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The Honolulu Advertiser
Posted on: Friday, November 3, 2006

Shoppers get 'up-sell' come-on to buy online

By Ylan Q. Mui
Washington Post

When clothing retailer Gap Inc. embarked on a plan to create an online shoe store a year ago, it turned to its Web customers for advice.

Here were shoppers who had no qualms about buying Gap khakis or Old Navy fleeces online, so shoes were no problem, either. But in e-mail surveys and focus groups, they told the retailer that they disliked paying for shipping and thought the process was uninspired. They would be willing to shop Gap for shoes, but their loyalties lay with other brands.

Two weeks ago, Gap quietly launched Piperlime, following those suggestions. The elegantly designed site offers fashion advice from celebrity stylist Rachel Zoe and year-round free shipping and returns. There are more than 100 brands of shoes, including Roxy, Rockport, Naturalizer and Charles David.

"That is a classic example of taking advantage of your existing customer base and trying to up-sell them," said Sucharita Mulpuru, an analyst at the technology consulting firm Forrester Research Inc.

The development of Piperlime underscores a subtle shift in Internet retailing. For years, the explosive growth in online sales was driven by scores of buyers shopping on the Web for the first time. With the number of new online shoppers leveling off, retailers are left looking for ways to ensure that their existing customers spend more and have been luring them with new merchandise, free shipping and special discounts.

Online sales growth has slowed significantly in recent years, though still outstripping that of traditional retail stores. In 2002, online retail sales, excluding travel, were up 43.8 percent, to $53.5 billion, according to trade group Shop.org. This year, online sales are predicted to increase 21.5 percent, compared with 2005, to $138 billion.

Still, targeting existing online shoppers can be lucrative for retailers. A report this month by Forrester Research showed about 10 percent of online shoppers had spent $500 or more during the past three months. These heavy Web shoppers have an average household income of $91,296, Forrester said.

Getting them to spend more on the Web is important, but Erika Serow, a partner at management consulting firm Bain & Co., said online retailers also need to focus on convenience, easy navigation and checkout, and providing detailed information about merchandise. By contrast, new shoppers are most concerned that their transactions are secure.

"You don't need to fancy up the Web experience," Serow said. "You just need to make sure it is as consistent and pleasant as the in-store experience."

That was the goal of Wal-Mart Stores Inc. when it unveiled its revamped Web site this week featuring simplified design and pop-up boxes with product details. A link to items with price reductions has been pushed discreetly to a column on the left side of the page to make way for rotating photos of the latest fall bedding, baby furniture and the newest high-definition television.

Internet retailing is still far from reaching maturity. Shop.org estimates that online sales will make up only 5.5 percent of total retail sales this year. Mulpuru, the Forrester analyst, estimates that the market share of online retailers could rise as high as 15 percent. After that, she said she expects the booming e-tailing industry to plateau.

"At the end of the day, most people still want things immediately, or they want to touch and feel an item. Online is never going to solve that problem," she said.