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Advancing Digital Commerce Capabilities to Drive Financial Value Perspective and Benchmarking Framework
Leading Research Klaus Hölbling
Florian Gröne
Fabian Seelbach
Birger Maekelburger
Digital commerce is the single most dynamic retail channel with new game-changing trends unfolding in fast intervals
1
Digital Commerce Trends
2006 2012 2010 2008
Multi-
Channel
Mobile
Commerce
Digital Commerce
Trends
Process and Platform
Implications
Social
Media
2014
Cloud
Commerce
Social
Commerce
Full integration of
online platform
and backend
across all
channels
Need to shift from
make to buy
Integration w ith
ow n cloud
platform or
collaboration
w ith third party
cloud providers
Individual offers
based on personal
cloud (e.g., music)
Both from home
and in shops (e.g.,
record store)
Integration of all
channels (online,
phone, bricks-and-
mortar)
Inclusion of steps:
explore, shop,
service
Individual offers
based on social
profile
Integration of shop
frontend into
Social media
(Tw itter, YouTube,
Facebook) for bi-
directional
communication
w ith customers
Dedicated social
media team
Introduction of
special Facebook
offers
Functionality for
scanning social
media content
Templates to cater
to small screen
needs
Applications
development and
integration w ith
platform
Second spring of
m-commerce
through rise of
smartphones
Both via mobile
sites and
apps
Linking product
and service
offerings w ith likes
and interests
Development of
“light” shops for
w ebsite integration
$ $ $$$
Source: Booz & Company
Booz & Company
Recent developments include customer interaction through social media, mobile commerce, and social commerce
Did You Know: Digital Commerce?
197 218 240 259 279
2011 2012 2013 2014 2015
56% of Facebook users are female
1 in 4 U.S. online shoppers has posted
product reviews online
4 billion: the number of people owning a mobile
phone worldwide
U.S. e-commerce Sales (in US$billion)
3.5 billion: the number of people owning a toothbrush
worldwide
90%
67%
Trust recommendations from people they know
Spend more online after recommendations
P&G sold 1,000 diapers in 1 hour
on Facebook
GAP achieved US$11 million revenue in 1 day with Groupon
US$30 billion
The expected social commerce revenue in
the United States by 2015
24%
88% 12%
Prefer smartphone
apps
Prefer mobile websites
U.K. smartphone owners use it to compare prices
Source: Booz & Company
2 Booz & Company
GAP
GROUPON
PAMPERS
A company’s online presence remains at the heart of these developments and requires continuous improvement and overhaul
Digital Commerce Trends of Digital Commerce Leaders
Marketplace within Facebook:
fully functional e-commerce
platform
Offers coupons to customers who
become “fans” of the service,
thereby promoting it to friends
… by following customers wherever they go
… by venturing into the “social parallel universe”
Smartphone apps to browse and shop the full
range from the mobile
Functional online shop in Facebook to send real flowers to virtual friends
Transparency through price
comparison with barcode
scanner
Focus on most important
information in mobile app
Power users and “verified
buyers” create credibil ity
Assessing products by
several dimensions,
pros/cons, and best uses
…by improving the big-screen experience
Customer ratings and reviews to provide
trusted shopping guidance
Source: Booz & Company
3 Booz & Company
Website features are the visible dimension
of digital commerce capabilities
These features represent the tools and systems dimensions of a capability and
are relevant for the attractiveness of websites to consumers
To be able to offer these features,
companies also need to build up the necessary skills, create the required
organizational structure, and introduce the underlying processes
We tested digital commerce functionalities in extensive market research to identify those with the highest relevance to customers
Website Features and Digital Commerce Functionalities
Shopping Cart
65%
Recognition
Product Comparison
57%
58%
57%
54%
My Account
58%
54%
Offers & Promotions
46%
Cross & Up-Selling 45%
Support 45%
Consistency 40%
Payment Options 36%
Order Mgmt & Delivery 36%
Check-Out
Shopping Experience
54%
50%
Advisor
Ratings & Reviews
Search & Filter
Top Digital Commerce Functionalities1)
1) Proprietary Booz & Company Market Research (survey question: Please rank the following based on how important they are to you in an e-commerce website.)
