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For Online Retailers, Fast Shipping Is Becoming as Important as Price

NEW YORK (TheStreet) — Consumers have always looked for the lowest prices when shopping online. But these days, speedy delivery is becoming just as important to them.

Fewer than 20% of consumers say they always buy the cheapest item, according to Shmuli Goldberg of Feedvisor, a re-pricing company for Amazon sellers. Everyone else is looking for better customer service, overall experience, and perks like free and faster shipping.

That’s why shipping programs like Amazon (AMZN) Prime, Overstock’s (OSTK) Club O, Sears’ (SHLD) Shop Your Way MAX, and Barnes & Noble’s (BKS) membership club are becoming more popular. Even though they charge membership fees, these clubs are attracting more consumers because they offer free shipping and quick delivery. The problem, for retailers at least, is that timely delivery isn’t always possible.

A big factor is that online retailers must rely on shippers like UPS (UPS) and FedEx (FDX) for the actual deliveries, which puts that vital mission outside their control. And it’s the retailers who bear the brunt of complaints if items are late.

“You have to deliver on your promise,” said Clarus Marketing Group CEO Tom Caporaso. “Regardless of all the benefits that might be in the program, you say its going to be there in two days, it’s got to be there in two days. You start to disappoint your consumers, they’re ultimately not going to retain.

A recent survey from Reuters and Ipsos, for example, showed that Amazon Prime didn’t always deliver on time. In fact, 10 percent of the nearly 1,700 consumers surveyed who chose the two-day shipping option on Amazon orders between Nov. 1 and Dec. 31 said their orders did not arrive within two days. Amazon denies that these statistics are accurate, claiming they don’t match up with their figures.

Another survey suggested that a significant percentage of consumers with free shipping club memberships are thinking about dropping them due to late deliveries. The survey from Bizrate Insights — a platform run by Connexity, which works with certain retailers like Sears and Barnes & Noble (though not Amazon) — claims that 9.7% of shipping club members are considering not renewing for that reason. Amazon says the survey is “not credible.” But timely delivery remains a big issue for online retailers.

“I think 2015 is going to be a challenge for all retailers,” said Hayley Silver, vice president of Bizrate Insights. “Balancing the requirement for on-time delivery and relatively speedy delivery versus consumers’ desire not to pay a lot for delivery — on the one hand, if you want to draw in consumers and sales, free shipping is extremely successful. But on the other hand, you have to deal with the rising costs and the challenge of on-time delivery. I do believe retailers will figure it out. They have to. But it will be a challenge.”

The importance of free shipping programs for retailers like Amazon is clearly growing.

According to ChannelAdvisor, Prime now has about 40 million paid subscribers, who account for 15% of Amazon’s 270 million active buyers. Amazon does not release precise numbers for the program, but has continued to say that Prime is growing, most recently sharing that paid Prime membership grew 53% year-over-year in the fourth quarter of 2014. Whatever the total number is, it is clear that these members are more valuable to Amazon than nonmembers.

As Scot Wingo, CEO of ChannelAdvisor, noted in a blog post, Prime users spend two to four times as much as nonprime users, and therefore represent 30% to 60% of the “Amazon buyer’s wallet.”

While Amazon now offers its Prime members much more than two-day shipping, it still must keep that fundamental promise if it wants to maintain a positive relationship with them. Amazon may have the balance sheet and logistical heft to combat this challenge, with its 107 fulfillment centers and other investments. But it’s not as easy for companies like Overstock, which only has three fulfillment centers.

According to Overstock CEO Patrick Byrne, those three fulfillment centers are strategically placed so that the company can reach 98% of the American population in two days, and the company is constantly thinking about how to improve that reach.

“Amazon has achieved the two-day shipping by using a heck of a lot of capital,” Byrne said. “In our case, we are replacing capital with information, and so I think we’re by properly positioning our warehouses. I think we can get to two-day shipping without spending billions of dollars. Our shipping times are coming down and down, but we’re doing that with analysis and data.”

Like Amazon, Overstock is bulking up its membership service with more than just delivery, having announced that it will launch a digital content platform to sell and rent digital media, and offer a video subscription service. Enhancing its membership program helps grow numbers, which is critical, especially since Club O members account for 20% of Overstock’s business.

But even as the membership club offerings expand well beyond free delivery, meeting those basic customer expectations never loses its importance.

| | Rebecca Borison, in New York.

