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Happy Friday, everyone. For the past two days, #TheDress has sparked an interesting and unexpected debate over whether it is gold and white or black and blue. It’s a question that has divided the internet and emphasizes the importance of using high-quality product imagery when selling items online. Of course, the virality of the issue makes for some comic social sharing, too:
— Tim Schulz (@timschulz) February 27, 2015
Now to get into our roundup of this week’s top ecommerce news. See below for more information on the FCC’s new rules supporting net neutrality and what that means for ecommerce businesses, Target’s new strategies to beat out Wal-Mart and Amazon, and what Nordstrom plans to do with an estimated $4.3 billion spend to improve their ecommerce experience over the next few years.
FCC Passes New Rules to Keep the Internet Free and Open
The Federal Communications Commission passed new rules supporting net neutrality on Thursday, reclassifying the internet as a public utility. Net neutrality was a hotly debated topic throughout 2014, with more than 2 million comments left on the FCC’s website regarding this potential legislation. Ultimately, the new rules side with the majority of commenters, who demanded the continuance of equal access speeds for all websites.
The rules spell out a loss for service providers including Time Warner Cable and Comcast, the two companies standing to benefit the most from a lack of net neutrality governance. For companies like Netflix, Facebook and Amazon, however, net neutrality regulation is a huge win, meaning they will not be forced to pay increased fees for high site speeds.
The ruling is also a win for startups and small businesses with a digital presence. Studies like those from The Aberdeen Group report that, on average, a 1 second delay in page load time causes a 7% loss in conversion, 11% fewer page views and a 16% decrease in customer satisfaction. Without net neutrality, internet service providers would have been able to charge different fees to different websites, effectively creating a fast and slow lane for internet service –– with those paying the highest amount getting access to the fastest speeds. This would have prohibited startups and small businesses from being able to compete with big box retailers.
Net neutrality effectively keeps the playing field level given that the internet is currently run on a free and equal access basis. After all, a “free and open” internet is key to allowing innovation. Too many gatekeepers and “smaller, less-moneyed” voices could be left behind in a world absent of net neutrality regulation, as Emily Peck put it for The Huffington Post.
The fight, however, is not completely over. The new rules await refinement from the courts and Congress, in addition to an expected heap of lawsuits from telecoms. Republicans are also investigating the decision. Some feel that net neutrality will slow investment in new internet infrastructure.
Target Beefs Up Ecommerce Strategy, Aims Directly at Competitors Amazon, Wal-Mart
Target executives are tired of lagging behind competition when it comes to ecommerce, and 2015 is the year the brand will prove just how innovative it can be. This week, the company halved its minimum order size (from $50 to $25) for customers to earn free shipping. Competitors Amazon, Wal-Mart and Best Buy have kept their minimum order values steady at $35, $50 and $35, respectively.
“Playing catch up is never fun,” Target Chief Strategy and Innovation Officer Casey Carl told Fortune in a recent interview in Minneapolis. “I’ve lived that for the last five years, and we’ll not let that happen. We’ll be seeing around corners far more effectively.”
Indeed, Target used 2014 to recode its ecommerce offering, bringing it up to par with competitors and even leading similar brands with its mobile shopping experience. At the end of Q4, during the holiday season, Target reaped the benefits with digital sales on Thanksgiving, Black Friday and Cyber Monday increasing 40% YoY. Now, Target’s ecommerce sales account for 3% of total revenue.
More ecommerce innovations are coming from Target this year, including an online reservation system that will allow a customer to pick up their items. To challenge Amazon directly, Target is also experimenting with same-day delivery in Minneapolis and Boston.
In all, to succeed in ecommerce, Target is proving that you must give shoppers what they want in order to gain their loyalty.
Nordstrom to Spend $4.3 Billion to Better Ecommerce Experience
Not to be outdone by any other retail brand’s ecommerce presence, Nordstrom is looking to increase its revenue from $13 billion in 2014 to $20 billion in 2020. The brand’s major focus to make that happen is ecommerce, specifically the integration of its stores and its digital business.
Currently, Nordstrom is a leader when it comes to ecommerce, with 18% of its sales occurring online. Many of those purchases come from the brand’s flash sale site HauteLook and its recent Nordstrom Rack-branded ecommerce offering.
To kickstart the growth, Nordstrom plans to spend $1.2 billion on ecommerce and new stores this year, compared to $750 million in 2014. In total over the next few years, the company plans to spend $4.3 billion to build up its ecommerce presence. What will that buy them? Plenty:
- A new distribution center specifically for ecommerce orders (aimed at cutting down delivery times)
- Larger purchasing selections online, mimicking in-store options (meaning much of the capital will go toward multi-channel inventory management infrastructure)
- Using stores to handle ecommerce returns (again highlighting the need for efficient multi-channel inventory management)
- Bringing technology to the in-store experience (Nordstorm sales associates already use iPhones to take additional pictures of items for customers shopping online and tablets for in-store check out when the lines get long)
Nordstrom said these investments are necessary to stay on top of changing customer behavior. “We always reinvest back in the business,” CFO Mike Koppel told Wall Street analysts. “That where we get the highest returns.”
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