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A beacon of light in the economic gloom
A welcome relief from the all pervading doom and gloom, two recent reports indicate that etailers have much to be cheerful about, with online activity rocketing and plenty of opportunities to convert visitors to customers. Robert Collins takes a look at a good news story that looks like getting better and better.
As British consumers continue to watch their pennies ever more closely because of banks, bills and bad news, their love affair with internet shopping is intensifying. The lower prices and convenience of 24-hour accessibility common to e-commerce sites have seen cash-strapped UK shoppers flooding online en masse. In fact, according to a study released earlier this month, online shopping is now more popular in the UK than it is in America - the supposed spiritual home of the internet.
The poll of online consumer behaviour carried out by price comparison site Shopzilla.co.uk showed that nine out of ten Brits logged on to shop at least once a month, compared with seven out of 10 across the Atlantic. Around 1.3 million of us go online every day to purchase goods and services...and that number is growing exponentially. Retail experts Verdict Consulting estimate that online retail will grow 129% over the next five years and where internet sales currently represent around 6.7% of all retail spend (equal to £19.6 billion), that figure will more than double by 2012. Verdict's analysts believe that by the time London is hosting the Olympic Games internet sales will make up 13.6% of the UK's total retail spend - worth a whopping £44 billion. To put these colossal figures into some kind of context, high street retail is only expected to grow by 5% over the same period.
Interestingly, while the 3,000 UK shoppers polled by Shopzilla confirmed that price and convenience remained primary drivers for opting for online retail, other key factors were playing an increasingly important role. Where once the lack of human contact at the point of purchase might have been considered as an Achilles heel for cyber-stores, respondents to Shopzilla's study actually preferred the online shopping experience to venturing out into the three-dimensional world. When scoring satisfaction from one to 10, 79% of shoppers gave the online experience eight out of 10 or above, compared with just 27% for high street stores. In addition, according to the study, satisfaction with the customer service offered by online retailers was also significantly higher - 55% of shoppers gave internet stores eight out of 10 or better compared with only 28% for their bricks and mortar counterparts.
In slight defence of the high street store, you're not really comparing like with like when it comes to customer service - online this would generally pertain to post-sale aftercare service or dealing with enquiries rather than face-to-face sales service on the shopfloor. And of course if you poll people online you are, by definition, already accessing a group already bought in to the online experience. Nevertheless it is significant that the overall shopping experience showed such a bias in satisfaction towards online.
The survey also confirmed that UK consumers are becoming increasingly sophisticated in their online shopping habits. More than 39% of respondents stated that they usually or always used price comparison websites to seek out a bargain, while 53% believed that feedback on retailers from other customers was influential in their decision to purchase. What's more, Shopzilla's survey showed that seven out of 10 people believed that the experience of online shopping was now "much better" than it was five years ago. As the country's population becomes more comfortable with web shopping, as our familiarity with and confidence in etailers continues to grow, as the shopping experience continues to be honed to better suit customer needs, the proportion of Brits shopping online can really only go in one direction.
Emphasising this point nicely, the data from Shopzilla showed that a third of those polled planned to do the majority of their Christmas shopping online this year, with a further third planning to make around half of their purchases online. Reflecting on the findings of the study, Scott Macon, managing director for Shopzilla Europe, said: "This survey shows that Britons are among the world's keenest online shoppers and that they are becoming more and more sophisticated. While price and convenience are still key motivators for shopping online, people also want to know more about the online retailers they are purchasing from.
"Web shoppers in the UK are savvy and although this research shows they are enjoying the online shopping experience, it is clear they will not put up with poor website performance and after-sales service".
Now while all of this will no doubt be leaving any e-commerce professionals with a smug little glow around them, a new report from Verdict Consulting suggests that the online trading community could and should be doing much better. Verdict's report 'How to pull customers online' says that too many online retailers are allowing customers to slip through their nets. It states that 25% of all online shopping carts are abandoned, resulting in £2.3 billion in lost sales every year.
The report, produced by Verdict for Webloyalty (a company that describes itself as a provider of incremental revenue for online businesses), assesses strategies for winning and keeping customers in an increasingly competitive online environment. Identifying key barriers to purchase, Verdict suggests, such as concerns over delivery or delivery charges, can contribute to £992.4 million in lost revenue every year.
The research shows that etailers need to become better finders and keepers of customers. While most current comparative statistics between online and high street retailers show all the good news going in one direction, Verdict's data demonstrated that levels of online loyalty are 10% below that of their bricks and mortar counterparts. In the food and grocery sector, where Verdict calculates a typical consumer will spend £33,000 online over a lifetime, this lack of loyalty carries a high price. Looking at the lifetime spend of just 100 customers, it translates to a loss in sales of approximately £1.2 million. On the one hand this sounds like bad news, but on the other, all it is really emphasising is that the potential market for online retailers is even greater than the industry's already stellar trading figures currently suggest.
Neil Saunders, consulting director at Verdict, says: "Standing out from the crowd on the internet has become more of a challenge. Online retailers have to work harder than ever to attract consumers. This is not a challenge restricted to smaller sites - big players face the same issue. They all need to be more creative about customer acquisition. Old methods of driving traffic still have their place, but are increasingly being replaced by new strategies."
Attracting new customers, converting browsers to purchasers, encouraging the multi-bag buy and building customer loyalty are challenges that retailers have faced for a couple of hundred years and these are the challenges their online counterparts will continue to face for the foreseeable future. But for those who manage to meet these challenges, online shopping has the potential to make them rich beyond the dreams of avarice.
