The Rise in Online Retail
Andrew McClelland is Director of Projects and Marketing for the Interactive Media in Retail Group (IMRG), the industry body for the rapidly evolving world of e-commerce. As online consumer confidence and spend in the UK continues to soar, Spannerworks' Marketing Manager, Charlotte McDougall talks to Andrew about such growth and how successful marketers are in embracing and fostering online retail.
What do you think is driving the record online shopping spend we've seen recently?
Online consumers spent £19.2bn on retail goods last year. As a result of such massive consumer confidence, the IMRG are expecting e-retail to be worth over 10% of retail this year. Broadband uptake is a clear driver, but we're also seeing big brands promote their online channels through their offline marketing activity which is increasing awareness.
How well have UK retailers embraced online retail compared to other European markets?
Serious ecommerce figures on what's happening across Europe are thin on the ground, but the UK definitely leads the way. Closest in terms of penetration is Germany where uptake is steady, but the lack of available payment methods is slowing progress. I think we'll see a wider acceptance of different payment technologies across Europe but until then, UK consumers remain the most savvy and confident of European online shoppers. A trend that retailers here continue to encourage.
Competition in the search engines is soaring as retailers vie for the top spot. Do you think the large brand retailers face a bigger threat from smaller retailers who now have a platform to compete on?
Everyone now sees the online channel as a must. If they don't provide their customers with the choice they are looking for, their competitors are a click away. Simple as that. But there is still consumer unease around going online and trading with smaller, unknown retailers.
A search for mainstream products such as lawnmowers, pushchairs and high definition TVs is very telling. The big brands you would expect to appear for such products are still not appearing. Instead, online only brands are stealing the show. The high street retailers can rely on brand equity to a large extent, but need to realise this isn't enough by any means.
How important is search in driving customers to websites?
A search strategy should be integral to a multi-channel approach and some of the big retailers are benefiting from creating a seamless experience between on and offline channels.
Previously, search was seen as a separate marketing tool. Now I think most retailers understand that it is one of many tools that a retailer has at their disposal. But, it should be integrated well to ensure maximum benefit.
A: Our own research indicates that a large number of marketers ignore latent sales, those that occur after the initial visit to the website. Do you think retailers are savvy enough in order to compete in the online marketplace?
The consumer owns the desktop, they pay for the machine and internet connection. It's up to them what they allow in. As an industry, we can extend the virtues of the many measurement tools but at the end of the day, if the consumer doesn't want them on their computer, there's nothing we can do about it.
Retailers have been focusing on how to convert first time customers to their websites. It is a challenge to track online consumer behaviour, and if retailers are to do so successfully, a re-think around how latent sales can be measured, understood and how best to plough such knowledge back in is essential.
Are retailers using paid search more than natural search solutions? Is this affecting the potential return on their investment?
The majority of retailers are using paid search, but many are now looking at natural search as a more cost effective channel. If you can get in early enough with paid search to benefit from lower click costs then you are on to a winner. But this is not a long-term strategy. I think we will start seeing retailers using agencies for natural search in order to make use of the content they already own on their site.
There is a time and place for each of the tools available but it's good business sense to make sure your natural search strategy is as effective as possible if investing in a major paid search campaign.
What are the main challenges that online retailers face over the next year?
Greater competition as more big brands come into the picture. Dixons has just announced their withdrawal from the high street to go online. I think this is more of a brand exercise, but it is another high street brand competing for customers online. This shift in focus will continue to polarise the online retail industry further. Increased competition among the bigger players creates an increased challenge for the mid size retailers.
The biggest gripe we get at the IMRG is about communication. Level of service is going to really separate the winners from the losers over the next 5 months. There are many factors that drive customers to a high street store or website, but ultimately they need to look after the customer once there. Customer service is in the spotlight.
What are your members saying about mobile as a potential sales channel?
Our members aren't discussing it heavily at the moment. We are running our first m-commerce workshop in July this year so opinion from this will be interesting. Kelkoo and some of the other price comparison engines offer a WAP service and are taking the channel seriously, but those aside, most are weighing up the opportunities.
We need to understand where the key value will come from and what the benefit for the consumer is. I suspect that, from a consumer perspective, it will be used as a price comparison tool within the high street. It's a very interesting marketplace to be in - the key thing will be payments and how that will be handled.
Favourite and least favourite online shop?
My favourite is www.ctshirts.co.uk. I can't fault their service and have shopped with them since they were mail order only. My least favourite, I couldn't possibly say but as a group, any online retailer that wants my inside leg measurement before I can buy anything.
Best and worst online buy?
Best buy has to be flowers for my wife (Interflora). Worst - not a single one (the secret is in the research).
A retailer that has taken the online world by storm?
Amazon and Lastminute.com have a lot to answer for. They showed the world it could work. The likes of Argos and Comet, from a traditional background with lots brand equity, have really taken it to the masses.
Yo Sushi or Nandos?
Can't stand either of them!
Our thanks go to Andrew McClelland for giving his time for this interview. For more information on the IMRG visit www.imrg.org.
