Case Study: Online Golf Brand

Click on the image to enlarge.

Online business models are very enjoyable to manage. Executives have a veritable plethora of metrics available to measure the effectiveness of their business, in stark comparison to catalog or retail executives.

That being said, online business executives often have less experience managing business models "across time". In other words, online business growth can be forecast over multiple years, so that the online executive can understand the long-term impact of today's business decisions. This is an area where catalog/retail executives traditionally have more experience.

This week, we'll take a look at an online-only business model that sells Golf Clubs, Golf Accessories, and Golf Apparel. This business is five years old, and management is not pleased with the sales growth of the Accessories division. Last year, sales of Golf Clubs totaled $8.6 million. Sales of Golf Accessories were $4.8 million. Sales of Golf Apparel were $9.9 million.

A new Accessories merchant was hired. Management hopes to grow Accessories through an improved merchandise assortment.

Anytime a change in management occurs, it is wise to conduct a Multichannel Forensics analysis, to understand how customers are behaving. The image at the start of this article illustrates the "Migration Probability Table", a grid of numbers that help the business leader understand how customers migrate between merchandise divisions.
Notice some of the interesting findings:

• On average, 48.6% of last year's purchasers will buy again this year. This puts the online golf brand in "Hybrid Mode", meaning that the business grows through a mix of customer retention and customer acquisition activities.
• Golf Clubs have a 39.6% repurchase rate. Being in "Acquisition Mode", Golf Club sales grow by finding a constant supply of new Gulf Club purchasers. This means that Golf Club buyers don't buy new clubs every year. The 71.8% repurchase index for Golf Accessories means Golf Club buyers are likely to "transfer" their allegiance from Clubs to Accessories in the year after buying Clubs.
• Golf Accessories have a 37.9% repurchase rate (Acquisition Mode), and the repurchase index metrics suggest Accessories buyers are in "Equilibrium" with Clubs and Apparel. In other words, Accessories buyers will purchase just about any merchandise in the year after buying Accessories.
• Golf Apparel has 47.3% repurchase rate (Hybrid Mode). These buyers are unlikely to buy Golf Clubs next year, but are willing to buy Accessories.

These findings are interesting. Accessories have a low repurchase rate, so the hiring of a new merchant could make a difference. However, Club and Apparel buyers are willing to purchase Accessories. All customers have the propensity to purchase Accessories. The question will become, "How do you grow Accessories if all customers are already willing to purchase Accessories?"

We'll explore growth opportunities this week.

What Is Wrong With E-Commerce?

We are more than a decade into the e-commerce experiment, and it feels to me like we've completely stagnated. Something is amiss with e-commerce.

Take a look at several leading websites:

• Electronics: Best Buy, Circuit City, Buy.com
• Apparel: J. Crew, Talbots, Coldwater Creek
• Home/Office: Staples, Office Depot, Office Max
• Housewares: Williams Sonoma, Restoration Hardware, Crate and Barrel
• Food: Omaha Steaks, Safeway.com, iGourmet.com

Within each category, I see similar presentation styles, similar merchandise, similar prices, similar promotions.

There is a human element of e-commerce that, to me, is simply missing. Retail merchandising is all about being human. People exhibit artistry and creativity in presenting and selling merchandise in a retail setting. People serve customers, solve problems, help select merchandise, help make the consumer feel good about her purchase. Humans fail, and we love to talk about all of the failures. But humans succeed far more often than not.

The catalog channel, to a lesser extent, has elements of human interaction. The catalog can be merchandised in a way that communicates a story to the customer. Imagery and copywriting communicates a story that engages the customer. The customer picks up the phone, and calls a person working in a call center. The human interaction between the person working in a call center is an important part of the historical success of cataloging.

I feel like the online channel is missing warmth, missing a certain element of humanity. All of the websites mentioned earlier do a nice job of presenting merchandise on their homepage. But in all cases, you are dealing with a machine. A machine (one usually programmed by humans) determines what recommendations it has for you. Navigation of the website is largely done in a drill-down manner, one built in the style of databases developed by information technology experts. You can use search and various hyperlinks to jump around a website. But for the most part, you are drilling down, then backing up to a landing page, then drilling down again.

This is not the human method of shopping used by customers in stores, or the random thumbing through pages of a catalog. It isn't natural. This drill-down and back-up style of navigation causes the merchant to not be able to tell a compelling story. Catalogers use copy to create emotion and inspire purchasing. The online merchant cannot do this, because the online merchant simply cannot know where every customer is going to navigate at any given time.

In the past two or three years, the pace of e-commerce innovation has slowed. E-Commerce continues to grow, in large part because customers are migrating from the catalog channel to the online channel, and because of the increase in access to broadband internet access. Once the transition from catalog to online wraps-up, and once the majority of consumers have broadband access, something will need to change in the online shopping experience.

I don't believe our industry's zealous focus on multichannel integration is the answer. Somehow, we marketers need to humanize the online experience. We need to move away from the "information technology" based design of websites, and somehow allow our customers to have meaningful experiences when visiting our sites. Until this happens, we simply compete on the basis of lowest price and best promotional tactics.