Active Users and Online Retailing

There was an interesting debate in the comments to my post yesterday on active and non-active users.

Gian Fulgoni, Chairman and co-founder of comScore said:

most businesses are in the opposite position. They need to boost the
activity of registered but inactive users. Think of most online
retailers, for example, who only convert 5% of their monthly visitors
into buyers. Their challenge is figuring out how to get a share of the
spending of the visitors / non-buyers. No way to do that without
focusing on them and understanding why they visit you but buy
elsewhere. Once you know the answers to that you have a shot at
addressing the issue. You don't if all you do is focus on the visitors
who buy.

And Steve Goldstein, CEO and co-founder of Alacra agreed with Gian and said:

I agree 100%. If I could get 10% of my inactive users to be active the business would be significantly better.

Now, these are two entrepreneurs who I backed over 10 years ago who have both built profitable and valuable businesses. So they know a thing or two about business.

But I think they are both missing an important insight. When I think of online retailing, I think of three kinds of users; non-active users, active users, and active users/transactors.

As Gian points out, for a business to succeed, it needs to have a healthy number of transactors. But looking at your user base as either non-active or transactors is the wrong way to think online (and maybe offline too). Just like bookstores use cafes to bring potential purchasers in the store, online retailers should intentionally cultivate an active non-transactor user base.

Our portfolio company Etsy does a good job of this. Many of the visits to Etsy are to read The Storque, participate in the conversations in the forums, or to build up lists of your favorite things. There are literally millions of people who do these things every month. Some of them choose to transact during these visits, but many do not.

So I'd advise all online retailers to focus on making users active first and foremost and give them a lot of things they can do on your website beside transact. By doing that you increase the number of monthly visits and therefore the total amount of potential transactors.

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Comments (Archived):

  1. Γ‘lvaro ortiz

    I see two opposite elements in this debate:1. From a usability point of view, if you put too many things in your site you are distracting potential transactors. Simplifying, If you reduce the elements on a page chances are conversion rates will increase.2. From a marketing point of view, creating spaces and content which may attract users attention is good because it creates brand and bring new users to the site, uses who might end converting.But, if I have an ecommerce site and I have a certain group of users who are not buying, and just wander around my site consuming resources (machines, moderation, support…)… are they valuable if they are never going to buy?I guess that if that users help me spread my brand the cost may be justified because it becomes part of the marketing buget… So I must focus on making that users spread my brand. Not just a space inside my site but give them tools to share my content, etc.

    1. fredwilson

      Your concerns are all very valid. The ‘free services” cost money to you and must be justified as marketing expense. And they cannot clutter up the experience

      1. DrexDavis

        In our experience, anything you do that creates a regular, repeat visitor pays for itself in spades. Either they’ll eventually transact, or else you’ll figure out a way to utilize their participation to enhance your value proposition and product offerings. Just because they don’t “buy stuff” from you doesn’t mean they aren’t creating content for you that helps you close sales with others . . .It’s tough to quantify that, but the effect is very real.

        1. fredwilson


        2. kidmercury

          yes. frankly i’m more interesting in getting them involved and participating on the site than buying something. eventually they’ll buy something. and the more passionate they are, the more they will buy with passion, instead of hesitance or reluctance.

    2. paramendra

      It’s not either, or, it is all of the above.

  2. LilianMahoukou

    Agreed! The relationship with users/members shouldn’t be too transactional. By giving them reasons to come back and to be really active, online retailers take advantage of the trust/esteem dynamics behind sales.

    1. paramendra

      Is there a Disqus for commercial reviews somewhere out there? If you don’t have to log in anew at each new site, you are more likely to leave reviews and feedback. And because your identity would follow you along, you are more likely to be responsible and yourself.

      1. paramendra

        Or perhaps there is a huge market out there for Disqus Enterprise.

      2. fredwilson

        Its called facebook connect and sign in with twitter

        1. paramendra

          Absolutely. And Disqus itself also. I can see Disqus being part of a company’s customer service.What I was getting at was if there is room for Disqus Enterprise? One that not only deals with comments but collects other forms of customer feedback, makes greater sense of customer comments, and so on.

          1. fredwilson

            That’s coming next year

  3. David Semeria

    Fred, that’s good advice for e-commerce sites, where people would only theoretically come to the site to make a purchase. By giving them other reasons to come, you keep the brand awareness high and increase the base from which conversions can occur.In a throwback to the discussions on freemium (even though e-commerce isn’t) the cost of running these sticky services should be less than the incremental value coming from the extra conversions. But, as you have pointed out many times, the cost of running (basically any) type of service on the net falls daily – so the marginal cost of providing ‘stickyness’ should come in quite low.

    1. fredwilson

      I was going to position this as a freemium oriented idea. But I decided not too. I agree about the connection

      1. kidmercury

        i think there are a few ideas that run parallel: freemium, open systems, local/niche, crowdsourcing, gaming. personally, i think it is best to look for solutions that leverage all these trends, because as they run in parallel, i think businesses that run with one of them will end up being able to run with all of them. your portfolio company etsy i think is a great example in my opinion and i would expect it to continue to leverage all these trends to an even greater extent as the business grows.