Source: Booz & Company
4 Booz & Company
KPIs and Functionalities
A set of established digital commerce KPIs helps to quantitatively assess performance and improvement economics
KPI Description KPI-Improving Functionalities (Examples)
Unique Visitors
Average Cart Size
Conversion Rate
Average Dwell Time
Number of different users visiting the website
Average time a visitor spends on the website
Number of sales per number of site visits
Average amount spent per order
Ratings & Review s, Product
Comparison, Offers & Promotions
Ratings & Review s, Product
Comparison, Advisor
Ratings & Review s, Cross & Up-
Selling, Offers & Promotions
Cross & Up-Selling, Payment
Options, Check-Out
Monthly Return Visitors
Ratio between total visits and unique visits
Shopping Experience, Offers &
Promotions, Order Mgmt & Delivery
Source: Booz & Company
5 Booz & Company
All depicted KPIs have high economic relevance for online
retailers …
… while conversion rate is by far
the most sought after
However, conversion rate does
not tell the fully story and thus needs to be combined with other KPIs – example: – Relevant content may reduce
conversion, as visitors gather information rather than buy.
– Relevant content may however increase visits and average cart
size, counteracting the reduction in conversion rate
KPIs vary significantly from category to category—this implies significant potential to transfer best practices across industries
EXAMPLES
Conversion Rate
Average Dwell Time
Distribution of Average Dwell Time2) in minutes
min
20 18 16 14 12 10 8 6 4 2
17 7
%
16 15 14 13 12 11 10 9 8 6 5 4 3 2 1 0
Distribution of Conversion Rate1) in percent Conversion ranks from merely 0.3% to
almost 20%, some reach up to 30%
Conversion can improve by involving customers, having an engaging showroom, and providing an optimized
order process
Small increases can have huge impacts on the bottom line
Average dwell time differs from some seconds to up to 20 minutes
Rich multimedia content, customer participation, a broad portfolio, and configurable products keep (potential)
customers on the website
Users staying longer are more likely to convert and spend more on average
1) Values for Conversion Rate: Dell: 1%, Amazon: 4%, Vistaprint: 6,5%, Staples: 10%, 1-800 flowers: 17%
2) Values for Average Dwell Time: Levi’s: 1 min, Apple: 5 min, Staples: 7,5 min, Amazon: 10 min, QVC: 14 min, jewelry televis ion: 20,5 min
Source: Top 500 Guide, Econsultancy, Booz & Company Analysis
6 Booz & Company
DELL AMAZON VISTAPRINT STAPLES 1-800
FLOWERS
LEVIS APPLE STAPLES AMAZON QVC JTV
Digital commerce functionalities significantly improve individual KPIs and thereby are important drivers of financial value
Booz & Company 7
Unique Visitors
Average Cart Size
Conversion Rate
Monthly Return Visitors
No Ef f ect Positiv e Ef f ect Negativ e Ef f ect
We have in-depth research on the
relationship between digital commerce functionalities (e.g., user-friendly
product display, recognition and personalization, express checkout)
and typical KPIs (e.g., unique visitors, conversion rate)
The results indicate substantial
financial upside potential through implementing digital commerce
functionalities, as indicated by the increased unique visitor and return
visitor numbers, higher average cart size, and improved conversion rates
Due to inspiration seekers, platforms with user-friendly product displays (e.g.,
360° spin, zoom) have lower conversion rates (-7%) than the overall average.
However, this is compensated by higher unique (+29%) and return visitors
(+6%) who spend more time on the online platform (+7%).
