by Guy Chiswick
The online retail sector has shown a tremendous growth in the last decade. From very specific products catering to tech savvy early adopters in modest volumes, it has gone on to become the biggest change in retail since the introduction of self-service stores. Forrester Research expects the UK online retail and travel sales to reach £56bn by 2014 (UK Online Retail And Travel Forecast, 2008 To 2014, Forrester Research).
Each product sector had to overcome its own hurdles for the customer to see online as an acceptable sales channel. Selling books online was easy, each copy is the same and people usually know what they want to buy. Clothes are a different beast, more personal and consumers often need to try things on before they know they want it. Not until no-questions-asked returns policies with return packaging included arrived did the online fashion sector see real growth.
Now the massive growth of the online channel is one of the main reasons the High Street is undergoing a radical makeover. Some products, such as CDs, DVDs and, increasingly, books are disappearing from shops all together. Other retailers are being forced to adapt their formulas to multichannel strategies. At Webloyalty, we explored the effect on the High Street in-depth in Webloyalty’s March 2011 report with Verdict, The impact of mobile on multichannel retail.*
Although for many shoppers these developments have led to more convenience, they have also led to less loyalty to retail brands. On the web, vicinity of a store is hardly relevant and with no face-to-face contact, the personal touch is often lost as a means to build or retain loyalty. It also makes communicating with customers harder. The result is that the main focus for online retailers is on price, impacting margins and leaving little room for other means of differentiation. A side effect is often email marketing which is not personalised and resembles spam in relevance and volume.
Whilst it’s easier to obtain data for online retail customers than for high street customers, there are still a few tactics online retailers could borrow from bricks and mortar stores to use data more effectively.
Solutions to overcome some of these challenges include the use of customer relationship management tools that can help personalise offers and communications. Companies such as Amazon and Wiggle are fine examples of online retailers using personalisation. With emails based on previous purchases and searches their communication is targeted at personal interests of the recipient.
Elsewhere, Tesco‘s ‘8+24 rule’ controls when coupons on specific items are emailed to consumers to avoid overwhelming them. If a consumer purchases a food item twice within an eight week period, only then will they be sent a coupon for a discount on that type of item. The same works within a 24 week period for non-food items. Contrasting this example is mounting anecdotal evidence that businesses such as Groupon are yet to strike this balance. Some people, myself included, have unsubscribed from their offer, because of the number of untargeted emails members receive.
But technological advances mean that there are increasingly sophisticated opportunities for online retailers to differentiate and provide additional customer benefits - at the same time as increasing revenue. Complete savings programmes that provide discounts and rewards, services or other benefits are just some of the ways that companies can use to successfully differentiate and enhance revenue.
Improving monetisation is a low-cost/high return strategy too, and partners in this field will often manage the entire process, leaving online businesses to focus on what they do best. And whilst improving the bottom-line return through more effective monetisation, companies can also provide added value to their customers and differentiate their offer in a crowded and tough market.
Guy Chiswick is managing director, Webloyalty UK
Guy joined Webloyalty in November 2010 as business development director. He joined from Digicom where he was commercial director and was with dunnhumby prior to this, where he was Commercial Director for Tesco.com.
* Webloyalty and Verdict's report “The impact of mobile on multichannel retail“ can be downloaded for free from: