Faster Fulfillment

E-retailers are upgrading their fulfillment operations as customer expectations grow

InternetRetailer
By Thad Rueter

As they build new warehouses and reconfigure existing ones, many web retailers are deciding that rising consumer expectations of fast and accurate delivery require new technology and new warehouse procedures.

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Faster Fulfillment

Many-Stop Shopping? How Niche Retailers Are Thriving on Internet 2.0

Published: May 11, 2011 in Knowledge@Wharton

A decade after pets.com and a string of other early Internet specialty retailers collapsed, a new wave of start-ups -- enabled by the power of cloud computing, advanced delivery systems and deep social relationships with customers -- is shaping e-commerce.

From diapers and eyeglasses to pool tables and, yes, pet products, entrepreneurs are developing specialty businesses to compete alongside one-stop shopping giants like Amazon.com and Walmart.com.

"There is a new generation -- Internet retail 2.0," says Wharton marketing professor David Bell, noting that after the 2000 dot-com bust, activity in online specialty retailers dried up as financing became difficult, or impossible, to get and industry executives struggled to evaluate failed business models. Now, engineers have dramatically reduced obstacles to creating web-based businesses, and entrepreneurs have learned more about how to capture online consumers.

Many of these small players are working in affiliation with Amazon or other major online retailers that assist with the marketing platform and/or delivery fulfillment. Others are folding into bigger sites. This month, Seattle-based Amazon paid $545 million to acquire Quidsi, a New Jersey retailer that delivers diapers and baby products under the name diapers.com and recently started selling soap and cosmetics. Last fall, Amazon paid $1.2 billion for Zappos, the specialty shoe retailer.

Online sales continue to outpace overall retail spending growth. In 2010, U.S. e-commerce sales totaled $165.4 billion, up 14.8% from 2009, the U.S. Department of Commerce reported. Looking forward, eMarketer, which tracks the digital marketplace, estimates online sales will rise to $188 billion in 2011 and $269.8 billion in 2015. According to eMarketer, 87.5% of U.S. Internet users over age 14, or 178.5 million people, will browse or research products online this year. Of that group, 83% will make an Internet purchase in 2011.

The Internet lends itself to specialty retailing because it allows companies to offer huge product portfolios without having to stock inventory in bricks-and-mortar shops. Wharton marketing professor Stephen Hoch notes that Amazon itself began in 1994 as a niche player selling books only. Now, the $34 billion company markets everything from fine jewelry to industrial supplies.

According to Hoch, improvements in computer technology and graphics allow consumers to get a better sense of what they are buying online. "People, especially young people, have grown up on this and are more trusting and more confident about buying online." Zappos, for example, made it easy for consumers to buy shoes -- "the one thing that really has to fit right" -- online with liberal return policies. And eyewear e-tailer Warby Parker will ship sample frames to customers. The site also has an interactive feature that allows shoppers to upload their photo to see what they would look like in different styles.

In the earlier days of online retailing, Bell notes, companies overestimated the value of "eyeballs," or the number of visits consumers made to a site. Retailers now understand more about converting visits into sales, often by building relationships through social commerce tools, including blogs, Twitter and Facebook. "Companies are learning how to turn their own customers into their sales force," says Bell. "The whole social media platform wasn't around in the first boom."

Jeffrey Grau, principal analyst at eMarketer in New York City, predicts that social connections will continue to drive growth for Internet retailers as mobile technology expands. "There are a lot of creative business models coming out all the time that involve social commerce or mobile commerce. There's a lot of innovation going on in e-commerce."

Pitching to New Parents

But Wharton marketing professor Peter Fader cautions that e-tailers hoping to evolve small niche lines into national mega-brands face difficult, if not impossible, odds. He cites the marketing law of "double jeopardy" and research showing that big brands enjoy higher sales and more brand loyalty than their smaller, more specialized counterparts, which tend to appeal only to the most avid buyers.

He uses the example of a consumer who buys a specialty brand of gentle laundry detergent for people with sensitive skin. That person is probably still buying name brands such as Tide to meet his or her other needs. A business based on the specialty detergent could never scale up enough to capture significant sales from the major brands, Fader says. Online specialty retailers can be successful if they understand their limitations, and construct logistics and marketing operations to suit that size.

"Unfortunately, too many small brands don't view themselves as a specialty," Fader points out. "They think they can compete with the big guys." As a result, the company spends too much on broad-based advertising and other attempts to drive scale. Ultimately, Fader says, they "get crushed.... If you admit that you are a small brand, go after the specialty angle and say, 'People will buy us only occasionally' -- and you keep costs down and keep the message focused -- then you can be okay." However, he adds, "That [approach is] not sexy and doesn't sell well to the venture capitalists."

According to Wharton marketing professor Leonard Lodish, diapers.com retailer Quidsi, founded in 2005 by Marc Lore and his business partner Vinit Bharara, has the important characteristics for an online specialty retailer today -- strong execution and lavish customer service. Lodish, who served on the board of Quidsi before its acquisition by Amazon, says the firm developed highly efficient distribution networks revolving around state-of-the art information technology. Its warehouses are equipped with sophisticated robots handling automated fulfillment. In addition, Quidsi developed a software program, called Boxem, that calculates the best sized box for any individual order, saving on shipping and other costs.

However, Lodish says the company's most important asset is its relationship with new parents, fostered through its own customer service staff, not a remote call center. "Their customers love them," notes Lodish. "Their reputation with young mothers is better than anybody else by far. People talk about them and refer friends to diapers.com when they have new babies."

After battling Quidsi on diaper pricing, Amazon offered to buy it. "The present value of what Amazon was offering was better than what [Quidsi] could do on its own -- That's the right way to look at it from the point of view of the shareholder of the company," says Lodish.

Wharton marketing professor Barbara Kahn describes Amazon's purchase of Quidsi as the online version of a long-established retail phenomenon known as the "wheel of retailing" in which large companies seeking scale and new capabilities often acquire specialty retailers to expand their offerings in a one-stop environment.

However, in time, new specialty retailers discover niches and create targeted organizations to meet those customer needs better than the large retailers -- and the wheel turns again. The differences between a company like Amazon and a small specialty player illustrate the disparities between a market-share model, designed to serve as many products to as many people as possible, and a customer-focused approach aimed at developing deep loyalty from shoppers, according to Kahn.

The new breed of Internet specialty retailer is reaching customers by building communities among customers, she adds. In traditional retail, the closest example of this kind of effort is at independent running stores where customers come together to form running clubs and train for races. "In the virtual world you can do that around any interest," Kahn notes.

Three Engineers vs. 40

Social commerce is critical to Davis Smith's latest venture. In 2004, he founded pooltables.com, which shipped pool tables made in China to consumers' homes. Smith sold that business to a competitor to focus on his next company, an online baby product retailer in Brazil called Baby.com.br -- modeled largely on diapers.com. While the margins on diapers are slim, Smith says, the new company's strategy will be to develop loyalty so that mothers return to the site frequently, not only for diapers but also for wipes and other baby products.

"In these niche markets, customers, especially mothers, expect great customer service and [significant] depth of products and they actually want a community," Smith says. The site, scheduled to open this spring, will have outlets for consumers to share their pregnancy and parenting experiences. "This whole idea of social commerce is very new. No one has really figured it out entirely yet. But a lot of people are coming in brand new with a lot of fun ideas."

Once he has a customer hooked, Smith figures families with two children will be loyal customers for at least six years. "When you find mothers coming back to the website to buy the wipes and the formula they need every week, there is a tremendous opportunity to up-sell and cross-sell other products." Those same mothers, he adds, could be converted to other consumer products because "they are not going to want to strap their toddlers into a car seat to run out to buy q-tips or Windex or toilet paper."

