Online shopping has begun to grow more rapidly as consumers have started to make better use of multiple retail touch points - whether in-store, on the web, or using a mobile device - to search for better prices and deals, according to Richard Higginbotham, head of marketing for UK-based customer retention specialist Transactis.
The retail industry is a complicated industry to track and measure, especially since online shopping has boomed as consumers have shopped around using all available media channels in their search for bargains during the recession.
This boom has enabled catalogue and online retailers to take market share away from the high street, with even high street retailers starting to aggressively use both catalogues and online channels, according to Higginbotham.
With the consumer's shopping journey being increasingly complicated to track and measure, retailers of all kinds have felt the need to gain a better insights into each individual customer's behaviour across all touch points, with the aim of getting their marketing communications right.
Even home shopping firms are starting to recognise the benefits of using multiple platforms to engage consumers, who now tend to hop between media channels when making purchase decisions. And the changes that have taken place in consumer behaviour during hard economic times are likely to stick even after the economy recovers, warned Higginbotham.
Many shoppers see items in shops or catalogues and then go online to buy them - perhaps because they prefer the ease of ordering over the internet, or because they can get a better price. Others might use catalogues or web sites to browse for items such as clothes, but prefer to make their purchase in a shop where they can touch, see, or try them on first.
Consequently, many online retailers (such as Tesco Direct in the UK) have begun printing paper catalogues to complement their online offerings. Many that started off as mail-order catalogues (such as Littlewoods, Next Direct and Freemans in the UK) continue to provide catalogues despite now having a dominant online presence.
Sadly, tracking the consumer's decision-making process is not as simple as determining whether they use one channel or another but, by looking at sales volumes, retailers can certainly see which channels home shoppers are tending toward when making purchases, and how that pattern has changed during the recession.
Across its entire member base, Transactis deals with 186 home shopping brands and some 38.5 million customers. The company wanted to use recent sales statistics to track any changes in customer behaviour that might confirm the inevitable shift toward digital channels. In order to do this, Transactis created an annual Home and Fashion Online Retail Index which looks at online spending among different age groups and retail sectors.
Overall, the index found that spending in the home shopping sector was down slightly in 2009, suggesting that the high street was not the only retail sector to be hit by the recession. However, when the figures for web spending were isolated, the company noted a much more complex picture than was previously thought.
Reflecting the drop in the overall number of home shoppers, total spending for mail order and online channels combined dropped by 10%. However, looking at the amount spent by individuals, the annual average spend per person increased from 335 to 370, which softened the impact of an overall decline in the number of home shoppers.
Nevertheless, despite the retail woes suffered by many firms in the grip of recession, online shopping has still thrived. According to the index, the percentage of British home shoppers who used the web to complete transactions climbed to 47% in 2009 (up from 38% in 2008).
The index also showed that total web-based spending was up 12% in 2009 compared to 2008, and that total web spending spend rose from an average annual spend per person of 351 to 376. So, those who are spending through home shopping channels in 2009 are, in fact, spending more than they were in 2008 - and the highest spenders are doing a lot of their buying online.
To present a more complete picture of online spending, the figures were then broken down into age profiles. As expected, younger profiles are more active online. The 18-24 year-old group showed the greatest increase in total web spending (up 27%), average web spend per person (up 35%), average web transactions per person (up 33%) and total web transactions (up 25%), making it the most active category of buyers online.
However, the largest group of online consumers is made up of 35-44 year-olds, who accounted for 29% of all web spending in 2009, while the greatest growth in online shopping activity came from people aged 35-54. In 2008, among 35-44 year-olds, 52% of home shopping activity was web-based, and among 45-54 year-olds the figure was 40%. In 2009, this increased to 66% and 52% respectively.
Transactis also split the annual spending figures into sectors. Since the home shopping retailers that Transactis represents are predominantly based in the home and fashion sectors, that is where analysis was concentrated, since smaller categories cannot be considered representative of the nation as a whole.
Reflecting the rise in total web spending between 2008 and 2009, children's merchandise was up by 6%, adult fashion by 9%, home interiors by 14% and young fashion by 15%, with household goods showing the greatest increase of 24%. The only category to show a decline was gifts and gadgets, which was down by 2%.
Based on the figures, Higginbotham warned, marketers might mistakenly think that traditional mail order shopping is dead and that all investments should go into the web. But, when age profiles and shopping categories were studied in more detail, it became apparent that some customers still prefer to use the traditional mail order channel - particularly the older generations.
Only 7% of home shoppers aged 75+ choose to use the internet, in contrast with 74% of 25-34 year-olds. However, the over-75s who do use the internet should not be ignored, and it certainly should not be assumed that all 25-34 year-olds prefer to use the internet for home shopping.
"With the decision-making process that leads to a purchase being much more complex thanks to the advent of the digital age, it is rare that a customer will use just one channel when choosing what to buy and how to buy it," explained Higginbotham. "Rather, a mix of channels is employed and this is naturally the best way to communicate. What's more, the consumer should see the retail brand as a single entity with multiple contact points."
The range of possible media combinations is almost endless, so it is important for retailers to understand their customers. It is essential to find out exactly what consumers want to buy, when they want to buy, and how they want to buy. That way, offers and incentives can be provided to suit the needs of each individual.
"Tracking and understanding consumer behaviour is a vital part of this process," said Higginbotham. "The more a company knows about individual customers, the more it can tailor its communications and strike the right chord with each."
The recession has clearly driven a major change in customer shopping habits but retailers should remain on their toes, as it is difficult to predict whether these changes are long-term or whether an improving economy will lead to further developments. For catalogue and online retailers, good customer management boils down to having effective strategies for acquisition, retention and managing value in place and this requires a 360-degree view of customer behaviour. Retailers need to use their own data to understand the different behaviours in order to understand how customers interact with their business.
This, Higginbotham concluded, has to involve bringing all data within the organisation together to form a central resource that can provide a single customer view. This not only helps retailers target individuals with relevant offers, but can help them create profiles of the best customers and then search for look-alikes within the pool. At the end of the day, the more you know about a customer, the better decisions you can make.
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