gild & nordstrom ecommerce mobile integration analysis

MKT41010

DIGITAL BUSINESS MODEL AND ECOMMERCE

MSc Digital Marketing Course Tutor: Graham Merriman

INDIVIDUAL ASSESSMENT

BALZARINI Matteo

ID 14200328

Dublin, Ireland December 10th 2014

2 Matteo Balzarini -‐ ID 14200328 -‐ MKT41010

TABLE OF CONTENTS EXECUTIVE SUMMARY ................................................................................................................... 3 COMPANIES OVERVIEW ................................................................................................................. 4 GILT ...................................................................................................................................................................... 4 NORDSTROM ....................................................................................................................................................... 4

MOBILE INTEGRATION .................................................................................................................. 5 KEY PROCESSES AND TOOLS ASSOCIATED ..................................................................................................... 5

GILT ...................................................................................................................................................... 5 COMPETITIVE ADVANTAGE THROUGH MOBILE ............................................................................................ 6 GROWTH AND PROFITABILITY THROUGH MOBILE ....................................................................................... 7 MOBILE ONBOARDING OVERVIEW .................................................................................................................. 7 RESOURCES, COSTS REQUIRED AND CHALLENGES ..................................................................................... 10 OPPORTUNITIES FOR DEVELOPMENT .......................................................................................................... 10 STRATEGIC MOVES MADE AND POSSIBLE .................................................................................................... 11

NORDSTROM .................................................................................................................................. 12 COMPETITIVE ADVANTAGE THROUGH MOBILE .......................................................................................... 12 GROWTH AND PROFITABILITY THROUGH MOBILE ..................................................................................... 12 MOBILE ONBOARDING OVERVIEW ................................................................................................................ 12 RESOURCES, COSTS REQUIRED AND CHALLENGES ..................................................................................... 17 OPPORTUNITIES FOR DEVELOPMENT .......................................................................................................... 17 STRATEGIC MOVES MADE AND POSSIBLE .................................................................................................... 17

REFERENCES ................................................................................................................................... 19

Matteo Balzarini -‐ ID 14200328 -‐ MKT41010 3

EXECUTIVE SUMMARY The following document proposes a detailed and comprehensive analysis of a fundamental eCommerce operation, mobile integration, which was selected for its critical role in today’s commercial environment. Mobile integration constitutes another strategic operation too often undervalued in practice by retailers, even though more and more advocated in the industry. Mobile is now an integral part of consumers’ life (48% of all U.S. consumers owns a smartphone and nearly 58% of them use it to purchase products online) and as the recent research form Deloitte suggests, once consumers start using it for shopping, they generally continue using it a lot. In this scenario, the proposed analysis tries to layout critical elements of the operation and does so by describing and comparing current strategies adopted by the different retailers in the same sector of clothing/footware retailers. The study evaluates the ecommerce strategy for mobile integration, of three big retailers in the sector: Gilt and Nordstrom. The analysis will focus on specific elements of the aforementioned operations:

• Key processes and tools associated with each operation • How competitive advantage can be reached • How growth and profitability are reached • Examples of strategy deployment • Resources needed, costs associated and deployment challenges • Opportunities and overall operational strategy potential • Possible strategic moves


COMPANIES OVERVIEW

Gilt Gilt is an ecommerce website which gives access to top fashion and interior design labels. Recently the company extended its operations offering curated activities suggestions for its members, in selected cities. Gilt is part of Gilt Groupe, the company, located in New York and founded in 2007 by 4 partners, has received a total of $236 million in 6 rounds from 11 investors. In 2011, Gilt acquired first Decorati (a platform providing interior design products and services) and later on BuyWithMe (a website where local merchant could offer limited-‐time offers to their community members) , in order to expand its user base and gain strategic know-‐how to be implemented on its operations.

Nordstrom Nordstrom is an online retailer specialized in fashion apparel, shoes, cosmetics and accessories for men, women and children. Nordstrom, Inc. has a long history, being first founded in 1901, is now based in Seattle and can counts on more than 10 thousand employees and over 187 stores all over the world. The bran offers a selection of owned and private label products, selling it through various channels (flagship stores, off-‐price stores, clearance stores and boutiques and online). The company also offers members-‐only VISA credit cards through its loyalty program. In 2012-‐2013 Nordstrom invested in Bonobos, an ecommerce driven clothing brand, in order to expand its strategic online efforts.