Beyond logistics and customer relationships, some of the new web entrepreneurs are focused on creating their own products. Bonobos, a men's apparel e-tailer, designs, develops, sources and merchandises its own clothing brand. "So unlike Zappos or Quidsi, we are not about offering the deepest selection of brands on the market," states Bonobos founder Andy Dunn, who started the company in 2007. "Rather, we want to curate brands, and go so far as to actually create and own the very best of those brands." Dunn calls the strategy "vertical web retailing."

Even pet food is getting a second look. Petflow.com, founded in 2009, is delivering food and other pet supplies on a new subscription model that relies on regularly scheduled deliveries. Julie Wainwright, former CEO of Pets.com, says specialty retail start-ups today are operating in a completely different world than when Pets.com folded after famously promoting its business with commercials starring a sock puppet during the Super Bowl.

First, Wainwright notes, the number of people with Internet access, including mobile devices, has grown from 250 million in the early part of the decade to around five billion today. In addition, technology has evolved with new plug-and-play solutions that had to be custom designed for e-commerce firms in the first wave of online retail. For example, new start-ups today can buy a digital shopping cart from a software company. Pets.com had to design its own. Wainwright says three people can now do the work of creating a site that took 40 to 45 highly skilled engineers a decade ago. Back then, cloud computing was unknown. Each individual e-commerce site had to operate its own servers and backup systems. "Now, it is pretty easy for any mom and pop to set up an e-commerce site," states Wainwright, who is currently running a health consultancy.

Wharton's Bell says that in addition to mom and pop entrepreneurs, many top business school graduates are looking for ways to start their own firms rather than migrate to finance as they had in recent years. And as Wainwright notes, online retailing today is becoming an increasingly creative outlet. Rather than simply moving products out of warehouses, online retailers now have the opportunity to build elaborate sites incorporating photos, video and music that can express a personal vision.

Subsidiary or Competitor?

For some, the long-term strategy may be to scale up and sell to Amazon or cash out in a stock offering. Others, according to Bell, seem driven to build their firms and remain in control. While Quidsi and Zappos agreed to be acquired by Amazon, he notes that Groupon rejected Google's $6 billion offer. "It comes down to the vision of the individual founder and the size of the opportunity to be had."

Dunn, the Bonobos founder, says service-driven, product-depth players like Zappos and Quidsi are good candidates for acquisition by larger firms. "We don't want to compete with them at their own game, which is low-cost product depth," Dunn notes. "In the long run, we would be more honored to be their competitor than their subsidiary. But we've got miles to go to even think about that possibility."

Not all entrepreneurs are drawn to the online world. Patrick FitzGerald is working on another diapers-oriented venture, Nanny Caddy. The company provides vending machines stocked with diapers and other baby items, such as pacifiers, wipes and sunscreen, to child-oriented locations, including zoos and museums. FitzGerald's prior start-up, RecycleBank, provides incentive programs for recycling. "You can't get more in the physical world than trash and vending machines," says FitzGerald. The key difference between managing an Internet and an offline company is the relationship with customers, which he argues is more powerful in a company that works primarily in the physical world. The downside is that a business like Nanny Caddy requires significant travel and hands-on involvement. "The logistical component of moving Nanny Caddy and delivering nationwide is not so easy. I have much bigger forearms than I did before."

FitzGerald stresses that first-hand feedback on the ground is critical. "You learn very quickly where the holes are," he says. "It's easy to sit in a room and pound away at spreadsheets, but sometimes you have to get your hands dirty."

Online or off, retailers will always face the pressure to generate profit, Wainwright notes. The online retail marketplace has a lot of "clutter," and e-commerce companies face challenges, she adds. "The economics are not that much different than bricks-and-mortar stores. The margins are slightly better, but they are still thin margins."

Wharton's Hoch also adds a note of caution: "In the future, there is a lot of opportunity for start-ups in specialized e-tailing. But it's also easy not to succeed. The barriers to entry are low, and the barriers to exit are low. A lot of people are trying things. Sometimes you just can't tell exactly what is going to work."

Is Facebook Marketing Behind Macy's Online Sales Jump?

ClickZ
By Christopher Heine

Perhaps Macy's new online sales numbers are proof that Facebook "likes" do generate revenue.

The department store chain announced this morning that sales for its two key e-retail properties, Macys.com and Bloomingdales.com, were up 50.3 percent compared to the same month last year and 38.3 percent year-over-year for the entire first quarter. While improving consumer confidence and rising gas prices could be helping Macy's digital direct sales, the brand's Facebook and online marketing strategies likely also deserve credit.

Macy's Facebook page has picked up a whopping 800,000 "likes" in 2011 so far thanks to a handful of initiatives. It now has an audience of almost 1.8 million on the social site.

For Mother's Day, Macy's has been orchestrating a Facebook-driven goodwill marketing effort called "Thank A Mom". At the initiative's onset, it aimed to raise $400,000 for five charities, such as America Heart Association and Futures Without Violence, while sending 80,000 e-cards to mothers before this coming Sunday. Both objectives have already been accomplished.

A Mother's Day gift guide button has been prominently placed within the Facebook app page, and people clicking through are taken to a dedicated Macys.com landing page.

Consumers "Like" Makeover Contest
On Dec. 28, 2010, the retailer might have made its biggest Facebook play. It released a nationwide call for entries for so-called style makeovers as part of its ongoing partnership with fashion expert and cable TV star Clinton Kelly. Dubbed "Million Dollar Makeover," the contest ran through January, helping accrue thousands of new "likes" by the day.

Participants were required to "like" Macy's, provide URLs for their personal website, Facebook account, and YouTube page, and upload photos or a video. They were asked to detail their style; what was missing from it; how their wardrobes had been presenting challenges to their everyday lives; what their dream jobs were, and more.

Eight contestants were eventually chosen to go to New York for their makeovers. A second phase of "Million Dollar Makeover" has been launched, and two finalists will be announced May 9. For both phases, the contest has offered a $1 million grand prize.

Display Ads + Foursquare-Twitter Combo = Flowery Campaign
In April, Macy's looked to mass transit info website HopStop.com, Foursquare, and Twitter to target on-the-go consumers and tourists for its 37th annual flower show.

The retailer purchased takeover ads on HopStop.com's public transportation search pages for New York, Washington, D.C., Philadelphia, Chicago, Minneapolis, and San Francisco. Macy's offered guided "Tower of Flowers" tours in each city.

As part of a week-long buy, the retailer also appeared in a takeover ad on HopStop.com's general homepage. The display ad creative reflected the different floral offerings for each metropolitan market. For instance, Macy's ads on the Washington, D.C., page called out the capital's annual Cherry Blossom Festival.

Macy also utilized a Foursquare-Twitter combo throughout the festivities. When geo-social users checked in at a show, they received a tip on Foursquare that encouraged them to take a picture of the floral scene and share the image via Twitter. They were instructed to use city-specific hash tags, such as #MacysFlowerNY, #MacysFlowerPHI, and #MacysFlowerMIN. Macy's monitored the hash tags, while a limited number of gift cards were distributed daily to users who tweeted an image. Meanwhile, display ads ran on sites like MSN.com and Glam.com to push the flower show events.

New York-based Macy's declined to comment for this story.

A Vigorous April For E-Commerce

Online spending increased 19% last month, says MasterCard in a new report.

Internet Retailer


Online spending in April increased 19.2% year over year, the sixth straight month of double-digit growth for e-commerce, according to an estimate released today by MasterCard Advisors, the consulting arm of MasterCard Worldwide. E-commerce spending increased 16.1% year over year in March.

MasterCard bases the SpendingPulse report on retail sales using all payment forms, including credit and debit cards of all brands, cash and checks. As is often the case, this month’s report did not include actual spending in dollars.

Online sales of shoes increased 20% year over year in April, with online sales of women’s apparel increasing about 15%, the second straight month that the women’s apparel e-commerce category has grown by at least 15%, MasterCard says. Total apparel sales, which also include bricks-and-mortar stores, increased 10.4% in April, helped by Easter sales, the report says.

