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Martha Lane Fox – Getting ahead and racing online

Martha Lane Fox, who, in her non-exec roles at Marks & Spencer and and her government-appointed position of Digital Champion, has many markets across the retail sector in her sights. She talks to Emma Herrod about her Race Online mission and the trends in UK retail in 2011.

TO DATE, some 40 million people in the UK have used the internet, with 30 million going online every day. According to Boston Consulting Group’s report ‘The Connected Kingdom’, 31 million people have shopped online and their spend on goods and travel reached about £50bn in 2009 – or £1,660 per person – a figure that’s forecast to keep on increasing.

However, almost a fifth of the population have never used the internet and it is these ‘unconnected’ people that Martha Lane Fox and her Race Online 2012 group have been appointed to champion. Since launching the Race Online 2012 campaign in March 2010, they have been working with partners in the private and public sectors to help inspire, encourage and support as many people as possible to get online by the end of the Olympic year.

The group’s aims are set out in its Manifesto for a Networked Nation, which states: “By the end of this parliament everyone of working age should be online and no-one should retire without web skills.”

Whether for altruistic (Corporate Social Responsibility) or for commercial reasons (an increase in the potential customer base for retailers), organisations from all areas of the private and public sector have already pledged to help these nine million people experience the internet. (Internet Retailing is pleased to be doing our bit to help in the run up to the Internet Retailing Expo in March.)

We all know that online shoppers are more financially beneficial for retailers and, of course, those who shop online and in-store are the most desirable. Research by business advisory firm Deloitte has shown that multi-channel shoppers spend 82% more per transaction than those who shop in-store only.

Using the internet is financially beneficial for shoppers as well, and not just because of the savings they can make by comparing prices online. Usage brings a host of benefits such as improving children’s educational attainment, opening up employment opportunities for the unemployed, boosting the standard of living for older people and their general engagement in society; in some cases, it can prove to be a lifeline. PwC estimates that the total economic benefit of getting everyone in the UK online is in excess of £22bn, listing the specific benefits as:

  • Consumer savings of £560 per year;
  • 3.6m low-income households could save more than £1bn a year by shopping and paying bills online;
  • If the 1.6m children without internet access were online at home, they could boost their lifetime earnings by more than £10bn;
  • If just 3.5% of unemployed non-internet users found a job by getting online it would deliver a net economic benefit of £560m;
  • People with good ICT skills earn between 3% and 10% more than those without;
  • The government could save between £3.30 and £12 on each contact or transaction if it was switched online. Currently, 20% of the estimated 1.8bn contacts with public services every year are online. If every adult switched just one of these contacts from the telephone to online each month it would save an estimated £900m a year.

Whilst nine million people in the UK have yet to make the move online, four million are among the most disadvantaged. This group is made up of 39% in the 65+ age group, 38% unemployed and 19% families with children.

While many non-internet users are in the lowest socio-economic groups, some six million are not classified as socially disadvantaged. In fact, close to 50% of non-internet users aged 16-64 fall outside this category. As Lane Fox explains, about half are neither in the lowest nor the highest socio-economic groups.

Some 4% of adults in households earning more than £30,000 a year aren’t online and 10% of 16- 24 year olds don’t have internet access. Contrast this with the figure for those aged 65+, of whom more than 60% aren’t online. But these potential silver surfers shouldn’t be ignored, because it’s among this age group that there’s been the largest take-up of broadband and the internet in the past year.

Why are so many people still not online? It seems that for a significant proportion of noninternet users the main barriers are insufficient knowledge or money, with nearly a quarter citing their lack of knowledge and 14% saying internet access is too expensive for them.

Companies, including retailers, are now being encouraged to play a part in breaking down these barriers and helping more people try out the internet, which its 20-year history shows leads to consumers spending money online.

Pass it on

More than 900 companies, from the BBC to SMEs, have pledged to help Race Online 2012. Corporate Social Responsibility is one reason why companies get involved but, says Lane Fox, “it’s not just on the fringes of being a worthwhile thing to do”. There are business reasons, not least of which are the cost savings of operating online and the fact that online customers spend more. She explains that getting involved with Race Online really is a case of where “doing good is good business”.

“We’ve seen great involvement from retailers,” says Lane Fox, explaining how the first wave of Race Online 2012 partners all committed significant resources to initiatives such as ‘Pass IT on’, aimed at helping, inspiring and educating everyone to get online. “The level of vision and commitment from our first wave Race Online 2012 partners has been extraordinary.”

