U.S. banking institutions soon will be deploying new two-factor authentication technologies that should greatly enhance the security of online financial transactions; the same technology is expected to spill over into the e-commerce world as well.
Security's Next Big Step
Two-factor authentication replaces the use of static passwords, which can be hacked easily. The new measure combines something the consumer knows with something that the consumer physically possesses, said Diversinet Corp. chief security officer Stuart Vaeth.
"We supply a security token that directly runs on the PC as a plug-in to a browser," Vaeth said. This software-based token is "basically an authenticator that can generate the unique one-time password that would be used as a second factor in authenticating a network," said Vaeth, who is also the cochairman of the Open Authentication organization's technology work group. Because the passwords are never repeated, hackers are unable to steal them for fraudulent reuse.
One downside is that Diversinet's two-factor authentication technology costs between $10 and $20 per user to deploy in PCs, laptops, and wireless PDAs. On the other hand, big credit card companies and retailers might eventually see the merit in giving away the technology, analysts said, not only to boost consumer confidence but also as a way to reduce the money now being lost due to fraudulent online transactions.
"For the crooks, however, this is what they do for a living, and so they are always thinking of the next big scheme for making an end run around" the security processes in place, Graf said. "While there will always be some new scam, the continuing challenge is to be able to identify that scam real quickly."
But he added that online purchases have continued to grow at double-digit figures and will continue to do so. Bad press and analysts' reports of gloom and doom are not necessarily going to scare them away, he said.