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- KEVIN KELLS, National Director, Consumer Packaged Goods Industry Team, Google
- BETH MAYALL-TRAGLIA, Total Beauty Media, Editor in Chief, TotalBeauty.com
- KATHLEEN MCNEILL, Vice President of Beauty, Beauty.com and Drugstore.com
- SHAWN TAVAKOLI, CEO, Beauty Collection
- LAWRENCE MORTENSON, President, LM Consulting
- LAURA KENNEY, Beauty Editor, Fashion and Beauty Channel, StyleList.com, AOL
GCI: What are the implications and impact of online retail on brands?
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Kevin Kells: Consumer packaged goods (CPG) companies are further behind, in general, regarding online retail when measured against vertical industries such as retail or travel. Meaning that the bulk of CPG sales still go through brick-and-mortar doors. Having said that, there are certain pockets, such as prestige beauty, where that percentage has been increasing dramatically in the past five years. So brand marketers are still keenly aware that their online campaigns need to, for the most part, drive off-line actions. CPG companies are also trying to figure out how to drive more sales online using their existing customers’ Web sites, and I would look to see much more of this in coming years.
Beth Mayall-Traglia: Ultimately, online retail makes it easier for the consumer to pick and choose. She’s no longer limited to brands with a brick-and-mortar presence in her mall. The huge boom in online beauty product reviews at sites like TotalBeauty.com and beauty blogs have made consumers smarter about their spending, too. Our focus groups tell us they read reviews before they purchase, to get endorsements from other women. Products without endorsements from consumer peers raise a flag—Why does no one use this? I wonder if it’s a bad product? That kind of experience only existed among friend groups before the Web.
Women are making more informed purchases—perusing marketing materials on brands’ or retailers’ sites, and reading beauty product reviews to get testimonials from peers. This is great news for highly rated products that had never received mass notice before.
Kathleen McNeill: Online retail provides national exposure with very little overhead. There are no testers, shop-worn damages, fixtures or extensive trainers needed by region. It also provides a brand with a greater platform to tell their brand story in “their voice” and educate consumers on their brand.
Shawn Tavakoli: Online retail provides brands with the opportunity for much greater exposure to consumers. Consumers today want information, and they want convenience. More consumers are turning to the Internet to find products that are not widely distributed. Brands can have national and international exposure if sold online.
Lawrence Mortenson: The Internet makes geographic location irrelevant. Brands that invest in establishing themselves online have the opportunity to build exposure worldwide. There are some headaches that come with the technology, to be sure. It can be harder to control your product distribution and manage your brand image. Things such as customer complaints can get a lot of visibility fast. But all-in-all, I think it’s fair to say that the pros far outweigh the cons. The coolest thing about online retail? It’s still in its infancy—we ain’t seen nothin’ yet.
Laura Kenney: The Internet has the ability to exponentially increase brand awareness. Local companies or brands with limited distribution can now reach a nationwide or worldwide clientele. Brands can reach audiences beyond their normal client by marketing themselves in areas outside their usual comfort zone, and you can take your marketing to a micro level—leveraging specific products to captive online audiences on a site-by-site basis.
GCI: How have partnerships/working relationships between brands and retailers been impacted by the proliferation of online retail channels?
Kevin Kells: They are much more reliant on each other’s data streams and all that comes with that—consumer insights, accountability and measurement, to name a few. CPG companies and their retail partners are also looking deeply at the optimum spending level and usage of co-op and trade marketing dollars, including both online and off-line.
Shawn Tavakoli: It really depends on the brand and the retailer. Beauty Collection builds partnerships with brands based on their marketability, and company and brand integrity. We have had experiences where brands committed inventory to us but later changed their minds because they wanted to take advantage of an opportunity to sell direct online. That experience made us realize that the brand was not supportive of us, and we ended up limiting our support and exposure of the brand. Most brands, I think smartly, have used their online channel to provide a resource to the consumer to date. That may change, but so far it seems to work.
Lawrence Mortenson: The incident Shawn mentions left a bad taste in everyone’s mouth. It’s critical in this day and age for brands to honor their commitments to retailers and vice versa, and for relationships to be based on mutual respect and integrity. At the same time, my guess is that the traditional lines that have been drawn between brands and retailers are going to continue to be redrawn in time—and probably at a pace that’s faster than most currently operating in the industry will be comfortable with.
Laura Kenney: The online relationship has strengthened some brand/retailer relationships and weakened others. Since many brands now have so many possible points of distribution (including their own Web sites), more and more retailers are demanding exclusive products from the brands to give themselves an edge over other retailers.
GCI: What is the impact of online retail on packaging and brand identity? On physical shelves, packaging helps communicate the brand message and make that first sale. Do brand owners need to consider packaging differently when a product is retailed online? If so, how?
