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The Web delusion

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Impressive internet sales graphs disguise failings of online retailing  
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Uncomfortable truth of online sales

The seemingly inexorable rise of online retailing is the crumb of comfort many store groups cling to in these tough trading conditions. However, the impressive growth rates hide an uncomfortable truth... that online sales could and should be even higher.

There is no denying that online sales growth is strong and will remain so for some time to come. At Christmas, the key period of the year, internet sales rose by 18% compared to the previous year and accounted for 10.6% of all retail sales. And yet, the nagging doubt remains that the impressively steep online sales curve masks a more discomforting truth.

Our TrendSpot project, which we conducted again either side of Christmas, delves deep into the psyche of consumers. Among other insights, it compares what and where they say they are going to buy with their actual behaviour.

Our analysis shows that retailers are actually falling down on the job, that web growth should actually be much stronger – and that it is fairly fundamental operational errors that are to blame.

The consequence is that while many more people feel emboldened to spend online, buying into the slick advertising and the prospect of bargains delivered straight to their doorstep, huge numbers are put off spending any more through having a bad experience.

One of the standout findings in TrendSpot this time was that while 81% of our survey sample bought online, the proportion that had indicated in November and early December they would be manning the mouse to buy presents was a significantly higher 89%.

This drop in people’s actual purchasing patterns, compared to their own predictions, is all the more disconcerting because the bad weather in December encouraged consumers to spend more on internet sites rather than trudge around the snowbound high streets.

Of those who shopped on the internet, 68% experienced some kind of problem. That frustration prompted 1 in 4 people to spend less as a result. The list of major problems experienced is below…



Stock shortages



Delivery delays



Presents not arriving



Wrong/unexpected item



No problems



Last year stock shortages were a major factor in disappointing online sales and were experienced by almost 30% of consumers. While stock planning improved this year, 18% still experienced the frustration of not getting what they wanted.

More than half of deliveries were late and, for 1 in 6, those delays meant at least one present did not arrive in time for Christmas Day. The number of people receiving the wrong gift almost doubled.

Of course, the atrocious December weather played its part in putting a spanner in the infrastructure works but this is an unconvincing explanation for the whole story. It should also be remembered that the whole attraction of online retailing is speed and convenience – undermine that with uncertainty over delivery and you undermine the whole raison d’ętre for going online.

The idea that consumers will put up with inconvenience and poor service in search of a bargain is a fallacy. Previous work by Intersperience on Digital Ageing shows quite clearly that the UK is not as “adapted” to the new internet age as other countries: many people are still uncomfortable navigating their way round websites and it does not take much to put them off. A product going astray or a poor response from a contact centre might be enough to tip the balance.

There are also lessons about real-life consumer behaviour and the interaction between physical stores and websites that many retailers are missing. They need to understand much more clearly the non-linear customer journey from browse to purchase to delivery, what works at each point along the way to bolster their reputation and what can go wrong that will undo all the good work.

These are the key areas in which online retail has to improve to fully realise its potential…

Fulfilment and customer satisfaction:

According to TrendSpot more than half of deliveries were delayed. This figure is simply too high – something like 5% is more within the bounds of acceptability.

Customer service:

Some high street brands are examplars in customer service, giving support when something is out of stock, making it simple to return or exchange, but that same focus on the consumer as an individual is missing in the online world.

Improve the customer experience:

Almost 70% report problems with online purchases and 25% of those are put off spending more as a result. That is a huge missed opportunity. Reducing those numbers by half would add hundreds of millions of pounds to the bottom lines of retailers.

Become truly multi-channel:

The silo structure of many large companies mitigates against them being able to take a rounded view to their entire offering on websites, on mobile devices and in stores. Those making the strategic decisions in one area have to work more closely with colleagues in others.

All of these are important issues to address now but they are about to be thrown in to even sharper focus by the emergence of the M-Agers, those emerging consumers born after 1997, who have only ever known the “always on” world and demand instant satisfaction.

They have an extraordinary sense of entitlement and what matters to them is fulfilment of promises. They have little patience and are not easily mollified by excuses. If goods start to go missing or service levels drop they are less likely to give online retailers a second chance than their more sanguine elders.

The first of these M-Agers will be looking to spend their first real disposable income in 2015 which means there are a mere 1,400 shopping days left for retailers to get their online operations sorted out.

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