Local retailers under threat from overseas competition

Overseas web retailers are reaping sales from Australian consumers with little challenge from local businesses.

A US-based internet retailer survey has revealed that Australia ranks in top three markets for generating web sales outside of the US. Some of the 36.8% of web retailers who responded to the survey admitted to winning business without offering the necessary features and functions designed to cater for international shoppers.

Bing Lee head of ecommerce Peter Krideras says tech-savvy consumers are reluctantly buying from international businesses because they are starved of brand choice.

“The delay in Australian retailers embracing selling online has made it easy for overseas ventures to tap into the Australian market,” said Krideras.

“The quicker local organisations embrace the power of the web, the quicker we can capture this growing market before we lose more money overseas.”

Forrester Research has revealed that online spending is expected to grow to $32 billion in Australia by 2012.

Figures from IBISWorld show that online sales may reach $75 billion as more retailers increase the efficiency and reliability of their online channels. The figures also found that Australian online sales currently represent just 5.5% of the country’s total retail sales

However, research by the Australian Payments Clearing Association (APCA) found that in 2005, 86% of local online spend was domestic. By 2008, this had already plummeted to 57%, with close to half of total online sales being directed to overseas competitors.

Online Retailer Expo and Conference managing director, Mark Harvey, says more retailers need to ask themselves why Australian consumers are behaving this way.

“A whole new generation of consumers have taken control and are changing the game for the retail industry. With access to a wealth of information online, customers are speaking to us loud and clear by putting their credit cards on the line and transacting,” explained Harvey.

Learnings from the Online Retailer conference

I had the pleasure of attending the inaugural Online Retailer event
in Sydney recently and I must say, I was impressed. The quality of
exhibitors, attendees and speakers was high and the topics addressed
and discussed very valuable. My congratulations go out to the
organisers – they created a lively and engaging event which captured
the attention of most of the local etail industry.

Over the two-day event I enjoyed talking to many retailers looking
for ways to enhance their online business performance, which lead to
interesting discussions about today’s marketing tactics and whether
they’re generating real results. What was most interesting to me was
that no matter what the focus of the retailer, everyone I spoke to was
looking to shift to a new model of marketing in the immediate future.
Let me elaborate…

From clothing retailers to wine cellars and electrical goods
wholesalers, most attendees were looking for ways to personalise their
marketing tactics to stay ahead in the online retailing game. Everyone
grasped the concept that it’s simply too easy for customers and
prospects to shop with competitors if the online experience is too
boring, complicated or confusing.

So what are they doing at the moment to engage people online? Most
talked about a compelling online presence that was easy to navigate,
looked good, read well and ranked high in search engine results. Many
were also using free web analytics services to monitor traffic to their
site and regularly sent out emails to customers touting sale items and
special offers. All of this adds up to a great start for any online
marketing strategy. However, it quickly became apparent to me the
attendees weren’t that impressed with the results. In fact, most people
I spoke with were looking for ways to personalise their marketing
tactics on a whole new level. They felt that they didn’t really know
who their customers were and how they could enhance communication with
them. And so the shift to contextual marketing begins to take shape.

Retail marketers (out of all the different kinds of marketers out
there) are probably among the first to understand just how important
sophisticated marketing tactics are to a business’ profitability. Many
rely solely on the online store to drive sales. And even those with
traditional stores are quick to understand that they could lose out big
time if they don’t improve their online strategies pronto. Therefore,
the need to hold fast to existing customers and entice new ones is
paramount. But how do they improve on existing tactics? Interestingly,
most thought that by gaining a better understanding of who their
customers are, how they engage with the business, what their
preferences are and entire history with the company, would reveal
important information to answer their marketing questions. And they’re
right.

Knowing exactly who you’re customers and prospects are, what they’re
interests are in your business, how valuable they are to your sales
etc. is the only way to personalise your marketing. There’s no point
trying to send targeted email campaigns to your female customers about
baby wear when only half of them are mothers and have actually sought
information about your baby products online. Just as pointless is the
exercise of highlighting a particular service or product as a ‘special
offer’ on the homepage when none of your customers have ever shown any
interest in it. Just because you want to move that product or try out
that new service, doesn’t mean your customers are interested and it
should take up prime space on the homepage. And what about
re-developing your website to make it more aesthetically pretty when in
fact your customers found your contact page and check-out system
extremely easy to navigate? Why fix what ain’t broke?

I wanted to share my experiences at the Online Retailer event
because it raised marketing issues and a change in thinking relevant to
all businesses. And if you’re not convinced that you need to heighten
your online marketing efforts, think about every time you’ve had great
customer service at your local café where, as soon as you’ve walked in
the perfect brew is already being prepared for you. Now that’s great
customer service and why wouldn’t you want to offer your online
customers the same experience? Lord knows your competitors soon will be.

Loyalty wins online customers says Salmat Digital

Although Australian retailers have been slow to expand online they have a distinct advantage over web-only retailers, according to the executive director of Salmat Digital Paul Marshall.

