IT in retail 1: The future is multi-channel

The credit crunch, recession and debt-reduction mean that retail is going through a challenging time. However, online retail remains buoyant despite a challenging economic environment.

British shoppers spent £31.5bn online to 1 July this year; a 19 per cent increase on the same period last, according to the IMRG Capgemini e-Retail Sales Index, a UK e-retail performance indicator.

In June, a total of £5.3bn was spent online, 21 per cent more than June 2010, and equivalent to £86 per person. This growth far exceeds that witnessed on the high-street, which reported a like-for-like 0.6 per cent drop on the same period last year.

With such growth online it’s tempting to think that it is only a matter of time before online retail displaces conventional bricks and mortar entirely. But bricks and mortar are here to stay: the future is multi-channel.

According to figures from retail analyst firm Verdict, online expenditure will increase by more than 56 per cent to 2014, and will continue to out-perform total retail. But growth will slow considerably from previous years. Indeed, Verdict forecasts average annual growth between 2009 and 2014 will be 12 per cent compared with an average of 35 per cent per annum over the previous decade.

With so much retail innovation pivoting on technology, adapting to this multi-channel world in a tough economic climate presents challenges and opportunities for IT leaders in retail firms.

Visibility

Multichannel retailers that retain physical premises have one big advantage over online-only retailers – visibility.

Online retailers have to be found. Nowadays the web is a crowded place where e-tailer’s sites jostle for search-engine attention with myriad eBay merchants. But bricks and mortar retailers have the advantage of visibility in the shape of their physical outlets. The increasing homogenisation of Britain’s high streets means that the biggest brands are visible to their consumers nation-wide every day.

Verdict says 14 out of the top 20 most-used shopping sites belong to physical retailers. Furthermore, multi-channel shoppers spend more: multi-channel retailers achieved average basket values of £165 in 2010, versus £108 for online-only retailers.

Fulfilment

Furthermore, with the exception of downloadable goods – music, movies, software and some books – retail still comes down to the corporeal business of fulfilment.

Offline shoppers walk out with their goods; online shoppers have to be more patient. For consumers, fulfilment by online-only retailers can be a source of dissatisfaction.

A recent survey by The Co-operative Electrical and published in The Guardian revealed that 90 per cent of internet shoppers rate not being given a defined delivery time-slot as their number one gripe. The survey of more than 3,000 internet shoppers found that people were unhappy about having to take time off to receive their deliveries. More than half of homes (55 per cent) are likely to be unoccupied during normal delivery hours.

There are ways around this for consumers: 60 per cent of respondents in the Co-op’s study had asked family or friends to wait in on their behalf. Some e-tailers will permit delivery to be redirected to addresses other than that of the bill-payer, which can help if you’ve got a retired relative or work in an office with a co-operative receptionist. But it’s still messier than the slick friction-free commerce that was predicted for e-tail in the late 1990s.

“Delivery is absolutely fundamental to consumer satisfaction, as it is the final step and can convert an otherwise positive shopping experience into a negative one,” says Andrew Starkey, delivery director at IMRG.

Multi-channel retailers can use physical outlets as local distribution centres making timed deliveries more predictable. And they can encourage customers to order online and pick up in-store, a technique profitably exploited by catalogue retailer Argos recently. Not only does this eliminate the issues of waiting in for a courier, it also plays to the instant-gratification psychology on which traditional retail depends.

Online-only retailers who can crack technological solutions to the inconveniences of fulfilment will win customers. Nearly half (46.5 per cent) of respondents to IMRG’s 2011 Consumer Delivery Survey said their choice of retailer is influenced by the delivery service available.

Respondents to the study said they want specific day and two-hour timeslot deliveries; and improved delivery information, clearly accessible during the product browsing phase, at the time of dispatch and in advance of delivery.

They also wanted better returns services, including access to more drop-off points, better information about the returned goods in transit, and confirmation that the goods have been safely received. With some e-tailers, the only signal that returned goods have arrived safely is when the customer’s credit card is reimbursed. Is that likely to encourage repeat business?

Charging extra for delivery – especially everyday items – is a big turn-off for shoppers. Consumers can see straight through online retailers who ensure they offer the cheapest base price on comparison sites and then make their margin on delivery.

Out-of-hours deliveries, online tracking services and text message services from courier to customer informing of delivery progress are all a step in the right direction.

Two other related technological factors are having a major impact on retail: the rise of mobile and a diversification of payment systems. Both affect offline retailers as much as online, and both make multi-channel retailing all the more compelling for consumers. We’ll deal with those in the following articles.