When Hitwise published its Hot Shops List of the Top 50 Online Retailers in the UK, I leaned back from my screen and thought what does it all mean?
Strip out travel, IT and services, and you see how online performance still doesn’t correlate with organisation size, market share and buying power.
A high profile UK retail CEO recently noted his ambition to build his web revenues to 20% of his group sales (currently £500m). He noted that he didn’t see anybody doing anything “all that interesting” on the internet.
A £100m online retail operation grown in five years will most likely carry a valuation higher than his core business. The implications are therefore very significant. So why are some of the major retail groups still performing so far behind the curve?
Couple this with the total volumes of online sales (£4bn in July alone) and you wonder how Asda (in 36th position) and Sainsbury's (45th) managed to get off to such a bad start. Meanwhile Tesco.com and Tesco Direct occupy two places in the top ten.
So where’s the gap in matching vision with opportunity?
In the first place, it’s tricky to look around and benchmark ambitions against the best online operators without a detailed understanding of the investment and effort they have made. The internet is a very hostile place for subjective decision-makers.
Secondly, online real estate is becoming more expensive so the barriers to entry in volume categories are rising.
The Top 50 group is pretty stable for good reasons. The best online operations are dynamically different to the limper efforts and these elements are not always obvious to less experienced eyes.
If you cast your eye down the list, best practice is often demonstrated by pure play brands and offline businesses that have a history of operational focus.
It is notable that Tesco’s initial foray into multi channel retail combined the agility of start up culture with the power of its brand and customer expertise. Meanwhile others found it hard to leverage the scale benefits that they possessed.
What sets the winners apart then?
A number of things come to mind but clearly a great site is a good start. Tracking back to the CEO’s comment, the winners in online retail have objective methods of continuously making their site more “interesting”.
They have successfully aligned acquisition with merchandising and service processes, and their metrics allow them to fund and scale their real-estate.
At Maxymiser we are in the thick of this process. Our retail clients need objective, intelligent and continuous methodologies to make sure their content is driving sales.
They typically have analytics data which highlights the weak spots in their conversion funnels. Prior to our engagement, they have often lacked the tools to solve these issues efficiently and effectively.
Our benchmark of what customers find interesting is to arrive at the optimal content combinations which support higher sales conversions.
These typically focus on a site’s form and structure, information architecture, merchandising and highly granular processes.
The name of the game here is to help retail businesses get conversion uplift and improved ROI from traffic. This is a crucial piece of the process that aligns metrics and underpins robust and scalable business models.
If you look around at the Top 50 and beyond, stunts and tricks are unlikely to build a great online brand. You need a great business model which is creatively but objectively executed.
Optimisation is not a one-off magic trick because the pursuit of excellence exists against a backdrop of fast innovation and market growth. If you stop improving you will slip backwards very quickly.
Time is a critical factor as the pursuit of new ROI is enhanced by the ability to chase after it from all parts of your site.
Continuous optimisation tools help you realise improvements in real-time and therefore cover more ground in a quarter.
Without them you are leaking ROI while you wait around for decisions to be made and changes to be implemented. A month in online retail is a long time.
Peter Ellen is MD (Services) of Maxymiser. Mark Simpson will return for the next installment.