Live From NRF: Want Growth? Nail the Basics

Jan 17, 2008 1:57 AM  By

New York – Online retail has shown extraordinary growth since 2002, according to Sucharita Mulpuru, a retail analyst with Forrester Research. And despite media naysayers, several more years of similar success are projected.

So what’s the problem? In her session, “State of Retailing Online,” Mulpuru told attendees at the National Retail Federation Conference that continued growth wouldn’t come from a search for “whiz-bang” technologies, but from refinement of rudimentary business tools. “Online retailers have not nailed the basics,” she said.

Online retail sales reached $220 billion in 2006, following five years of phenomenal growth – 48%, 51%, 24%, 25%, and 25%. Mulpuru said online retail still has the opportunity to “wow” customers, and focused on “five truths” about e-commerce.

  1. Online shopping still isn’t easy. While most online shoppers cite convenience as the biggest attraction, Mulpuru said site accessibility remains a problem. “Sites aren’t always available,” she said, adding that customers can experience problems completing transactions. “There is a great opportunity to improve this metric.”
  2. Key information is often missing. “We need to empower the customer,” Mulpuru said, “because otherwise customers will go with the cheapest.” Package delivery is a sore spot, she added, because shipping can end up taking longer than expected.
  3. No standard definition of ROI. “There are significant differences in this definition for companies,” Mulpuru said. “While customer acquisition is a big focus, there should be more focus on customer retention.” What’s more, she said half of online shoppers drive two thirds of online spending.
  4. We want customers instead of listening to them. “Retailers look to competition rather than customers, but should listen to customers,” Mulpuru said.
  5. Online retailers aren’t managing assortments particularly well. “Seventy-five percent say they carry the largest assortment, compared with any single channel,” she said.
  6. Retailers still have not truly embraced multiple channels. Mulpuru said there should be more of an emphasis from online retailers to drive traffic and sales at brick-and-mortar stores. Fifty-eight percent of multichannel retailers allocate costs across channels, she said, but 23% of retailers give offline channels credit for online sales, and 21% of retailers debit the online channel for returns processed in stores. Offline channels incur the costs, but few of the benefits.

The solutions? Incorporate standards on product pages, site availability, and deliverability. The good news, she said, is 88% of retailers have improved product content on product detail pages. Online retailers have to think more broadly about interactive marketing, she said, and heed the voice of the customer.

There should also be an obvious option for customer feedback on the site. “Think about what’s relevant to customers and rethink the independence of the Web channel,” Mulpuru said. “The siloed approach doesn’t work anymore.”