The challenge of an Online provider

With Australian consumers shifting to online retailers more than bricks and mortar retailers for their consumer needs, the challenges for an online provider is more how to keep their patronage. And shipping costs are usually a hot button issue. One trick they can do is follow the lead of Apple on its online store and how they sell a lot of their products. Their secret: free shipping.

From StartupSmart.com

Online retailers risking customer exodus over costly shipping: Report

By Michelle Hammond
Wednesday, 03 October 2012

Australian online retailers are being encouraged to “do more with the same budget” in order to retain customers, after a report revealed only a quarter of local businesses currently offer free delivery.

 

The report, by global information firm Experian Marketing Services, is titled Retail in Australia: It’s time to embrace the digital future.

 

It is based on research involving 300 Australian marketing professionals from sectors including automotive, sports, groceries, health and beauty, office supplies, fashion and apparel.

 

According to the report, only a quarter of Australian retailers currently offer free delivery, despite the fact that 73% of consumers want to see free shipping at the online checkout.

 

In light of these findings, Experian general manager Matt Glasner had accused Australian retailers of “making a margin on delivery”, as shipping prices typically range from $25 to $30.

 

However, the report reveals free delivery is expected to increase to 50% over the next year, suggesting retailers are starting to react to the demand for customer value.

 

Another key finding is in relation to returns and refunds – the research shows only 42% of retailers currently offer online refunds.

 

But unlike free shipping, only 16% of retailers plan to introduce online refunds in the next 12 months.

 

Likewise, only 30% of retailers currently offer free returns, while another 16% plan to introduce this service in the next 12 months.

 

According to the report, retailers need to “think hard” about their entire digital strategy if they want to deliver world-class eCommerce services.

 

“Retailers need to look to the success stories. There are plenty of online retailers out there who are reaping huge profits by selling their wares online,” it said.

 

“These retailers have implemented best practice tactics like free shipping and free returns that keep their customers coming back for more.”

 

“It won’t be long before these approaches are completely commonplace in the online retail vernacular. For now, retailers must actively build them into their digital marketing plan.”

 

The report identifies five key steps for retailers:

  1. Design an integrated cross-channel strategy
  1. Become data-savvy
  1. Embrace new technology and befriend IT
  1. Do more with the same budget
  1. Start a dialogue with consumers

Growth in online spending continues to remain strong, as evidenced by the latest NAB Online Retail Sales Index, which moved higher to 210 points in August, up from 200 in July.

 

In the year to August, Australians spent a total of $11.9 billion in online retail sales. This figure is equivalent to 5.4% of traditional bricks-and-mortar retail spending for the year ended July.

 

However, growth for online sales remains considerably stronger than traditional sales, which slowed to 1.6% year-on-year in July, compared with 4.9% in June.

 

In contrast, online spending increased by around 22% year-on-year in August. This level is slightly softer than in July, but stronger than the period from March to June this year.

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