Kathleen McNeill: A brand can keep the same packaging. Every detail of the package is clearly visible for our customers online, and we highlight each brand in a custom brand store. This is a great way to create a brand atmosphere and seasonal marketing message without printing costs. To further enhance the shopping experience, brands can also offer advice through video how-tos and demos.
Shawn Tavakoli: The design and experience of a good retail Web site needs to be consistent with the brand identity and packaging. Online, the look and feel of the site needs to communicate the brand message. Beauty Collection goes to great lengths to make sure that consumers have the same experience online that they do at the store level.
Lawrence Mortenson: Packaging for brands being sold online should be the least of their concerns. Brands are in the business of telling and managing a story. They need to be thinking much bigger than packaging if they want to have any degree of influence over their brand. That isn’t to say that packaging isn’t important—it is. But it’s just one piece of the puzzle.
Laura Kenney: Online, it’s the inner packaging that counts. The outer packaging, not so much, as it is often removed to shoot the product. Color also becomes an issue, as colorful packaging tends to pop more online than more ethereal, spa like packaging. On the upside, kits are easier to depict online, as it’s easy to shoot the products outside their packaging so clients can see how much bang they’re getting for their buck. Where as on the shelf, all they may see is the outer packaging of the kit.
GCI: How does the task of reaching out to consumers and fostering a brand/consumer connection differ when the brand is retailed online?
Kevin Kells: The building blocks—insights, relevant storytelling, engagement and driving action—are still the same. Online offers many more options to engage along the entire consumer funnel, from awareness to actual purchase, with a chance to measure every step along that path.
Beth Mayall-Traglia: It truly expands reach instantaneously. When we work with brands looking to build an online presence, it’s like a lightbulb goes off. For example, we use Facebook and Twitter to get products in front of consumers when they’re in a relaxed, social environment. We engage our beauty influencers—a combination of the top reviewers on our site and the great beauty blogs in our community—to try out products and start posting honest, unbiased testimonials. We help them build their e-newsletter subscriber lists, because by pinging your brand’s “ambassadors” once a week or so, they feel more connected to [the brand], and that translates into sales.
Kathleen McNeill: Online consumers are very savvy. They utilize search, shop affiliate Web sites for special promotions, and, if they are truly passionate, they are researching products on beauty blogs and in social communities. Our site is extremely searchable, we manage millions of key words in search and our affiliate program is very strong. We also take the time to review social networking opportunities afforded by sites like Twitter, MySpace and Facebook.
Shawn Tavakoli: The brand message and identity need to be consistent. At the store level, Beauty Collection provides trusted advisors to help educate and find individual solutions for our customers. Online, we need to provide the same. Information about the products is provided to help consumers identify the right solution for their needs. Given the breadth of our selection, consumers have an opportunity to view different products from different brands and make informed decisions about the products that fit their need—unlike going to a brand’s site where they only find information about that one specific brand.
Lawrence Mortenson: Brick-and-mortar retailers such as Beauty Collection work something like this: Customer comes in, asks questions, receives some product/ solution education and makes a purchase. Following the purchase, the retailer follows up with the consumer with a thank you note, possibly a telephone call and some kind of ongoing marketing campaign that may include online and off-line elements. In online retail, customers first want to find information about the brand and product not only on the retailer’s Web site, but on blogs, Twitter and other sources of information. Once they buy, the basic marketing mechanics should be the same. The online retailer should be following up with customers regularly through some kind of e-mail newsletter at a minimum. Regardless of how customers buy, brands and retailers still need to go through a process of constant outreach and communication with customers—it’s just that the media mix is a bit different. Same principles, different media.
Laura Kenney: Reaching out to customers can become less formal, as the Internet is generally a more laid back space than other forms of advertising. Brands can reach their audience where they go to “play” through smart blog, video and social networking outreach. They can also maintain direct contact with their clients, and prove to them that their voices are being heard. A great example of this is the “My Starbucks Ideas” Web site, where clients can submit ideas and Starbucks reports back with specific examples on how they’re using these ideas.
GCI: What is the most effective approach to transitioning from a bricks-and-mortar store to an online presence? What are the challenges?
Kathleen McNeill: The biggest obstacles in selling online versus a bricks-and-mortar environment are the abilities to touch, smell and feel the product. We virtually replicate a counter experience with our robust sampling center and site-wide gift programs. Education is also key. Educational content, live chat, and interactive skin care and hair care consultations are key to assisted selling online.
Shawn Tavakoli: The best approach to transition online is to first give great consideration to the goals of your online presence. Are they to support your off-line store by providing an online marketing tool? Are the goals aimed at transitioning from selling products off-line to selling them exclusively online? Or is your goal to build your brand on a national level without having to have stores throughout the country? Based on your goals, you need to identify the resources required to achieve them. And depending on your goals, different challenges will present themselves. For Beauty Collection, one of the biggest challenges early on was identifying the right technology solution for our needs and the talent required to manage the various resources required to achieving our goals. It is very easy to use the wrong solution for your needs. I learned that one the hard way. Other challenges include inventory management and continuous marketing of your online store.
