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UK consumers are expected to spend more than £1bn on the Web during the festive period, but online retailers must have contingency plans in place to counter potential problems, analysts have warned.
Ocado has been gearing up for Christmas since autumn, said Roger Whiteside, joint managing director of the Waitrose-backed online grocer. "It is Ocado's first Christmas so we decided to give our established customers the first option to book December shopping slots early," he said. "We only have a limited capacity, so this gives us visibility on what we need to do."
Whiteside is confident that Ocado's front- and back-office systems will be able to cope with the extra demand. "The site is constantly being revamped - a more effective search engine was implemented recently, for example," he said. "We are also ensuring that the back end is more and more proficient.
"However, the issue with scaling is generally how to manage the growth rather than the systems themselves."
Lastminute.com also expects to reap the benefits of planning early for the festive period, according to Paul Shaw, head of lifestyle at the online leisure and travel retailer.
"The main lesson we learned from last year is to plan early," he said. "This means getting stock lined up early, putting in contingency plans and developing good relationships with suppliers so we can deliver as late as possible, which is obviously important for us."
Lastminute.com has seen sales volumes rise by 40%-50% compared to last Christmas, which has increased the pressure on the company. "The increased volumes have exercised us," said Shaw. "Over the past few months we have been ensuring we have the IT kit to handle the volumes, and what we have done is now coming into play."
Tesco.com, meanwhile, is expecting a record-breaking Christmas, according to John Browett, the retailer's chief executive.
Tesco's fleet of 950 vans will be out until lunchtime on Christmas Eve, making nearly 24,000 grocery deliveries a day, including more than one million bottles of wine and champagne and 20,000 Christmas puddings.
The company recently achieved sales of £10m in a week for the first time. Browett believes this is a reflection of the increasing acceptance of online grocery shopping. "In the past, there has been a feeling that there is no substitute for going to the shops for Christmas groceries and presents but it looks like that attitude is a thing of the past," he said.
Despite the inevitable optimism, online retailers are bound to encounter some problems during the festive period, warned Wendy Hewson, research director at consulting firm Hewson Group. It is how they deal with them that is important, she said.
"It is much better to recognise there is a problem before a customer goes through the pain," Hewson said. "Research shows that if you can get a problem right your customers will love you even more than before."
Some online retailers simply ignore problems, such as overwhelming numbers of customer orders, Hewson said. This then has an adverse effect on the user experience as the company cannot fulfil its promises - which has a direct impact on sales.
There are simple steps retailers can take to counter such problems - a process known as service recovery. "If you have a problem it is easy to signpost it on the home page, which is not difficult from a technical point of view," Hewson said. "You can then postpone demand and give incentives for customers to buy in January, for example."
Many problems arise because of poor links between the e-commerce department and other sales channels. "Companies have not worked out how to manage the concept where people go online first and then go to the store or the telephone," Hewson explained. "Communication between departments needs to improve."
Poor Web site performance can damage a company's brand, Hewson warned. For example, recent Hewson Group research highlighted the bad online customer service offered by a leading UK ferry operator, leading to dissatisfaction among users.
"A mystery shopper sent the company a lengthy e-mail requesting details about numbers, disabled facilities, food requirements and the like," explained Hewson. "But all they got back was an automated minimal response which just reflects poorly on the brand. It is not complicated to put systems and processes in place which can improve e-mail handling."
This highlights the value of the IT department during vital trading periods. With UK consumers set to spend more than £1bn on the Web during the festive period, those online retailers that get their systems and processes right can look forward to a very prosperous new year.