  4. zerobeta

    I agree. While Non-Active users can easily be used as a crutch for a warm lead, but the fact is they have come to your site, and decided not to use it. I know, personally, each day I get email from all the sites I registered to over the years, but never used, and hardly ever decide to go back to check it out.Active Non-Transactors are very helpful. When I was at yoonew, we a had a number of traders on our site that weren’t the most active/most profitable traders, but were all over the forums, constantly taking our back when any issue arised and referring us to everyone they knew. We would always take care of them, and they would be our biggest advocates. I think in the days of social networking/media, these people shouldn’t be overlooked because every person is a few people away from many many people and word of mouth travels in real time very quickly.

    1. paramendra

      “….every person is a few people away from many many people and word of mouth travels in real time very quickly…” A gem of thought.

  5. Adarsh Pallian

    Talking about Etsy… i wanted to show you – a place to further talk about the items you bought on Etsy (or any other retail store) and share your experience with others… retailers are not tapping into social shopping as much as they should be.

    1. ShanaC

      Shopping is social- even when you are doing it alone, you never notice thinking along the way what others will think about what you are buying for yourself in that piece of clothing or what they will think of that tv when they get to your house?

      1. Adarsh Pallian

        No, I think you’re getting the wrong msg… what aims to do is to showcase an already growing trend of shoppers really wanting to tell others what a good deal or find they found while visiting a new city… and showcase stores and products that usually will get no online attention.When I want to go shopping, I like to know where a good deal is in town… or where the local designers are and the products they carry, and aims to highlight them.It’s not meant to be an affiliate filled online store junk… but for users to really embrace unique finds (similar to the stuff you find on etsy) and the designers behind them.We launch shortly… feel free to get in touch with me directly at [email protected] for a beta invite.

    2. fredwilson

      Thanks. I’ll check it out

  6. NatMich

    Great post. I completely agree with Ortiz’s points but also think Pallian point that more can be done is valid as well. It’s great to have mini-social network type things on a company website but I think businesses are also not utilizing existing social networks to their greatest potential yet, either. Specifically, Twitter provides a really excellent way for businesses, not just big established ones like Starbucks, but also more small-time local organizations to keep a general user base of both active and transactors in the know and up to speed on any special deals, sales, etc happening on a local, even neighborhood level. Additionally, Twitter is easy to search and spread information on and is easy to connect up to mobile which means I could take advantage and act on and tweeted out daily specials, deals, etc as I am running errands, coming home from work, etc. I expect that overtime businesses will start getting a better grasp of how to use these sorts of tools to their advantage.

    1. fredwilson

      You know I agree with you on this one!

    2. paramendra

      Twitter also works for blogs as businesses.

  7. gian fulgoni

    More and more interesting a discussion.Every business needs to attract triers and then convert them into repeaters. If you get a lot of triers and they don’t repeat, you’re dead. If you get high repeat and low trial you don’t have a large business. But it could be sustainable. Fundamentally, I don’t think a retailer can just focus only on one of the two segments: triers OR repeaters. It has to be both. The trick is to have anough reasons for people to try you but then a really compelling reason for them to return and buy again. Yes, good content can attract a lot of visitors to a retail site (Amazon might well be the best at that) but you then need a compelling reason for the visitor to buy and a mandatory reason for them to return and buy again (Amazon is terrific at that also).But, as I said in my earlier post, with conversion rates averaging only 5%, one of the biggest challenges facing an online retailer today is how to get a larger share of their visitors’ wallets. At comScore, we do a lot of work helping retailers understand why their visitors buy elesewhere. Turns out there are a variety of issues to examine and understand. It could be price, product variety, shipping cost, site layout etc, etc. But, bottom line, you really need to understand the reason for the problem before you can implement the correct solution.

    1. fredwilson

      Gian – has comscore published any of the insights you get from this kind of work with retailers? I’m sure its fascinating data

      1. paramendra

        Collecting data, making sense of that date, presenting that data, using the data, got to do it all. And then there is always intuition that might fly in the face of data. The financial gurus that got us into the current mess were all data right until the roof crumbled on all of us.

    2. paramendra

      Amazon had its investors really, really nervous not that long ago.

  8. Chris Kincade

    Has Etsy looked into integrating advertising to pick up the revenue slack for active, but non-buying users?

    1. fredwilson

      Yes. In fact, Etsy has its own advertising system called showcase in which etsy sellers pay to run advertising in the service. The company has plans to do more with showcase down the road

  9. dlifson

    I have the unique experience of both working within Amazon’s community group and running Product Management at Etsy…Frankly, I don’t think Amazon does a very good job at all of keeping non-transacting users on the site. First, I would suggest that people writing reviews or Listmanias are not necessarily active users. Most of the time, just like with Wikipedia editors, people write one review and disappear. So that is not community building. A small percentage of people regularly participate in discussion boards, but it’s not a number that moves any needles.Etsy has an obsessed but modestly sized group of people who participate on the forums. Generally, these are sellers, not buyers, and I don’t remember exact numbers but probably are around 5-10% of the total user base. Yes, many people do regularly come back to the site and add items to their favorites, but that’s a form of window shopping like Amazon’s Add to Wishlist. I don’t think you can call that a community either. Etsy’s other community feature – virtual lab chats – include up to 100s of participants, but for a site with millions of registered accounts, that’s not meaningful either. I don’t remember how many people read the Etsy blog, so I can’t comment there.So I don’t think e-commerce has figured out community at all. Etsy has repeat traffic because the community that has grown up around design blogs – Design Milk, Daily Candy, etc – regularly blog about items discovered on Etsy, constantly sending traffic over to Etsy… because of the items listed for sale, not any particular non-transactional feature.To be successful, I think Etsy should build a Tumblr-like community platform where members can publish the items they’ve discovered and marked as favorite, read blog posts by those members about their crafting experiences, and publish photos of them wearing / using / creating the items found on the site. Then, allow users to “follow” each other, reblogging the best content. Every semi-regular Etsy user can tell you finding that diamond in the rough is a frustrating experience on Etsy (the provided search tools are very rudimentary), and providing a social platform for passing these links around can be extremely powerful. As a bonus, all of this user-generated content provides great SEO for Etsy.

