November 2008
The Stories Behind The Multi Channel Headlines
Welcome to our bi-monthly review of key trends in the multi channel marketplace. The main theme we will be exploring in this issue is how the "just build it and they will come" days have gone. The emphasis is now on "proper" retailing of websites, adopting learning from stores... yes, stores! We will also look at the 2009 multi channel initiatives that we believe are sure-fire winners:
- It is about the customer, the interface and the product, not the technology
- Multi channel, much misinterpreted, finally provides real advantage to those retailers who actually know what it means
E-commerce growth slows. Is this the end?
In the US, e-commerce growth in October dropped to just a 1% increase on October 2008, and it actually fell in the first weeks of November by 4% compared to last year according to ComScore. In the UK, according to IMRG, growth has slowed to 14% in the autumn and is set to drop further. So are the double-digit growth days over?
Well, no-one can hide from the fact that we are either about to be, but for most we already are, in a recession. However, we believe that this is now providing a reality check for the multi channel consumer. There are a few missing facts that lie behind the headlines, which form what we consider to be the key initiatives for retailers in 2009.
The first thing that we note in the plethora of interim trading statements recently released is for the first time, just like the high street for decades, there are now emerging winners and losers. It is clear that the time of "build a website and consumers will buy" has ended.
Consumers
As consumers adopt broadband and increase their usage of the Internet as part of their daily routine, they become more sophisticated. And just like visiting the high street, they now demand websites to cater for their needs, have great product, allow them to get to products quickly, seek expert advice, converse with other customers and have an enjoyable shopping experience.
And yet so many websites are frankly nothing more than dull electronic catalogues, failing to engage the consumer or meet their needs in the buying cycle. In fact, in a thumb test (put your thumb over the top left brand on the homepage) many of our usability test group couldn’t distinguish one brand from the next for some of our major high street stores.
So are all websites failing the consumer? Well, like a beacon of light, ASOS.com clearly shows the way forward. Sales for the six months to 30 September were £65.7 million, up 107% from the first half of last year. Pre-tax profit for the same period grew 71% to £4.1 million. For the seven weeks to 16 November, year-on-year sales were up 104%.
There are a number of key lessons that others would do well to adhere. Products and service aside, ASOS have a great interface, mixing wonderful imagery with video and multiple views.
They have thought about the customer journey from browse and inspire through to purchase. Multiple selections happen on the same page, making the whole shopping experience more pleasurable and..... erm, just like shopping for clothes in a store. Oh, and unlike many retailers who put content up in a cold text-like way, ASOS mix editorial (note this is fundamentally different from content) with products and magazine imagery. Underlying all this seamless one-page activity is great attributing. We say this time and time again, get the attributing right, and no it isn’t easy, and then you can produce beautiful pages that consumers want to shop with ease, as is the case with ASOS. Continue to explore new techniques to keep up with the consumer and ahead of the competition.
Convenience
With the recession starting to bite, we have noticed another interesting trend. Although the "average" e-commerce spend is up circa 14% on last year, there is something far more profound emerging. From the early days when one of our founders invented Reserve and Collect for Argos, we have constantly argued that all the forecasts from the "experts" told only half a story. Now it is fact. More and more customers are now turning to the Internet as part of their decision-making process before going to the store.
Sure Fire Winner Number One: Order on-line, Collect in Store
In fact, the latest reports indicate that increases of 50% of customers are now looking on-line before going to the shops. So it is a pretty simple equation. Products that are in retailers’ stores should also be on-line, and in most cases with the same price. One only has to look at the recent Argos half-year trading statement, where multi channel now accounts for 22% of all sales and over 250,000 products a week are sold via their Check and Reserve service.
And it doesn’t stop there. Halfords, Comet and DSG launched their Reserve and Collect service in the past 18 months. Consumers adopted it straight away and it continues to go from strength to strength. Now other retailers have recently launched their own variations, including Boots, John Lewis, Interflora, with the list is growing and growing. But watch out. Tesco has announced its intention to roll out this service on a mass scale in the next 12 months.
But a word of warning; as we are very close to all aspects of several of these services , it is actually easy to get wrong, or in many cases adopt the same approach as many do with their websites and not maximise the potential. Clear communication is required with the customer. This has to happen throughout the website and also in stores and press. Absolute focus has to be given to the checkout process. So many have this service with an appalling checkout process that not only dampens demand for this service but also has a negative effect on home delivery.
Above all, it is about convenience for the customer. This means a great supply chain, store booking-in service, in-store signage, ease of collection and return, and knowledgeable staff. This requires a real focus on a store engagement strategy prior to launch.
And finally, while we are on the subject of convenience, consumers are now starting to embrace order in-store for home delivery. One only has to look at the success of Mothercare, with their direct in-store sales up 21.5% to £22.6m, according to their latest interim statement. What this clearly indicates is that the consumer is now indeed multi channel, mixing store visits with the web and also technology in-store.
Sure Fire Winner Part Two
Customer multi channel mapping has never been more crucial to maximise a retailers' assets, minimise extra costs and drive revenues. And that is without taking in to account the rise of social marketing, but that is for another time.
Bringing the store experience to the web. It still amazes us how many retailers do not measure the right things on the web. In stores, retailers know how gondolier ends are performing, sales per sq yard, merchandising impacts, fast moving ranges, cross sells and hero products. And lest we forget, the millions spent on improving checkout flows. Yet on websites many ignore the basics of retailing and either drown in data or quote only visitors, high level conversions and time spent on-line.
