The sudden deterioration in the economy has seen the demise of many retailers: at the end of 2008, high street chain Woolworths buckled under the weight of its £385 million debt and administrators confirmed the closure of all the historic retailer’s stores by 6 January 2009.² 

Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers, said: “The eye of the storm has moved on from the banks to the retailers.”³ 

With consumer demand much weaker than it has ever been, how can retailers achieve growth?

The online channel
Verdict Consulting, the UK’s leading independent authority on retailing, claims there is a more sustainable route through which to grow sales: the internet. Accounting for just 0.1 percent of all retail spend in 1997, today the internet has grown into a multibillion pound business.

Over the next five years, Verdict Consulting forecasts that well over 40 percent of total retail expenditure will come from the online channel. In fact according to new figures, online sales for December 2008 were up nearly 15 percent⁴  on a year ago, with a 22 percent⁵  leap in online traffic reported between 25 and 26 December 2008, driven by bargain hunters. Consumers are turning to the internet as an effective way to make savings in the economic downturn.

Such is the appeal of the internet that in February 2009, Shop Direct, the UK’s biggest online and home shopping retailer, bought the Woolworths brand⁶  to re-launch the chain as an online retailer.

But while the internet is an attractive channel, online retailing is not an easy win. As the internet has grown in importance, it has also grown in complexity and online success is much harder to achieve than it used to be. So what does it take to do online retailing well?

Getting closer to your customers
According to Verdict Consulting, to be a good online retailer, you need to get closer to your customers – and this means personalising the site experience wherever possible. Around 30 years ago there was a mass market of consumers who shared behaviours, lifestyles and requirements. In this environment, retailers could, fairly easily, sell a standardised retail offering to a large number of consumers. But today, the mass market no longer exists. Consumers want different things and they all place different demands on retailers. Increasingly they expect a personalised experience – whether shopping in a physical or a virtual store.

Given the remoteness of the internet, how can you personalise a customer’s online shopping experience? The virtual nature of online retail is an advantage: the electronic selling space can be modified to meet the needs of individual users far more easily than the physical store.

But, says Verdict Consulting, to exploit this advantage, it is essential that you understand the different consumer groups you serve and what they want from their online shopping experience. Then you must be able to identify when those customers visit your site and present them with an online experience that’s tailored to their needs. This isn’t to suggest you have a different site for every customer. But if your site can adapt to suit the preferences of different consumer groups, you will be on to a winner.

Managing your range
Of course, catering to your customers’ wants and needs doesn’t mean you have to stock every item imaginable – although it can be easier to carry a wider range in the virtual world where you don’t suffer the costs of carrying that range. In fact, a survey conducted by Verdict Consulting revealed that a far lower proportion of consumers choose a website simply because it has a wide range of products.

Rather, online consumers are looking for convenience and to make a purchase quickly and easily. They want what Verdict Consulting terms ‘edited choice’; that is, to be presented with the products that are most relevant to them.

As an online retailer, you need to think about how you manage the product ranges that you carry and how you present these to the consumer. Wherever possible, position the most relevant products at the front of your site. You can identify these by looking at consumers’ past purchases and demographics, and understanding your customer base.

Mastering multi-channel complexities
As the internet channel continues to grow over the coming years, Verdict Consulting warns that offering consumers a credible multi-channel approach that combines physical and virtual stores is critical to maximise future growth opportunities.

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² www.bbc.co.uk, 27 November 2008
³ www.bbc.co.uk, 27 November 2008 
⁴ Interactive Media in Retail Group (IMRG), 14 January 2009
⁵ www.silicon.com, 2 January 2009
⁶ www.bbc.co.uk, 2 February 2009