    1. EtsyWatcher

      I think you are right about the community aspect of Etsy, the forums are very active with sellers (although I would guess most sellers or aspiring sellers are also some of the most active buyers) there is less of a community connection with buyers only. Given the difficulities with searching on Etsy there needs to be an alternate method to identify and locate items of interest to buyers. Right now that functionality is, largely, provided off Etsy by blogs, Twitter, etc. It should be an intergral part of the experience.(Etsy could also be the posterchild application where on-site search advertising could vastly out-perform organic search results, but that’s a discussion for another time)

      1. fredwilson

        You’ll be happy to know that the issues you raise are the number one priority at the company right now

        1. Mark Essel

          I wonder if etsy search could work in a framework like PrismaStar’s answeroil

          1. paramendra

            This particular comments section is a case in point. Etsy has millions of buyers. Less than 0.01% of them show up at Fred’s blog. Of those, less than 10% came to this particular blog post. Of those, less than 1% have commented here. Of those, less than 10% have commented on Etsy.The question is, are those Etsy comments here of value to the Etsy leaders, be they executives or investors?Answer: the tip of the iceberg is still ice. Yes, a big yes. These comments are of value.Community building is important. We used to call it market research and pay for it. We used to hire fat consultants to give us advice.

          2. fredwilson

            I find the comments about etsy valuable and insightful

          3. paramendra

            Thank you. It is humbling that you should say that. I mean, a VC of your stature. There are many richer VCs than you, but few are as approachable. Your blog puts you in a class of your own.Your comments sections are really something.And I have commented in this particular comments section more than any other for some reason. Someone could argue I decided to head to FriendFeed and ended up here instead!

          4. fredwilson

            Yeah. The comments here are like a mini friendfeed

          5. fredwilson

            I am not familiar with answeroil

      2. paramendra

        Community is important and sometimes helps with search, but search is a domain of its own, a big one, a central one.

    2. DrexDavis

      I’d invite you to take a look at what we’ve done to marry social and commerce at’re small fries next to amazon and etsy, but within our niche and because of the nature of the people/activity we serve, we’re able to do some neat things to leverage our community and store . . .www.scrapbook.comcheck out how our product pages suck in related information from all over the community and concentrates it . . . We’ve figured out how to get our non-transacting users to work for us . ..

      1. paramendra

        If you do social better than the big dogs, you should launch a consulting service on the side for them and cash on it.

    3. fredwilson

      Thanks for the comment dave. I agree that amazon and etsy can do more and will do more. But I also think they do this better than most other e-commerce sites

    4. paramendra

      Amazon and Etsy both need to engage in community building, although Etsy is currently doing a better job. Amazon does not feel the hunger because it has been doing so well in the revenue department (finally!). But the time for Amazon to wake up to social media is now. Adding a rich social media layer is key to the giant retailer. Otherwise it will be like the big newspapers not waking up to the web reality 10 years ago because they were making a ton of money offline. Now they are paying for the slumber.

    5. kidmercury

      great comment, thanks for sharing.eventually i think all ecommerce sites will move in this direction, which i think is something important for those in the new media business to bear in mind. while i agree with the criticisms you noted i still give etsy props because they seem to understand a lot of this stuff better than many of their ecom peers, and so it seems to me they are well-positioned with regards to social media/ecommerce trends.

      1. dlifson

        Yes, I would agree that Etsy is heads and shoulders above most players in the ecommerce space.My friend Sara pointed out that I made a glaring oversight when I failed to mention Etsy teams. She is right, the Etsy Teams phenomenon is unique, incredible, and inspiring. I recommend others dig in and check them out.

  10. Mark Essel

    Fred your example is applicable to any community building web site/business. Creating a space for folks to interact and build their own value on top of one’s business is a great way to engender trust in a company.I’ve been using gmail for free for years (thanks Paul Buchheit and Google) and like to support google search (there’s always a chance a search of mine will turn into revenue for the big G) and now friendfeed (can’t accurately describe how cool this social interface is becoming).I get so much incredible info from Twitter and friendfeed that I’m determined to help find ways to support these businesses (by dreaming up tools to cache (cash πŸ˜‰ in on social media).The social sites/tools these companies produce and inspire have been incredibly fertile for layered Internet innovation. Some of the augmented reality apps for iPhone & competing smart phones are mind boggling (see through walls and pavement by tracking subways using Twitter).

    1. paramendra

      Layered internet innovation: that is the key phrase here.

  11. Paul Jin

    Active users provide valuable information about what matters to them. If they aren’t transacting, the reasons must be evident in the dialog.As for Amazon, I find it hard to find a community there because there is no core theme or themes apart from commerce. There may be a micro community per sale item, but it does not translate or connect other communities. Instead of having a section called “Customers Who Bought This Item Also Bought”, Amazon should use the algorithm to connect communities.

