By failing to properly plan their e-commerce strategies, the UK's retailers may be losing out on a total of more than 2.3 billion in online revenue each year, according to a report produced by Verdict Consulting for Webloyalty.
The report says that too many online retailers are allowing shoppers literally to slip through their nets. It calculates that an e-commerce site converting just one percent more visitors into paying customers could generate an additional 678 million in revenue.
The report, entitled 'How to Pull Customers Online', assesses strategies for winning shoppers in the intensely competitive online environment. It examines six key stages of building successful online relationships, including how to attract customers, how to sell to them and how to increase their loyalty.
Identifying key barriers to purchase, such as concerns over delivery of goods and dissatisfaction with delivery charges, Verdict says can contribute to 992.4 million in missed or lost sales every year. Understanding, anticipating and breaking down these barriers is key to maximising sales, says the report.
Rising cart abandonment is an obvious symptom of dissatisfaction, as is the fact that customers are increasingly using shopping comparison sites. Verdict calculates that 25% of online shopping carts are abandoned, resulting in some 2.3 billion in lost sales every year. So businesses that employ strategies designed to reduce shopping cart abandonment, have the opportunity to claw back significant revenues.
The rewards for winning over online shoppers are getting bigger all the time. Internet sales currently represent 6.7% of all retail spend in the UK, equal to 19.4 billion. By 2012, Verdict forecasts this to reach 13.6% of all UK retail sales, with a value of over 44 billion. This equates to 129% growth in online sales from 2008 to 2012, compared to only 5% on the high street.
The research shows that levels of online loyalty are 10% lower than in physical shops. In the food and grocery sector, where Verdict calculates a typical consumer will spend 33,000 online over a lifetime, this lack of loyalty carries a high price. Looking at the lifetime spend of just 100 customers, it translates to a loss in sales of approximately 1.2 million. Low prices, good service and ease of navigation are the three main factors boosting loyalty in e-commerce.
According to Neil Saunders, Consulting Director at Verdict "Standing out from the crowd on the internet has become more of a challenge. Online retailers have to work harder than ever to attract consumers. This is not a challenge restricted to smaller sites - big players face the same issue. They all need to be more creative about customer acquisition. Old methods of driving traffic still have their place, but are increasingly being replaced by new strategies".
Affiliate marketing, eShots, downloadable widgets, cash-back promotions and viral marketing are all on the rise, according to Verdict, which also notes that consumers are now far more likely to find retail sites via search engines and word-of-mouth recommendation, both of which have grown rapidly since 2003.
In this highly competitive environment, generating incremental revenues through monetisation strategies are predicted to become increasingly important for retail sites. Monetisation models, which allow third parties to pitch their offers to a retailer's web traffic are currently worth over 192 million, according to Verdict, rising to nearly 870 million in 2012.
Martin Child, Managing Director Europe of Webloyalty, which operates monetisation models such as Shopper Discounts & Rewards, says that e-retailers have much to learn about generating incremental revenue from bricks and mortar stores. Offline, retailers have become sophisticated at using space in their stores to generate incremental revenue: "It is all about leveraging their high levels of footfall. The same principle applies online, where web traffic can help generate much-needed incremental revenue for retailers. We believe monetising retail websites will become an important additional revenue stream."