May 20 2008

Comment – How to avoid the downturn

E-commerce expert Avail Intelligence warns online retailers without a robust business model to plan now and protect their business from economic slowdown

Soaring costs and weak growth are set to characterise the UK economy over the next few years, so Avail Intelligence – who advise over 80% of the leading Scandinavian e-commerce sites, and UK customers include GAME, Woolworths, Berry Brothers and DVD.co.uk. - is urging UK sites to address three key elements of their business model now in order to survive tough market conditions:

“The credit crunch is hitting the retail industry hard. Both the High Street and e-commerce outlets are facing a tough time,” said Dr Rolf Elmér, CEO, Avail Intelligence. “Online retailers especially need to not only ensure short-term survival but also long-term success in a very crowded market, while customers expect a fast, hassle-free process for their purchases. The margin for error is extremely narrow.”

“E-commerce sites should do all they can now to ensure their proposition for customers is as compelling as possible,” continued Elmér. “Retaining customers who purchase regularly will only be achieved by building the same sense of brand trust that consumers have for the High Street’s big names."

In order to survive tough market conditions UK sites need to address three key elements of their business model:

1. Reduce the cost of customer acquisition

Increasing customer numbers, while reducing the costs involved in attracting and retaining their business will be a critical survival tactic for online retailers. Ensuring the most effective customer journey through the site will encourage regular visits and repeat purchases. Social behavioural merchandising strategies must become a central focus - personalised offers, recommendations, reviews and relevant items of interest can help entice customers to develop an affinity with the site

2. Implement an effective and robust returns system

The one challenge all online retailers face is that customers cannot physically see or handle the products they want to buy. Therefore ensuring customers can easily return unwanted or unsuitable purchases is critical. From the retailer’s perspective, costs should be kept to a minimum, while maintaining the highest possible customer service levels. Additionally, utilising information from the site’s customer base on previous purchases can help increase the amount of knowledge available to help shoppers make the best purchase

3. Streamline manual labour processes and costs

An online business still relies heavily on the physical processes running behind the scene that ensure orders are shipped correctly and transactions are completed efficiently. Online retailers need to maximise the workflows in place at HQ and warehouses to ensure the trust customers develop through the website is reflected in the delivery procedures

by Marcus Austin (Web Editor)