    1. paramendra

      The Amazon online community has not seen new features in years. They have been doing reviews for over a decade.

  12. bennettzucker

    Great discussion. What etailers should do and what they actually do are miles apart due to their thin margins, obsessive attention to ROI, and their own channel conflicts (e.g., online store v the retailer’s stores and distributors, search v display, etc.) They are their own worst enemies when it comes to building trust with consumers, whom many sites seem to view almost as necessary evils.

    1. fredwilson

      The thin margins are an issue for sure. Its hard to innovate and pay for new services when you are barely making a profit. But I think you hve to find a way to do it or the thin margins may disappear altogether

      1. paramendra

        Thin margins are a big reason to innovate.

    2. paramendra

      Define they. There is not a homogenous they. Each site is unique.

  13. RakeshAgrawal

    Case in point: Photojojo

  14. Jen van der Meer

    This debate reminds me of the customer lifetime value vs. customer referral value finding in HBS a few years ago, reinforcing the idea that your heavy transactors are not as profitable as your very socially connected fans. So it would seem that whether your business is community or software or retail, interaction and activity is actually more of a priority than just seeing your consumers for the sole act of consumption. Link to HBS article (not free) How Valuable is Word of Mouth: http://hbr.harvardbusiness….

    1. fredwilson

      Thanks for that link. I think I may have read it but I’ll check it out to make sure

    2. paramendra

      There are those who make money for you because they buy from you. And then there are those who don’t buy much but do free marketing on your behalf. A penny saved is a penny earned.

  15. RacerRick

    I’m surprised there’s this much of a discussion.Who cares about the people who don’t love your product? Sure those folks might increase revenues, but you’ve already lost them.Create your products for the people who love them.

    1. paramendra

      I am not at all surprised there is a ton of discussion. I have not left as many comments at any of Fred’s blog posts before. This topic is fascinating. We are talking about transaction territory, kaching territory.

  16. Venkat

    Umm… I am sure many of you are aware that you are reinventing the wheel to some extent here. This is the classic model of disruptive vs. sustaining innovation that Clayton Christensen talked about in Innovator’s Dilemma. Do you listen to your most valuable current customers or non-customers (either adjacent to your markets or in non sequitur markets). The Web adds a wrinkle to the theory by adding a middle layer of nonconsuming “proto customers” but the rest of the theory applies.Fred’s position is basically what is known as lead-user theory, mutatis mutandis for the Web. Here’s a link to some interesting stuff there:…For disruption, which is paying attention to the needs of non-users (or registered passives), there is plenty of literature both on the “how” and the “why” of it.Overall, it is a simple equation. Yes, you need to pay attention to your top current users if they represent revenue streams that are thriving and growing. You need to put disruption into your strategy and pay attention to the other categories if the revenue is either not there or it is end-of-life.The Web adds a unique angle: there is often a huge vocal minority that drives the offering design, but are NOT the top users in driving revenue. You should distinguish between the top 10% most _valuable_ customers from the top 10% most _active_ ones. I might be very active on Amazon, browsing a lot, sending a lot of feedback, posting lots of reviews, but maybe I don’t buy all that much, while another person could visit only once a month, buy 100 books and leave.Venkat

    1. fredwilson

      Thanks I’ll check out that mit study

    2. paramendra

      Love was still around 2,000 years ago, but there was no social media back then. Are you going to argue social media makes no difference to love at all?The basic market/marketing principles might stand the test of time, but the web is a novel application to all those market/marketing principles.Your second point is more robust though. Those who cost you much time might not be the ones making you the most money.

      1. Venkat

        Take another look at what I said in my comment. There are 3 places where I point out how social media makes things different. The point is that there are always some things that remain true from the past, and some things that are new.

        1. paramendra

          Adam Smith’s invisible hands are as hot today as ever, but the applications are novel today. All I meant.

  17. FlavioGomes

    How does the online retailer know they are buying elsewhere? They may just be leaving and doing nothing. Doing nothing is an interesting competitor, vs DIY or going to the store down the street.

    1. fredwilson

      Comscore can help a retailer know if they are buying elsewhere because they have a tracking panel.

  18. Jason

    great discussion – if your talking about proven models – your post and the comments that follow support your points – and i agree as usual.though i am taking a slightly different angle in building my technology – because to me having communities all over the internet does not seem relevant – yet is time consuming for a consumer – a marketers dream.instead i am focusing on building a platform that uses the internet os to market ecommerce – and with unprecedented ease. then use existing social media outlets and ugc blogs to create customer engagement.guess we’ll see how it turns out πŸ™‚

    1. fredwilson

      I’d like to see it when it is built

    2. paramendra

      Quick in, quick out. That is a valid business model.

  19. David J Bland

    Bake in customer feedback loops within your site. If a customer loves or hates something, give them a sounding board to express it. Run A/B splits and use empirical data to make product decisions & convert these users. Don’t keep guessing until you run out of money.With all of the technology available at minimal cost (Google Analytics / MixPanel, etc), there is no excuse not to leverage these tools.

    1. paramendra

      No excuse at all.