Online sales of consumer electronics grew 9.1%, the eighth straight month of growth for that category. By contrast, overall sales of electronics and appliances, including products sold in bricks-and-mortar stores, declined 1.8% year over year in April.

MasterCard says rising gas prices likely will boost online sales. “We can expect consumers to make fewer shopping trips, especially on weekends, and this may contribute to an ever stronger growth for e-commerce,” says Michael McNamara, vice president, research and analysis for MasterCard Advisors SpendingPulse.

This month’s report offered no more e-commerce figures, but did note that overall luxury sales had its seventh consecutive month of growth, up 9.6% year over year, the largest monthly gain since May 2010.

The Tupperware Party Moves to Social Media

New York Times
By Stuart Elliott
Published: May 4, 2011

The Tupperware Brands Corporation plans to increase its presence on Facebook and Twitter.

Although The New York Times is charging for some of their content, readers coming through links from search engines, blogs and LinkedIn will be able to read any article without restriction.
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The Tupperware Party Moves to Social Media

Sites That Send Shoppers What They Might Like

New York Times
By Claire Cain Miller
Published: May 1, 2011

Rather than being greeted by an avalanche of shopping possibilities, Internet shoppers can subscribe to shopping sites that suggest items with the user’s style in mind.

Although The New York Times is charging for some of their content, readers coming through links from search engines, blogs and LinkedIn will be able to read any article without restriction.
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Sites That Send Shoppers What They Might Like

Should There Be Sales Taxes On Internet Purchases?

An increasingly large number of Americans are shopping online, browsing catalogues, selecting items and making purchases from the comfort of their own homes. Beyond convenience, one of the most attractive aspects of online shopping, at least to consumers, is that very few online "stores" charge sales tax, meaning that shoppers pay even lower prices for what they buy online than they would in a traditional store. The days of tax free Internet shopping, however, may be short-lived. Should there be sales tax on Internet purchases or should web shopping remain "tax free"?

To answer this question fairly, it is important to put the sales tax in its proper perspective. Most state and local governments rely heavily on sales tax revenues to fund a wide variety of government functions and programs. All but five states collect a sales tax of some kind or another. The states that collect sales taxes do so in a variety of different ways--some states tax virtually all purchases while others tax a narrower range of purchases. The most commonly exempted class of purchases is food. Tax rates also vary quite widely, from as low as 0.5% in Hawaii to 7.25% in California. Additional sales taxes are also collected in many counties and cities on top of established state sales tax rates.

State and local governments have generally established their taxation and spending patterns over long periods of time, adjusting for local and regional economic conditions and spending requirements when necessary. While it is impossible to anticipate every possible contingency, one of the most important functions of state and local governments is to plan ahead and establish taxation systems that will work down the road as well as today. Each state and local government has developed a mixture of sales, income, property and other taxes to bring in the revenues each needs to maintain roads and highways, build schools, pay teachers, etc. When one or more of a state or local government's expected revenue sources is curtailed or eliminated, its budget plans are no longer useful and it must either scramble for new revenue or cut spending. Neither one of these tends to be very popular with the public.

So, should sales tax be collected on Internet purchases? Ultimately, the answer comes down to this: Most state and local government tax systems and budget plans would be seriously disrupted if sales tax revenue disappeared altogether. If an increasingly larger proportion of purchases are made sales tax-free on the Internet, there will be a fiscal crisis in most states and localities. State and local governments will either have to raise revenue in other ways, by increasing income or property taxes, for example, or by cutting spending.

Most of the uproar over taxation of purchases made on the Internet seems to arise from the perception that any tax on online purchases would be a new form of taxation. This is simply not the case. Purchases off-line have been taxed for decades. Shopping online may be different in many ways, but money is still being exchanged for goods and services. Those purchases would be taxable under any other circumstances, i.e. if the purchases were made anywhere but on the Internet.

Taxing Internet purchases is further complicated because most purchases are made across state borders. In such cases, where should the tax be collected? At the point of sale or the point of delivery? If the tax is collected at the point of sale, there would probably be a migration of online stores to sales tax-free states. The most workable idea would probably be to require the tax to be paid to the state or local government where the purchaser lives. The drawback to this, however, is that at least one rationale for collecting sales taxes in the first place is to provide state and local governments the money they need to build roads, sewers and provide other services that allow businesses to do what they do. If sales taxes are collected in the states and localities where buyers live, the states and localities where sellers are located may not be able to collect the revenues they need.

The issue of sales tax collection on Internet sales is a complicated one. If people want to shop online--and more and more are doing so every day--and they don't want to be charged a sales tax when they do so, they should realize that they will either have to pay those taxes in other ways or be prepared to see reductions in state and local government services. And as states and local governments come to grips with the evolving nature of commerce, they will have to develop new ways of thinking about and administering tax systems.

Men Avoid Stores Through Internet Shopping

A duffel-load of new websites provide shopping-skittish guys with a reason to never leave the house again.

Wall Street Journal
By Sameer Reddy

In the average man's mind, shopping for clothes falls somewhere between taking out the garbage and going to the dentist—a necessary evil that subtracts from time that could be spent watching sports, drinking beer and taking naps. But with a wealth of new websites aimed specifically at manly men with a disdain for in-store shopping, getting gear has never been more appealing (or painless).

Sites like the dapper Mr Porter, an extension of Web retail pioneer Natalie Massenet's empire; avant-garde portal Oki-ni; Southern-bred start-up Lyonstate and flash-sale favorite Gilt Man and its coming full-price site are upending the notion that acquiring cool clothes requires tedious hours spent sifting through mountains of merchandise. Instead, they offer a curated selection of hard-to-find labels and even vintage wares. Information, clean graphics and efficiency are emphasized on the sites, which are designed specifically to avoid the horrors that men's shopping nightmares are made of.

Unlike most women's sites, which focus on spotlighting product, men's e-tailers have made a big investment in editorial content that shepherds visitors through the corridors of male personal style. London-based Mr Porter (mrporter.com), which launched in late February, is the most ambitious of the bunch, updating its comprehensive style bible weekly. Editor in chief Jeremy Langmead's magazine experience—as the former editor of Esquire's U.K. edition and of Wallpaper—brings a polished sensibility to Mr Porter, offering classics from 80 designers, including Turnbull & Asser, Yves Saint Laurent and Ralph Lauren. It also contains detailed lifestyle tips from well-dressed men, including Hugh Jackman and Pharrell Williams, and get-the-look shopping guides based on style icons like Paul Newman and Fiat heir Lapo Elkann. Mr Porter also provides a level of service on par with that of luxury department stores like Bergdorf Goodman, offering brief introductions to each brand they carry, highlighting its strong points along with factoids and sizing. "Content gives us the ability to illustrate an idea while also educating a customer about a brand or a product that is featured on the site," Mr. Langmead said. "As a retailer, you have to talk and sell to men in a very different way than you do to women. They want information and advice."

However, men are just as susceptible to impulse buys as their female counterparts—a wager on which Gilt Man (giltman.com), launched in 2009, has built its $100 million business. A subsidiary of the popular site Gilt Groupe, Gilt Man's "flash sales" are similar to a designer sample sale (minus the threat of violence), selling a limited quantity of discounted product from more than 350 brands—everything from vintage Porsches to John Varvatos suits. This summer, Gilt will move into a new corner of the market, launching a much-buzzed-about full-price men's site editorially directed by Tyler Thoreson, who has recruited magazine editors from publications such as GQ and contributors like Gay Talese. (The name of the project has been embargoed until closer to the launch date.) According to John Auerbach, president of the new division, the site will adopt a more populist approach than Mr Porter, treating both rarefied luxury goods and wardrobe staples with a degree of irreverence and an eye for utility. "You'll see a wide range of styles, along with surprise items that you didn't realize you needed," he said. If Gilt Man's blog, Gilt Manual, which was launched last September by Mr. Thoreson, is any indication, it will be less slick and more informal than Mr Porter's editorial, with a kinetic aesthetic, providing merchandised solutions to practical problems that confront contemporary men, such as "how to sharpen a straight razor" and "how to clash with panache."

