Ecommerce Reconsidered: Why You Might Need a Shopping Cart After All
Technology has not only changed what we offer to the marketplace -- it has also influenced how those offerings are sold. The ability to sell things online has had a profound impact on our economy as a whole. Research and consulting firm Forrester projected U.S. online retail sales during the 2014 holiday season to reach $89 billion, a 13% increase from the same time period in 2013. Mobile commerce is only fueling this growth.
Curiously, many publishing organizations do not have the capability to take orders and execute payment transactions online from their website. To those outside the industry, this lack of ecommerce seems preposterous -- proof positive that book publishers are incorrigible Luddites, ostriches with heads firmly in sand. However, those with a deeper knowledge of publishing's distribution ecosystem and publishers' economic realities know that there are some valid reasons why publishers have not made ecommerce a priority, and consequently why many in the industry do not have that capability today. Many publishers made well-reasoned business decisions not to invest in online storefronts based on the facts and a rough calculation of a return on such an investment.
Existing Channels Are Sufficient
For many, the principal reason for not creating an online storefront was that online selling was not consistent with the publisher's channel strategy and would not bring in enough additional revenue to warrant the investment. Existing channels, they reasoned, appropriately handled current sales opportunities.
For trade publishers, online marketplaces such as Amazon most appropriately serve consumers. Trade customers don't conduct a search for books by going to a publisher's websites, but rather to a comprehensive marketplace where all publishers are represented.
Institutional librarians have expressed a preference to purchase through intermediaries that aggregate titles from multiple publishers. For both print and digital titles, librarians prefer the efficiency of buying through a third party channel, such as Overdrive, as opposed to buying from individual publishers.
Educational publishers that serve markets at the primary, secondary, or higher education level must conform to established high-touch adoption sales processes, typically with a direct sales force.
While the specifics may vary from market segment to market segment, publishers concluded that online storefronts would not yield significant additional revenue. Worse, online sales might disrupt existing distribution relationships through channel conflicts, threatening existing revenue.
The Money Pit
The second fundamental reason publishers have questioned whether to create their own storefronts is cost. Businesses have been creating ecommerce sites in earnest for around fifteen years. In the early years of ecommerce, creating an ecommerce site represented a significant capital technology investment. A high level of technology integration was required, if not outright software development, to create the desired shopping experience for the customer and fulfillment processes. Ecommerce initiatives in the early days were risky, complex, and became a career Waterloo for many executives for whom the initiative got out of control. Without a clear projection of the new revenue ecommerce channel would generate, it was difficult for publishers to justify the investment of an ecommerce site.
A Need for Reassessment
The time has come for many of those publishers who earlier decided not to develop or acquire ecommerce capability to reassess their decisions. Many will find that after five to ten years, previous assumptions about ecommerce are no longer true.
The cost and complexity of implementing online transaction capability have been lowered substantially for publishers over the past ten years, driven by a number of factors:
- Vendor-Hosted Ecom: A wide-range of ecommerce software-as-a-service (SaaS) providers can now offer a hosted ecommerce capability to publishers efficiently and economically. SaaS providers enable a publisher to have its own branded storefront without building it themselves.
- Existing Infrastructure: Compared to ten years ago, today publishers have generally put in place the other systems that ecommerce requires, such as a marketing website, CRM systems, and electronic catalogs. Ten years ago, publishers did not always have these components in place, which significantly increased the cost of an ecommerce project.
- Easier Payments: To provide complete transaction capabilities, ecommerce sites connect to a payment gateway that allows the publisher to connect to the banking system to complete the sale. Payment gateway providers, such as authorize.net, have significantly expanded the services they provide, such as securely managing customers credit card information and supporting recurring payment plans. This means there is less functionality that publishers need to implement to provide a full-featured ecommerce site. The payment gateway providers do a lot of the heavy lifting.
Evolving Consumer Behavior Equals Greater Revenue Potential
For many customers, publishers are in fact the preferred point of sale, and ecommerce a preferred method of transaction. Many trade publishers have developed brand equity that has led to customer engagement and loyalty. Based on the brand relationship, customers often wish to engage directly with publishers to buy. Publishers such as Scholastic and Harlequin have shown that a strong brand and an editorial focus enable publishers to engage with and sell to their customers directly, and the customers prefer doing so.
Trade marketplace and aggregation channels are not a fit for many professional publishing segments. Professionals in such fields as law, healthcare, and engineering, do not buy authoritative professional content through consumer marketplaces. Professionals have focused interests and have little motivation to buy omnibus offerings from aggregation channels that serve institutional librarians. Professionals and corporate librarians already know the publishers that are authoritative in their fields, and do in fact start their product search with these authoritative publishers. Ecommerce is the most relevant approach for publishers who wish to pursue non-academic enterprise and professional market opportunities.
Customers of educational publishers are grumbling for change. Educators and educational institutions have expressed a desire for greater flexibility in what and how they buy. They seem to feel locked in by the traditional adoption of a single comprehensive text, and have communicated a desire for acquiring publisher content in smaller chunks, sometimes referred to as learning objects. In order to fulfill the vision of modular content offerings, educational publishers need to not only create content in a more flexible fashion, but to be able to sell it in a more dynamic, nimble fashion: just-in-time sales and just-in-time delivery. The long-cycle textbook adoption sales model is incompatible with the learning object product vision.
For all customer types, an ecommerce site is not just a place to buy, but also a place to check on order status, to see what is new from the publisher, and to administer their customer profile information. A company that provides a well-designed commerce experience is seen as providing a higher level of service to customers.
How Much Ecommerce Revenue Are You NOT Getting?
With significantly lowered implementation and operating costs, and increasing evidence that suggests higher revenue can be expected from ecommerce, it is critical that all publishers reassess decisions they have made in the area of ecommerce, as some key assumptions may have changed.
There is a Catch-22 here: Publishers feel they can't afford ecommerce since historically they have not generated ecommerce revenue, which is only because they did not have a viable storefront to begin with! And that is the key point: Without true ecommerce capability how does one know how much revenue is currently being lost? With lowered implementation costs, publishers can now find out.
Andrew Brenneman is founder and president of Finitiv (www.finitiv.com).