Data: The study is based on data gathered from the Top 500 Guide, entailing records for the Top 500 and Second 500 leading North American online retailers
Source: Top 500 Guide, Booz & Company Analysis
Functionalities, KPIs, and Financial Value STUDY EXTRACT
Express
Check-Out
+31%
+14%
-8%
+55%
Recognition &
Personalization
+19%
+9%
+7%
User-Friendly
Product Display
-7%
+29%
+6%
+7% Average Dwell Time
We bring a tried and tested toolkit to baseline digital commerce capabilities
Booz & Company 8
Modules are structured into three clusters
– Purchase Funnel: These are modules that drive a particular element of the frontend experience for the customer during the purchase process
– Design: These are key decisions that need to be designed into the platform upfront, as they have significant requirements on foundational elements and impact most if not all elements in the purchase funnel
– Foundation: These are critical enablers that need to be available to support the purchase funnel and design elements
Capability assessment modules were
designed with a view toward their ability to be managed as stand-alone projects
in a sequential platform upgrade
Marketing Channels
& Shop Link
Account
Management
Showroom Offers & Promos
Order
Post-Order
Management
User Engagement
Support
Data
Management CMS
Workflow &
Processes
Analytics &
Testing
User Tools
& APIs
Multi-Channel Segmentation
& Targeting
User Interface
& Navigation SEO
4
5
1a
1b
1c
2a
2b
2c
3a
3b
4a 4b 4c 4d
5a 5b 5c 5d 5e
Digital Commerce Capability Assessment Modules
Interact & Get Support
Shop, Buy, Receive & Use Explore
2 3 1
Pu
rch
ase
Fu
nnel
De
sig
n
Fo
un
da
tio
n
Source: Booz & Company
The framework breaks down 5 top-level groups into 17 modules with 191 specifications for a rich and well-grounded assessment
Booz & Company 9
Showroom
1a
Explore Shop, Buy,
Receive & Use
Account
Management
1b
Marketing
Channels &
Shop Link
1c
Offers &
Promos
2a
Order
2b
Post-Order
Management
2c
User
Engagement
3a
Interact & Get
Support Design
Support
3b User
Inter-
face &
Navi-
gation
4a
Segmen-
tation &
Targeting
4b
Multi-
Channel
4c
SEO
4e
Data
Manage-
ment
Foundation
Analytics
& Testing
5b
CMS User Tools &
APIs
Work-
flow &
Pro-
cesses
5c 5d 5e
1 2 3 4 5
Digital Commerce Capability Assessment—Details
Groups
Dimen-
sions
Speci-
fica-
tions
Modules
Comparison
Content & M ultimedia
Ratings & Reviews Advisor
Algori thm
Fi l ter
Error Correc tion
Res ul ts Dis play ed
Rec om m end-ation
Produc t Finder
Dis p lay & In terac tion
Com peti tors Com paris on
Com parable Produc ts
Com parable Features
Data Qual i ty
Dy nam ic Offers & Prom os
M ul tim edia / In terac tiv e
Tutoria ls
Us er C&M Contribution
Prom otional Videos
YouTube In tegration
Qual i ty Content
Ratable Produc ts
Rating Logic
Pres entation
Rev iews Subm is s ion
Ex perienc e Cov erage
Rev iewer Ty pes
Adv is or Func tional i ty
Us er Ques tions
Rec om m en-dations
Ex pert Rev iews
Soc ia l Sharing
Search & Filter
Single v s . M ul tip le
Regis tra tion Proc es s
Us er ID & Pas s word
Pers is tenc e
Regis tration Confi rm ation
Authentica-tion
Serv ic es
Nav igation & Struc ture
Integrated Searc h &
Fi l ter
M yAccount Shop Link
Link ing
Landing Page
Cus tom er in form ation
M arketing Channels
Channel Pres enc e
In tegrated Ex perienc e
Spec ia l / L im i ted Offers
Offers & Promos
Noti fic ation
Pers onal ized Offers
Bundle Dis c ounts
Driv er
Col laborative Fi l tering
Sugges tion Relev anc e
Sugges tion Loc ation
Eas e of Nav igation
"Top Rated" Sugges tions
Proac tiv e/ Reac tiv e
Agent Qual i fic ation
Feedbac k
Cross & Up-Selling
Com plex i ty
Nav igation
Standard-iz ation
Order View
Cros s & Up-s el l ing
Check-Out
Vis ib i l i ty
Pers is tenc e
M ul tip le Produc ts
Shopping Cart
Configuration Paths
Degree of Cus tom -iz ation
Support
Produc t Prev iew
Sav ing & Sharing
Product Configura-
tion
Click to Call/Chat
Dis c ounts
Chec k Out Dis play
M ultip le Addres s es
Shipping Options
Chec k -out Ups el l ing
Cros s & Up- Sel l ing
Integrated Com paris on