In his presentation to the Online Retailer Conference in Sydney, Marshall asserted that brand awareness, loyalty and an existing customer base are key assets when ‘bricks and mortar’ retailers take their business online.

Combine that with the power of the store network to give their customers a true multichannel shopping choice and retailers have a strong playing hand.

“Despite being slow to adopt eCommerce, the history and level of trust retailers have built with their customers will pay major dividends when they expand online. Data from the US shows that consumers of multichannel retailers, or retailers with both a physical and online presence, are proven to be more loyal, buy more per visit, and have a higher lifetime value,” explained Marshall.

The US Internet Retailer website indicates that of the top 100 online retailers in the US, ‘bricks and mortar’ retailers make up the largest segment (circa 44%) and are also the fastest growing segment over web-only retailers, mail-order retailers and manufacturers. Fast movers include Costco, Wal-Mart, Sears and Best-Buy.

“Success in multichannel retailing is a marathon not a sprint. Making sure your house is in order is essential, develop the right strategy and invest where it matters,” says Marshell.

In 2009, ecommerce in Australia is expected to generate around $18 billion in sales.

Is your shopping cart only half full?

The interest in the recent Online Retailer event held in Sydney highlighted that most companies appear to be still struggling to fully benefit from ecommerce and offer their clients/customers a new convenient sales channel.

A number of Australian retailers are working to refine their online strategies and understand that if they are successful they can potentially make tens of millions more in revenue. With many Australian retailers still learning the ropes, you competition may only be a few steps ahead and it’s not too late to catch up.

The common project questions are what platform, shopping cart and web analytics will be best suited to your industry and budget. What can often confuse business is the sheer number of potential store platforms and shopping carts available.

For simplicity we have listed seven of the most common solutions in typically order of cost:

  • Paypal
  • Amazon/eBay stores
  • Out-of-the-box hosted
  • Custom built by web developer
  • Open sourced solutions
  • Proprietary solutions, and
  • Enterprise solutions.

The store cost also varies from a small investment in time and possible ongoing charge per sale to enterprise solutions costing millions. The first three options are the cheapest and quickest solutions but are not suitable for competitive industries or large stores. Many custom built solutions by web developers while appearing cost effective can often have longer term limitations, can be inflexible, non-search friendly and make it difficult to track ROI.

The best solution for ecommerce stores is typically an open sourced solution, as they offer the most flexibility, support, plugins and customisations. Proprietary solutions can be suited to complex projects or need implementation within existing CMS platforms, they can prove expensive and not always the best solution. The enterprise solution is the type that Walmart, Amazon or Woolworths would select and can be a combination of proprietary and open sourced solutions.

The main factor that can rapidly increase costs of an online store is the addition of multiple solutions such as:

  • Back-end fulfillment
  • Customer relationship management
  • Email marketing integration
  • Geo targeting/personalisation
  • Multiple stores
  • Integration with custom applications
  • Onsite search engines, and
  • Usability testing and implementation.

The more advanced options can even replace other existing sales channels as they can offer more potential benefits allowing visitors to receive the best possible experience and better ROI for the business. While these can increase initial launch costs the benefit of many of these solutions can provide to your online store with better conversion rates, reduced processing costs and even increase visitor traffic.

In this current economy many projects don’t always have the budget for a complete website rebuild so there are two effective solutions to increase your ROI. If you have an existing website solutions such as SLI Systems offer intelligent search solutions which can improve conversion rates and can assist with improved search optimisation campaign results. There are also web usability firms such as Peak Usability that have advised my clients that typical conversion rates should be around 2% and websites should be aiming for around 5%.

The focus in a successful ecommerce business should always be on quality foundations supported by the ability to correctly measure ROI and success. The key to better understanding your visitors and behaviours is having correctly implemented web analytics running within your shopping cart that combines visitor data and revenue.

Around one third of websites are still not using web analytics software and rely on the basic web server logs to understand the success of their online marketing campaigns. The problem that many of these web server logs while free, do not offer business the necessary information required to track their campaigns or refine their online marketing spend.

If you are driving visitors to your online store you need correctly implemented web analytics so you can track how much revenue each campaign or medium delivers the best revenue. While most web analytics packages support campaign tracking some allow for advanced integration with email, video & social media platforms.

Most people understand that the leading web analytics solution is now Google Analytics based purely on the volume of websites, across all industries followed by Omniture. According to my extensive research of the world’s top 1,200 public companies a majority of the world’s largest retailers are split between Google Analytics and Omniture.

While enterprise solutions such as Omniture are often suitable for large ecommerce websites, its setup and costs can make it harder for business to justify. There are other web analytics solutions that fit between Omniture and Google Analytics, listed below with links to their clients/case studies.

If you are in a particular industry it can be a good guide to check the top few sites and follow their solution for web analytics as customised packages maybe available for particular industries. So using web usability testing, onsite search and web analytics you can measure how many visitors have their shopping cart half full and better help them fill it.

Case study success stories: