Greetings Multichannel Mavens!

I was driving back to the San Diego airport after Shop.org's annual merchandising workshop last week and was quite pleased to realize that Web merchandising has, to paraphrase the old Virginia Slims ad campaign, come a long way, baby. Nearly all retailers now make concerted efforts to focus on their home and section pages, carefully select assortments of new products and top sellers, and provide richer imagery where applicable. That was the good news . . .

Left Brain Merchandising. Still, I had a nagging feeling that there was something missing from online merchandising. Despite the adoption of some industry standards, online Web sites nonetheless have conversion rates that have hovered stubbornly in the 2%-3% range for the past five years. Somewhere along the freeway, I realized that part of the issue was that retailers should be looking at different metrics. While the online marketing world is rife with intense analysis and myriad metrics to determine the worth of various vehicles, the online merchandising world has lagged behind. There is a huge opportunity to apply the principles that my colleague Shar VanBoskirk many months ago termed Left Brain Marketing Planning to merchandising. It is high time for Left Brain Merchandising, a customer-focused and data-driven approach to online retail, to become commonplace in the eCommerce world.

So, what would that mean? Left Brain Merchandising in its most reduced form means that merchandisers would scrutinize the data that they get from their site analytics, business intelligence tools, and transaction databases to gather a 360-degree view of their customers to understand Web site behavior and thereby drive the factors within the control of Web merchandisers -- site navigation, product assortment and display, adjacencies and cross-sell rules. So much attention goes to where traffic comes from (i.e., marketing acquisition programs), but hardly the same scrutiny is applied to the 97 or 98 visitors out of every 100 who come and browse around a Web site but leave without purchasing.

How does a retailer get there? One approach to becoming a data-driven online merchandiser is to apply the principle of the planogram, which exists at many brick-and-mortar retailers, to the Web -- a concept that's been called the "Webogram." A planogram is a blueprint given to store operators of what items go where in a store. The purpose is to help improve overall sales and make optimal use of consumer traffic patterns. By creating business rules that optimize margins and inventory turns on key pages of a Web site, like home pages, popular paid search landing pages, and checkout pages (this, in effect, is what a Webogram would do), online retailers could be capturing incremental gains that will help sustain the eCommerce industry's double-digit annual growth for years to come. This is in addition to meaningful gains that are likely to come to retailer loyalty and cross-channel spend.

Interesting, but how to create those business rules? The answer to this is a whole research paper unto itself, but the 30,000-foot answer is this. It happens in two ways: 1) by expanding the list of metrics that online merchandisers look at (one of my favorite rarely used measurements is conversion rate by item), and 2) by creating different executions of key Web site pages and testing them to see various lifts. Some of this may sound obvious, and it may very well be executed by some retailers, but it's hardly applied in any significant or systematic way. In our most recent State of Retailing Online, a report that Forrester wrote on behalf of Shop.org, only 36% of retailers reported executing A/B tests on site design elements, even though 57% found it "very effective." There's still a long way to go, baby.

I'll be writing much more on this in the coming months, so stay tuned. In the interim, I'd love to hear your thoughts on Left Brain Merchandising. Feel free to share comments, suggestions, or stories of success (or challenges) to sucharitamulpuru@forrester.com.

Thanks,

Sucharita Mulpuru
Senior Analyst, Consumer Markets

Research Referenced In This Issue CPG Sites That Deliver Brand And User Value (39589) Europe's eCommerce Forecast: 2006 To 2011 (38297) Google Checkout Supports Its Search Business (39866) Left Brain Marketing Planning (36427) Retailers' New Software Buying Habits (39820) The Voice Of The Store Manager (39491) Understanding Hispanic Web Buyers (39577) Understanding US Cross-Channel Shoppers (38127) What Drives Retail Consumer Loyalty? (39390) Who Buys Custom Consumer Products? (39664)

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