Catering to a much smaller audience, the progressive British site Oki-ni (oki-ni.com) has become a destination for men who can wax poetic on the transcendent virtues of Japanese denim. Launched in 2001, the site was one of the first aimed toward men, offering a mix of both established and up-and-coming labels like Thom Browne, Omar Kashoura and Raf Simons. An early embracer of the now-saturated collaboration concept, Oki-ni has refocused on carrying exclusives, such as suede creeper boots from George Cox. Akin to specialty stores like New York's Opening Ceremony, the site affords fashion-conscious consumers who live outside of urban centers access to brands they likely wouldn't have been exposed to.

Going for more of a rural aesthetic, the men's site Lyonstate (lyonstate.com), which launched this spring, pays homage to owner Reba Cunningham's Southern roots. Born in Mobile, Ala., the former A.P.C. executive is now a Manhattan resident, but has held onto her down-home appreciation for personal touches. Ms. Cunningham's values are evident in every aspect of the site, from the personalized thank you notes enclosed with each order to special commissions, like the handkerchiefs she had silkscreened with a letter written by her grandmother in the 1920s. Offering just 13 labels, the brand matrix is casual and focused on independent designers like Billy Reid and Rachel Comey.

While for many women online shopping is an extension of a favorite leisure activity, for men, it's a one-click answer to their prayers. Men want to look put together, but they don't want to spend half the day wandering from store to store in search of a cashmere sweater or the perfect pair of flat-front pants. As Mr. Langmead of Mr Porter put it, "a guy can have the items he chooses delivered, he can try it on with stuff he already owns, check if his partner likes it and keep it if it works. If not, we will pick it back up." Best of all, he can enjoy a beer, watch the game and take a nap while shopping from home—just try doing that in a department store.

Overstock.com Released From Google 'Penalty Box'

Wall Street Journal
By Matt Jarzemsky

Overstock.com Inc. said it has served out the search-engine penalty Google Inc. subjected it to for violating policies that prohibit companies from artificially boosting their ranking in the search engine.

During the penalty time, Google was pushing Overstock further down in the search results.

The case, along with a similar incident involving J.C. Penney Co., demonstrates Google's efforts to thwart attempts to game the system with its search engine, long considered the gold standard of Internet search. Google has faced criticism for not doing a better job weeding out "low quality" sites that offer little value but appear in search results.

Google penalized Overstock for the misstep earlier this year. The Internet retailer had said the incident stemmed in part from its practice of encouraging websites of colleges and universities to post links to Overstock pages so students and faculty could receive discounts. Overstock had said it discontinued the program Feb. 10, before it heard from Google, but some university webmasters were slow to remove the links.

Sites associated with educational institutions, which come with a ".edu" in their Web addresses, are said to be given priority by Google's search algorithm.

"We understand Google's position and we have made changes to remain clearly within their guidelines," Overstock Chief Executive Patrick Byrne said in a news release Monday with the headline, "Overstock.com Released From Google Penalty Box."

Asked for comment, a Google spokesperson said, "Our webmaster guidelines are designed to protect users, and when a site violates them, we take action to preserve a good user experience. We typically don't comment on how specific websites rank in our search results."

Web Ground Zero in Ongoing War on Counterfeits

by Alexandra Steigrad
From WWD Issue 04/25/2011

The fashion world is going after bigger fish when it comes to counterfeits — and it’s all because of the Internet.

As the industry’s relationship with the Web morphs into one of both loving and loathing, companies are changing tactics in their fight against counterfeiters, who in turn are becoming increasingly sophisticated. Fashion firms recognize they need a vibrant presence on the Web — from e-commerce to social networking — yet also are finding the Internet is now the primary source for counterfeit goods and sites selling fakes that are proliferating as quickly as daffodils in spring.

The numbers illustrate the scale of the fight: last year research firm ComScore said U.S. e-commerce sales totaled $227.6 billion. In 2010, U.S. Immigration and Customs Enforcement valued the global counterfeit market at $600 billion.

As a result, the Internet has become a clandestine conduit for piracy, cybersquatting and counterfeiting, all of which can take legitimate sales away from apparel, beauty and retail companies, according to legal experts speaking at Fordham University’s first annual Fashion Law Institute Symposium earlier this month. And with violators working around the world, rather than simply around the block, fashion companies are seeking remedies wherever they can find them.

Brands have a few traditional tools at their immediate disposal, including sending out cease-and-desist letters and litigating in court. But the Internet brings a cloak of anonymity with it, and often a cloak of great distance, and pinning down the culprits can be tough. Firms selling fakes have been known to be based in one country, such as China, yet ship the goods from another Western nation to make the products look even more legitimate. Tracking the location of Web sites also can be a nightmare.

“Before, counterfeiters needed money, import and export skills, manufacturing contacts and language skills,” said Scott Gelin, shareholder at Greenberg Traurig, where he practices trademark and copyright law. “Now, all you need is an Internet connection.”

About 80 percent of counterfeits are sold online, according to Valerie Salembier, Harper’s Bazaar senior vice president and publisher. “Counterfeiting supports child labor, most of all, terrorism and drug cartels,” she said.

When the product, the Web site and the pricing “look good, it’s deceptive,” said Fred Felman, chief marketing officer at online security firm MarkMonitor. “It’s a huge problem for brands in terms of the scale of the traffic that is siphoned.”

Prosecuting third parties, such as Internet service providers, is a growing trend after delivering successful results to brand owners in the last year, according to Felman, who cited Roger Cleveland Golf Company Inc. versus Christopher Prince, et al., a recent case in which the plaintiff sued and won against search engine optimization and Web-hosting firm Bright Builders Inc. for assisting with the construction and hosting of Web site Copycatclubs.com, an online business that sold counterfeit Cleveland golf clubs. The judgment, which included an award of $770,750 in statutory damages against Bright Builders and $28,250 in statutory damages against Web-site owner Prince, is the first time that an SEO/Web host or other Internet intermediary was found liable for contributory infringement without having first received actual notification of the counterfeit sales from a third party, according to Felman.

“This could be problematic for marketing companies,” he said, explaining that counterfeiters will copy any sought-after items — whether beauty products, sporting goods, pharmaceuticals or designer apparel — and companies are looking to hold someone accountable.

While the fight against counterfeiting stretches across all industries, many of the more groundbreaking cases have come from the luxury world.

In 2007, Louis Vuitton Malletier SA sued Akanoc Solutions Inc. for contributory trademark infringement liability, claiming that it allowed several Web sites it hosted to sell goods that infringed its copyrights and trademarks. Two years later, a federal jury in California ruled in favor of LVMH, awarding it more than $32 million in damages, a sum that, according to Felman, would put the defendants out of business.

Now on appeal, the Akanoc case has made “inroads” in third-party liability, said Brian Brokate, a partner at Gibney Anthony & Flaherty, who cited 2010 decisions in Gucci America Inc. versus Frontline Processing Corp., et al., and The North Face Apparel Corp., et al., versus Fujian Sharing Import & Export Ltd. Co. et al., as other significant cases. The court established in the Gucci case that credit card processors may be held liable for contributory trademark infringement, while in the Fujian litigation, courts gave plaintiffs North Face, a division of VF Corp., and Polo Ralph Lauren Corp. the authority to shut down counterfeiting Web sites and transfer their domains.

Both suits effectively shifted the power to the brands, giving them the ability to hold someone accountable and collect money from a legitimate entity. While the terms of the Gucci judgment were confidential, North Face and Polo were awarded a $78 million judgment, which is believed to be the highest sum of damages ever awarded in an Internet counterfeiting case.