  20. Steffan Antonas

    In direct response to @Gian’s comment:”most businesses are in the opposite position. They need to boost the activity of registered but inactive users. Think of most online retailers, for example, who only convert 5% of their monthly visitors into buyers.”When it comes to online retail, are users actually “inactive” if they don’t convert into buyers? If we take a look at actual desired behavior, these people maybe active “window shoppers” who are researching with intent to buy locally at the store. It’s possible that this activity is fundamental to the way people shop, and that online retailers should actually be tailoring the online experience towards driving people to stores, rather than focusing energy on online conversions.There was a great talk at Web 2.0 Expo in San Francisco this year called “Why Local is the New Global” that argues this well with solid data (i.e. retailers need to adjust to buying patterns, rather than change habits).Here’s a link to the presentation for anyone interested on looking at this problem through a different lens -…

    1. Steffan Antonas

      Someone informed me that the link didn’t work. It can be found on the site here -…

    2. Yule Heibel

      That applies to me – I “window shop” on Amazon, and as for Etsy, I recently bought a fabulous bag from Bonspielcreation, who has a shop on Etsy (her products are great). But when it came time to buy the bag, we met for coffee instead (she’s local). ;-)PS/Edit: Ooh, the threading in the responses looks weird – I was responding to Steffan’s first comment.

    3. fredwilson

      Thanks steffan. I’m going to check out that presentation

      1. Steffan Antonas

        Happy to help. If you have any questions about it, I’d contact Siva Kumar (TheFind, Inc.). He was particularly active and helpful in the delivery of the presentation. He’s got a lot of insight into how his company has benefited from using their search engine technology to find all stores online for a product and then segmenting to only find stores in the customer’s area. His experience is particularly instructive because they work across many e-tailor’s sites AND help customers find locally.

    4. paramendra

      The online offline integration probably has the best of both worlds. Is it the future?

  21. Seymour Duncker

    Love the concept (non-active, active, active/transactionals). Active users are hugely valuable. For one they carry worth-of-mouth which may bring active/transactionals to a site. And second – for certain sites – they actually contribute the data that a site can monetize as a derivative business. In some cases, this data is actually the main source of revenue, take for example the online lottery business.

  22. James Franks

    All very interesting – thanks to Fred and all those who have posted comments. I am interested to hear from those with experience what percentage of the “active users” (or perhaps we could call them most loytal users) were amongst the first users of the site/service? I have seend trends in the past which have suggested that the first users of many sites remain the most loyal, active and helpful in terms of letting the site owners (business operators) understand how to better their services.

    1. paramendra

      First mover advantage on the consumer side? Now that’s a concept.

    2. fredwilson

      I’ve not seen any data that correlates when you show up with how active you become

  23. lawrence coburn

    Great discussion.It seems that Fred’s conclusion in the previous post:”Your best advocates are always your most active users. So focus on them, make them successful in your service, focus on growing that number, and the non-active problem will take care of itself.”Is slightly different from his conclusion for online retailers:”So I’d advise all online retailers to focus on making users active first and foremost and give them a lot of things they can do on your website beside transact.”To me, “making users active” means focusing on folks who are not your super users.I think the best way to think about this stuff is in buckets. How do you get the people are not engaging at all to engage a little bit? How do you get the people who are engaging a little bit to engage a lot? And how do you get the people that are engaging a lot to engage even more?

    1. paramendra

      I think by now we are dealing with two definitions of active. Active as in buying, and active as in actively hanging out.

    2. growandmake

      I ran a survey for the first six months after we opened the digital doors at We asked customers what was important to their shopping experience (Selection, Price, Trust, User Experience, Editorial & Reviews, Forums & Social Interaction). They consistently rated ‘Forums and Social Interaction’ as least important. We have also found that getting users to write reviews is VERY difficult, despite having products which people tend to be passionate about.My take away from this discussion is that engaging your customers in any way possible has to be a priority, but it should be done through customer service and more traditional forms of interaction. I was on the phone taking an order the other day and ended up having a twenty minute conversation which lead to a very enthusiastic interaction. I think that comparing eTail and other online engagement is pointless, since the mindset of online shoppers is so different from those using Twitter or Facebook.

  24. Vicente C. de Baca

    Agree with Dlifson’s comment about Amazon needing better browse functionality and social features beyond 5-star reviews and Listmania. But I think Amazon is following Alvaro Ortiz’s philosophy of not making the core site too crowded. That seems to explain Amazon’s comfort with launching or acquiring spin-off sites (SoundUnwound, IMDB) to let people browse, with only subtle ties in to proper.

    1. paramendra

      You mean keeping many brand names alive under one umbrella?

  25. ShanaC

    I prefer to see this as a spectrum of users. Wihtout going in depth- some people may show up regularly, and never transact. Some people may never show up, but when they do, only transact, some people show up regularly, and only transact, ect, ect, ect.And it very hard to take care of each and provide a community with reinforcements for everyone to buy something at the end of the day, as well as a reinforcement to mention it to one person at the end of the day.Silence is compelling for a variety of reasons- to speak up, one often has to feel good about the behavior. Same with buying something- if it is messy- it is not going to be a wonderful experience. nd these two experiences on the web are often interlinked with e-commerece. I have yet to see a really critically engaging experience linking shopping with talking that makes me want to speak up about ecommerce.The closest experience I’ve had is MakeupAlley- and even then a good chunk of people will still buy in person. Ecommerce still lacks the personal touch that defines sociability with shopping, of knowing sales people, catching a deal and bragging, and dragging friends around for opinions and how to knowledge.Providing reinforcement for the irregularity of humans is what makes this all so difficult…

    1. paramendra

      I have been reading all comments to this post from the top, and this is the best so far. There are several key concepts put forth, the spectrum concept, the fact that it is a dynamic crowd, hard to pin down. And most revolutionary, how about not buying online at all, how about buying in person at a store, because shopping is not just a transaction, it is an experience. And the final point is the killer point. There is always the human element. Just when you think you have figured out human behavior, it mutates to tease you.