In 2009 a KPI framework will be critical to allow retailers to trade sites effectively. For example, what click-through rate should each promotional spot on the homepage and landing pages be achieving, and most important what is the conversion rate of each promotional spot? One without the other is rather meaningless. This is just like in stores, where the effectiveness of displays is measured, and if they don't work, they are changed.
Yes the web is very exciting and dynamic, but there is still a lot to learn from hundreds of years of retailing in the high street. The same selling techniques and more importantly in this multi channel world, customer shopping habits apply.
Sure Fire Winner Part Three: It is not just about the damn platform!! Next year will be about the Interface
Over the past few years, far too many retailers have focussed on the platform. Many consultancies have made a fine living out of RFPs. But between them, many forget to address what the customer wants and to map those requirements against the business requirements.
We recently heard a wonderful analogy, although the gentleman in question prefers to remain anonymous. “"Why do retailers call in the building company to dig the foundations and build the walls when they don't even know what the house looks like yet? If it were a house, they would call in an architect, discuss their needs, look at concepts and the practicality of maintenance and then draw up detailed plans. Ok, they may well get high level quotes before the detailed plans to see if they can afford it, but they already know what they want. At that stage, and only at that stage, do they call in the builders." anon
Yes, we agree that having a sound platform is crucial; otherwise you have outages and lose sales, just like Debenhams where every time during their 25% off sales in November we checked their website, it was down. Also the platform is key to ease of implementation of new interfaces and trading. But many retailers spend far too long on analysing platforms or throwing out existing platforms, installing new ones and finding themselves 18 months down the road with a new platform and an interface that is no better than the last one.
Although they want to focus in on the customer experience, invariably resources are spread so thin on the new platform and back office system integration, they will sadly end up with a similar interface to the one they have now. Guess what? The customer doesn’t notice the difference and in the meantime have voted with their credit cards. This explains, in part, the difference between the winners and losers in multi channel retailing. Those that get it make the platform work for them and are not beholden to it at the expense of core retailing.
In the time of scarce resource and budgetary cut-backs, plus the consumer demands, we believe that 2009 is the year of the interface. To keep the analogy going for a few seconds longer; now you have the building, attention will change to how to make your house welcoming, practical and above all meet your customers’ needs. With the advent of broadband, web 2.0 if you will, we are seeing the successful websites focussing more and more on great interfaces to engage their customers and make the shopping experience enjoyable. It is, in our view, no co-incidence that the likes of ASOS, Gap and Borders online are enjoying growth:
- Borders.com. The magic shelf is achieving a 62% increase in conversion and 42% increased product views, according to Allurent.com.
In addition we are seeing emerging new interfaces, based on the principles of the multi touch screen work by Jeff Han, among others. One of the new emerging interfaces is by no less than Amazon at www.windowshop.com. Now the interesting thing about this type of interface is that heavy web users seem to take some time getting used to such a radical departure. But, and most surprisingly, low and non-web users actually pick it up very quickly.
Is this a glimpse into the future? Well, yes we think so. Just like the work of Jeff Han, these new interfaces are far more intuitive and do what you would expect, all by using your hands, with not a mouse in sight. To build on this further, the success of such interfaces is perhaps largely because they are very visual and take their lead from how retailers merchandise their stores. For example, the success of Borders is down to having the top sellers displayed visually, just as you would when you walk in a store and browse with your hand and eye.
Which brings us full circle. 2009 will see a focus on improved interfaces, which will rely on proven store shopping techniques and attributing of on-line assets. In a store, if a shopkeeper witnessed that his customers came in, walked 5 steps and then turned around and went out, he would do something about it. And yet until recently that was the accepted norm on the Internet. With a 3% conversion rate, the retailer would shut the shop, but not the Internet site.
Now with these new interfaces, we are seeing double digit conversion rates. Shopkeeping is finally coming to the web and multi channel success is driven by the demands of the customer.
The Winners in 2009?
Although the recession is clearly having an impact, it is clear that the web has moved on. With the advent of multi channel and broadband it is no longer good enough just to build an electronic catalogue and reap the benefits.
Just like the high street, those who put the customer at the heart and excel at the shopping techniques will win.
Those that adopt the merchandising techniques from their own stores, create compelling customer interfaces, cater for their core customer segments by mapping their retail buying habits and realise that the customer shops their stores and their websites will flourish. Then work with people who know retail, set up and act upon the KPI framework and trade the site. In short, act like we would expect a shopkeeper to, treating every customer, especially in this current climate, as special. This means a multi channel marketing and CRM framework, but that is for another time.
Those who still think an 18-month implementation of a new platform is the answer will find 2009 very long and very hard.
2009 Workshops
We will be holding workshops at the end of January in Watford and Manchester to illustrate the above with our full web 2.0 showcase, codename CoHo, explaining the trends, real life case studies and the shopping techniques. As part of this we will be sharing our customer multi channel mapping process to aid in surviving the recession. And to prove we know the platform is important, Salmon will provide real insight into platform do's and don'ts and advice on getting the most out of your current assets.
If you would like to be notified when these workshops are taking place please email andy@jtmpartners.co.uk
Our next insight will be early February where we will analyse the Christmas trading and develop more on the key trends in 2009
Until then, all at JTM Partners Ltd would like to wish you a very Merry Christmas and a healthy and peaceful New Year.
