The latest figures from e-commerce industry body the Interactive Media in Retail Group (IMRG) have shown the increasing importance to retailers of the online channel. But other research has again highlighted the potential for fraud to disrupt efforts by online traders to boost profits and improve customer relations.
The latest IMRG e-retail index, which is carried out by consultancy Capgemini and charts online retail spending, showed that £15.2bn was spent online in the 12 weeks before Christmas 2007. This equates to 15 per cent of all retail spend now online, with December’s sales almost 50 per cent higher than in the previous year, despite a slight tailing off towards the end of the year.
The largest sales growth came in the electrical sector, with 60 per cent, while the clothing sector showed a 28 per cent increase over December 2006. Marks & Spencer, which reported poor high street sales, showed a 78 per cent growth in its online channel.
“If you look at availability, capacity and familiarity, it’s clear that there is huge potential for further growth in this area,” said IMRG chief executive James Roper. “If it continues like this, in five year’s time, half of all retail will be online.”
Anthoula Madden, vice president of Capgemini’s consumer products and retail team, argued that retailers must still work to meet heightened customer expectations of service, particularly in delivery.
“Those with good results have addressed the front-end web site as well as the supply chain and warehousing,” Madden added. “The full value chain is important here.”
In addition, a separate study by online market research firm eDigital Research found that 22 per cent of respondents went online on Christmas Day and 31 per cent on Boxing Day, for pre-purchase research into products and prices.
The research highlights the increasing sophistication of consumer shopping behaviour and the need to integrate offline and online channels more efficiently to meet customer requirements, according to eDigital Research director Chris Russell.
Capgemini’s Madden agreed, arguing that retailers with an online and offline presence often do better than pureplays, because of issues such as brand loyalty. “This shows the importance of integrating the two [channels] and offering a unified experience to the customer,” she added.
Further research by the European Interactive Advertising Association (EIAA) released last month confirmed the importance of integrating sales channels. It found that the British are more likely than any other European shoppers to change their minds about which brands to buy after researching on the internet.
In addition, 59 per cent of online shoppers said that websites of well-known brands are an important source of information when researching a product or service, according to the survey.
David Walmsley, head of web selling for John Lewis Direct, said, “Customers are sophisticated multi-channel shoppers who research online and buy in-store and vice versa our challenge is to understand that and help our customers.”
But delivery was still seen by many to be the weak link in the e-commerce chain, potentially even restricting the growth of the channel. “It has improved enormously, but it still boils down to the idea of trust and fulfilment and knowing when and where you will get your product,” said Tesco Direct’s Trevor Datson. “Although as consumers learn how to shop online that will help them knowing they can vary delivery addresses and getting savvier about cut-off dates.”
Elsewhere, new research from payment solution provider CyberSource found that the growing incidence of identity fraud is causing retailers significant headaches. The CyberSource Fraud Report 2008 found that nearly half of large online merchants recorded losses up more than 10 per cent on the previous year, with online fraud perceived as the most critical technical threat to their enterprise.
“Merchants are demanding cross-industry co-ordination,” said managing director of CyberSource, Simon Stokes. “There are lots of tools and deterrents but it’s a case of what’s best practice for a merchant and how they can share [information] in real time.”
Lu Zurawfki, director of cards and consumer payments at IT services firm LogicaCMG, argued that merchants should invest adequately in their own anti-fraud systems.
“It still amazes me that the industry is quite lackadaisical with this type of fraud,” he said. “Merchants are quite a demanding lot but they have their own responsibility to protect data too.”
The research also found a significant increase in adoption of the 3-D Secure Verified by Visa and MasterCard SecureCode schemes, with uptake now at 71 per cent among respondents, but half felt these schemes were not entirely effective at preventing fraud.
Somewhat surprisingly, only 39 per cent felt that PCI compliance would improve their payment security processes. CyberSource’s Stokes warned that no merchant can afford to ignore the standard. He recommended businesses install web-based automated fraud screening capabilities, alongside the 3-D Secure scheme, and address and card verification number services.
“There are a lot of sophisticated tools on the market but the challenge for merchants is the continually changing patterns of fraud occurring on an hourly or daily basis,” Stokes explained.
