Web discounts have grabbed customer attention over Christmas but exploiting the online world to its fullest could prove make or break in this tough economic climate. Joanna Perry reports
You only need to look at what consumers were searching for on the web in the run-up to Christmas to realise how profound the shift in consumer sentiment has been in the past six months.
According to Google UK, searches on the term “discount vouchers” soared 94 per cent over a 30-day period between November and December. Other terms such as “Debenhams vouchers”, “John Lewis vouchers” and “Amazon vouchers” all had high double-digit increases.
Google retail industry leader Peter Fitzgerald says he is certain consumers are researching more before making purchase decisions. “In the past 90 days we have seen changing behaviour as consumers look for discounts, voucher sites and price comparison sites,” he explains.
And customer ratings and reviews platform provider Bazaarvoice revealed that in the month leading up to December 8 there was a 51 per cent increase in the number of customer reviews posted across its UK client base, which includes Boden, Early Learning Centre, Comet, Argos, Wickes and QVC. At its peak, consumers posted nearly 386 reviews a second.
The internet proved to be the battleground where many retailers chose to set out the promotions they ran for all channels – think of all the e-mails announcing the early Christmas Sales, the home pages shouting about mass discounting and savvy retailers running pay-per-click campaigns on search terms such as “cheap TVs”.
The strategy retailers adopt to harness the web to keep shoppers buying both online and in stores could significantly affect how well they do this year.
Price will be a major competitive factor, but retailers are also getting wise to how they can use the web to give certain customers more subtle and targeted discounts.
PayPal UK general manager of merchant services Cameron McLean agrees that price is top of consumers’ minds. PayPal runs a special web site where account holders can browse and search for special offers that retailers will give to customers who pay on their sites using PayPal.
For instance, Burton and Republic were both offering 5 per cent cash back on orders before Christmas and Lloydspharmacy was offering 10 per cent savings. Other big names offering cash back discounts through the site included Marks & Spencer, Tesco, Boots, Bhs and JD Sports. McLean says there are more than 120 retailers using the site and he has seen a big change in the past three months in the number of retailers getting involved with targeted offers for PayPal’s customer base.
However, price alone is not enough. HMV head of online Justin Moodie says: “Competitive pricing is a given really – customers expect it and price comparison sites can obviously also highlight the value of your offers. Ease of use has to be the key thing: make it responsive to customers’ needs and also make it fun, engaging and straightforward to use. Get that right and the response will hopefully be there.”
John Lewis Direct head of web selling David Walmsley is clear that John Lewis will not be dragged into competing online purely on price. He says that customers come to John Lewis’ site because they love the brand and the service guarantees, although they also know they will always get good value.
Walmsley believes that 2009 will be the year when shopkeeping comes to the fore online. For John Lewis, this means the basics of supplying products that people want to buy at prices they are willing to pay. It won’t offer different prices to different customers. “We stopped doing online vouchers in 2007 and won’t go back to that. It does not fit with our brand principles,” he says.
Martin Newman, who has previously run e-commerce operations for brands including Ted Baker and Burberry, agrees that discounting on its own is unlikely to be enough. Retailers must use the internet to add value to the customer experience. He says that there are lots of ways retailers can leverage their online presence to combat the economic downturn.
In addition to Google’s statistics Newman notes that it is just as important to analyse what consumers are searching for within your site. This can help with site merchandising decisions, but could also provide feedback on your brand. He asks: “If lots of consumers search for products on your site that you do not stock, why are you not stocking them?”
John Lewis will introduce an online merchandising system from Omniture this year that allows it to display different content to customers based on who they are and how they have come to the site. Walmsley adds that John Lewis intends to use Omniture’s analytics systems to help the department store retailer understand who its customers are and what they want to do on the site.
Fitzgerald says retailers need to ensure that their marketing through different channels is joined up. “A retailer will run a TV ad and then we will see a massive amount of search traffic, and that’s when the competition often siphons off the traffic. Those that combine online marketing with above-the-line campaigns will often double their marketing effectiveness,” he explains.
“There is a massive gap between sales online and money spent on digital advertising. That is one of the most important discussions we are having at chief executive level – retailers are selling maybe 6 per cent online, but maybe only spending 1 per cent of their marketing budget on digital advertising.”
Branding work often goes on the back-burner during downturns, but Fitzgerald says it can still be powerful. “Those consumers that start by searching on a brand will end up buying from another brand almost 50 per cent of the time,” he says. As such, he believes it is still worth investing in generic terms like “clothing” as well as the more specific ones.
Moodie says that the bulk of HMV’s online marketing activity is run as direct response and is aimed at driving profitable sales for the site. “There is also a branding element. Display is not only used for direct response but to generate wider awareness for HMV and Hmv.com – particularly in the run-up to Christmas when consumers were using the web for researching gift ideas as much as making purchases. The objective would be to get the products and brand front-of-mind for gifters in particular rather than self-purchasers at this time of year, which is reflected in media choice and creative treatments,” he says.
Links of London has pushed on with digital marketing campaigns working with agency Ambergreen – even though it is difficult to track return on investment as people often want to come to a store to complete the purchase of jewellery. However, it has found ads that bring customers to landing pages featuring more affordable jewellery, before allowing them to browse more expensive products, work best.
It now averages a 4.6-times return on investment from running pay-per-click campaigns and click-through rates rocketed 154 per cent between 2007 and 2008. No doubt the pay-per-click campaigns also drive more customers to its stores.
Newman points out that retailers such as Argos and Boots believe the ratio of store sales generated by the web compared with sales online is about three to one. He believes that this ratio will be even higher for fashion brands, as customers want to try things on before they buy.
And if a customer comes to your store and the product they want is not available? Well then the internet can ensure that you don’t lose the sale. Newman says that cross-channel inventory management is crucial, as is giving either staff or customers access to a version of your e-commerce site within stores.
One retailer that is bringing aspects of the web into its stores is HMV. It is trialling kiosks in some shops to provide access to rich content and information previously only available on the net. Customers can download music onto their own storage devices and view trailers for films and games, as well as look at stock availability in stores.
A mixture of transactional, information-only and combined kiosks have been tested over the Christmas trading period. HMV is working with WebTrends to provide reporting on how they have performed, before the roll-out is continued in 2009. WebTrends will also be able to tell HMV how people are using the kiosks.
And what of those that don’t trade online at all?
Fitzgerald believes that even retailers that don’t sell through their web site must still consider their digital strategy because so much research is done online. For instance, he says New Look is one example of a retailer that used its site well even before it started selling online and so had good traffic levels.
In addition, the likelihood of falling store sales in 2009 might make the online doubters think again. Even Matalan – which, along with other value fashion retailers, had shied away from e-commerce – is now experimenting with the channel.
Online expert Transaction Partnership was formed a year ago by ex-Littlewoods executives Steve Goodheart and Richard Blanchard, who helped the company pioneer online sales in 1999. They estimate that a typical mid-sized retail chain could expect 100,000 hits a week on a non-transactional site, equating to£4 million in sales across a year or£1 million alone during the Christmas period.
The battle for the hearts and minds of cash-strapped consumers will get bloody this year; it will also undoubtedly be fought most fiercely online.