There’s no doubt over the internet’s success as a retail channel. However, behind this success there are many factors that have changed over time, including the consumer.
We’re used to seeing fantastic growth figures for online sales such as the IMRG Capgemini e-Retail figures, which for July were up 16.8% on last year. But there are push and pull factors that have led to the channel’s success.
In the wake of the financial crisis, consumer confidence dropped significantly and consumers have become sensitive. Whether they have been directly affected through changes to their livelihoods or job stability, they’re more cautious, more reluctant and scrutinise their spending decisions more than ever.
Consumers are spending, but the manner in which they are making spending decisions has changed. Footfall is down 2.1% in the year to date and Allegra Strategies forecasts a decline of 0.5% in the eating out market next year, but satellite broadcaster Sky has experienced the highest customer growth in five years and Domino’s Pizza sales are up 19.5% in the half year to the end of June.
All these statistics, although anecdotal, tell a story. That story is arguably of the consumer controlling their spending environment, choosing to entertain at home over going out, where they may spend more than they would like.
I would argue that online retail has potentially benefited from this change in consumer patterns. Internet retail has a perception of value and with the rise of price comparison websites and search engines the consumer has a feeling of greater control and the ability to save on purchases.
If consumers spend more time at home and as a result more time online, greater opportunities exist for internet retailers, as do opportunities to convert online browsing into in-store traffic.
In the dotcom boom, high street retailers were concerned that consumers would investigate products in-store before then searching to buy them online for less. Somewhat of an opposite trend has occurred instead, with many consumers researching online before buying in-store.
One way for high street retailers to protect against this trend is to offer click-and-collect type services. If consumers are browsing online and researching goods to buy in-store, there is no better way to ensure a sale than offering click-and-collect as this reduces the risk of the shopper going to a rival on the high street to make their final purchase.
Even though online retail is increasing, there’s still much online traffic that isn’t converting into sales. Consumers are informing themselves with window shopping online, as shown by research from Amaze and the University of Glasgow, which revealed that 87% of online customers abandon their basket before paying.
The key is to understand these consumer trends and play to the strengths of the internet. Is your website engaging those browsers and window shoppers? Does your website encourage and reassure with simple steps to purchase? Perhaps try buying something off your own site to see…
Richard Lowe Head of Retail and Wholesale, Barclays Commercial Bank