“No more will these cases be just against the infringer,” Brokate said. “Plaintiffs will look deep within, be it at Web hosts, landlords, transportation companies….It’s much easier to get payments from them than from a counterfeiter.”

Brokate, who did not attend the Fordham conference, has helped set the foundation for third-party liability cases tried in courts today. His firm was the first to hold landlords accountable for knowingly allowing tenants to sell counterfeit goods.

One of the firm’s attorneys, Heather McDonald, who is now a partner at Baker Hostetler, spearheaded the effort by putting the landlords “on notice” when she discovered that a counterfeiter was a tenant.

The firm’s first cases testing this form of liability were brought against Michael Marvisi, an owner of a building at 365 Canal Street in New York, which contained a marketplace of vendors, some of whom sold counterfeit goods.

Louis Vuitton Malletier and Rolex USA sued Marvisi in 2004, after McDonald amassed large quantities of fakes she found while on raids.

“This case was my baby. I went on 30 some-odd seizures through that stupid building,” she said. “I had to climb over rat poop.”

McDonald, who still trolls the streets for knock-offs, said that although the majority of counterfeiting has shifted to the Internet, “brands have to go at it from every angle” in order to dissuade counterfeiters.

“If there’s no demand, there will be no supply,” she said, while acknowledging the immense task of eradicating fakes entirely. “I think the solution really is public education. As long as people are going to buy counterfeits, someone is going to sell them.”

Years ago, fakes were a lot easier to spot, said Erica Alterwitz, assistant general counsel at BCBG Max Azria Group, holding up two gray and purple dresses, one a shiny, garish, shabby version of the other.

“Recently, it’s gotten a lot harder to tell,” she said, now displaying two similar-looking strapless black dresses. Not only has the quality of fabric and tagging improved, but counterfeiters have also increased their prices, a strategy used to fool customers into thinking they were getting a good deal on the genuine article.

Retailers Find Customers Are All Thumbs When It Comes To Mobile Shopping

New York TImes
Stephanie Clifford and Claire Cain Miller

Retailers are retilling sites to ease mobile shopping, because it can be
hard to examine items on a small screen, pages can be slow to load and typing in information requires either surgical precision or tiny fingers.

Although The New York Times is charging for some of their content, readers coming through links from search engines, blogs and LinkedIn will be able to read any article without restriction.
Click here to read the entire article at www.nytimes.com:
Retailers Find Customers Are All Thumbs When It Comes To Mobile Shopping

Adapting to the New Retail Landscape

by Rachel Brown
From WWD Issue 04/14/2011

At the 15th annual Global Retailing Conference here last Thursday and Friday, Martha Stewart clearly articulated traditional retailers’ modern dilemma. In a world in which shopping on the Web is easy and convenient, they have to be that much better than their online rivals — and even their own online shops — to lure customers into stores.

“No matter where you live, you can get great stuff if you order online. It’s happening, and it is going to continue to happen,” said Stewart. “The challenge, I think, to retailers is to keep the stores very, very interesting and to keep new and innovative products appearing in the stores as they grow their e-commerce business.”

Similarly, Raul Vazquez, executive vice president, global e-commerce at Wal-Mart Stores Inc., said, “Consumers today, when you ask them what their favorite retail experiences are, they list online companies. One could argue it is a superior customer experience online.” And he continued with a cautionary note: “There are going to be winners and losers. Some people are going to ride this game, and it is going to be phenomenal for them.”

Retailers are certainly not throwing in the towel, as evidenced by the speeches encouraging innovation from executives at companies as diverse as Wal-Mart, Macy’s Inc., Gilt Groupe, Crate & Barrel and QVC Inc. during the conference, which was presented by the University of Arizona’s Terry J. Lundgren Center for Retailing at the Loews Ventana Canyon resort. Instead, they have carved out strategies to distinguish themselves from competitors — online or otherwise — and implement technology to keep pace with customers’ adoption of the latest advancements.

Lundgren, the chairman, president and chief executive officer of Macy’s, said the retailer has been making its merchandise relevant to consumers with its deals for exclusive brands. Last year, he estimated about 40 percent of sales came from those brands carried only at Macy’s, such as Rachel Rachel Roy, Tommy Hilfiger and Material Girl — a key point of difference to drive shoppers into stores. “If the customer likes the brand and wants it, they can only come to you for that product,” he said.

Meanwhile, Macy’s has been on board the technology train. Lundgren mentioned Quick Response bar codes, which are placed throughout stores and are readable by shoppers’ cell phones, enabling them to watch videos of designers telling stories about their inspiration. And he highlighted successful online marketing efforts, including a contest via Facebook with Clinton Kelly for wardrobe makeovers that garnered around 20,000 applicants; a beach party in Chicago promoted on the Web in advance of spring break to energize young customers; and a flash performance of “Hallelujah!” by the Opera Company of Philadelphia at Macy’s Center City store that has been viewed more than 7 million times on YouTube.

Three years ago, Lundgren said Macy’s spent no money to advertise digitally. Last year, he said, the company shelled out $120 million to do so. “We are planning to grow that number significantly and, in many ways, it is coming out of traditional media,” said Lundgren.

Vazquez underscored technological progress isn’t a boon to everybody. He singled out an independent San Francisco store owner who, in order to gain new customers, had his margins shaved by Groupon taking 50 percent of sales on its offers and Google asking for 20 percent or more of sales for the store to show up on local searches. “We are going to start spending a lot more not only to acquire these new customers…[but] for every new customer that someone is acquiring, some other person is spending money to retain that customer,” he said.

Still, seizing the opportunities technology provides is a must for most retailers’ survival. “The whole ecosystem that you’re part of is under attack right now by people who are innovative,” said Vazquez. Elements of Wal-Mart’s counterattack he identified are Web enhancements that allow users of the retailer’s site to determine which stores around them have a product — for example, the iPad 2 — in stock, and its “Site to Store” program being rolled out nationally that lets customers order online and pick up their purchases in stores. Vazquez also said Wal-Mart is exploring self-service “way finding” technology that informs customers on cell phones where something they are looking for is located inside a store so they don’t have to ask for directions.

Giving consumers more precisely what they want — and securing an order — is the goal of many of retailers’ technological improvements. At Wal-Mart, Vazquez said the Web site suggests daily values based on customers’ online viewing and purchasing patterns. Gilt Groupe is introducing individualized tailored e-mails to all its members after a test resulted in a 7 to 12 percent lift in revenue from a limited group getting the personalized e-mails. Chairman Susan Lyne explained that two regressions run each day, examining what members browsed and added to their carts, and purchasing behavior power the personalized e-mails. She added that e-mails to alert members any time a designer they have bought from before is up on Gilt Groupe again has led to a 30 to 40 percent lift in revenue.

For the customer, Mike George, president and ceo of QVC, said the television shopping network’s objective with new technological tools is to “create an experience that’s about her and the QVC that she wants, not the QVC we want to offer her.” He said QVC is changing its technological infrastructure to respond to where the customer engages with QVC (such as a tablet versus the TV), what time she buys products and where she wants packages left at her house, as well as many other data. As it does so, George said, the technological ground is shifting under QVC’s feet. Mobile technology, he stressed, “will change retailing in the most fundamental and profound way, and I think at a pace that will make the pace of change driven by the Internet [seem] glacial.”

The Coming Virtual Web

In the future, the Internet is almost certain to look more realistic, interactive, and social—a lot like a virtual world

Bloomberg Businessweek
By Robert D. Hof

Ever since Neal Stephenson published Snow Crash in 1992, the virtual world he described in his seminal dystopian novel has been the Holy Grail for a generation of tech whizzes. The metaverse, as Stephenson called it, was essentially the Internet.

But in place of the flat, two-dimensional World Wide Web that had just been invented, he imagined a completely immersive and highly social 3D online world. People's avatars, or virtual representations of themselves, could interact using facial expressions and body language so richly textured that for many the metaverse became more compelling than the real world.