    2. kidmercury

      personally the approach i’m taking is to build social sites and then add ecommerce capabilities. ecommerce is increasingly going to be about understanding how to build customer communities, in my opinion.

  26. falicon

    Maybe I’m missing something, but I think what you would want people to focus on transactors and increasing the transactors activity…they’re your best customers, they’ve already shown a likely hood to transact with you, and it’s generally going to be A LOT less work to get them to repeat than to pull someone from one of the other groups into the ‘transactor’ group…From what I understand that’s the whole key to successful direct marketing (and to me the web, and especially the social web, is the ultimate direct marketing tool)…spend less than their lifetime value to get the people in…and once they are in work them as much as you can to keep them transacting (and thereby extending their lifetime value).For a company like Etsy, I would think that would mean doing everything and anything it can to get people who’ve bought something via Etsy at least once, to do it again, and again, and again, etc.It’s cool to have some other things to do, and it might help to convert a few non-transactors into transactors…but again, I think all of those ‘extra’ things are really about spending as little as possible towards their lifetime value to turn them into transactors…In fact I think that’s where a lot of sites and services go wrong right now…they either don’t know what the lifetime value of a transactor is, or they just don’t know what their transaction itself is yet…without a clear picture of either, it’s pretty hard to focus!

    1. paramendra

      The concept of the repeat customer has been around a while, but their application might be novel in the new environ.

    2. fredwilson

      I think too much direct marketing thinking can hurt an online retailer. Its not just about the transaction and the transactor on the web. Its also about community and people and social activity. I think you need both to have a great sustainable service

      1. falicon

        I agree too much is probably not a good thing…but I would have two follow up things to your point on needing community and social activity:1. Why?2. I would think that, given your latest thought direction these past few months/year, you would be in favor of having companies focus on building out API’s that allowed for these sorts of things to be developed by third parties rather than focusing on them directly themselves…This would leave the ‘company’ free to focus on just two main groups – transactors and a secondary group which is developers using the API to help build things (like community and social activity) that help convert more people into transactors…

        1. fredwilson

          Excellent point. You may well be right about the two top priorities. I think third party developers are so important

  27. $3236

    One issue is that if you have a really long-tail business, where the same item rarely gets bought twice, it’s almost impossible to create a community. With most visitors appearing via SEO, getting them to stay and explore has proven, at least for us, to be quite a challenge. Any way we can get them to stay will immediately drive revenue.

    1. jarid

      In an e-commerce environment, rather than active vs. inactive, I like to think of it as qualified vs. unqualified traffic. Your SEO traffic is going to be less qualified than your paid search traffic which is going to be less qualified than your RSS-referred traffic which is going to be less qualified than your type-in/non-referred traffic. The key is getting users to move up the qualification trail.For example, if you can retarget a banner ad (using DrivePM, Interclick, etc.) to someone that came to the site originally via SEO/SEM, they’re more likely to convert. Even if they don’t convert, if you can get them to opt-in to email/RSS, they’re more likely to convert next time. If you’ve been able to build a brand, through all of your marketing initiatives and customer service, where you’re now top of mind next time they have a need for your product, and they will just directly type in your URL to begin their search, you’re in the best shape (e.g. Amazon).

      1. paramendra

        Good concept. Move them up the ladder gradually.

      2. fredwilson

        That’s right. Its interesting to note that almost 40pcnt of this blog’s traffic is ‘direct’ and its even higher if you add keyword from search like fred wilson, avc, and a vc

    2. paramendra

      There is no one hat that fits all.

    3. fredwilson

      I wonder if integrating free content or community (like stocktwits) would help

  28. DrexDavis

    This is spot on. I’m the CEo of and the key to what we have been able to accomplish has been due to “intentionally cultivat(ing) an active non-transactor user base.”We spend a terrific amount of time catering to scrapbooking enthusiasts who (currently) have no interest in shopping with us. We build them social tools so they can inspire one another. They have their own layout galleries, blogs, friend lists, wish lists, all of which they share with one another – they leave each other comments (on profiles and projects), they have friend streams to view their friends’ activities, they converse on forums.Ten of thousands of people visit our site every day to use the free inspirational scrapbooking content we provide – and we, of course, market to them all day long . . . But it’s not just hundreds of thousands of marketing dollars we’re saving when they come back to our site each day unprompted; we’re also establishing a relationship of trust and authority, building mind-share.When the time comes for them buy scrapbooking supplies, they buy from us. In the meantime, they play in our backyard.This has been our formula from the time we launched 8 years ago, and thank goodness. During these tough economic times we have recurring traffic that we don’t have to pay for, it comes each day whether we’re advertising or not.

    1. DrexDavis

      Whoops. Well, yes, I suppose I’m the the CE(little oh). No proofreading here so sorry in advance if the above is a hot mess.

    2. paramendra

      Mindshare is the keyword here.

