Beyond the Hype: E-commerce technology must solve retailer pains

Online retail is an industry in nearly constant flux, and 2011 will be a year of disruption. The rise of group-buying sites like Groupon and LivingSocial, flash-sales merchants Gilt Group and Jetsetter and location-based services like shopkick easily attest to that.

From dynamic personalization to location-based tie-ins to mobile and social integration, technology providers are racing to compete for retailers’ budgets, and there is no shortage of “this is the marketers’ Holy Grail” talk. E-commerce providers such as Endeca boast lofty announcements like “mobile is the long-awaited link to total customer insight.” Perhaps, but some B2B providers might be missing part of the picture.

A telling discussion

Last week, Boston’s high-tech community converged in the high-rise offices of CSN Stores for a MITX summit on “Technology and the Retail Transformation: Mobile, Social, and e-Commerce.” The panel discussion featured the CEOs of three e-commerce solutions companies (Clovr Media, AisleBuyer and BuyWithMe) and two online retail titans (Dustin Humphreys, the General Manager of CVS.com and Mike Dreese, co-founder of pop culture giant Newbury Comics).

The solutions providers talked about the convergence of mobile applications and social shopping, boasting that new developments were reinventing commerce and generating new business for retailers and throwing around phrases like “shopping experience optimization” and “generating buyer loyalty.” There was a perceptible rift between the speakers, however. The retailers on the panel cautioned that outside of the vendor hype, many next-generation e-commerce technologies can pose a “treacherous” risk to merchants.

Dreese gave two examples of new online retail technologies backfiring on retailers:

  1. A consumer sees an ad for 40% off a handheld digital video camera at BestBuy.com. While the coupon is online only, they take it into the store and demand a discount — and they get it. “What does that tell you?” Dreese asked the audience. “It tells you that next year there are going to be two or three fewer Best Buy stores, but there will be a bigger Best Buy logistics warehouse.”
  2. The small-business owner of a local massage parlor in Boston participated in a Groupon promotion, expecting to sell several hundred massages. She sold 1700 — a massive percentage of her yearly inventory — crippling her business.

Both Dreese and Humphreys provided additional examples: poorly thought out partial payment details, gift card policies that show how far ahead technology is of the law and the practical difficulties of training retail staff on new technologies. My colleague Amanda Fraga presented an informal case study of a retail app in action a few weeks ago. It’s one thing for vendors to tell retailers that new technologies will help them generate business — it’s another to actually train five hundred store clerks on a new tool and process weeks before Christmas in the middle of a crowded store.

Consumer pain solved, but retailers are suffering

The problem is that current e-commerce technology like group-buying sites and location-based services are solving consumer pain, not retailer pain, said Dreese. Surely that’s a good thing, right? A happy consumer buys more, and buys more often. Right. But retailers need to be healthy as well. “The consumer gets kind of what they expect for kind of free,” added Dreese, “but really what you’re doing is crushing your margins as a merchant.”

It was striking to see these B2B providers so clueless about their own customers’ concerns. What exactly is the disconnect? Are e-commerce solutions vendors too caught up in the “shiny new thing” sexiness of their own technology to truly understand the problems they are solving?

For B2B companies, product must begin with the customer.

Customer Centricity Begins with Understanding

To solve your clients’ problems, you must truly understand their reality. The MITX discussion demonstrated that in many cases, solutions providers just don’t listen to their clients — and even resist feedback.

But it doesn’t have to be that way. When Network Solutions set out to understand their customers’ reality, they created two online communities — one public and one private — building a strong relationship with a key target segment by listening to their needs. Their private community generated key insights to drive their business forward, and their public community soon boasted over 7,000 members (65% of them representing new potential business for the company), a vast library of user-generated content and a sounding board for new products and services.

Embrace Co-Creation

Giving your customers a voice in shaping the policies, products and services you offer can ensure that your company’s tools can move the needle in a big way for your clients. To truly embrace B2B co-creation, participate in structured ideation, help uncover unmet needs, enhance your existing product or service offerings and help develop new ones. Communispace calls the elite customer/co-creators who will help you along your way Creative Problem-Solvers.

Best practices designed by customers will always be better informed than those created in a vacuum.

As Humphreys made clear toward the end of the panel discussion, a diligent customer focus would mean massive success for solutions providers. Newbury Comics and CVS are both hugely successful companies — and both on opposite sides of the spectrum. “If they can solve both of our problems,” said Humphreys, “they’ve pretty much solved everybody’s.”