Online retail sales growth may be slowing, but there is still a whole world of opportunity out there on the web, and retailers willing to embrace it, finds Alison Clements.

Zara and H&M have only just launched their transactional web sites in the UK, and Morrisons still has to make the leap into ecommerce, but elsewhere there’s evidence that the traditional online market is beginning to mature, and growth of online sales is slowing. So what next?

Retailers that embraced the web early have certainly seen years of fast sales growth – about 35% per annum over the last decade – but Verdict forecasts a drop to around 12% between now and 2014. Although the research firm says overall expenditure will increase by more than 56% to £35bn by 2014, continuing to outperform total retail, a slowdown in growth is inevitable, exacerbated by what could be two or three years of acute economic austerity.

“With the number of people shopping online becoming highly saturated, retailers will have to change and evolve their online strategies,” warns Verdict senior retail analyst Malcolm Pinkerton. “Driving loyalty and increasing spend per head across all age groups will become vital factors to ensure growth.” Perhaps it’s just as well that etail has so many exciting new technological tricks up its sleeve, in the form of m-commerce, social commerce and enhanced content and functionality on websites that should keep consumers interested during the next chapter of the etail story.

Bricks and mortar versus web

Migration of sales online from bricks and mortar stores is another way to consider the future, says Bazaarvoice international marketing manager Jacob Salamon, as this will help retailers evolve their business operations to be fully multichannel.

“The proportion of online sales versus offline sales is constantly growing, and in many cases the turnover retail groups are seeing generated through their web divisions is now equivalent to 12 or 15 stores, whereas five years ago it was only the size of one or two stores,” he says.  “Rather than look at year-on-year growth, it’s important to look at online’s percentage of overall growth.” He thinks those organisations that ‘get’ multichannel – that are strategically driving growth across all customer touch-points, for example Argos, Marks & Spencer, Dixons Retail and John Lewis – will be well-positioned for the next stage of development.

Crossing the channels

Dixons Retail e-commerce director David Walmsley acknowledges online is entering “a maturing growth stage”, which will see a switch in focus from the operational setting up of websites that characterised the last decade, to “becoming genuinely customer-centric”. “From now on the growth strategy must be about marketing to the right groups of consumers, delivering to their exact needs, and making sure the overall offer – across all the channels – is winning customers and driving sales,” he says.

For Dixons Retail, stores continue to matter greatly because they bring the brands to life and are vital in the purchase journey. “Often customers make the Saturday morning trip into Currys or PC World to explore the options, talk to staff, and then make the purchase online on Sunday night,” he says. “Equally the web must perform as a shop window for all the services we offer, showing people the great things we have going on in stores. Online might be our biggest ‘store’ but because we are linking up the experience for customers across the channels, we’re attuned to the overall growth of the business.”

Verdict’s advice for generating future sales growth is to try harder to entice novice online shoppers, as an alternative to the largely saturated 35 to 44 age group. “To meet the demands of the younger, 15 to 24, age group, retailers must focus on the use of pictures, video and mobile, while the older group, aged 55 plus, wants a service-oriented customer experience linked to brands they already trust,” says Pinkerton.

The use of video for marketing and merchandising online will explode in the coming years, says Fashshot.com managing director Lee Friend, the ecommerce photography and video specialists. “The focus will be on producing content that makes customers feel confident in purchasing online,” he says. “In fashion retail, we’re producing much more catwalk and editorial video as a means to do this, as the shopper gets ever more demanding. Retailers are moving towards becoming publishers too, so editorial video content lets them do this, while also promoting product. Our sister company, Packshot.com, is seeing more interest in this type of content from other style-focused categories such as homewares.”

And once retailers have adapted their web offer for use on mobile devices, many new ways to engage customers and offer helpful shopping services will be possible. A recent study by Sterling Commerce found that around 17% of respondents were already using their web-enabled mobile phones to place orders, 53% rate the ability to use their mobile phone while shopping to verify product availability at a particular store location as ‘important to very important’, and 64% were interested in using their mobile phone to scan and purchase items to bypass checkout lines.

Some retailers are reacting fast to customer interest in m-commerce. The John Lewis and M&S mobile sites have generated much interest. Meanwhile, the new Debenhams mobile app includes an innovative ‘Barcode Scanner’, which uses the phone’s camera to snap product barcodes in store, check reviews and pricing, and buy without needing to go to the checkout. There’s also a function for users to create a Wish List by scanning products and emailing the list to friends and family alerting them to gifts they would like. 

With this degree of cross-channel shopping becoming a reality, etailers should prepare for the challenge of making the shopping experience seamless for people touching their brand at a variety of points. “Retailers must recognise that mobile has an important place to play in their cross-channel strategies,” said Sterling Commerce retail/CPG executive David Hogg. “The added convenience mobile provides to shoppers makes it a vital channel. But beyond sales, retailers need to understand that mobile is a tool to grow loyalty, provide assistance to shoppers and when used right, enables targeted marketing based on consumer shopping habits.” Already coupons sent via SMS, or offers emailed to smartphones are on the radar, and with the added capability for location-triggered voucher distribution, driving traffic into stores can complete the cross-channel circle.

It’s already clear that etail marketers of the future will be the architects of social commerce. Topshop, Tesco, Boden, Blacks, John Lewis  and countless others are already having social fun with ‘fans’ on Facebook and Twitter,  hosting online competitions, sending out promotional messages and encouraging consumer chat and recommendations that will generate more stickiness to their sites it’s hoped. 

“And relevance to consumers will be even greater when social and mobile integrate fully,” says Salamon. “With the latest mobile devices, consumers already have a wealth of information such as customer reviews, ratings and price comparison data at their fingertips in the store, which will be incredibly useful and a service consumers will come to expect.” New methods of giving consumers easier access to user-generated content on the move – with simple click-throughs to convert researchers to buyers – are being developed. For instance Bazaarvoice is launching a ratings and reviews app for Facebook that will allow brands to install an app on to a brand’s fan page. Customers can write helpful reviews and this content can be syndicated across the brand’s various social commerce platforms. The scale of customer-created content is mind-blowing, with Bazaarvoice saying to date it has served over 145 billion pieces of customer-created content, and currently processes up to 2,300 pieces per second globally.

“Far from being a fad, customer reviews will be transformational going ahead, because etailers will start to use this valuable data to market goods more cleverly, shape their merchandising across channels, even approach suppliers if product problems have been flagged up,” says Salamon. “The most successful multichannel retailers will be those who leverage the content users are generating for them, in ways that will give them competitive advantage in the years to come.”

Join the debate

Retail Week editor Tim Danaher is hosting a webinar on the subject of online Christmas trading and the next chapter of ecommerce on November 30 at 2pm. Submit your questions if you want watch the webinar live, or watch it at a later date on replay.

For more details on the webinar and to register to watch it, please go to mediazone.brighttalk.com