    3. fredwilson

      Scrapbooking is a way better approach than list making. It something many e-commerce sites should embrace

  29. Josh Morgan

    Instead of looking at it in generic terms, most companies would be better served to think about customer personas and targeting people who fit that mold.For example, the Etsy customer persona might be married caucasian women who stay at home with two kids, own a home, and have an income of 75k per year.Find ways to connect with this persona through ads or some other method and you can simultaneously increase the level of “triers” and also the “converters.”Sites like Etsy and Amazon probably have this figured(hopefully) out and so we are left to debate semantics like we are here. Personas always change so it is worthwhile to revisit. I’m not going to debate how to convert or get more triers in generic terms.I think that Fred’s idea of providing things to do outside of transacting is good (to a degree). However, I think it is far more important that one understands who you are providing the service for, which will dictate what things outside of transacting to provide.

    1. paramendra

      I don’t think it is either or. I don’t think Fred is saying make sure people hang out but do not buy. He is saying, the more people show up to hang out, more the chances some of them will buy.

  30. TheArly

    I think it depends on the business: pure male energy competes on one dimension: price. Pure female energy focuses on making the ‘feeling’ of the transaction nice. There are always tradeoffs, and the balance depends on the nature and exigencies of each individual business.

    1. paramendra

      That male female thing got me. Are you so sure about that? Is it that blunt?

  31. paramendra

    As in have a pool of users from which some buy. The larger the pool, more the buyers. So more so called inactives is not a bad idea. More the merrier.

  32. Mark Essel

    I put together a short video and post. I made the connection between businesses and sports teams. You cater to your fans until you have an avid following, then diverge some resources to good causes outside you sphere of influence.I’d link it but iPhone’s copy and paste has decided to ignore my thumbs. It’s in my friendfeed stream (

  33. Phanio

    Would it not depend on the cost of those non-active or non-transactor visitors. If you convert 5% – the other 95% are costing your firm the lions share.I am sure there is some point or equlibrium between these where the non-spenders and the active spenders balance. But, I hope that the non-active one do provide some sort of benefit to the company – like increase ranking, work of mouth, etc.There is the 80/20 rule – but it seems cost inefficient at a 95/5 ratio.

    1. fredwilson

      Some internet services don’t cost much to operate. Forums are a good example

  34. paramendra

    If it were not for Disqus, I would not have been participating as fully here. The credit/blame goes to Disqus.

  35. paramendra

    If it were not for Disqus, I would not have been participating as fully here. The credit/blame goes to Disqus.

  36. paramendra

    If it were not for Disqus, I would not have been participating as fully here. The credit/blame goes to Disqus.

    1. paramendra

      I only pressed the post button once. I don’t know what happened. Disqus also seems to not post all my comments to Twitter. Customer feedback just like to Etsy. I don’t use Etsy or Zappos – I am more into mindfood – but I use Disqus a lot.

  37. Joe Lazarus

    My favorite example of a highly engaged (though not necessarily transacting) retail audience is According to Comscore, Woot is the stickiest high-volume retail site in the world with an average of nearly 8 visits per month per visitor (vs. 2.5 visits / visitor for Etsy and 2.9 for Amazon). Woot leverages social media (through their blog, forums, Twitter, etc), but what’s interesting is that their most compelling engagement feature is a traditional retail technique applied to the unique attributes of the web… a time-sensitive “deal of the day”, communicated at low cost through their website that creates artificial demand and gives shoppers a reason to check the site every day for fear that they’ll miss out on a good deal. I’m sure online retail will become more social over time, but in the meantime, there are a lot of ways retailers could increase their active, non-transacting metrics through creative approaches to time-honored retail techniques like this.

    1. fredwilson

      Yup. Woot, vente-privee, gilt group, and others are killing it with ‘real time’ commerce. Its the one category on the web that I feel like we missed and I’m not happy about it

  38. Ann Betts

    Check out retargeting to address the overlying issue mentioned:”I agree 100%. If I could get 10% of my inactive users to be active the business would be significantly better.”Retargeting allows you to get your message (via online display ads) back in front of the 90 – 98% of people who left your site without converting. From those efforts, you will see a 50%, 60% even 100% increase in your return conversions (conversions by those who visited a site, didn’t convert, then came back later to convert.)Not only does Retargeting re-engage those inactive customers, but it also provides an opportunity to build a relationship to keep them active, vs. never seeing them again.Check out FetchBack: to learn a bit more…

    1. fredwilson

      I agree retargetting is the best form of display advertising I know

  39. Keenan

    I like your perspective here. I like it for a several reasons. One, because the cost of adding a destination component to an online retail site is relatively low in comparison to doing the same thing in brick in mortar and two because the trend is we want more engagement in our online interactions. Finally, anytime you get more people to your site, like a store, the more they are talking about it. The more information you can garner and more. More traffic is always a good thing.

  40. Steffan Antonas

    You’re right Ryan. Obviously, it’s impossible to frame it as a “they should…”. I think the point is that retailers have to take a good hard look at the people they are targeting and adjust their strategy with real life patterns and the ways that people want to use the technology to make the eventual purchase. If they want info and then to find it near them, focus energy and resources to making that process simple and user friendly (as long as you have a brick and mortar presence). On the other hand, if people don’t want to buy online, it wont matter how simple and user friendly the process of getting to that shopping cart is.If you don’t have a brick and mortar presence, but people still want to buy local, is where it gets tricky. Perhaps a site that found the identical product nearby and guided the customer to it with a “Still want to buy local?” button (and took an affiliate commission for doing so) would be the right way to go. At least then you’d be picking up incremental referral fees while building trust and showing your customers that you care that they get what they want in the way that they wanted to make the purchase.

