As retailers and individuals literally climb over themselves to get on board this crazy phenomenon known as online shopping, even the harshest sceptics are starting to realise that online shopping is no flash in the pan.
What does this mean for our little industry? Acceleration of the undeniably increasing share of consumer wallet. With online spend sitting at around 10% of total retail spend in 2019, predictions were for that figure to reach 12% by 2021 - That timeline was obliterated during the Covid-19 restrictions, with 12% being hit in March 2020. Australia Post reports that 41% more people are shopping online in 2020 vs 2019.
There are pros and cons in those numbers. For those early movers like Kogan, or those playing in the “at-home” space during lockdown, like Temple & Webster, the jackpot has well and truly been hit, with share prices jumping 4-5 x in 6 months. On the other side of the coin we’ve seen businesses with a heavy dependence on bricks and mortar disappear into the horizon - and not in a good way.
JB Hifi has surged, despite its heavy network of retail stores and the burden of lockdown, because they’ve been able to use their physical stores and online store to compliment each other, an example being their deliveries being done by store members, which serves as an innovative way to keep staff employed, logistics costs low, while providing an exceptional experience for the customer. By contrast, department store Myer has trumpeted growing online sales, but at the expense of profits, according to major shareholder Solomon Lew, effectively cannibalising rather than incrementing profits. Let's be honest, if you’re selling any form of homewares online during Covid-19, Blind Freddy could increase sales. To do it profitably, and with longevity is the key.
The cons referred to earlier are that early-mover advantages are being eroded, particularly when it comes to advertising on popular channels like Facebook. With increased demand comes increased costs. For example, the Head of Digital at The Horse, Miguel Fernandes has reported Facebook costs per impression increasing by 20-25% since June. What retailers hope is a fight to the top of the pile, is in danger of ending in a race to the bottom. If you’re a brand searching for cheap, authentic virality, those days may have slipped by.
Across the board, I am seeing online businesses seeing reductions in the efficiency of Facebook spend. In my capacity as an ecommerce advisor, I have never been approached by so many startups wanting to sell online, brick and mortar retailers who are scrambling for cash or building out new channels, and online businesses going through huge growth. I would caution against relying on paid media as a sole strategy for online success. Consider going back to basics.
The Horse managed to grow 30% year on year during the Covid-19 impacted period, mainly due to a focus on the customer experience. We realised people wouldn’t be rushing out to buy watches and leather goods during lockdown, so we positioned ourselves as the go-to for gifting, believing that in the absence of seeing loved ones and friends face to face, sending a gift might become more important than ever. We offered free hand-written notes on all orders, plus complimentary gift wrapping. Since then we’ve kept the momentum going, purchasing an engraving machine for our watches, and relaunching the monogramming experience on our website. We’ve also renewed focus on old-school customer service, ensuring live chat response times are faster than ever, and switched on longer in the day. This has seen conversion rates post chat increase beyond 10%.
It is almost impossible to fake great product and great service, so during this time it’s more important than ever to find cost effective ways to grow your business, by matching product to demand, and retaining your customers through prompt delivery, and excellent customer service. Some of the fastest growing businesses I work with are the simplest - They have the right product at the right time, in other words they know what their customers want, and when they have a customer, they do everything in their power to keep them.
- Paul Waddy, CEO, The Horse