Prepare for social commerce

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Consumers became increasingly Web savvy to advertising and not as susceptible to basic cross-sell and upsell techniques. In response, targeted marketing became the standard as blast marketing faded into oblivion.

"The 'mass' is no more - the more national your brand, the more we have learned to speak to specific identities, tastes, and demands," Ken Goldstein, CEO at Shop.com, Monterey, CA. "We are learning to respond to the voice of the individual much more through collective understanding than loud undifferentiated promotion."

And even as mass marketing cools, online shopping is becoming more prevalent than ever.

"We found that online purchasing is no longer a fringe activity," said Maria Reiling, director of fashion and sports at eBay, San Jose, CA. "It is mainstream."

This theory proved true as Cyber Monday saw the biggest e-commerce sales day to date with $608 million spent on post-Thanksgiving, back-to-work shop day. Overall, online retail spending reached $11.7 billion for all of November 2006, up 24 percent from 2005.

In 2006, major retailers like Nike and Wal-Mart revamped e-commerce sites with rich media for faster functionality and a more interactive experience.

Next year, retailers expect to continue to empower the customer with controlled choices, leveraging digital technology to make shopping easier, branded and more entertaining.

"In 2007, retailers will start experimenting with Web 2.0 technologies to follow early leaders like the Gap and Nike, who both realized early on that customer experience matters," said Joe Chung, CEO of Allurent, Cambridge, MA.

"Shoppers will come to expect rich, interactive shopping online and retailers have to move quickly to catch up to early leaders," he said.

According to Ian Davis, director of product strategy at e-commerce software firm Art Technology Group, Cambridge, MA, e-commerce is at the beginning of a radical change. Eighty percent of consumers have broadband at home and 90 percent have it at work, with some version of flash installed on 96 percent of PCs.

"Legions of companies are rushing to take advantage of this and as a result customers are getting amazing experiences online like100MM videos are downloaded a day from YouTube.com," Mr. Davis said.

"This is changing consumers' expectations for what an online experience should be like, shopping or otherwise," he said. "And yet the online shopping experience remains largely unchanged. E-tailers who realize this and offer more compelling experiences to their consumers will be rewarded."

In regards to legal action this year, e-commerce giant Amazon.com, Seattle, was involved in two major suits that could change the way e-commerce firms operate.

Toys "R" Us, Paramus, NJ, sued Amazon, alleging the breach of exclusive rights to supply specific toy products on the Amazon site. A New Jersey superior court judge in July ruled in Toys "R" Us' favor.

Amazon is also being sued by IBM Corp. The software giant is alleging infringement of five IBM patents that are core to the online retailer's platform, like the presentation of applications in an interactive service, the storage of data in an interactive network, the presentation of advertising in an interactive service and the ordering of items from an electronic catalog.

If Amazon is found guilty, every e-commerce site will be faced with how to merchandise anew. Next year holds the cards to a key decision.

This year also saw the rise of the social network reach beyond its initial purpose, as sites began to influence consumer behavior with a substantial impact on e-commerce.

The Fox Interactive Media Inc.-owned social networking giant MySpace site added a download music option through a partnership with digital licensing and copyright management services company Snocap. It challenged Apple's iTunes music store, the online leader in the space.

Bands can now add songs, music videos and pictures, and spread the word through viral marketing with "friends," a revolutionary platform for music groups with no major label deal.

Expect more merging between e-commerce and social networking in 2007.

"This 'social commerce' is creating new and more meaningful ways for retailers to interact with customers," Mr. Goldstein said. "Search, communication and community have the potential to have an even more powerful impact on commerce when closely tied together."

Personalization and customization were key words for e-commerce firms in 2006 year, as consumers took ownership of online shopping experiences.
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