MOBILE INTEGRATION

Key processes and tools associated Mobile is becoming more and more a crucial aspect of today’s communication and economy. Many retail categories are already deeply influenced by mobile shopping adoption. For the purpose of this study, following the Deloitte Digital research, the Clothing/Footware retail category in 2012 has seen a 38% of adoption by smartphone users for shopping initiatives, with a frequency of use of more than 50%, a current mobile influence which is of about 6% and a projected influence for 2016 which will range between 21 and 24%. Mobile is changing the way users buy online and offline and the target smartphone owners who buy through mobile tend to be between 25-‐34 years old, with a mobile shopping rate which gets close to 70%. The important factor to keep in mind is that once a consumer starts using her smartphone for shopping initiatives, she keeps using it more than 50% of the times she wants to buy something online. Another interesting aspect to keep into account is the higher probability for mobile consumer to convert in store: smartphone shoppers are 14% more likely than non-‐smartphone shoppers to convert in store.

Gilt

The company recently decided to become a “mobile first” retailer. In early May of this year the founder Jason John presented his plan at the Mcommerce Summit in New York City and explained that more than 40% of Gilt revenue is now made through mobile (both smartphone and tablets) and that these numbers are growing every month.


In addition to this, Gilt’s mobile customers tend to purchase way more frequently than its desktop-‐only users. The company’s app is currently available both on the App Store and the Google Play store. Additionally, the app is also available in the iPad-‐optimized format. Gilt’s marketing effort are currently focused on bringing as many customers as possible on mobile; email and on-‐site advertisement propose multiple times o download Gilt’s app and start browsing through its product on mobile. The company soon realized that it was not enough to just load its products on a mobile friendly site, since consumers expect the app to be fast, reliable, user friendly and fun. This last aspect is particularly important when it comes to compete with other retailers on the new mobile environment. Gamification can play a critical role in making the user build a habit for the app and frequently come back to add new discover new products and save her wish list

Competitive advantage through mobile The founders’ strategy, consists of testing new functionalities on the app and extend those functionality to a desktop version only when successful. In 2012 the company started introducing two innovative features on its mobile ecommerce app:

1. Gilt Color 2. Gilt Try It On

Gilt Color is a tool that helps consumers to search automatically for clothes that match the ones already owned. The color tool, uses the smartphone camera to detect the color of something that the user is wearing and then searches on Gilt website for other apparel with matching colors. Gilt Try It On, allows users to take a photo of herself and then adjust the product on the photo in order to see how it would look on her. Additionally, it is possible to share the photo on Social Media in order to get a final advice from friends. This features has helped Gilt to improve customer experience and increase its brand awareness through social sharing. The company’s successful mobile presence follows a specific set of rules:

1. Design for each device – adjusting the ecommerce platform to proper device characteristics (tablet’s screen resolution vs. smartphones

2. Deep platform and stress testing – in order to maintain a functioning platform even during peaks of traffic (i.e. weekends)

3. Browsing speed – consumers want a fast and responsive environment where to make their purchasing decisions. The platform need to be quick in order to create a seamless onboarding flow and exploit customers’ irrational decisions

4. Understand the motivation of customers and provide relevant information exactly where and when needed.


Growth and profitability through mobile Gilt’s mobile revenue is coming mainly from the iPhone, while fewer Android users tend to buy. Currently 40% of the company revenue comes form mobile sales.

Mobile onboarding overview When registering for an account, the signup email is mobile-‐optimized and presents a call to action on the top-‐right corner, to persuade users to download the app on their smartphones. This moves from the assumption that most of Gilt target customers generally read their emails also on a mobile device (if not exclusively on it). Useful to note that I registered through the app so Gilt could better use this information and send me a more pertinent welcome email (i.e. I don’t need the top-‐right button since I already have the app).