Noti fic ation
Order Options
M anagement
Shipping Options
M anagement
Entry Points
Order & Delivery
M anagemen
t
Configuration
M aintenance & Repai r
Cros s & Up-Sel l ing
Life Cycle M anagemen
t
Warranties
Returns
Warranty & Returns
Blogs & Forum s
Us er Generated
Content
Forums/ Blogs/UGC
Fac ebook eStore
Soc ia l Network Pages
Share Blogs/ Forum Posts
Social Sharing
Financ ia l Adv antages
Partners h ip Program
Loyalty Program
Share Rev iews
Share Produc t
Configuration
Referra l & Sharing
Prem ium Serv ic es
M em bers ’ Area
Subs c rip tion
Genera l /Per Produc t
In tegrated Searc h
Sel f Learning
Support
Support Phone
Tic k et
L iv e Chat
Brows er Optim iz ation
Cons is tency
Nav igation
User Interface & Navigation
Segm ent Defin i tion
and
Granulari ty
Struc ture Driv ers
Hom e Page
Segmenta-tion
Targeted Offers
M ic ro Porta ls / Sec tion
M es s ages
Pers onal -iz ation Engine
Pre-defined Po in ts
Dy nam ic rea l -tim e
page
generation
Targeting
Channel Pres enc e
In tegrated End-to-end Ex perienc e
Enabled Channel
Swi tc h ing
M ulti-Channel
Channel Sy nc hroniza-
tion
SEO
Off-Si te SEO
On-Si te SEO
Key word Optim iz ation
Searc h Eng ine
Optim iz ation
Cros s -Func tional Analy tic s
Ded ic a ted Team
Data M anage-
ment
Cus tom er Data
M anagement
Produc t In form ation M anagement
Interfaces to bac k end
in form ation
s y s tem s (Del l )
M ulti -Channel
& M ethod
Cov erage
Autom ation
Us er Ac c ess
Feedbac k Loop
Analytics
Optim iz ation Tes ting
Us er Tes ting
Autom ation
Testing
Real -Tim e
Sy s tem ic Optim iz ation
Dy nam ic Page
Generation
Cus tom iz a -tion
Global
Sy s tem Integration
M ulti -Channel
Content M anage-
ment
Work flow & Interfac e
Sel f-Optim iz ing
User Tools
Sim pl ici ty & Pok a-Yok e
Com m onal i ty &
Cus tom izatio
n
Standardized APIs
APIs
Com m onal i ty
M odulari ty
Doc um enta-tion
Workflow & Processes
Organiz ation Struc ture
Dec is ion Authori ty
Proc es s Sim pl ici ty &
Reac tion
Speed
Sales & Tec hnology Work flows
In tegration
Sav ing & Sharing
Ratings Sum m ary
Web M apping
Integration
Other Content &
M ultim edia
Produc t Cho ic e
Us age Lim i tation
Tes t Setup
Product Test
Vis ib i l i ty
Gi ft Options
L ink to M y Ac c ount
M ethods
Spl i t Options
Onl ine Subs c ription
Bi l l ing
L ink to M y Ac c ount
Dis c ounts & Coupons
Payment
Final Pric e Dis play
Currenc y Conv erter
Sav ing Options
Us efu lnes s
Produc t In tegration
Com m uni ty Integration
Cros s & Up- Sel l ing
Loy al ty
Gamification
App Features
App Ins ta l lation / Configuratio
n
Dev ic e Com patibi l i ty
M obile Apps
Pric ing M odel
Trac k Pas t Orders
Im prov ement Sugges tions
Config-to -prom is e
Cam paign Too ls
As k the Com m uni ty
On-s i te Support
Sharing In form ation
Sy nc hron-iz ation /
Interac tion
Languages
5a
Source: Booz & Company
For an initial evaluation of a player’s digital commerce capabilities, we assess the 12 modules that are accessible outside-in …
Marketing Channels
& Shop Link
Showroom Offers & Promos
Order
Post-Order
Management
Support
Segmentation
& Targeting
User Interface
& Navigation SEO
4
1a
1c
2a
2b
2c
3b
4a 4b 4d
Interact & Get Support
Shop, Buy, Receive & Use
Explore
2 3 1
Pu
rch
ase
Fu
nnel
De
sig
n
User Engagement
3a
Results of Outside-In Evaluation—Summary View
Account
Management
1b
Multi-Channel
4c
Dimension Specification Evaluation
Authentication Single vs. Multiple
Persistence
Registration Process
User ID & Passw ord
Registration Confirmation
MyAccount Services
Navigation & Structure
Integrated Search & Filter
Visibility
Evaluation Dimensions and Specifications
“Account Management”
Note: “Foundation” cannot be assessed outside-in
Source: Booz & Company
10 Booz & Company
Best-in-Class Marginal Performer Minimal Capability Qualified Participant
… and provide a sense of a player’s competitive position through comparison with our benchmarking database for these 12 modules
Client (Score: 38.9) Client offers good multi-channel experience but lags behind regarding showroom and navigation.
