Changing the Way Your Customers Buy

It's funny how things have changed in the last two years. Instead of worrying about survival due to limited market potential, online retailers are now concerned with maintaining market share in light of massive market growth.

E-commerce and online advertising have blown away the offline alternatives in terms of revenue growth and marketing, operational and IT investment. While the offline retailing market is growing in the low single digits, online retailing has doubled in size in the last 24 months to become a $144 billion dollar market.

Meanwhile, the online advertising dollars that companies allocate in their budget are today the largest that have ever been reported. In the first quarter of 2004, $2.3 billion was spent on online advertising. That represented a 40% increase over the previous year, and it was the largest amount spent on record. The analysts who reported these results had started tracking the expansion in 1996. It's safe to say that it was the biggest quarter for online advertising in history.

A few trends are driving technology innovation and are worth noting.

The first is the important role of marketplaces like Amazon.com in brand development and merchandising. Although growing your top-line revenue is an important driver in a merchant relationship, it's only part of the story. Merchants benefit when customers associate their positive shopping experience with the sellers' brands, elevating the third-party retailer in the eyes of the consumer.

Second, we see a trend toward SKU-level—or item-specific—merchandising. Your brand image is critical. But if you're not thinking about merchandising in terms of the most detailed product attributes and variables—pricing, title, description, keywords—you're not fully leveraging available merchandising control.

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Eric Best

is Founder and CEO of Mercent (www.mercent.com).