OPINION: Should all retailers sell online?

Andy Mulcahy is an insight editor at IMRG, the UK’s industry association for e-retail. Here, he discusses why all retailers should be thinking digital.

Every retailer has its own unique identity – made up of a complex mix of proposition, customer demographic, brand characteristics, voice, geographic location etc. So it stands to reason that each will have its own unique approach to targeting its customer base.

Which raises an interesting question: should all retailers sell online?

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IMRG is the UK’s trade association for online retail, so you might expect our answer to be a resounding ‘yes’. But actually that response would be too generic to be really useful to every retailer reading this. Instead, it would be more appropriate to offer a slight variation on this question, and suggest that all retailers should at least be online. That all businesses in our age need to think digital.

What I mean by this is that it’s not necessarily essential for all to have an ecommerce platform in order to be relevant in the digital age – your customer demographic might be very old and uncomfortable with buying things online, for example, or you might be a micro business with limited resources with which to manage an additional channel – but it is arguably essential for sustaining growth today that you have some kind of digital presence.

Q1 downturn

To help illustrate why thinking digitally is so important, we just need to look at what happened in Q1 this year.

We’ve been tracking online retail sales since April 2000. The year-on-year growth rates in those early years were triple-digit and gradually fell to double-digit as expected with any fast-growing area such as this.

There has been the odd occasion when we’ve recorded single-digit growth for a single month, but this has generally been explained by factors such as highly irregular weather patterns preventing people from shopping for new season stock.

But then in Q1 this year, growth for the quarter was just 7%. To put that in perspective, Q1 in 2014 was up 17%. Single-digit growth for a quarter had never happened before and was, frankly, a bit unexpected.

So what was going on here? We did a bit of investigation and identified a number of potential culprits to research the impact they may have been having on online retail.

These included the knock-on effect of Black Friday, uncertainty around the election, the strength of Sterling hitting cross-border sales, evidence that growing consumer confidence meant spend was being diverted to leisure activities and the possibility that online retail was reaching a new level of maturation.

And the answer? Well, probably all of them in combination, creating a perfect storm for the industry.

And this is the point really – online retail is no longer simply high street retail’s upstart sibling, but a major part of culture susceptible to the impact of diverse macro events.

In fact, we estimate that around one in every four pounds spent in UK retail is done so through a digital channel. And that penetration will continue to grow, until the offline and online worlds are so interconnected that we won’t be able to tell them apart anymore.

Online lingerie performance

But until that day – let’s review how the online lingerie sector has been performing in 2015.

As mentioned above, online retail overall suffered an unexpected downturn in Q1. During Q2, the performance was much better though, with sales up 14%.

For the lingerie sector, however, sales growth has actually been fairly solid throughout 2015. In Q1 for example, growth was 19% – far ahead of the market as a whole and an improvement on Q1 2014 when sales were up 16%.

Lingerie has been a consistently strong performer in our index over recent years – with growth for the sector usually a few points above that of clothing generally:
2011 – 24% (vs 22% for clothing)
2012 – 15% (13%)
2013 – 37% (17%)
2014 – 16.5% (13%)

The exception was 2013, when it was the strongest-performing sector in our index that year – with sales growth over double that of clothing.

Thinking digital

Lingerie then seems to be something that shoppers are very comfortable with purchasing online but, as mentioned above, it doesn’t necessarily mean that all lingerie retailers should definitely launch ecommerce sites – if you don’t have one already you will need to assess whether it will be successful for your proposition, and customer base.

If you are unsure about it however, that doesn’t mean that digital is off-limits entirely – why not take some tentative steps toward including digital as part of your overall thinking?

For example, click and collect has become a major part of UK retail, accounting for 17.7% of multichannel online orders in 2014. While you may not be ready for that – for click and collect orders, shoppers complete payment online – you might look at offering some form of simple reserve and collect, so customers can be sure they will not have a wasted journey to your store.

Also, keep in mind that there are many free digital tools available for you to use to increase your reach and engagement with potential customers. Social networks are an obvious first port of call, and these can be used to push offers and market new product ranges to draw people into your store.

Even if you don’t launch an ecommerce site, it doesn’t mean you can’t have a site at all – you can still use it to market products and encourage people to visit your store.

By taking initial steps like these you can start to think digitally in our increasingly digital age.

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