It's All Geek To Me - January 4th 2006

E Commerce Future - Bigger means Harder The number of web users hit one billion in 2005 – it took the web 36 years to get there and experts think it'll take about ten more years to get the next billion people online. Lots of this growth is different than you might expect – statistically that one billionth user was a 24 year old woman in Shanghai. (Dr. Jakob Nielsen) Recently, the growth rate has been about 18% per year, modest by the standards of the early 90's, but very healthy indeed – and by 2015 North Americans will be only 15% of users, though they'll be about 1/3 of the total dollars spent.

It has been given many different names, like Web 2.0, but most of those recent “entrepreneur” type articles about how well the web is doing are all basically saying the same thing – if you aren't seeing a serious percentage of your sales from the web ever increasing yearly, you are making errors.

The increasing number of users is a long term trend worth serious thought - it will have a dramatic impact on what I call the “increasing sales disaster trap”. An increasing sales disaster happens when a site manager sees increasing sales without looking at any other factors and is, therefore, all happy about it.

Suppose your Average Order Profit (AOP) was $24 and that last month your site had 900 sales. This month it had 990 sales for total profit of $23,760 – a 10% monthly increase is celebration worthy, and a bit more than 2K in additional profit is nothing to sneeze at.

BUT - If you looked at the underlying data you'd see that last month you had 4,500 people visit – those 900 sales represent a conversion rate of 2%, very solid. This month you had 6,500 people visit because you worked hard on email marketing and optimization – a traffic increase of more than a third. Suddenly that 10% increase in sales looks like what it is, a serious problem with your plummeting conversion rate.

This common lack of analysis problem will get broader as the years go on – the first 200 million people on the web are fairly described as early adopters. The most recent 200 million are fairly described as late to the party. It is definitely more difficult to sell to the late comers – the airlines and banks can force people by use of punitive policies (priced a ticket through a travel agent lately? Seen the “service fees” banks are starting to use for those that go to the counter?) - but you do need to get better.

To maintain current conversion rates in a marketplace that is adding oodles of less experienced users daily, your systems need to improve constantly. Your site now needs to make it even easier and simpler for customers to buy simply to hold your current conversion rate.

Fundamentally it is fair to say that the increase in total users will make it harder to sell things, as they are much less experienced than the folks you are selling to today. Look at your site carefully and make a commitment to reduce purchasing problems in 2006. Figure out how the site can be made to work for the millions of first timers online this year. Will you work on personalization this year for returning customers, or will you focus on making your shipping process more clear?

A few years ago this may have been fine for those that hit the potentially mysterious “cart” button:

“Your Shopping Cart is empty”

Have you seen what it says at Amazon lately when you push the cart button when it’s empty?

“Your Shopping Cart lives to serve. Give it purpose--fill it with books, CDs, videos, DVDs, toys, electronics, and more.

To put something in your Shopping Cart, start by searching or browsing through any of our stores. When an item interests you, click the Add to Shopping Cart button.”

Many people I speak with have simple goals for their site in 2006 – the ten to fifteen percent growth they should expect in “keeping up” with the growth trends. Watching the bottom line is always important. Think about the long haul, though, too - - - make a plan this year in stages for the system improvements your site needs.

KISS News

As many of you know Ross is up in the woods of Maine working on his book this year (and maybe next), currently titled “A Way to Think About That”.

The focus is on providing entrepreneurs with clear information on how to – from a point of principles and not instructions – manage their growing web vehicles. If this newsletter were a few hundred pages long – well, you get the idea.

Ross is looking for a group of folks to bounce ideas and content off of as the work is being done. If you'd like to be included please send him an email.