Online shopping has soared despite tough economic conditions for UK consumers – indicating a complex shift happening in the home retail sector. The recently published Transactis Home and Fashion Online Retail Index revealed that consumer web spend increased by 12% last year.
The percentage of total home shoppers who used the web to complete transactions jumped to 47% in 2009 from 38% in 2008 and total web spend per person rose from to £376 last year from £351 the year before – this buoyed home shopping spend per person last year to £370 across all channels from £335 the year before. So, those who are still spending through home shopping channels in 2009 are, in fact, each spending more than they were in 2008 – and the highest spenders are doing their buying online.
The rise in online buying came despite an overall 10% year-on-year drop in total spend in the home shopping sector when web and mail order transactions are both counted – as fewer people were spending offline, even if they were spending more overall. However, it’s not just a simple case of online versus offline.
To provide a more complete picture, the figures for online spend in the last two years were broken down into age profiles. As expected, younger profiles are more active online. The 18 to 24-year-old group showed the greatest increase in total web spend (up 27%), average web spend per person (up 35%), average web transactions per person (up 33%) and total web transactions (up 25%), making it the most active category of buyers online.
The largest group of online consumers is made up of 35 to 44-year-olds, who accounted for 29% of all web spend in 2009, and the greatest growth in online shopping activity is coming from people aged between 35 and 54. In 2008, amongst 35 to 44-year-olds, 52% of home shopping activity was web-based, and amongst 45 to 54-year-olds the figure was 40%. In 2009, the figures for these two age groups grew to 66% and 52% respectively.
So, what does this all mean for home shopping firms? Based on the figures, businesses could mistakenly think that traditional mail order shopping is in its death throe and that all future investments should go into the web.
But, when age profiles and shopping categories are studied in more detail it is easy to see that some customers still prefer to use traditional mail order. This is particularly the case with older generations. Only 7% of home shoppers aged over 75 choose to use the internet – in contrast to 25 to 34-year-olds, 74% of whom choose online over traditional mail order. However, these figures also indicate that over-75s who do use the internet should not be ignored. On the same note, it should not be assumed that all 25 to 34-year-olds will be using the internet for home shopping.
With the decision-making process that leads to a purchase much more complex thanks to the advent of the digital age, it is rare that a customer will use just one channel when choosing what to buy and how to buy it. Rather, a mix of channels is employed and this is naturally the best way to communicate. What’s more, the consumer should see the retail brand as a single entity with multiple contact points.
With consumer behaviour becoming increasingly complex, it is vitally important for retailers to better understand their customers so that they can get a grip on exactly what consumers want to buy, when they want to buy, and how they want to buy. That way offers and incentives can be tailored to suit the needs of each individual. Tracking and understanding consumer behaviour is an essential part of this process – the more a company knows about individual customers, the more it can personalise communications and strike the right chord with each.
The recession has clearly driven a major change in customer shopping habits but retailers should remain on their toes, as it is difficult to predict whether an improving economy will lead to further developments.
For catalogue and online retailers, good customer management boils down to having effective strategies for acquisition, retention and managing value in place, and this requires a 360-degree view of customer behaviour.
Retailers need to use their own data to understand the different behaviours in order to understand how customers interact with their business. This involves bringing all data within the organisation together to form a central resource that can provide a single customer view.
This not only helps retailers target individuals with relevant offers, but can help firms create profiles of the best customers and then search for look-alikes in other data sets. At the end of the day, the more you know about a customer, the better decisions you can make.