Competitor 1 (Score: 40.0) Competitor 1 presents good offers and promotions but lags behind in some other dimensions.
Competitor 2 (Score: 39.4) With intuitive user interface and navigation, website still provides potential in other dimensions.
Competitor 3 (Score: 48.0) Competitor 3 provides a well-rounded shopping experience to customers.
Competitor Benchmarking—Top-Level Summary CLIENT EXAMPLE
DIMENSION DRILL-DOWNS AVAILABLE
2
3
1
75
50
4
Note: “Foundation” cannot be assessed outside-in
Source: Booz & Company
11 Booz & Company
In addition to benchmark scores, rich qualitative assessments versus best-in-class examples help derive actionable conclusions
Digital Commerce Capability Assessment—Qualitative Benchmarking
Source: Booz & Company
12 Booz & Company
Define functional and
non-functional future
requirements
Conduct high-level
baseline of digital
commerce processes
and organizational
structure
Conduct high-level
baseline of technology
platform
Derive gaps and
define activities to
close gaps
Develop functional capabilities to support digital
commerce strategy and required target state
Develop digital commerce target processes and
organizational structure to close identif ied gaps
Develop business and technical specif ications for a
future-proof target technology platform
Define roadmap to achieve target platform (e.g., make
or buy decisions, vendor assessment)
Baseline existing
digital commerce
strategy (e.g., channel
mix and integration)
Benchmark against
digital commerce
leaders
Develop digital
commerce target
strategy
Conduct in-depth
evaluation of
purchase funnel
modules
Conduct w orkshops
w ith key experts for
design and foundation
modules
Compare against
digital commerce
leaders and evaluate
f it w ith digital
commerce target
strategy
Ultimately, e-commerce initiatives should deliver a fact-driven target-state design, covering technology and operating model
Core Elements of Digital Commerce Projects
Capabilities Strategy
Technology Platform
Skills, Processes, and Organization
Target-State Development Gap Analysis Initial Audit I II III
Acti
vit
ies
Requirements
Baseline key KPIs (f inancial, quality, experience)
Formulate hypotheses on improvement levers
Validate lever logic and develop business case
Define performance management framew ork,
governance
Define priority KPIs
Set ambition level
KPI/ Performance Baseline Ambition Setting Business Case and KPI Steering Model
Scope and redesign commercial proposition, including
digital product and service portfolio, pricing strategy,
and digital channel experience
Align digital versus other channel roadmaps
Commercial Proposition
Source: Booz & Company
13 Booz & Company
14
Contact Information
Vienna Klaus Hölbling Partner +43-1-518-22-907 [email protected]
New York Florian Gröne Principal +1-212-551-6458 [email protected] New York Fabian Seelbach Principal +1-617-959-2480 [email protected] Berlin Birger Maekelburger Senior Associate +49-30-88705-856 [email protected]
14 Booz & Company
15
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senior agenda of the world’s leading institutions. Our founder, Edwin Booz, launched the profession
when he established the first management consulting firm in Chicago in 1914. Today, we operate globally
with more than 3,000 people in 58 offices around the world.
We believe passionately that essential advantage lies
within and that a few differentiating capabilities drive any organization’s identity and success. We
work with our clients to discover and build those capabilities that give them the right to win their
chosen markets.
We are a firm of practical strategists known for our functional expertise, industry foresight, and “sleeves-
rolled-up” approach to working with our clients. To learn more about Booz & Company or to access
its thought leadership, visit booz.com. Our award-winning management magazine, strategy+business,
is available at strategy-business. com.
©2012 Booz & Company Inc.
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