Instead of replicating functionalities from website to mobile, Gilt tries to better use the mobile device functionalities in order to enrich its customers journey and effectively engage with them. Every device has its own set of rules and a successful ecommerce strategy understands consumers’ needs related to its device and environment of use, in order to provide the best possible experience.


When opening the app for the first time, the user is prompted with useful information and a clear call to action, which invites the user to activate push notifications in order to get the best experience out of Gilt.

The app main page features sales per category, introducing elements of scarcity by inserting every sale end time. On the same note, in product categories, the items stock availability is highlighted when scarce, in order to spark the users’ irrational instinct to secure the product.


For relevant categories, Gilt features a powerful “refining” tool which helps customers quickly filter through products for specific details (price-‐wise or size-‐wise).

Additionally, Every product displays a rich description and detailed list of characterizing elements, plus a Social Media toolbar in order to easily allow users to share the identified products to their friends.


Lastly, once a product has been selected, the checkout process seems pretty straightforward and consists in three phases:

1. Cart Summary -‐ which displays all the products currently in the cart 2. Personal Details -‐ to be entered only on the first purchase and saved along

with the account in order to speed up the checkout process for future purchases

3. Credit Card details -‐ optionally stored in order to further speed up future purchases. Gilt integrated both credit card payment and the Paypal payment getaway in order to create an easier purchasing experience to its customers.

Resources, costs required and challenges Gilt costs include a constant A/B testing on its mobile platform, a strong development team always seeking to implement new innovative technologies and devices functionalities into the Gilt shop experience and an attentive products curation team in charge of the products list maintenance, promotions structure and new products discovery. Finally, shipping costs have to be taken into account especially when paid by the company for limited promotions or new markets expansions and not incorporated into the final purchasing price.

Opportunities for development Gilt seems to have developed a well-‐structured mobile platform, flexible and bugs-‐free at a first use, with a very balanced use of colors and an intuitive UI.


The company could further improve its Social Media integration by developing in-‐app instant messaging features, WhatsApp items sharing integration and a 3D view of products in order to present a more interactive user experience.

Strategic moves made and possible Gilt’s “Flash Sales” initiative, where users have a very limited time-‐window when to purchase items at a discounted price, represent a great strategic move which helped further spread mobile usage among its customers, given the inherent flexibility and ability to browse through products on mobile wherever a customer is. This feature is hugely popular among Gilt customers and products on sale tend to get sold out within minutes from their appearance on the Flash Sales section. Another strategic move that Gilt developed consists in the ability to alert customers about products of interest, which go back in stock. If a user finds a product she likes which is currently out-‐of-‐stock, she can add the item on her wish list and will receive an alert when available again, through mobile push notifications, email or text messages. This is a great way to create customer retention and relevantly engage users when not using the app.


NORDSTROM The company seems to be extremely focused on managing its mobile experience as an addition to the in store purchasing experience instead of viewing it as an alternative. Nordstrom’s approach to mobile clearly shows an omni-‐channel approach, very different to the “mobile first” approach of Gilt. This becomes even more evident when looking at the app experience and the philosophy behind it.

Competitive advantage through mobile Following an omni-‐channel vision, Nordstrom has made big investments in in store technology in order to transform the customer journey both in store and online. The company is extensively using mobile devices (especially tablets) in store, with tablets having about 85% of the company’s cash register. Additionally, it is including iPads in dressing rooms and equipped its staff with mobile POS (iPod touches) to provide a faster checkout experience. Additionally, customers requests and needs changed in recent years, with users showing that they want a personalized experience, thus possessing relevant data about each customer and integrating between the online and offline channels, is helping Nordstrom to build a loyal customer base through relevant recommendation. Finally, the company recently began a new partnership with Twilio, which is giving Nordstrom salespeople access to MMS text messaging communication with customers. Considering that text message marketing is rapidly growing as a preference among consumers, this initiative is helping Nordstrom to generate a more secure and reliable communication channel with its customers.

