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I speak to lots of fashion retailers and find that many remain unconvinced that there is a robust case to invest in a transactional website for their business.
I realise this is an anathema to E-consultancy regulars, but the fact is that, if a well-established offline retailer looks at a potential e-commerce channel as a standalone business, the case can look less than compelling.
Here are the three main reasons why:
At today’s level of e-commerce maturity in the UK, a fashion retailer with good national reach could expect to generate less than 5% of its total sales online. Even if this grew to 10%, the opportunities in the online business would still be dwarfed by what could be achieved offline.
Then there’s the cannibalisation issue. Would the sales generated by an online channel really be incremental, or would the e-commerce business simply rob from the offline business? How can this be measured anyway?
3. Net Margins
Finally, because of the high variable costs per order that are a feature of direct selling, sales achieved through the online business would deliver much lower net margins - so the larger the e-commerce channel, the weaker the overall margin performance would be.
It’s for these reasons that other initiatives and priorities have so far pushed e-commerce to the bottom of the agenda for many.
I’m pleased to report however, that the tide of sentiment is turning before our very eyes.
Fashion retailers are starting to realise that an online sales channel shouldn’t be viewed as a stand-alone venture, but an integral part of their offering and that, yes, they should have one.
One retailer (who has recently decided to take the plunge) told me last week that a 60% year-on-year increase in traffic to their non-transactional site plus daily complaints from customers, unhappy about not being able to buy online, convinced them to look at this issue again. You would wouldn’t you.
There’s a realisation among retailers that if potential online customers are the same people they serve offline, this shouldn’t undermine the business case (as the cannibalisation debate goes) but actually support it. It’s telling them that customers want the choice of interacting with them across several channels and that those retailers who allow them to do so will attract a greater share of spend. However, those who don’t...
There’s a recognition that your website is the new shop window and in the impress-me-quick, speed-dating world in which we live, why wouldn’t you want to use it to create the excitement and desire around your brand and range that pulls customers into your stores to shop? So what if just 5% want to buy online? If that’s more convenient for them on this occasion, that’s a good thing.
In short, fashion retailers have begun to understand that the benefits of a well designed and managed e-commerce business extend far beyond the sales and margins realised in the channel itself, into almost every other area of the business. It’s a way of extending reach, recruiting new customers and maximising the value of the customers you’ve already got.
Only a minority of fashion retailers have transactional websites today, but you should expect that to change – really quite quickly.
Steve Borges is the founder of Biglight , a specialist e-commerce consulting business.