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Tech journalists are always happy to see two research firms coming out with reports on the same topic in the same week. One report from one research firm gives that firm's opinion on a certain trend, but two reports giving the same opinion validates that opinion. Why, two reports practically make that opinion gospel truth.

Well, as the old cliché goes, two swallows do not a summer make, and two reports saying the same thing do not gospel truth make. In the case of the two reports released last week by Jupiter and Forrester on the subject of return on investment (ROI) in websites, they do not any sense make.

Both of the reports basically say the same thing. Traditional retailers with websites should not calculate the ROI on those websites solely on their online sales. Instead, they should take into account the effect of the website on offline sales, and on "operational efficiencies" and "improved payroll productivity". Forrester have decided to call this companywide ROI or cROI for short. We are a bit short of acronyms in the tech industry, I suppose.

While Forrester was happy to generalize about the whole thing, Jupiter went all out, giving very specific figures to underline their point. Sixty-nine percent of traditional retailers, it said, are ignoring the "non-transactional" benefits of their websites. Not 42 percent or 86 percent, but 69 percent. Jupiter analysts, however, didn't care to elaborate on how they alighted on this particular figure.

Neither did they care to explain how they figured out that by counting in these non-transactional benefits, retailers would find the ROI on their websites by 65 percent. Imagine that. Tweak the figures and rearrange the boundaries a bit, and your ROI bounces up by two-thirds. Fantastic. Of course, your website isn't as effective a sales channel as you had hoped it would be, but your payroll productivity sure has improved.

Maybe I'm just in a sceptical, cynical sort of mood today but these reports sound to me like a bunch of research analysts backpedalling as fast as they possibly can. The research firms seen to be making an effort to mollify all those middle managers who authorized outrageous budgets for fancy ecommerce sites back in the boomtime, when the self-same research firms told them that just about everyone would be buying just about everything on the Internet by 2005.

Now the middle managers and the vice-presidents of ecommerce evangelism are finding it very difficult to justify their actions. Armed with these reports from Forrester and Jupiter, however, they can stand tall in front of the boss and show how they were right to pump millions into all-singing, all-dancing online retail extravaganzas.

"No, no, Mr Chairman," they'll be saying. "Honestly, we haven't wasted valuable resources on our online B2C toaster retail InterWeb site. We know we've only sold USD100 worth of toasters through the site this month, but these reports show that our ROI is actually 65 percent higher than that. You see, somebody looked us up on the Web and then they went into our store in Hackensack and bought a top-of-the-range toaster there, which they probably wouldn't have done if it wasn't for the site being so fantastic. Probably. Maybe. Well, you never know, do you?"

That's the problem, really. It's almost impossible to quantify the effect that a retailer's website has on sales in its online sales. The NPD Group says that 45 percent of consumers have bought a product in a store after researching that product on the store's website. But maybe they would have bought the product in the store anyway. Some of them certainly would have, but how many, nobody knows.

What the research firms are basically acknowledging is that the Internet is essentially an advertising and marketing channel for most retailers, not a sales channel. Bricks-and-mortar retailers should count investment in their websites as part of their marketing budget, not as part of their retail plans. Undoubtedly, some low-price, low-risk products such as books and CDs sell well online. Most other products don't rush so quickly off the virtual shelves.

The Forrester director of research, Lisa Allen, likens retailers that haven't cottoned onto the "companywide ROI" concept to "nomads in the desert hoping to happen upon a lake". Unlike the rest of us, who are like nomads in the desert hoping to happen upon a research firm that doles out plain-speaking common sense, instead of jargon-laden, circumlocutious twaddle.

Continue reading "Nomads in the Desert" ... Read the full article

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