  • BT aims to get at least 100,000 people online for the first time by encouraging all of its staff, consumers and corporate customers to ‘Get IT Together’ via a series of partnerships which includes UK online centres and Age UK. BT will also build on BT Internet Rangers with a particular focus on young people helping older relatives and friends to go online.
  • Comet aims to Pass IT on to 50,000 digitally disadvantaged people via in-store online training for seniors and projects with selected charity and community partners, and it’s also developing a low-cost hardware package.
  • Google created and printed a simple guide to the internet that has been distributed nationwide and is working with internet developers to create and launch new online tools to make the internet more accessible, particularly for the over 65s.
  • McDonald’s will get new users online through a new ICT training module, asking its 80,000 staff to Pass IT on to friends and family. It will also use the Wi-Fi facilities in its restaurants for customer IT training.
  • Microsoft will get 250,000 new users online through its Britain Works initiative and will run a Pass IT on campaign through its 32,000 partners to drive volunteering and host events. The 700+ Microsoft Academies will also run Pass IT on campaigns targeting the digitally excluded.
  • has helped members of its local community in Flintshire, North Wales, to get online. Its first Pass IT on training session took several members of the Wales and West Housing Association back to basics. It has also donated computers for use by the staff and residents.
  • Sky aims to encourage up to 100,000 customers online for the first time by integrating the Pass IT on initiative into its customer communications. Alongside continuing to offer free broadband, it will also ask its employees to run campaigns aimed at educating friends, families and local communities about the benefits of broadband.
  • Skype will get thousands of digitally excluded people online by encouraging its customers to Pass IT on to offline family and friends, and by working with UK online centres to provide training for staff and the equipment to bring people closer together via Skype.
  • TalkTalk’s ambition is to get 100,000 new users online via community training at customer contact centres, asking its four million customers to Pass IT on, and creating a scheme whereby existing customers can sign up offline parents and grandparents to a discounted broadband package.

The internet is having an impact on everyone, whether they want to be online or not. People working in shops have to understand internet retailing and how their firm operates across its joined-up sales channels. Many multi-channel retailers are now incorporating into their change programmes staff training in how to use the internet and shop online, so all staff understand the customer journey.

As Andrea O’Donnell, Commercial Director of John Lewis, told me last year, the retailer felt it should help its partners from a moral and social perspective as well as to fulfil a business need. She said: “If partners don’t understand the internet and haven’t experienced shopping online, offering the best service in the UK will be a challenge.”

Trends for 2011

While not specifically pledged to Race Online 2012, programmes such as those implemented by John Lewis and other retailers including New Look are helping to bring more of the offline population online. Regardless of whether people take their first steps online through their work, a community training opportunity or being introduced to it by friends and family, there is no denying the impact it will have on their lives. In the future, internet access will become an even greater necessity as people risk being left behind as online behaviour evolves ever more rapidly.

“It’s always difficult to predict [how behaviour will evolve] as things can catch you by surprise. Who could have predicted Twitter?” comments Lane Fox. “When Brent [Hoberman] and I launched there was no Google.” She explains that Hoberman was ahead of the mainstream, being a great believer in locationbased services, and she feels that the mobile internet is only just starting to open up all kinds of opportunities for retailers.

She thinks that there are two aspects of the internet which will drive change over the next few years: it is a tool that enables like-minded people to find each other, and it is a technology that allows more direct communication between retailers and customers, helping customers feel more special.

“People trust people like themselves more than they do brands,” she says. It is this peer-to-peer nature of the internet which retailers must tap into via their brand advocates. Most online retailers don’t know who their advocates are, but the first step to finding them is via their best customers: the top 10% with the highest spend, she says.

It will be two to three years before social commerce really takes off but the beginnings of it can already be seen. She cites group buying such as the Groupon service as a great example of how people like clubbing together and how retailers could tap into that behaviour with their best customers.

Extrapolating that group mind further are disruptive models such as, a service where customers can buy furniture before it is manufactured, and NakedWines [as mentioned in the November issue of Internet Retailing]. While not new models for retailing, these sites are changing online purchasing behaviour.

Faster broadband vs 9M connected

The planned introduction of superfast broadband would provide an undoubted boost to business in the UK, but it requires a big investment and some question whether it should be a priority with so many people in this country still not online.

