By Steve Rowen, Partner
7/15/2008
It perhaps goes without saying that this has not been a great year for retail sales. Yet even though it has become clear that early predictions of 3.5% overall retail growth for 2008 will not come to fruition, the fact that experts sources were calling for 21% growth of online sales caused many to preemptively reevaluate the efficacy of online channel even before more traditional retail sales took a serious dive.
Going back a bit, the early days of eCommerce were rife with hysterical claims that online would eclipse stores and ultimately become consumers’ preferred shopping destination. And while the former has not happened (for most retailers online sales remain a fraction of their total), it seems that the latter has, at least in the US: Consumer satisfaction with online retailers recently surpassed store-based retailers for the first time. Further, while online sales may be a fraction of total sales, that fraction is growing large enough to impact retailers’ quarterly results. eCommerce growth shows little sign of slowing in an environment where brick and mortar sales growth is shaky at best.
As such, retailing is at an inflection point, and the tables have turned. While early eCommerce sites were designed to replicate the store experience, today’s retailers are struggling to bring elements of the rich online experience into their stores.
Further, eCommerce organizations have historically been independent from the main business of store-based retailers, to both positive and negative effect. On the one hand, this has enabled a fast-moving culture that is technology-savvy and unencumbered by “the way it’s always been done.” On the other hand, it has resulted in few links back to the main organization, giving rise to culture clashes and competing objectives.
To this, RSR decided to launch our first ever pure eCommerce benchmark study this year. Playing Well with Others: eCommerce’s Evolving Role in the Customer Experience aims to jump-start a dialog on the role that eCommerce will play, not as an independent entity, but as a player in an integrated cross-channel strategy. The intended goal of the research piece will examine retailers’ online strategies to determine what Retail Winners do differently in the design and execution of their online customer service experience. Our objective is to identify best practices – and new tricks – that make online a differentiating retail experience, with particular emphasis on how these practices can be, and are actually applied to other channels.
We invite all RPW readers to participate in the still-open survey, and in the meantime, we’ve decided to share some early findings. What follows is some early analysis based on the first 45 retail respondents.
Early Findings
Seventy-three percent of our early respondents sell in stores, 27% via catalog, and 87% via the online channel. Not surprisingly, many of those who took the survey early on were smaller retailers, with 44% coming from retailers averaging less than $50 million annually, 18% averaging $51 million to $250 million, and small percentages (<10%) coming from the remaining segmented categories of $250 million to more than $5 billion in sales.
Forty-two percent of these respondents came from what we call Winning Retailers (those who outperform their peers), as identified by greater than 3% annual sales growth, while 48% are average performers, and 10% are lagging retailers, or underperformers.
So far, our respondents have what we would typify as very “realistic” goals for their eChannel, (most are looking to bump their online sales by 20-30% in the next 3 years), exemplifying a desire to capitalize on the customers’ growing demand for goods online in a growing methodology that does not seek to boil the ocean.
However, we were quite surprised to see how much of a challenge product mix remains for these savvy sellers. When asked to identify the three largest challenges they currently face, our respondents indicated the following:
Figure 1: Product Mix Dominates
One thing that is surprising in the early findings is how shockingly product-centric our respondents are. For a medium that has a reputation for being very customer-centric and personalized, most priorities are secondary to product concerns (52% are most challenged to keep their product information and availability up to date and 42% identify “creating compelling merchandise mix” as a key challenge). In the final report, it will be interesting to see if this varies by geography – if the Europeans are influencing that more because they have more catching up to do in this department, and if in the US respondents view personalization as a higher priority. Our final cut of how Winners tackle this challenge differently will also be interesting.
Yet for those who seem so product-centric concerned, it appears that today’s online sellers are missing a tremendous opportunity. Figure 2 shows the response to our question, “What do you currently do with product reviews online?” It is clear that most are, so far, missing the boat on a very powerful tool. Very few use reviews to help alter default product offerings, let alone design their own private label goods.
Figure 2: An Untapped Resource
The final teaser that we’ll offer here comes from the Technology Enablers section of our forthcoming report. Quite simply, we wanted to know where retailers see the most value in the available technologies to help boost their own site’s shopping experience. From Figure 3, we can see that our early respondents were solidly behind virtually every option we provided. Apart from user manufacturer-driven microsites, our retailers showed us that they had strong to moderate interest in product reviews, product configuration/personalization, multiple product views, multiple search options, simple purchase screens and multiple payment options.
Figure 3: Retailers See the Value…
However, the dynamic of this chart quickly changes when we asked retailers to identify how well they felt they currently performed in each of these areas (Figure 4).
Figure 4: …But Haven’t Yet Attained It
Here we can see that there is tremendous opportunity for technologists of all stripes.
So far, our respondents are teaching us that it looks like it’s turning out to be more about how eCommerce takes its customer-centric elements for granted, and is turning a heavier hand on product/merchandising elements: this may be a bad thing in the long run if retailers aren’t careful.
Again, these are not the final findings of our report, just an opportunity to share what some of our early respondents are telling us. We certainly hope you are able to participate in our study, and help us shape the final report later this month.
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