Consumers and e-tail begin to click

The UK’s high streets may have had a poor start to the year, but online shopping soared at Christmas despite significantly weaker retail demand, meaning the importance of the internet as a retail channel can no longer be ignored.

According to new research from Royal Mail conducted by Continental Research, half the UK population – 29.4 million people – used the internet to buy gifts last Christmas. This led to a 20 per cent increase in e-tail sales compared with the previous year. Consumers spent more than £3bn online, representing 6.8 per cent of all UK retail sales. By comparison, high street sales grew by just 2.5 per cent over the festive period.

The increase in online retail transactions is part of an overall trend for 2004: total sales for the year have been valued at £14.5bn, which suggests that managing retail in a multi-channel environmentÂ- Web, in store, catalogue and interactive transactions – has come of age. Indeed, the Royal Mail White Paper Report, The Future of Retail: a 2010 Vision, which is a recommendation for action to the internal organisation, predicts that online sales will continue to grow. It forecasts that by 2010, online retail will account for 15 per cent of total retail sales and will be worth about £40.5bn.

According to the report, 46 per cent of UK adults have bought something online and consumers are increasingly keen to shop across a variety of channels. The research shows that one in three respondents expects to do half of their shopping from home by 2010; one-third also expect to shop using interactive and hand-held devices by that year. The challenge for retailers is ensuring that they meet this demand and market it appropriately.

The surge in online shopping is also being driven by consumers using the internet for background research, either through price- comparison sites, chat rooms or “peer review”, where they can seek and exchange information. These activities are transforming the way in which consumers shop online, with 30 per cent of online shoppers now using peer review sites. This trend for shoppers to interchange channels, such as looking for goods in store then going home and ordering online, is a new consumer-driven dynamic and, again, an area that retailers should not ignore.

The challenge facing marketers is how to communicate with consumers in a multi-channel environment without marketing and advertising communications becoming overly complex. Retailers need to understand their consumers and must consider having a presence in the three main shopping channels of store, catalogue and online, in order to build sales.

The importance of catalogues and brochures should not be underestimated, both as a sales channel and as a marketing tool. Royal Mail’s annual tracker research shows that one in three people are provoked to buy online by what they receive through their letterbox. Online retailers increasingly recognise this, with Amazon using brochures to attract new customers and prompt existing ones to buy, while Ebay uses direct mail to tell businesses about the benefits of selling goods through the trading site. For pure e-tailers, a glossy catalogue also provides customers with a convenient substitute for the in-store experience.

For those retailers with only an online presence, developing a relationship with customers is key to success. Figleaves.com understands that communicating with customers in a personalised and targeted manor is effective. To maximise results, marketers can use existing customer data to make mailings more pertinent and to encourage repeat purchases among recipients.

By analysing customer databases it is possible to break the information down into different customer groups for personal targeting, such as best customers or lapsed customers. Targeting at key dates in the retail calendar such as Christmas, or based on past purchasing patterns should also be considered.

The new data streams can also be used for targeting potential new customers when they are most likely to buy. For instance, Royal Mail has developed a change-of-address file that enables retailers to source the addresses of people who have just moved home and then send catalogues to them.

Although the move to online is being driven by consumers, there are many people who have yet to use the internet as a shopping channel and many may still be mistrustful of it. Retailers need to consider how best to promote the benefits and advantages of multi-channel shopping and make them aware of the security measures they have in place.

The Royal Mail research shows that 27 per cent of people do not know what attributes would encourage them to shop from home more often. The report concludes that marketers must grasp multi-channel retail and explain to consumers what is different about the products and services, such as range, price or specialised delivery, to encourage future demand.

Marketing methods such as posted newsletters inviting people to go online are essential, but these could be reinforced across various channels, for example by putting a company’s website address on carrier bags or on delivery vans.

Retailers can combine an acute understanding of their customers with an intelligent use of media. If the execution is right and the marketing messages are tailored to a multi-channel audience, consumers will hear about and endorse products themselves.