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Combine Digital And Physical Marketing Efforts To Increase Sales

While traveling recently I found myself in an airport with a long enough layover to enjoy a leisurely meal. As I walked past four restaurants, trying to decide what culinary mood I was in, I noticed something I had never seen before. Each restaurant provided an iPad for customer use at every table. This is a trend that will soon spread to all physical retail venues, as the merging of physical and digital marketplaces continues to yield greater convenience for customers and more profit for businesses.

Here’s why I believe this trend will only grow. As I was seated in the restaurant of my choice in the airport, I could easily observe some of the benefits of customer-facing devices. My customer experience began with an examination of the menu, and when I was ready to order I simply did so on the device itself—no flagging down the server. Then I ordered dessert and paid my bill, all without human interaction. I used the device during my meal to surf the Internet on a screen larger than my Smartphone, and generally enjoyed an added dimension to what would otherwise have been another mundane meal on the road. The efficient nature of the experience was not only positive for me; it also allowed the restaurant to operate with lower overhead because one employee was able to offer great service to more customers. And the task of changing the menu or any customer messaging digitally, rather than physically, is far more cost-effective for the business.

Of course, this multi-channel (or, omni channel) strategy is not limited to restaurants.< Dick's Sporting Goods recently expanded to an omni channel approach by sending weekly specials to targeted geographic areas near physical store locations, launching a stronger loyalty program app, and providing sales associates with mobile devices to help customers with online ordering while in stores. And Dick's uses brick-and-mortar locations for customer pick-up of online orders without shipping costs. As a result, Mobile Commerce reports that with Dick's omni channel approach, ecommerce sales have grown by 50 percent in markets that have physical locations. Tom Karren, CEO and Co-Founder of Moki, talks about the impact of customer-facing device strategies. “We have seen tremendous improvement in our clients’ ability to test and change content instantly in response to their target markets.” But this trend seems to be driven by a lot more than the ease and cost savings associated with better content management. Karren explains further, “The analytics can make the biggest difference, offering real-time data around session length, touches, digital interactions, views and impressions.”

In short, omni channel marketing, and merging the physical and digital access points for customers, is good for the bottom line. This is the inevitable result of more interaction, enhanced customer experience and loyalty, higher retention and conversion rates, and sales increases.

| | Larry Myler: CEO By Monday, Inc., adjunct professor in the Rollins Center for Entrepreneurship & Technology at BYU, author of Indispensable By Monday.

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Why Printed Books Will Never Die

Measured en masse, the stack of “books I want to read” that sits precariously on the edge of a built-in bookshelf in my dining room just about eclipses 5,000 pages. The shelf is full to bursting with titles I hope to consume at some indeterminate point in the future.

It would be a lot easier to manage if I just downloaded all those books to an iPad or Kindle. None are hard to find editions that would be unavailable in a digital format, and a few are recent hardcover releases, heavy and unwieldy.

But there’s something about print that I can’t give up. There’s something about holding a book in your hand and the visceral act of physically turning a page that, for me at least, can’t be matched with pixels on a screen.

Yet the writing appears to be on the wall: E-books are slowly subsuming the printed format as the preferred vehicle on which people read books. E-books topped print sales for the first time in 2011, a trend that continued into 2012. Just this month, Bexar County, Texas announced plans for the nation’s first electronic-only library. A recent study from Scholastic found that the percentage of children who have read an e-book has nearly doubled since 2010 to almost half of all kids aged 9 to 17, while the number who say they’ll continue to read books in print instead of electronically declined from 66% to 58%.

The hits keep coming.

For those who prefer their books printed in ink on paper, that sounds depressing. But perhaps there is reason to hope that e-books and print books could have a bright future together, because for all the great things e-books accomplish — convenience, selection, portability, multimedia — there are still some fundamental qualities they will simply never possess.

Books Have Physical Beauty

That’s not to say that electronic books can’t be beautiful — as a medium, e-books are still new and designers have yet to fully realize their potential. But for paper books, we’re already there. As Craig Mod points out in his essay “Hacking the Cover,” the book cover evolved as a marketing tool. It had to grab your attention from its place on the shelf. For that reason, the best designed covers were often beautiful art pieces. Not so in the digital world.

