Retailers are cashing in on the ecommerce boom but customer appetite for online retail creates a dilemma for value players.
The low average order transaction price against high overheads causes headaches for value retailers wanting to launch an ecommerce offer, but that has not stopped them entering the market.
Poundstretcher closed its first transactional site in February 2012 before reopening it again last summer and now Poundland is expected to enter the fray with the launch of an ecommerce site before the end of the year.
Retail Week spoke to eNova Partnership co-founder Sophie Albizua about the solutions available to discounters that will allow them to capitalise on the lucrative ecommerce market.
1) Minimum order value
If minimum order values have to be introduced it is best to do it in a subtle way that encourages customers to buy through initiatives such as special offers. It can be better to accept to lose money on the 5% of orders that are below the breakeven order value, rather than build a message around a minimum basket size that might put off customers.
2) Focus on click and collect
Click and collect can be more profitable than home delivery if the retailer is able to add orders onto its regular deliveries. It also offers additional flexibility by allowing shoppers to pick up products at locations including stations to make delivery even more convenient.
3) Higher charges for delivery
This has its challenges in a discount environment because shoppers after a bargain or on very tight budgets will be even less willing to pay for delivery than in other sectors and will not understand why they should be treated differently.
4) A different product range online
Value retailers could present a different or selective product range online of higher margin items only, or products less expensive to move and ship. This would need to be done very carefully as nowadays customers expect to find the whole range online.
5) Work with suppliers
Value retailers already work extremely hard with suppliers to cut costs of products as much as possible, but another way to cut costs would be to ship products to customers direct from suppliers.
Or… think about profitability in a different way
Some argue there is a case to be made for sustaining a loss on online orders to either attract new customers or drive more traffic to stores through initiatives such as click-and-collect, providing the opportunity to make add-on sales. This is multichannel thinking that many retailers are unwilling to entertain, but it is happening in practice already.