Now, 15 years later, the glimmers of a real metaverse are coming into focus. You can see it in the popular online role-playing game World of Warcraft, which is revolutionizing online games with sophisticated graphics and complex team strategy.

Virtual worlds such as There, Entropia Universe, and Second Life let you create avatars, buildings, and even virtual classrooms and businesses. With Google Earth and Microsoft's Virtual Earth 3-D, you can transcend the map layout and zoom into satellite-mapped locations around the world.

All these developments have one thing in common: They suggest that before long, the Internet of the future, and the vast wealth of information and services on it, will look different: slicker, more realistic, more interactive and social than anything we experience today through the Web browser. "Three-dimensional virtual worlds will, in the near future, be pervasive interfaces for the Internet," says Bob Moore, a sociologist who studies virtual worlds at Palo Alto Research Center, or PARC, the legendary Xerox lab in Silicon Valley.

Trappings of a Bigger Change

This Internet of the future won't just look different. It will work differently, too.

In a sense, it could become not just a portal into various media, entertainment, and communications services but a window into a much richer virtual life. It may become the place where we engage not only in familiar real-world activities such as family reunions and shopping trips with friends but also new, only-in-cyberspace adventures such as online games and virtual economies.

For all the visual appeal of avatars and slick 3D graphics, they could prove to be mere trappings of a bigger change in how people use the Internet—one only hinted at by the current crush of so-called Web 2.0 companies. Above all, virtual worlds hold the potential to transform social interaction online: In contrast to the Web, where there's almost no assumption of a human heartbeat behind the Web page, virtual worlds are inherently social settings. "You go up to an avatar and you know there's a real person on the other end," says Joe Miller, vice-president for platform and technology development at Second Life creator Linden Lab.

That's why the growing appeal of virtual worlds may prove to be much more than the fad some folks think it is. Social interaction, after all, is the key driver of people's use of the Internet today. From social networking sites such as Facebook and News Corp.'s MySpace to participatory projects such as Wikipedia to sharing services like Google's YouTube video site—not to mention such old standbys as e-mail and instant messaging—social activity dominates what people want to do online.

Defining the 3D Internet

And it's clear that Internet users crave richer ways to interact. "This is the mode of communication that we're gravitating toward," says Chris Melissinos, chief gaming officer at Sun Microsystems, which offers a computing platform for running online games and virtual worlds. "It's really going to change how we communicate and view information."

Eventually, at least. World of Warcraft and Second Life may be all the rage now, but they still touch relatively few people's lives, in no small part because they're primitive and awkward to use.

The Metaverse Roadmap, formed by the Acceleration Studies Foundation, a nonprofit tech research group, has set out to define the 3D Internet. But even Metaverse Roadmap assumes much of its vision won't materialize until 2016—and some participants think even that date is ambitious.

For one thing, many people don't even have personal computers that can handle the often heavy processing demands of virtual worlds. The amount of data required by 3D environments also can tax even high-speed Internet connections.

And all these virtual worlds are relatively closed systems, requiring people to download and learn special software, and then hope their friends do the same. One software company, Multiverse Network, is trying to push a "world browser" that would allow people to traverse many different worlds.

Competing Visions of the Future

Even if that's successful, 3D technology won't fully replace the current Web. Fact is, a lot of information, such as search results, lists of products, e-mail, and most of what we do online today may always be most efficiently accomplished with existing tools. Melissinos is a lifetime video and computer gamer, but even he concedes: "Not everything needs to be put in a 3D interface."

Indeed, some Web experts think all this talk of virtual worlds supplanting the Web is hooey. "3D interfaces always seem more glamorous," says Web usability expert Jakob Nielsen, a principal with product development consultant Nielsen/Norman Group. "But they're rarely useful for managing information." Nielsen contends that while 3D excels for a number of applications, such as medical scans, architecture, and chemical modeling, most information is best accessed and analyzed in more mundane, 2D fashion.

Controversial as these visions of the future Internet are, attempts to create metaverses for the masses keep sprouting up. Not surprisingly, they're most intense in gaming, thanks to the success of World of Warcraft, which now has more than 8 million paying subscribers. And for the next few years, that's likely to remain the focus of virtual worlds.

A Big Bang of Potential Applications

But that doesn't mean they'll remain a niche. Gaming companies are aiming to forge more links between their world and the so-called real one. Viacom's MTV Networks, for instance, has several virtual environments, such as Virtual Laguna Beach, that connect to its television shows.

Virtual worlds also are providing new online venues for education well beyond posting class notes and reading lists. Dozens of universities are conducting classes and other activities inside Second Life. At Ball State University in Muncie, Ind., for instance, some freshmen are taking the English 104 composition course partly inside the world, writing about field trips they take inside Second Life. A sign of how compelling the notion is: The first class drew 300 applicants for 18 slots.

If virtual-world visionaries have their way, those are just the start of a coming Big Bang of potential applications. Take shopping. It's no secret that the same efficiency that drives e-commerce also makes it a boring and lonely pursuit. "What missing from online shopping is the social and recreational experience," says PARC's Moore. "That's exactly what you get with virtual-world shopping."

Mapping Real Facial Expressions

For instance, Apple could run virtual dance or jazz clubs that let visitors buy music from its iTunes store as they listen to music with friends, he says. "Virtual worlds will be bigger in five years for shopping than the Web," contends T. Sibley Verbeck, CEO of Electric Sheep, which helps businesses market in Second Life and other venues.

Likewise, virtual worlds also could inject real-world richness into online business negotiations and collaboration. Jeremy Bailenson, an assistant professor in Stanford University's Communications Dept. who works on motion-capture technologies for virtual reality research, suggests that avatars could be made much more expressive by mapping people's real facial expressions and body language onto them in virtual meetings.

Even more interesting, and not a little spooky, avatars could be manipulated subtly to give one an edge in business negotiations, Bailenson says. Research has shown that people are more influential when they look directly at their counterpart. In other research, people who view pictures of other people that have been even faintly morphed to incorporate their own facial features say they trust those people more. By applying the same idea to avatars in virtual-world meetings, Bailenson says, "you can optimize your negotiations in business."

Setting Standards for Virtual Worlds

Still others hope to apply to business the intrinsic appeal of various features of online virtual worlds and games. Startup Seriosity, for instance, is testing software that creates a virtual currency that will be used to reduce e-mail overload.

People may spend five Serios to send an e-mail they consider a high priority for the receiver, while they might spend only one Serio on an e-mail to tell people the office fridge will be emptied Friday. "When you look at how addicted people get to these games, you realize there's a psychology that you can apply to real-life business situations," says Seriosity CEO Ken Ross.

Before most of these visions can be fully realized, a lot of heavy lifting has to happen. PCs need the benefit of a few more rounds of graphics-chip improvements, as well as faster broadband speeds.

Not least, standards for connecting these worlds need to be developed. After all, the Web took off in no small part because browsers could access any site that adhered to basic standards. Just as they did with the Web, such standards likely would involve a lot of experimentation.

The main challenge, though, isn't technical. It's conceptual. Today's 3D interfaces are a work in progress. "They're dragging too much of the baggage of the real world into online," says Multiverse Marketing Director and Executive Producer Corey Bridges, citing virtual stores built by the likes of Circuit City and Sears in Second Life.

"The last thing I want to do is shop for a crappy visualization of a washer," says Bridges, who's also a Multiverse co-founder. Ultimately, the key to virtual-world technologies spreading far and wide will be just what Neal Stephenson displayed in the first place: imagination

The Changing Face of Retail

Meet the store associate of the future, mobile device in hand

NRF Stores
By M.V. Greene

A customer enters a retail establishment, looking for that washer-dryer, hybrid vehicle, blue suit or pair of Jordans. Empowered by limitless web research, chances are she already knows the specs of the product, including features, functions, costs and benefits. No hard sell needed — no need to hone in on the washer-dryer’s energy ratings or the hybrid’s gas-saving features as selling points.

