Analysis: What challenges do online retailers face in 2012?

Last year ended with a strong finish for online retail sales and the pressure is on retailers to maximise the use of technology to ensure that this growth is sustained.

A total of £68bn was spent online during the year, according to the e-Retail Sales Index, which is an increase of 16.5 per cent compared with 2010.

So what are the challenges retailers face this year to ensure their online sales grow?

Even though the idea of multichannel retail is not new, retailers still have their work cut out in building a multichannel strategy.

The main challenge many retailers have in the upcoming year is in becoming a multichannel retailer, according to Chris Webster, head of retail consulting and technology at Capgemini, which puts together the annual sales index along with retail membership body IMRG.

"Retailers have to implement technology into existing stores to become multichannel," he said, citing technologies such as smart screens, in-store tablets and the use of near-field communications (NFC) technology for contactless payments.

Effectively embracing a multichannel model is all the more important given that online-only retailers are gaining ground on multichannel retailers year on year.

Multichannel retailers saw growth of 25 per cent in the first half of 2011 but growth was only 14 per cent in the second half of the year, compared with online-only retailers which saw growth of 11 per cent in the first half of the year and 13 per cent in the second half.

This reflects a trend among consumers who are leaning towards the lowest cost option over the ease and familiarity of a high street brand, according to IMRG and Capgemini.

One retail channel that is small but growing is the mobile channel. The Index shows that mobile commerce grew from 0.4 per cent in Q1 of 2010 to 3.9 per cent in Q3 2011.

Fashion retailer Reiss has noticed an increase in its sales from mobile devices and is looking to improve that growth by adapting its site to cater for those users.

"At Reiss we are getting 20 per cent of our [e-commerce] sales from iPhones and iPads, which means that the website should accommodate those users," said Dan Lumb, e-commerce director at Reiss.

Lumb urged retailers to look at their own analytics to gauge which mobile devices are being used to complete the majority of online sales and accommodate the users of those devices.

Lumb said that one of the problems is that at present many retail websites are not fully functional on mobile devices, which means retailers cannot fully profit from the growing use of tablets and mobiles for online shopping.

"Mobile websites should look more like the brand's actual website," he said, explaining that the site needs to be more than just a poor subset of what is available on the full website.

"Much of the time the mobile website is just about the products that are on offer. Retailers have to focus not just on what is available to buy but more on the brand identity and customer service options."

Social media

While the role of social media is strong in the realm of brand development and customer feedback, its use as a shop front for online sales is not an immediate trend that retailers see developing.

None of the retailers we spoke to saw their brand integrating a store into a social media website in the short term.

"Using social media as a way of selling, that is, integrating a store into Facebook, for example, is underrated in the long-term but overrated in the short-term," said Jonathan Brown, head of online at John Lewis.

The retailers suggested that although many of them will continue to use Facebook and Twitter groups for their respective brands, social media is not yet a credible space for online sales.

"People may start buying from Facebook, but not for a while. Maybe in five years' time," said Barry Wyse, e-commerce director at home accessories retailer The White Company.