“The cover image may help quickly ground us, but our eyes are drawn by habit to number and quality of reviews. We’re looking for metrics other than images — real metrics — not artificial marketing signifiers,” he wrote. And though that might eventually free book designers to get more creative with their designs, you can’t display a digital book, even if you wanted to. Any electronic book that boasts beautiful design, does so only ethereally.

Author Joe Queenan, in a Wall Street Journal opinion piece, argued that e-books are great for people who care only about the contents, have vision problems or other physical limitations or who are ashamed of what they’re reading.

Books Have Provenance

This piece of the experience doesn’t translate to the electronic format. Someday in the distant future, maybe David Eggers’ Kindle will be sold by Bauman Rare Books on Madison Avenue, but it’s unlikely that digital books will ever be personal artifacts the way that their physical counterparts can be.

“I think print and paper has a lasting value that people appreciate. Pixels are too temporary,” said Praveen Madan, an entrepreneur on the Kepler’s 2020 team, via email. Madan and his cohorts are attempting to reinvent the business model for independent bookstores, including ways to sell and offer services around e-books. “Books have been around for a very long time and people have a deeper relationship with some books than most digital content,” he said.

Printed Books Are Collectable

They possess the quality of scarcity, which means that your copy is unique on some level. For readers who truly love a particular book, an electronic facsimile is not an adequate replacement for owning a physical copy.

“There are books that I need bound and sitting on my shelf. I need a copy of Fahrenheit 451. That book is important to me,” author Rob Hart, the website administrator for digital imprint Mysterious Press and class director at LitReactor, told me. “Digital technology is funny — you own an e-book, but you don’t … You’re paying for the right to access data.”

Books Are Nostalgic

The PBS website MediaShift recently asked a group of book lovers in Chapel Hill and Durham, N.C. which they preferred: printed or electronic books? Those who preferred printed books cited things like the smell, the feel and the weight as reasons.

“Paper books don’t get replaced by e-books, because there’s just part of the experience you can’t reproduce,” said one man. (Of course, nostalgia is generational.)

But if e-books just replace mass market paperbacks, as Cheng predicts, will books become merely art pieces? Some pundits think so.

Writing last year in Slate, Michael Agresta argued that printed books will only survive as art. Books are no longer a good “vessel for text,” he wrote. “Bookshelves will survive in the homes of serious digital-age readers, but their contents will be much more judiciously curated. The next generation of paper books will likely rival the art hanging beside them on the walls for beauty, expense, and ‘aura’ — for better or for worse.”

In some ways, Agresta is correct. It would be smart to bet that print sales will continue to decline, while e-book sales will continue to rise. Most people will own fewer printed books, and those they do own may very well be beautiful collector’s editions, like the 50 Shades hardcovers, meant for display.

But it’s a mistake to assume that this is a case of the MP3 replacing the CD, or the CD replacing the cassette. E-books are not simply a better format replacing an inferior one; they offer a wholly different experience.

Brian Haberlin is one of the co-authors of Anomaly, an ambitious printed graphic novel, augmented by a smartphone app that makes animations leap off the page while you read. I asked why he chose to print the heavy, unwieldy and expensive hardcover edition. His answer was simple: “Because books are cool! I love print, always will. I love digital, always will. But they will continue to be different experiences. It’s a different texture, a different experience and that alone warrants their existence.”

Yes, Anomaly is one of those beautiful, collectible art pieces. But it also highlights why print is here to stay. The experience of reading Anomaly on your iPad is vastly different than the experience of reading the printed version. The story is the same, but the medium affects the way you read it. It’s not totally unlike the difference between watching the movie version of Les Miserables and watching it performed live on stage.

There may come a time when we look at electronic books and printed books as similarly divergent mediums.

In a recent Fast Company column titled “The Future of Reading,” author and comedian Baratunde Thurston made a compelling case for why books might just be better in electronic form. Superior annotation tools, easier discovery, interactive content and shared reading experiences are just some of the things made possible because digital publishing has allowed us to, as Thurston put it, network our words “and the ideas they represent.” For Thurston, this is an either-or scenario. Digital books or printed books. And while he lamented our diminished attention spans — the result of distractions embedded in the digital format — he concluded that it’s all worth it because of the great things e-books can do.

But the choice between e-books and printed books is not a zero sum game. Print books do not have to disappear for e-books to flourish, and e-books don’t have to be the only choice.

“Printed books are for people who love printed books. Digital books are for those who love digital books,” Haberlin told me.

Maybe it’s just that simple.


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