Online retail trends for 2011

by Bernie Johnson
23 Feb 2011
8 min read
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Online retail trends for 2011

In this recent interview below with B&T Magazine, Director Bernie Johnson talks about the future of Online Retail for 2011.

Where is the online retail market headed?

Online retail is front and centre. It's here and now in the minds of consumers and eCommerce adoption patterns in are screaming this fact at us. The fear of shopping online has gone and customers have openly embraced the convenience and added-value that online retail offers. In terms of the future, online retail will be about mobility and personalisation. Traditional retailers are very aware of not only the potential that online commerce offers to their bottom lines, but of the necessity to be seen as innovative and relevant to their customers. Consumers now expect their favourite high-street stores to offer online shopping and anything short of this will be detrimental to brand advocacy.

The general consensus in the industry is that Aussie retailers have been slow to embrace online retailing. Why do you think this is?

Australia is still in the growth phase of online retail, whereas counties such as the UK are very much in the maturity phase - evidenced by the fact that UK shoppers spend, on average, 7 times more online than we do in Australia. The main obstacles for traditional retailers who have not embraced online shopping are mostly internal - this includes order fulfilment complexities, a lack of a viable online retail model, licensee and franchisee reluctance and internal resourcing issues.

The bugbear for Australian retailers is the size of our country

The bugbear for Australian retailers is the size of our country; shipping costs, especially for bulky items, completely erode margins. Saying that, we're currently seeing 40% of all online retail spend in Australia go offshore - so it's a little rich if Australian retailers complain about shipping costs, when overseas competitors can ship us stuff for much less.

How is the strong Aussie dollar effecting the online retail market? Is it giving more retailers a compelling reason to come on board?

Gerry Harvey's recent tirade against overseas online retailers is reflective of the mood out there - Australian retailers are worried, and for good reason. The strength of the dollar has empowered Australian consumers like never before - we can now order products from the US and UK, pay less shipping than we do domestically and, in many cases, have the goods arrive quicker than they would from a domestic retailer.  For those retailers not yet online, there's a huge urgency to provide a competitive online retail offering, as they are currently bleeding customers to international competitors.

How are brands ensuring positive conversion rates?

Having strong brand equity does not translate to higher conversion rates. Customers are extremely disloyal to brands online and, in almost all instances, will price compare before making a purchase decision. Conversion rate improvements need to be driven at the site-level – this means providing not only value in the offer, but ensuring the customer has their hand held throughout the entire online retail journey. Shopping cart abandonment rates are still averaging 50 - 60% for Australian retail sites – this represents over half of the potential customers who have added something to their cart and then left the site. User experience is paramount here - and those sites that have poor information architecture and a shoddy checkout process are losing customers in droves.

E-commerce websites in Australia are actually achieving better conversion rates than their overseas counterparts. Why do you think this is the case?

There are plenty of retail sites in Australia which do an amazing job at converting customers – look at Appliances Online and Deals Direct for examples. Australian retailers have also become much smarter when it comes to understanding the drivers of online conversions, including solid design, great information architecture, personalisation and high levels of engagement.

Conversions metrics though only tell half the story

Conversions metrics though only tell half the story – it’s just as important to measure Cost Per Acquisition and Customer Lifetime Value to get a better understanding of how your ecommerce site is performing.

How has technology boosted the online retail market?

Improvements in technology have facilitated greater interaction and engagement with customers for online retail. The drive amongst retails to replicate the in-store experience online is gaining momentum through mobile devices, augmented reality and advancements in both video and social media technologies. Just as importantly, technology has bought with it both convenience and speed – critical attributes for customers when making a purchase decision, be it online or not.

What is advertising’s part in the take up of online retail? Are consumers driven to site via advertising, or are they already customers in the offline world?

Display advertising has emerged as an essential component of any media mix for online retailers. The ability to serve up intelligent display ads, using rich media and behavioural tracking, has enabled retailers to customise their advertising instead of relying on the traditional scattergun approach. Google is pushing their display network these days just as much as they are their search network, which reflects the enormous growth predicted for this space.

Many brands have launched online retail sites just in the past few months. Why have they chosen now to enter the market?

Some brands, such as Myer and David Jones are playing catch-up whilst others, such as Harvey Norman are still struggling to get online retail launched at all. For many retailers, the urgency to launch an online site is reflective of both the shift in online behavioural patterns and, more importantly, expectations of their customers. If you are a retailer and you don’t offer online shopping, the perception is now one of disappointment and frustration amongst brand loyalists.

Has social media played a part?

Social media should never be used purely as a customer-acquisition tool. Social media is about building engagement and brand advocacy, rather than being a vehicle to drive online conversions. A well-defined social strategy – which first looks to create a community and then activate and engage with that community - can definitely drive sales, but improving the customer lifetime value is where it’s at with a successful social media strategy.

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