by Chris Webster
A renaissance for online has shaped retail in 2010 thus far, with the market growing in June this year by over 20% for the second consecutive month – the highest rate since June 2008. The web is fast becoming the ‘default reference’ for shoppers, often whilst in-store via internet enabled mobile devices, and is frequently the first place that consumers turn to when researching an item or service. Online comparison sites, social networking sites, interest group forums and customer reviews and recommendations all play a part in the purchase decision.
There are a number of concepts and strategies which retailers will need to grasp over the next several years to ensure that they are maximising the huge potential consumer base, which is becoming more engaged online on a daily basis.
The iPhone, iPad and other similar devices from manufacturers have already started a mobile revolution, which will be further accelerated by faster 3G connection speeds. This trend will continue over the next decade along with an increase in the use of the mobile device for making payments (e-wallet), receiving personalised and location-specific offers (using near-field communications) and, of course, surfing the web. Amazon recently announced that its worldwide mobile commerce revenue reached $1 billion in 12 months and there will come a time when all retailers will not only have transactional websites, but those websites will be optimised for mobile use.
Web 2.0 technologies
The increased use of ‘web 2.0’ technologies has improved the customer experience online and made it easier to choose and make decisions about purchases. 2010 has seen a further increase in use of these technologies in the clothing sector - where 360 degree rotating images, zoom functions, ‘look books’ and ‘drag and drop’ functionality are just some of the innovations that make it easier to choose products which, in the past, might have historically required a trip to the high street. These technologies, exemplified by retailers such as NET-A-PORTER.COM have also created a much more enjoyable and engaging experience for shoppers, contributing to an increasing amount of time being spent online.
Social networks allow customers to improve engagement with retailers or their favourite brands where and when they want. ‘Social shopping’ is pushing the boundaries of online retail further, allowing consumers to create custom shopping lists and share them with friends, or encouraging groups of people to buy together at wholesale prices. Sites such as Kaboodle and Groupon are leading the way in this, and retailers like Dorothy Perkins, Starbucks and Gap are proving to be forward-thinking experimenters. By creating their own network of shoppers online, retailers can not only increase revenue from advertising and click throughs, but also learn more about their customers and increase brand loyalty.
Similarly, in the coming years, savvy retailers will hook themselves into existing networks, such as Facebook’s Credits system, which allow shoppers to buy virtual goods on the platform with PayPal integration. This could mean the end of the traditional ecommerce engine, with retailers eventually allowing consumers to buy through Facebook from their website.
Integrated multichannel retailing
We will continue to see retailers develop their multi-channel propositions, and put increased focus on integration across channels to provide a seamless and consistent customer experience. For retailers such as John Lewis, technology plays an important role in underpinning this capability by ensuring the effective sharing of customer, product and order data. This technology will also be essential for creating knowledge management systems for customer queries, as well as for enabling shared applications across the retail business to improve agility.
Growth in cloud computing retail solutions
The past two years have seen the cloud emerge as a credible platform for larger scale digital marketing or ecommerce solutions. The speed to develop sites, the flexibility to handle unpredictable volumes and advances in security have been major factors in adoption. We will see an increase in the number of cloud computing solutions to help retailers ‘outsource’ non-core offerings. For example, ATG and Bazaarvoice are already offering ‘reviews and recommendations’ services in the cloud for retailers. Technology providers will need to offer flexible solutions, such as cloud computing, to allow retailers to pay for only what they use, try before they buy and plug out what they do not need anymore. Capgemini Immediate is one such service offering this.
As the UK market continues to mature, retailers will have more opportunity to sell to ripe international markets. Shoppers in Europe and beyond are eager to receive products from their favourite brands in the UK, and lesser-known brands will do well to use the ability to sell internationally as a differentiator. Asos is a clear example of a brand already seizing this prospect, recently announcing that more than a third of its sales come from overseas, and shipping its products to 167 countries, and House of Fraser has recently launched its own international delivery service as part of plans to achieve a 150% increase in online sales by the end of the year. This trend will likely bring the need to meet different cultural tastes and payment preferences.
IMRG and Capgemini predict that the UK’s online retail market will grow by 110% in the next decade, reaching £123 billion by 2020. Retailers simply can’t be sluggish to accept change anymore. Those brands which have already embraced online as a channel to reach a key customer base must now look ahead to these emerging trends, all of which are at different stages of development and mass use, but arguably all as important in ensuring that e-retail sustains its momentum and continues to hit the growth levels we’ve seen so far over the last decade.
Chris Webster is vice president, head of retail consulting and technology at Capgemini.