So what’s left for the retail store associate to do? Locate the product within the retail supply chain, close the deal and get it into the customer’s hands promptly and efficiently in the manner of her choosing.

The key enabler for this store associate is mobile technology. Smartphones, handhelds and media tablets, along with burgeoning mobile application software, are changing the face of retail operations and the role of store personnel — positioning the store as a gateway to the retail supply chain rather than simply an end point, says Scott Fenwick, senior director of product strategy for consulting firm Manhattan Associates.

“The expectations of the store associate have started to change,” Fenwick says. “Now we are looking at them to help maintain inventory, maintain the accuracy of that inventory and fill orders vs. being the product expert. It is starting to shape how we think about those job functions and the types of tools we are able to put in their hands that … 10 years ago we would not have been able to do.”

This new model embraces a mobile supply chain, and retail’s business rules will need to adjust to meet the competitive opportunities inherent with mobility, Fenwick says. “The retail associate today is interacting with consumers who are just as intelligent as they are about the products.”

A March 2010 survey from Art Technology Group, a Cambridge, Mass., provider of cross-channel solutions, found that three-quarters of consumers use two or more retail channels to browse, research and purchase products; nearly one-third use three or more channels. In the coveted 18- to 34-year-old demographic, 41 percent of respondents told ATG they use mobile devices to browse or research products or services.

The power of information

Mobility has granted store personnel greater visibility into the movement and availability of products within the retail pipeline. Fenwick says mobile applications makes supply chain functions similar to those enjoyed in retail corporate offices and distribution centers available at the store level.

“We’re now able to fulfill orders whether the inventory is there or not,” he says. “If a consumer has a need and I cannot fulfill it right now, through this mobile technology we are able to reach out to the cloud to find out if there are other locations that have that inventory, when it is available and how long it might take to ship.

“In a lot of cases, that might save potential lost sales by preventing that consumer from walking out and going to a competitor,” Fenwick says.

As the mobile supply chain continues to gain traction in the retail marketplace, service providers are moving aggressively with tools and applications. UPS has developed a series of smartphone apps designed to assist retailers and other businesses in supply chain management functions.
UPS apps for BlackBerry, iPhone and Android devices are configured to facilitate supply chain functions like shipping and tracking packages, locating UPS facilities via GPS and calculating shipping rates and time-in-transit.

The TradeAbility functions of UPS’s apps provide retailers with data for international shipping and receiving so they will know the precise costs for duties and taxes in advance. UPS paperless invoicing systems provide pre-clearance for documentation for international shipping.

Jordan Colletta, UPS vice president of customer technology marketing, says mobile applications are designed to give retailers — particularly smaller companies that lack the technology assets of major merchants and chains — the ability to take control of their supply chains.

“It puts the control into the retailer’s hands so they have more information and they can actually execute what they need to execute,” Colletta says. “All of a sudden they have the power of information out on location and can make solid decisions to keep the business on track.”

Small retailers often take buying trips to stock their store shelves and online catalogs, Colletta says, and must circulate those products for sale almost immediately to realize return on their investments. The mobile supply chain and its array of tools and applications bring precision to the process, he says.

“It leverages the supply chain to the retailers’ advantage,” he says. “You buy the goods … we know we have the goods [and that they will] be there on Thursday. You go ahead and put the ad in … for the weekend.”

Real-time product management

Dwight Klappich, research vice president in supply chain management with Gartner, says that as declining technology costs were galvanizing companies to modernize their supply chain footprints, both large and small organizations were also seeking increased efficiencies amid the global economic crisis.

Supply chains, given their traditional transport and shipping functions, have long had mobile components — trucks with satellite tracking capability, for instance. The key difference in today’s technological environment is that data can be transmitted upstream in real-time using mobile devices, Klappich says.

“What has happened is that the technology and communications costs have come down such that you can now basically communicate with that mobile user at a reasonable price, which is expanding the market.”

Despite the promise, Fenwick says the expansion of the mobile supply chain won’t occur without challenges.

One barrier to adoption is the need for retailers to refresh their stores’ technology infrastructure to accommodate mobile processes and be in sync with cross-channel sales and branding opportunities. Additionally, retailers have to adjust to the scale of change management involved in implementing modern mobile supply techniques. Traditionally, retail store operations have focused primarily on point-of-sale, merchandising and managing time and attendance. Now supply chain responsibilities are being added to that mix, creating entirely new processes for store personnel, Fenwick says.

“In this new environment, POS is still a big part of the model, but it’s no longer the only part of it,” he says. “That’s where the mobile technology really starts to make that store kind of a full-fledged participant in the supply chain, functioning just like a full-bore distribution center.”

Selling Via Facebook Benefits Few, Study Finds

Wall Street Journal
By Sarah E. Needleman

Small retailers that lack websites may be the only businesses benefiting from having shopping carts embedded in their Facebook pages, a new study finds.

Forrester Research reports that having an ecommerce presence on Facebook isn’t very effective at acquiring and retaining customers compared with email and paid search. But for retailers that don’t have websites, which is often true of small, local businesses, directing consumers to a Facebook fan page with a shopping cart is, Forrester concludes.

“It’s so much cheaper and easier to slap up a few images on Facebook” than to build a website with an ecommerce component from scratch, says Forrester Research analyst Sucharita Mulpuru. “If you’re a really tiny business, to get one or two sales through Facbook, that’s a big deal, especially if that’s the only way [consumers] can access you online.”

Forrester’s findings line up with earlier studies that reported that early adopters of shopping carts on Facebook had seen only modest results, and in most cases not until after they’d established a loyal-fan following. For e-commerce via Facebook to work, businesses need to make consumers aware that their fan pages exist, which typically means having to invest in advertising, said Larry Chiagouris, a marketing professor at Lubin School of Business at Pace University, in the article. A Facebook profile that isn’t heavily trafficked could create the impression that a business isn’t popular, “and nobody likes to shop at places where no one else shops,” Chiagouris said.

Forrester’s study, however, finds that Facebook just isn’t a hot spot for shopping. Most people log onto the social-networking site to – you guessed, it — socialize. For this reason, Forrester concludes that despite Facebook’s enormous user base, the social-media giant isn’t poised to become a major ecommerce player.

Can Google Influence Consumer Behavior?

Wall Street Journal
By Sarah E. Needleman

Just how powerful is Google when it comes to small business?

The search giant might actually be capable of influencing consumer behavior, as it recently seems to have prompted a brief spike in sales for some mom and pop ice-cream shops.

On Sunday, April 3, Google’s homepage featured a “doodle” – a design of its logo that celebrates holidays, anniversaries, famous artists and scientists – in honor of the 119th birthday of the alleged first documented ice-cream sundae. That same day, some U.S. businesses that sell the cool treats say they were busier than usual.

Coincidence? Amy Simmons doesn’t think so. The founder of Amy’s Ice Creams, which has 15 locations in three Texas cities, she says the Austin outlets sold 150 sundaes on the day the doodle appeared, double the number it normally sells. “At least three or four people said they saw the Google logo and that it made them come in,” she says.

Sundaes at Amy’s, which was founded in 1984, are topped with fresh strawberries instead the traditional maraschino cherry. Simmons says they’re typically not as popular as the business’s “crush’ns” – treats made of ice-cream mixed with fresh fruit, candies or nuts.

To be sure, Simmons says she didn’t see a similar turnout at her other outlets in Houston and San Antonio. Plus, Austin locals had recently scooped up $35,000 worth of Amy’s ice cream, she says, courtesy of Google for a special promotion. The Web company was in town to promote Google Hotpot, a local recommendation engine from Google Places that launched in November.

But Amy’s wasn’t the only dessert shop that saw a surge in sales on Sunday. Kevin Simon, co-owner of Bonnie Brae Ice Cream in Denver, says business was surprisingly strong for a snow day. “I can’t say it was attributable to Google, but it was interesting,” he admits. In July, the shop will celebrate its 25th anniversary.