Growth and profitability through mobile Given the 30% investment in new technologies, processes and mobile, and an online business growing 20% each quarter, Nordstorm is placing itself as a top omni-‐channel retailer. The company is generating a great amount of traffic to its physical stores well integrating online and offline. Additionally, with the integration of mobile devices and QR codes in store, the company is effectively collecting contextual data on its customers which becomes relevant on every phase of the customer journey, be it online through personalized suggestions on mobile devices or offline, through in store personalized recommendations by shopping assistants.

Mobile onboarding overview The Nordstrom app features a more classic design, with 5 main sections and an overall colder feeling than Gilt app. When first launched the app prompts users with a location permission request, in order to improve the customer journey with relevant products available near the user.


This feature might be effective but doesn’t seem to properly address the need of mobile customers who want to buy online and get products delivered.

The “Style” section features proposed blog articles and Instagram feed from Nordstrom, with the purpose of inspiring users looking for new items to purchase. The “Shop” section features the actual store, divided by departments and brands. The horizontal category division is very similar to Gilt main screen but the use of colors and images seem less effective.


The “Wish List” section features the items saved by the user for later purchase, while the “Bag” section acts both as a shopping cart and as a “Saved for Later” list, which appears to be a duplicate of the “Wish List” in terms of scope of usage.

At some point during the browsing experience, the app prompts users with an interesting permission request: Near-‐Store Notification. Nordstrom asks users to allow alerts about products present in their shopping bag, which are available in nearby stores.


Coming back to the “Shop” section, the actual category division appears to be effective and engaging, not focusing on clothes and shoes categories, instead intriguing with special categories and contextual groups of items. The actual product listing (one tap away) gives all the relevant information together with user reviews.

Moreover, the product listing features useful sorting and filtering options, which appear to be more extensive than Gilt ones, definitely helping in browsing through the vast amount of items provided by Nordstrom.


When selecting an item, the product page available appears to be very exhaustive in details and relevant data about the item, providing useful customer reviews which might represent both a successful tool in persuading other customers to buy and a “trojan horse”, when displaying overall bad reviews for a product.

Once a product has been added to the “Bag”, by accessing it form the bottom menu, it is possible to proceed to checkout. The checkout process seem to be very well integrated in iOS, giving the option to buy as a guest (feature not available on Gilt, which requires mandatory registration), pay with Paypal (once again, integrated to facilitate the user purchasing experience) or sign in.


The user then is prompted for a maybe too extended version of necessary information and can then successfully pay for its products.

Resources, costs required and challenges As previously noted, Nordstrom is investing heavily on new technologies in order to constantly evolve its brick and mortar business and affirm its leading role in other channels. Additional costs require training on new processes executed through mobile for in store assistants and important IT and infrastructure costs to maintain the integrated network of offline stores and online sites.

Opportunities for development Nordstrom Rack, together with the acquired Hautelook, and the new integrated online and mobile site Nordstormrack.com, can offer a huge opportunity to grow the mobile market, inherently fast-‐paced and more inclined to exploit its “on-‐the-‐go” functionalities in a time-‐limited or “flash sales” environment. Nordstrom can pose serious threats to online-‐only competitors (like Gilt), if able to translate its technology investments in new alternative business channels and further expand its omni-‐channel strategy.

Strategic moves made and possible Nordstrom created a page on Wanelo, a similar product aggregator site focused on ecommerce. The page reached over 1.2 million followers in June 2014 who appear to be actively engaged with the brand, generating more than 30 million product saves (an average of 343 saves per item) on the 200’000 products uploaded to the Nordstrom page.


This strategic move, given the highly mobile-‐responsiveness of Wanelo website and overall mobile traffic coming to it, seem to have helped Nordstrom effectively engage its mobile customers. Another interesting strategic move introduced by Nordstrom is the Instagram shoppable landing page called “Picture This”, featuring the store’s images on Instagram together with links to purchase the products. The idea is to give users a way to access the relevant product page for pictures displayed on the popular social network. The scope is to further encourage conversations with customers, social sharing and integrate more and more Social Media with the ecommerce experience.


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gild & nordstrom ecommerce mobile integration analysis

Business

mobile onboarding overview

mobile integration

matteo balzarini id

strategic moves

competitive advantage

companies overview

key processes