“It has to happen on both fronts,” recommends Lane Fox. “Superfast broadband is very exciting, but a good quality 2Mbps service is a necessity for many people.” Then there is the huge number of people who could access a good-quality service but have chosen not to. Lane Fox is confident that Race Online 2012 can do something about getting this section of the population online.

But the challenges and frustrations of not having a fast and reliable service should not be underestimated. While the UK ranks sixth for internet penetration (with 20 million unique IP addresses according to Akamai’s State of the Internet Report), only 17% of its internet connections are above 5Mbps. This falls way below Romania’s fastest European average connection speed of 6.8Mbps.

A further complication is the delay in the deadline to deliver superfast broadband, with Culture Secretary Jeremy Hunt announcing that it is pushing it back from the 2012 target set by the former Government to 2015. The coalition’s current target is for everyone to be able to access broadband with speeds of at least 2Mbps in five years’ time.

A poll conducted by broadband comparison site Broadband Expert has revealed that only 5% of Britons believe the UK will have the best superfast broadband network in Europe, as pledged by the current government. Some 42% said they didn’t believe Britain would have the infrastructure in place to support superfast broadband by 2015, with 26% considering the pledge mere political spin.

“As retailers, we haven’t got to the start of putting customers at the heart of the businesses,” says Lane Fox. She explains that the ability to tap into where people are – with their permission – and to send them vouchers when they are at the checkout, incentivising them to spend more or visit other departments, is a great application of real world and online thinking. If you could combine the services of SMS vouchers by Eagle Eye Solutions with daily deals from Groupon and Foursquare’s location-based check-in service, you’d get a different way of thinking and interacting for retailers and for customers.

She says that as far as the retail sector in 2011 is concerned, the VAT hike is going to have a real effect. This view is echoed by analysts, with the Centre for Retail Research (CRR) expecting consumer spending to drop by £354m (0.5%) in the first quarter, causing retail sales to plummet by up to £2.2bn (3.1%) compared with the same quarter of 2010. This drop is made up of:

The CRR’s Kelkoo-commissioned report, ‘Raising VAT to 20%: Effects on Consumers, Prices and the Retail Industry’, says that fewer than one in five retailers plans to pass the full VAT increase onto consumers by the end of January, but 95% expect to do so within three months. The increase is forecast to cost each household in the UK almost £520 in 2011 – or £212 for every man, woman and child – while raising £13bn for the Treasury. As a result, consumers are expected to reduce their annual spending by £324 per person, with 50% claiming they will spend less throughout 2011.

But according to Helen Dickinson of KPMG, retail spending will “continue along its current trajectory for some time to come. Low growth, but growth none the less, is here to stay – this is the new norm.” Rather than retail sales falling off a cliff, KPMG/Synovate Retail Think Tank says it expects a modest growth curve, “albeit with pain over the medium term for some”.

This year will be a tough one for consumers and retailers alike, as other price rises such as the increase in utilities bills, put further pressure on household budgets. Asda’s Income Tracker, produced by the Centre for Economics and Business Research (CEBR), reported that October 2010 marked the tenth month in a row in which family spending power had fallen relative to the previous year. Charles Davis, Managing Economist at CEBR, explains that household earnings growth has not kept pace with the rising cost of essential goods and services, and he says he agrees with the Bank of England’s expectation that inflation will remain above target throughout 2011.

“In this environment UK businesses are acutely aware of their responsibilities to keep a lid on costs to enable them to ease the burden on customers,” comments Andy Clarke, Asda’s President and CEO.

But consumers will have more ways to buy in 2011, according to Lane Fox, because there will be more deals with retail becoming more customer-driven.

Which brings us back to the mission close to her heart, Race Online 2012, and one of the main reasons why people who aren’t online should be. “No-one can afford not to take it seriously,” she says.

But she’s realistic about what can be achieved in such as short time, and feels that online access should be made available in public spaces such as libraries and post offices because “people shouldn’t have an overly optimistic vision that everyone will have a computer in their own home”.

Overall though, she believes it’s an interesting time to be in retail and technology. There are opportunities for retailers to engage and interact with their customers, involving them in aspects of their operation such as product development. And the winners will be those retailers that take this seriously and have the foresight to put it into action and take the lead for others to follow.

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