Lawrence Mortenson: I think the question should be “what’s the best way to take advantage of online opportunities if you have a bricks-and-mortar store?” And, Shawn nailed it. First off, the retailers needs to know their objectives. If they want to use online marketing to increase traffic to their bricks-and-mortar stores, there are some simple ways to do that—including social marketing with services such as Yelp, buying local advertising on Google, writing articles and blog posts using local keywords, using Facebook to inform customers about upcoming events and promotions, etc. If, on the other hand, the retailers wants to build an e-tail store, we’re talking about a totally different game and a really steep learning curve. Then, they need to worry about fulfillment, managing the online store inventory and the complexities of online marketing. They’ll need to learn search engine optimization (SEO) inside out, search engine marketing (SEM), article marketing, blogging and a whole host of other things that will probably make their heads spin at first. Of course, retailers can also start small and build from there.
GCI: There is potential for reaching a much broader market when retailing online. How must a brand owner who also retails her product prepare to deal with a far more widespread consumer base? What are the practical issues? Shipping, payment methods, etc.?
Kevin Kells: Marketers must be prepared to target at a much deeper level, and must be clear on the triggers and barriers to purchase against all those sub-groups of consumers because they will all be different. But while this is infinitely more complicated in the planning and execution stage, once set up there are many scalable tools to help measure, tweak and optimize all of your consumer touch points.
Kathleen McNeill: It is important for a brand to have its own online presence, but if retailers would like to reach a larger base of consumers online, it is important to also be in a multibranded environment. One of the biggest advantages Beauty.com has is a partnership with drugstore.com. A customer can shop across both sites in a single cart and buy mass and prestige in one stop from the comfort of home.
From a practical standpoint, it is easier for a brand to ship to a single warehouse rather than shipping individual packages to the customers’ homes or to multistore locations.
Shawn Tavakoli: First, you have to realize that now you are competing on a national level. At the store level, your customer service is much more personal. Online and on a national level you need to have clear policies for everything from shipping and return policies to credit card protection. You need to have a customer service call center to field calls on product issues or shipping and handling concerns. The biggest practical issues we’ve run into are inventory management and customer service. Simple things like switching customers to a different product online is also a problem. At the store level, if you are out of a product you can provide a different solution, but online, if you are out of stock, you lose the sale. If your inventory isn’t accurately measured, you will compromise your customer service by not being able to fill orders. Your merchandising mix might be different for online. Shipping solutions will vary based on where you are shipping (international, post office box, military base, etc.).
Lawrence Mortenson: In most ways, running a successful online store is a completely different business from running a successful bricks-and-mortar. Zappos (www.zappos.com) didn’t get started by an already existing bricks-and-mortar shoe store chain. It was started by a young kid who liked shoes and who understood the power of the Internet. Different mind-set, different skill set. It’s all learnable; brands just have to be open to learning new things and realizing much of what they know may not apply online.
GCI: How can a brand manage its image and positioning when retailed in an online environment? Are there virtual equivalents to the POP, display kits and shelf displays that brands often offer to bricks-and-mortar retailers?
Kathleen McNeill: This is the first thing I asked when I started at Beauty.com. In-store merchandising has its online equivalents: impulse items on customer check out pages, cross-sell/up-sell on product detail pages, featured item spots, banner advertisements and editorial features all accomplish basically the same thing as fixture and window displays, endcaps, and travel/mini POS sections in store.
Shawn Tavakoli: There are definite equivalents. The key in managing the brand image online is consistency. You want to make sure that the customer experience online is consistent with your brand image. The look and feel of your site needs to be consistent. Consumers should be able to navigate with ease and find what they need. The online equivalents of POP displays and shelf displays are your home and category pages. The home page is particularly important, as it’s usually the first place the consumer will land when going to your site. You have an opportunity to feature new and exciting products on your home page. Also, online gives you infinite merchandising opportunities.
Lawrence Mortenson: There are definitely online equivalents to display kits, shelf displays, etc. Brands can design compelling product images and banner ads for online retailers to use. They can do a lot of other things as well—such as provide viral video that supports their product, copy for e-mail newsletters and blogs that draw readers into the purchase funnel for a brand or product, and more. We get material from brands for our Web site all the time. The thought processes for online and off-line merchandising are pretty similar—if not the same. Brands and e-tailers just need to learn how to use the ever-evolving list of online options available to them. The most beautiful thing about selling online? You can get a lot of quantitative data about consumer behavior that lets you make 100% data-based decisions on how to improve your online store performance. Now that’s cool.
Laura Kenney: There are equivalents. Online, you can create special sections that mirror sections in stores or specific brand endcaps. If the store sells many brands, it’s very effective to create specific pages or sections for each brand online. That way, the brand can express its specific personality in one place and not get lost in the branding of the store.