Q&A: Cyber Monday: Online retail's biggest day is indicator for rest of holiday shopping season, Ann Arbor executive says
Cyber Monday offers a glimpse into how the activities of major online retailers like Amazon.com influence the Ann Arbor area economy.
Amazon swipes revenue dollars from local merchants — but it also presents a competitive challenge that presents an opportunity for local marketing firms, consultancies and software development companies that help online retailers optimize their websites.
At Pittsfield Township-based Fry Inc., which was acquired by Columbia, Md.-based Micros Systems Inc. in 2008, software engineers and project managers help mid-size retailers like Cabela’s and Express optimize their websites in the face of stiff competition from Amazon and big-box stores.
Rudy Pataro, president of Fry, which has about 110 employees in Pittsfield, said mid-size online retailers have to focus on finding ways to improve the customer’s “cross-channel” experience from their physical stores to their websites to their social media sites.
“It’s all about how can you combine that in-store experience with the online experience, and what can you use to differentiate against Amazon if you’re a small company?” Pataro said. “That’s where Express, frankly, has done very well. They’ve got a good set of solutions that span the channels for the consumer.”
Fry is currently seeking 10 to 15 additional employees as clients seek a foothold in the constantly changing world of online retail.
Photo courtesy of Fry Inc.
U.S. consumers spent about $1.028 billion online on Cyber Monday in 2010, according to research firm comScore. That was up from $887 billion in 2009. ComScore projected that Cyber Monday spending could reach $1.2 billion in 2011.
More than 78 percent of online retailers will offer Cyber Monday deals, according to a study conducted by BIGresearch for Shop.org's eHoliday Survey.
More than 58 percent of office workers with access to the Internet are expected to browse the web for holiday gifts on Cyber Monday, according to the Shop.org survey.
The reality is that most retailers are offering aggressive online deals from Black Friday through Cyber Monday, Pataro said.
“Cyber Monday is becoming less of a day. Black Friday is becoming almost as big of a day for online retailers as Cyber Monday,” he said.
Pataro recently spoke to AnnArbor.com’s Nathan Bomey about Cyber Monday. Excerpts:
AnnArbor.com: How do the retailers balance the Black Friday to Cyber Monday rush with the rest of the holiday season online? Is it just one big promotional push?
Pataro: Every brand’s a little different, and it depends on whether it’s hard goods or whether it’s apparel.
Most of them will have an entire calendar for the promotional events they’re going to run. The biggest events typically are at the beginning of the period and they’ll spread them out between this weekend and Christmas.
The difference is if they don’t perform well. If that big push over the holiday weekend isn’t what they expected it to be, you’ll see them generate a whole lot more promotional events than what they had planned on doing.
AnnArbor.com: So they do respond pretty quickly based on what kind of data they’re seeing online?
Exactly. If this weekend blows up the numbers, they’ll just continue down the promotional path they’re on, and they won’t do anything different with it. If this weekend doesn’t meet their expectations, then they get a lot more aggressive about what they’re going to do going forward.
AnnArbor.com: How much is what Amazon does influencing what everyone else does?
Pataro: Everyone pays attention to what Amazon is doing and why. It does influence folks, but there’s such a scale to Amazon’s business that most people don’t have.
What they do doesn’t always apply very well to what other clients would do. Everyone looks at what they’re doing within their category.
AnnArbor.com: Fry represents a lot of small and mid-size retailers online. The conventional wisdom in recent years has been that they have a hard time competing against the Amazons of the world during the holidays. How do you see it playing out this holiday season?
Pataro: They historically have. Our largest client is Cabela’s, and they do almost a billion dollars a year online. So they’re a large online retailer, but they face the same challenges the small guys do.
It’s all about price point for the same products. They sell everything from apparels to canoes. But in the particular products that they’ll compete with, say it’s Columbia outerwear, then Amazon sells the same stuff. So they’re very conscious about what Amazon is selling those products for, and the small retailers do the same thing.
It’s all about how can you combine that in-store experience with the online experience, and what can you use to differentiate against Amazon if you’re a small company? That’s where Express, frankly, has done very well. They’ve got a good set of solutions that span the channels for the consumer.
AnnArbor.com: Does Fry advise its clients on how to connect its in-store experience with the online experience?
Pataro: We do. In fact, as part of Micros Retail, that’s our whole focus. The whole concept of the acquisition was that we could combine our e-commerce play with the point-of-sale functionality of Micros Retail along with the CRM functionality of Micros Retail for a complete 360-degree view of the customer.
That’s what we’ve spent the last three years doing is building out the products to be exactly that.
AnnArbor.com: In that world, one of the most challenging things is to assess how social media is influencing the customer. How is it changing the customer’s online experience right now with online retail experience?
Pataro: It’s pretty fascinating. I don’t know if it’s as much the way people think it actually is. A great example is - if there’s a problem with an experience of a site, that information becomes viral in a heartbeat.
In the past, like 5 years ago, maybe it affected 5 or 10 people. And those 10 people who weren’t getting the promotion to work right were pretty quiet. Today, that information will be posted to that company’s Facebook page in a heartbeat, and all the hundreds of thousands of people who follow it are going to know about it.
The next thing you know you’ve got a customer service issue you have to deal with. Something that was a nonissue before becomes a huge issue you have to deal with today.
So it’s really about the response and how the clients and retailers manage that process and manage their customer base. Some retailers do it well, some don’t do it as well. But it’s totally changed the expectations. They expect things to be fixed immediately and they expect them to be fixed in a way that’s really beneficial to them.
AnnArbor.com: So the retailers need to be extremely responsive and fast.
Pataro: Yes, exactly, far more than they ever were. There’s a sense of urgency that was never there before.
AnnArbor.com: Mobile is influencing holiday retail sales. Do you expect more retailers to embrace it this year as a way to generate more customers, or are they still afraid of people price checking in the aisle?
Pataro: They’re still afraid of the price checking, but I think they’ve all realized that horse has left the barn already. So now it’s a matter of how do you deal with that issue?
Our clients are focused on making sure that the mobile experience with their brand is a good one, as opposed to redirecting it to your normal e-commerce site and having to use it on a smartphone. That’s not a very good experience for most sites.
AnnArbor.com: Living Social is doing some online holiday deals. Do you expect the daily deal websites to become more powerful in the holiday shopping world?
Pataro: That’s a really interesting question. I have my personal opinion about it, which might differ a little bit from, say, some of the folks in the company who spend more time in that area.
I think that model is starting to peter out, to be very honest with you. What Groupon has done isn’t nearly what it was, and it’s not going to have the influence going forward as it was. I do still think they have an outsize influence in the near future. And I think that what Living Social is doing for the holidays will be something that will move the needle.
The question is will it stick? And that’s the part I don’t know.
AnnArbor.com: Are there still jobs to be had for Michigan and Ann Arbor in the space that you’re in? Can holiday retail still drive local jobs?
Pataro: For our business, the answer is yes. Our biggest challenge is it’s just really hard finding the kind of people we need to do the technologies that we work in. Everyone always (says), ‘Well, Michigan, there’s got to be plenty of unemployed folks you could hire. It shouldn’t be that hard.’
Well, unfortunately those folks just don’t have the right skill sets for what we’re looking for. And that’s the bigger challenge.
The ironic part is schools like the University of Michigan generate lots of kids with those skills, and they go someplace else. They might come back six years later when they realize Ann Arbor is a great place to raise a family. But to get them right out of school, they’re looking to go to California or Boston or someplace else.