Online retail must evolve to increase profitability

Online retailers need to drive customer traffic to their websites to generate incremental revenue streams as well as sales, according to research.

The report, by Verdict Research for online marketing services company Webloyalty, highlights retailers move away from attaining market share, towards making operations profitable, stressing that the key is to maximise traffic to sites by attracting and keeping shoppers.

Online retailers need to have much closer relationships with customers to try and secure loyalty.

The report suggests that using web traffic to generate incremental revenue is an area that retailers are beginning to explore.

In the space of 10 years the online retail market has grown a staggering 7,700%, from £177m and accounting for 0.1% of all retail spend, to £13.8bn and more than 5% of total retail expenditure.

The report also reveals that retailers need to evolve beyond past efforts, which have focused on streamlining operations, making the supply chain more cost effective and improving the credibility of web offers.

Now that most online retailers have got the technical and logistical side of operations in order, the study says that the priority for retailers now is to attract more customers and to increase the average transaction values of existing customers.

Neil Saunders, author of the research, said: "When e-retail first started, it was a race for sales and market share -- especially among the newly formed internet companies. Essentially it was a landgrab -- most retailers weren't too concerned about profitability, that was always something to aim for tomorrow, what they wanted was to sell and to take share away from physical players."

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