The distance shopping consultancy firm Zendor has followed up its research into the online retail market with an in-depth study of more than fifty top retailers. While its original research showed that a large proportion of retailers do not have a transactional website and many are yet to move online, the new study revealed the reasons for their reluctance, and identified the main cause for concern: money.
Zendor's original research found that, despite a buoyant market, 75% of those in the home and garden retail sector, 65% in clothing and footwear, and 60% in health and beauty are yet to establish an e-commerce presence on the web. These surprising results prompted Zendor to try to identify the motivations (or lack thereof) behind such an apparent nervousness to set up shop online.
Top three barriers
The company conducted interviews with representatives from more than 50 retailers who had not yet ventured into online selling, revealing that the money involved in doing so was the primary barrier for more than half of the companies interviewed. The most frequent comments were:
· "We don't feel there is sufficient money in it";
· "It won't be cost-effective for us";
· "We can't afford it at the moment".
Other reasons cited included the fact that they had tried before and failed, or that there was no competitive motivation because their competitors were not yet doing it either.
Surprise
The results surprised Zendor because the online market is so buoyant at the moment. Research from Verdict (e-Retail 2004) forecasts that the online market will triple over the next five years, and Zendor had expected the majority of retailers to be at least looking at developing an e-commerce channel. The benefits have been proved by many retailers; customers are provided with more choice and convenience, driving the 'halo effect' (whereby multi-channel shoppers spend more than single channel customers), and the risk of losing customers to competitors who are already selling online is reduced.
Fear of failure
Zendor asserts that the retailers' reluctance may be partly due to a fear of failing if they lack the necessary knowledge and expertise, particularly in the area of online order fulfilment - an area that is often difficult to get right first time. The company suggests that, for those without the necessary expertise, they can reduce the risk and keep entry costs low by outsourcing using an established fulfilment provider, or at least calling in existing experts in the field.
Another financial motivation that is often missed in planning is that the lead-time to online selling is generally up to as much as a year, so the costs can be spread over that development time rather than being an immediate drain on the company balance sheet.
Consumers expect it
As for those that have tried and failed at online selling in the past, Zendor points out that the market has matured greatly over the past 2 or 3 years, and that online shopping has now become more widely accepted - to the point where consumers largely expect it to be an option. Many retailers have learned from their initial mistakes, are reviewing their websites, and are once more taking the plunge with different objectives; relaunches centred on improving customer service and relationship building are increasingly common.
Competitive advantage
Finally, Zendor's investigation found that retailers were reticent about developing a transactional website if their competitors had not moved online yet, despite having the clear opportunity to be first into the field for their sector or catchment area. Many retailers, it seems, prefer to focus on store development, with a multi-channel strategy taking a lower priority.
Zendor feels that this reticence could be an expensive mistake for some retailers, as there is a long learning curve involved in online and multi-channel retailing for those that are only accustomed to trading in the high street. If a competitor moves online first, it could take some time to catch up.
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