Other “ice-cream-preneurs” also aren’t sure what role Google played in how their shops performed the day the sundae doodle was featured. “It’s hard to say because Sunday was a really beautiful day,” says Alexis Miesen, co-owner of Blue Marble Ice Cream in Brooklyn, N.Y. “It was certainly a good day but pretty much on track with what we did this time last year.”

Ice-cream sales typically fluctuate based on weather conditions, says Lynda Utterback, executive director of the National Ice Cream Retailers Association, a trade group in Elk Grove Village, Ill., with 15,000 members, including franchises and independent merchants. “If it’s raining or cold, especially if it’s a walk up stand, people don’t go,” she says.

But in general, ice-cream businesses fare well in bad economies, Utterback adds. The reason: “It’s affordable.”

Meanwhile, it’s worth noting that there’s some debate as to the origins of the anniversary that the Google doodle honors. Utterback says at least two U.S. cities claim that the ice-cream sundae was invented on their turf, Ithaca, N.Y., and Two Rivers, Wis. And more than one city claims to have invented the banana split, too.

“We just think it’s fun trivia,” says Utterback, declining to take sides.

Computing Heads for the Clouds

Amazon, IBM, Yahoo!, and Google are all putting the power of cloud computing to work. Here's a short primer on how the new technology works

Bloomberg Businessweek
By Aaron Ricadela

Researchers seeking smarter ways to tackle the most complicated computing tasks think they've found the answer in a cloud—though not the kind that wafts across the sky as masses of condensed water droplets and frozen crystals. Instead, they're turning to something called cloud computing, which aims to deliver supercomputing power over the Internet.

IBM is the most recent company to announce plans to tap cloud computing technologies. On Nov. 15, IBM executives in Shanghai unveiled a system, dubbed Blue Cloud, that will let banks and other customers distribute their programs across large numbers of machines to deliver faster, more sophisticated data analysis. The first Blue Cloud products are due in the spring of 2008.

Supercomputing for the Rest of Us

Two top Internet companies recently announced similar projects. Yahoo! on Nov. 12 said Carnegie Mellon University, and eventually other schools, will use a 4,000-processor computer housed at the Web company to conduct software research. And Google, the steward of what's effectively one of the world's largest supercomputers used to power its search engine, in October said it would make hundreds of processors in its data centers available to schools including the University of Washington, Stanford University, and MIT to help teach high-performance computing programming techniques.

"All of these are examples of the frenzy around cloud computing," says Dan Reed, a longtime supercomputing researcher who will start work as Microsoft's (MSFT) director of Scalable & Multicore Computing on Dec. 3. Fueling that frenzy, says Reed, is the proliferation of high-speed Internet connections, cheaper and more powerful chips and disk drives, and the development of data centers that house hundreds or thousands of computers to quickly serve sophisticated software to legions of users. "None of this would have been possible a decade ago," he adds.

Herewith, a primer on how companies—and consumers—might harness cloud computing's power:

How does cloud computing work?

Supercomputers today are used mainly by the military, government intelligence agencies, universities and research labs, and large companies to tackle enormously complex calculations for such tasks as simulating nuclear explosions, predicting climate change, designing airplanes, and analyzing which proteins in the body are likely to bind with potential new drugs. Cloud computing aims to apply that kind of power—measured in the tens of trillions of computations per second—to problems like analyzing risk in financial portfolios, delivering personalized medical information, even powering immersive computer games, in a way that users can tap through the Web. It does that by networking large groups of servers that often use low-cost consumer PC technology, with specialized connections to spread data-processing chores across them. By contrast, the newest and most powerful desktop PCs process only about 3 billion computations a second.

Which companies are at the forefront of cloud computing?

Google's search engine and productivity applications are among the early products of efforts to locate processing power on vast banks of computer servers, rather than on desktop PCs. Microsoft has released online software called Windows Live for photo-sharing, file storage, and other applications served from new data centers. Yahoo has taken similar steps. IBM has devoted 200 researchers to its cloud computing project. And Amazon.com recently broadened access for software developers to its "Elastic Compute Cloud" service, which lets small software companies pay for processing power streamed from Amazon's data centers.

What's the market opportunity for this technology?

While estimates are hard to find, the potential uses are widespread. Rather than serve a relatively small group of highly skilled users, cloud computing aims to make supercomputing available to the masses. Reed, who's moving to Microsoft from the University of North Carolina, says the technology could be used to analyze conversations at meetings, then anticipate what data workers might need to view next, for example. Google, Microsoft, and others are also building online services designed to give consumers greater access to information to help manage their health care.

What are the biggest challenges these companies face?

The technical standards for connecting the various computer systems and pieces of software needed to make cloud computing work still aren't completely defined. That could slow progress on new products. U.S. broadband penetration still lags that of many countries in Europe and Asia, and without high-speed connections—especially wireless ones—cloud computing services won't be widely accessible. And storing large amounts of data about users' identity and preferences is likely to raise new concerns about privacy protection.

Haven't we heard about efforts like this before?

Every decade or so, the computer industry's pendulum swings between a preference for software that's centrally located and programs that instead reside on a user's personal machine. It's always a balancing act, but today's combination of high-speed networks, sophisticated PC graphics processors, and fast, inexpensive servers and disk storage has tilted engineers toward housing more computing in data centers. In the earlier part of this decade, researchers espoused a similar, centralized approach called "grid computing." But cloud computing projects are more powerful and crash-proof than grid systems developed even in recent years.

Fashism 2.0 Launches, Now With More Sharing, Tagging and Augmented Reality

by Rachel Strugatz
Posted Monday March 28, 2011
From WWD.COM

Fashism, continuing on a crusade to make brick-and-mortar shopping as efficient and painless as possible, unveiled its second generation Thursday.

The mobile app and social game, which launched in August 2010 with a roster of celebrity investors that includes Ashton Kutcher, Demi Moore and Nina Garcia, is expanding upon its innovative focus of users crowdsourcing shopping advice. Originally, community members were encouraged to upload images of themselves wearing items for potential purchase, inviting input and advice from fellow users, but Fashism 2.0 goes a step beyond this.

“[Version] 1.0 was strictly about advice, and 2.0 is about directing who you want to comment on your outfit and sharing,” said co-founder and chief executive officer Brooke Moreland. “You’re able to get better advice. It’s about tapping into your existing networks.”

Making dressing room decisions is often difficult for shoppers who fly solo, which is why Moreland and co-founder and chief marketing officer Ashley Granata thought it so important to enhance the main features of the app. Now, due to geo-location capabilities (via Foursquare’s open API), users can tag photos with the store they’re at and its exact location, as well as the brands they’re wearing. There’s also a sharing component that allows users to send a text (once an image is uploaded and a post is created) with a direct link, so friends can give advice on whether the sender should purchase. Sharing can also take place via e-mail, Facebook and Twitter.

A new discovery component also exists, where people can hit a “nearby” button after tagging their location and see what stores are around them and what other users have tried on at those retailers. Additionally, an “augmented reality” feature lets you hold up your mobile device and see the highest-rated outfit in every surrounding store.

Fashism.com currently has 58,000 members and receives nearly 1 million page views a month — and the mobile app has been downloaded 80,000 times since its launch seven months ago. “There’s a relatively low user base for the amount of page views, but we have a really engaged audience. Users spend on average about 15 minutes on the site per visit. They are pretty addicted,” Moreland said.

About to roll out several sponsored programs with brands in the coming months, the company is expected to make revenue the second quarter of this year.

Advertisers in Europe May Face Limits in Use of Keywords

New York Times
By Eric Pfanner
Published: March 24, 2011

An adviser to the bloc's highest court said some restrictions should be placed on the use of brand names by rivals as keywords to generate Internet search ads.

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Advertisers in Europe May Face Limits in Use of Keywords