Merchants Post a 40% Year on Year Increase in Online Revenue in Q4 08
As the High Street is hit by hard times, online retailers are experiencing growth and success
The news from the High Street remains mixed and everyday there appears to be another story about a retailer, large or small, going into administration. It was a sad day for retail when Woolworths closed down their last store in January of this year and the administrators have been kept busy, with a number of other notables like Blooming Marvellous, Adams Childrenswear, Viyella, MFI and the Officers Club all falling by the wayside. The financial crisis has signalled a sea of change in UK retail environment with challenges to find credit affecting both businesses and customers alike.
So how has eCommerce faired? The answer in our space has been very positive. The The British Retail Consortium (BRC) tracker posted an average growth rate of 30% in December, and Venda’s Instant Salesware Index™, where we normalise revenue across the hundreds of websites on the platform showed a Q4 year-on-year increase of over 39.7%. So why such a stark contrast to what is being reported online?
Your customers purchase behaviour is changing
Broadband penetration in the UK has increased significantly. The Office of National Statistics figures suggest that the number of households with broadband has now increased to 56% of overall in 2008 increasing from 51% from 2007. From 2004 the UK has seen an average increase of over 1 million households per year connecting to the Internet since 2004, reaching a total of 16.05 million in 2008. Internet is now becoming available to everyone, whether it be at home, at work or through the many cafes that now provide terminals or wireless as standard.
This has meant a fundamental shift in the channels that customers use to spend their disposable income. The proportion of spend online is increasing significantly and amounted in the UK to £80 for every UK adult per month in the summer. It will be interesting to see what this amounts to when the Christmas figures have been done.
Offline purchases are also being influenced by what consumers see online more than ever before. I believe that if we haven’t reached it already, soon there will be no such thing as a single channel customer, and in order to drive sales by recruiting new or developing existing customer relationships across your brand, it will be compulsory to have the right representation of your brand across all channels, and the ability for your customers to purchase your goods and services at any stage in the purchase experience.
Customers expect a good quality experience
Retailers spend millions on their stores, the merchandising, the experience, their products and marketing offline. Given that customers are becoming cross-channel, it is becoming more important to ensure that your website is an asset to your brand and your products and services, not an embarrassment. There are 3 areas that should be addressed:
- Brand & Proposition consistency
- Features & Functionality
- Site performance & Security
Brand & Proposition consistency
If customers have a bad experience online this can have a negative impact on your overall brand perception. I always think that De Beers (http://www.debeers.com) is presented very well online. Their website oozes luxury and high-end, and they list nearly all their extensive range, whether they are available to buy online or not, so that customers get full visibility of their range. Where items are not available to buy online due to customisation requirements they enable customers to book and appointment for in-store, utilising the web to drive further footfall. The website also covers their stance on social responsibility on where the diamonds come from, supported with rich media presentations about their collections. For the novice, the guidance section explains what you should look for in diamonds (the 4 C’s), and the images of the diamonds in the Imageware™ function at product level is exceptional. The website does the brand complete justice, and the consistency with the catalogue and stores means that customers who come to the site know they are buying the best quality jewellery from De Beers.
Features & Functionality
The Features and functionality race that happened earlier in the decade is slowing and technology is no longer a key differentiator; it’s all about how you merchandise your products and services and provide a quality experience as you would through your other channels. Customers who buy products / services online expect clarity in your messaging and ease in navigating your website. Technology becomes a differentiator if you don’t live up to their expectations. Competitors are only a click away, rather than a walk away, so it is important that you give your customers what they want when they want it, and the information they need when they need it. Enhanced imaging, sophisticated guided navigation, search and merchandising, customer reviews, social bookmarking and multiple payment and delivery options all help websites attract more shoppers and convert those shoppers into buyers. One of our clients Republic (http://www.republic) experienced 360% growth in Q4 last year, much of this can be attributed to the ease-of-use and clear messaging and merchandising to satisfy their customers at every step.
Site performance & Security
Despite eCommerce being around for over 10 years, site security and confidence that personal information being submitted to websites is not being stored in a way that can open it up to malicious attacks is still very high up the list of concerns. Very public breaches to some well known brand names have not helped in increasing customer confidence in this area. To combat this the payment card industry (PCI) have released the PCI Data Security Standard (PCI DSS), that outlines the measures that a company selling products and services online should adhere too when handling sensitive customer information. Although now compulsory in the US, very few companies in Europe have taken this on board. It will be interesting to see what will happen this year when it becomes compulsory in Europe, and the payment card industry start to reserve the right to refuse transactions if they feel an online company does not have the measures in place for security. I for one am pleased that this is being progressed having a global standard outlined by the payment card industry and widely publicised will mean that for those that have it, consumer confidence in internet security will increase, removing yet another potential barrier to shopping online.
If your website does not perform well or is not available, you will lose customers. eCommerce is a peaks ’n’ troughs business, so as a business you need to ensure that you have enough database and application servers as well as bandwidth to cater for your maximum load. This can sometimes be costly and expensive, but given that your customers expect a site that works, this must be paramount in your overall online strategy. The buy and build approach could soon be a thing of the past as companies online are looking at the ‘shared infra-structure approach’ accompanied by a technical and business support network. This delivery method has now been paraphrased as Software as a Service (or SaaS). SaaS enables you to manage your spikes in traffic and sales by sharing the infrastructure with others in a vast network of hardware and software supported by someone else. A bit like renting a store space in a shopping centre you can rent the infrastructure for a low predictable monthly fee, and save on all the operational and CAPEX costs that you would otherwise have to incur if you chose to do this in-house. Software as a Service was recently recognised as a growing option for eCommerce in Gartner Inc.’s Magic Quadrant for eCommerce, authored by Gene Alvarez and published on July 18, 2008. It also means that retailers can concentrate on their core proposition.
Focus your technology budgets on marketing
In the current climate it is important to focus budgets on recruiting and retaining customers. The infrastructure for eCommerce does not have to be an unpredictable and costly overhead. The operational overheads and staffing costs can be significantly less than other channels. By opting for the SaaS approach, you can free up budgets normally allocated to technology and focus on on-site improvements such merchandising, promotions, SEO improvements and driving incremental traffic to the website. ECommerce is THE growth area in the economy this year. And as well as acquiring new customers, an eCommerce website with a good quality customer experience will help you to keep your existing customers too.
Author: Andy Houstoun, Global Head of Marketing, Venda