Insights on Marketing & Technology

The digital shopkeeper

The consumer behaviour has changed, but the business acumen is basically still the same. It is all about attracting customers, closing the deal and selling more to the same customers. The old virtues of retail, like increasing traffic into your shop, delivering outstanding service (which leads to a purchase) and upselling, have merely been given new names, such as SEM, SEO, Conversion Rate, Predictive Merchandising and so on.

Physical vs. digital
Despite their similarities, there are still a number of fundamental differences between the physical and digital shop:

  1. Rent has become online marketing. In the physical shop, placement is essential for attracting customers, and having the right placement costs a lot in terms of, for instance, the high rent and marketing expenses that come with having your shop in an attractive shopping centre. On Internet Street 1, there is no walk-by traffic and you must allocate a considerable chunk of your marketing budget to attracting customers. 12-15 % of the turnover is not unusual.
  2. It is much harder to close the deal online. The customer’s effort to enter your shop has been minimal and they will therefore quickly leave if unsatisfied. Is your page loading too slow or are the costs of delivery to high? Even a distracting phone call might be enough for the customer to disappear from your shop. Additionally, the personal contact between seller and buyer is non-existent.
  3. Running an online business is far more complex and the competition is tough. The marketing mix consists of a long row of channels, which are developing rapidly, and on top of this you have to consider factors like IT and logistics.

How to be successful
The successful digital shopkeeper understands how to exploit all new opportunities. He runs his business on the basis of analysis and knows exactly how much a click must cost in order to get his business model to function. He is constantly monitoring customer behaviour on his site, so he can pinpoint where site visitors leave and where he can optimise to the greatest effect. He uses re-targeting to attract potential customers to his store – and once they’re in, he adapts range and campaigns to the individual customer.
    Additional- and cross-selling is implemented as naturally as when the outstanding shop assistant suggests a top to go with the pants a customer is looking at. The customer club is an integrated part of the business, with members receiving points when they shop or when their friends shop. The shopkeeper is present on relevant social media and understands why he is there – to engage on the same level as his customers.
    To be successful with e-commerce you need to establish an e-commerce-inclined platform. The webshop itself is only a small part of the platform, which must also be able to handle marketing, performance, fulfilment and customer service. More importantly, the organisation has to be able to handle it.

Why is this important?
Whether your customers are individuals or other companies, every company must respond to the fact that e-commerce will constitute the largest isolated sales channel. We have to adapt an e-commerce mindset, where e-commerce is a part of all functions of across the organisation.
Today, e-commerce constitutes about 15% of all retail transactions, and for some businesses, physical stores are becoming redundant. When was the last time you bought a CD in a physical store? Banks and travel agencies are also examples of businesses where there will soon be little need for more physical stores.
    The break down of the boundaries surrounding physical retail has created new, dominating players and most experts agree that small retail companies in particular will be forced to leave the market. ‘Local presence’ has not been reduced to a single click or a reach to one’s pocket for a smartphone. Convenience is no longer about how far away the store is, but how quickly they can they deliver my products. Today, the largest European fashion businesses are online companies that are less than ten years old. They have seized the opportunity to create a strong market position while the old brick and mortar businesses have been asleep at the wheel.

Why now?
E-commerce has become a fully integrated part of consumer behaviour. It is no longer an alternative to visiting stores, but has become the primary way to shop. It is especially relevant for retail companies, regardless of their size, and for companies selling comparable physical products.

How to get started
If you’re not already selling online, you better get to it. If you are selling online, you should be focusing on optimisation and development across your entire value chain.

  • Make sure to maintain focus on the three elements that create turnover: visits, conversion and order size.
  • Do a realistic business case for your online business, which means budgets with high marketing spend and low conversion.
  • Focus on conversion over traffic. Traffic is expensive and your investment will be a waste if customers aren’t converting.
  • Optimise your logistics. Logistics are essential for creating a profitable online business.
  • Gain insights in your business through Google Analytics or another kind of web analysis.
  • Approach your work in a structured and goal-oriented manner using analysis and testing. Apply the analysis to identify initiatives with the largest effect and ROI.
  • Consider outsourcing certain functions. Logistics are obvious, but what about IT, marketing and customer service?   

Carsten Blom-Hanssen

Carsten Blom-Hanssen is Director of Digital Commerce at In2Media, one of the leading digital agencies in Denmark. Here he offers customers advice on e-commerce and connected retail.