  41. fredwilson

    Not everyone who is on twitter is going to send tweets. You are right that they want more of the users to do that and they are working on features that will drive that.But the 100/10/1 rule of social media says your lurkers are always going to be an order of magnitude larger than your contributors. By making it easier to contribute content, twitter might compress the rule to 20/10/1 but there will still be a large group who is active but not contributing

  42. paramendra

    Too much is being made of Twitter’s so-called inactive users. I have a personal story to share.… Look where and how I started and look at me today on Twitter.

  43. Steffan Antonas

    I say why NOT help out that type of customer and collect a fee while you doit. They weren’t effectively your customer anyway (if they had no intentionof buying online). You might as well build trust and improve yourrelationship with them and help them out via a mutually beneficial action.As a customer, I’d be inclined to hit those types of websites FIRST when Iwas looking for products sold there, knowing that if I didn’t feel likebuying online that time, I’d be able to use the same website to quickly findthe item locally.This also begs the question: If referral relationships like this can bebuilt between online-only retailers and brick-and-mortar-only retailers,maybe there’s even an opportunity for companies to create exchangemarketplaces that connect the two.

  44. paramendra

    “Zappos will send you to a competitor if they don’t have what you’re looking for.”That is so 21st century. Customer trumps even competition. Think about that.

  45. ShanaC

    Still gets at the heart of the matter- the only way to judge most shoes is through the reviews, or to buy them. What makes Zappos great is the return policy (try on/hate/free return- no hassles)But the whole experience would be better if everyone cohesively not only bought shoes, but also wrote up the reviews so that my bad behavior could slip by unnoticed when I need to look. πŸ™‚

  46. DrexDavis

    Yes, Ryan, that is correct. All e-commerce sites should at least have consumer reviews.Because we’re a scrapbooking site and our users upload their projects to our site, we allow them to link to the products we carry in our store – so they can show others which products they used to create their projects.We then use that information to show the projects on our product pages . . . shoppers then get project ideas from our users, helping us close more sales.I’m not sure how many other sites could be doing this, but what about cites that sell accessories for cars – rims, body paints, etc . . .they could do this sort of thing . . .Drex

  47. paramendra

    Facebook Connect?

  48. fredwilson

    I wish more people would use glue. Like all networks, it will get better if more people use it

  49. Phillip Baker

    Even better would be distributed eCommerce (or at least the point of purchase) and the idea (not that it’s original I’m sure) came to me when thinking about Glue. I absolutely think Glue could become part of the infrastructure for making what I’m about to describe happen.I don’t see why products should only be sold via the website of the company that sells them in the real world. Obviously there are department stores, mixed retailers and companies like Zappos that sell lots of brands of shoes but I imagine these are all based on traditional, offline distribution deals.Products would most likely still need to originate and ship through the same company distribution networks but why limit the point of purchase to the company website? I would love to see the YouTube ’embed’ moment happen for eCommerce where any user could grab product data such as images, descriptions, pricing etc and embed it in any site or any stream (and ideally in a standard format like RSS for products). What would be really killer is if that content, for example views or reviews, was personalized based on your social network connections as with Glue. People might create their own or occasionally insert products in their existing blog feeds or other social media streams. Whether or not some kind of affiliate payments or commissions are involved is another debate but it’s something that seems reasonable and natural to me.If I recall Fred has blogged about the concept of “superdistribution” a couple of times (which may be similar or the same idea as “social distribution” which I’ve seen mentioned more recently) and either of which may or may not be what I’ve described here! I think Fred has also blogged about blogging about products specifically.

  50. paramendra

    Social feels like a one way road, does it not?

  51. paramendra

    Ditto. 10/10/10 can not be a goal. But moving from 100/10/1 to 20/10/1 is a huge leap for humankind.

  52. kidmercury

    IMHO the niche sites will be the best at compressing the rule. i think this is a huge point and a big part of why i am so bullish on niche businesses and the subject matter experts who can enable them.

  53. paramendra

    Managing online reviews is a business of its own.

  54. paramendra

    And what about data rich customer service? How about it?

  55. paramendra

    Educate me on Zappos. The only thing I seem to know about Zappos is that its CEO has an engaging Twitter account.

  56. paramendra

    I just learned from you Zappos are a retailer with great, great, great customer service. Wal-mart won with 100% satisfaction guaranteed. Return the stuff you bought, no questions asked, they will take it back. Result? People bought carelessly and hardly ever returned anything. Zappos seems to be taking that to a whole new level. And looks to me like they could teach Dell about who they put on the phone with you when you call them.PS. Let’s get on each other’s blogrolls, you and I.

  57. fredwilson

    Zappos is incredibly fast. Sometimes I get the stuff the next day

  58. fredwilson

    Its a huge deal.

  59. fredwilson

    I don’t know but I am curious too

  60. fredwilson

    Many online retailers are building apis so this can happen. Its the next big thing in ecommerce

  61. paramendra

    Fred, on an unrelated note, sorry your docs got stolen, but I would not worry too much. Now the potential investors will know to value the company right. And I get to make a case to you I am a visionary. Just like you. πŸ™‚ Will come in handy as I work to get my round 1, then round 2, then round 3. πŸ™‚… My billion people on Twitter blog post is the first one you commented on. Looks like Ev and co had been talking of the same number, around the same time. No, I am not the thief. πŸ˜‰