James Roper, chief executive of the industry body Interactive Media in Retail Group (IMRG), explains, “Most traditional retailers did not have transactional Web sites two years ago. Their efforts were mostly spent understanding how the Internet worked and waiting to see what their competitors would do.”
In the space of two years, e-commerce has become a must-have for retailers. Analyst firm Gartner Group identifies this requirement for an anytime, anywhere, anyhow shopping experience in its recent report E-tailers: 'Tis the Season for E-service Availability.
A Gartner spokesman says, “Web sites designed for 2000 and beyond should be capable of recognising individual customers, helping them through each step of the buying process and remembering purchase histories.”
Retailers are now learning online shoppers are highly sophisticated. It was only a couple of years ago that making purchases over the Internet seemed to be the sole preserve of our American cousins. Not any more.
Research from accountancy firm PriceWaterhouseCoopers suggests the number of UK and German consumers shopping online has reached a comparable level to the US. Importantly, these consumers also expect the same high levels of customer service as their American counterparts.
The current dilemma for the retail sector is this is both a technical and a logistical challenge. On the technical side, sites need to be slick and easy to manoeuvre whilst downtime has to be minimised. This is the most important technical issue an e-business faces. Meticulous planning and also, if necessary, significant investment can keep it to the bare minimum
According to Gartner, a large number of e-business sites currently process transactions on IBM’s S/390 mainframe to avoid downtime. This is due to the impressive reliability and availability the mainframe offers but also because it ties in neatly with existing transactional systems.
On the logistical side, order fulfilment has always been a headache, even for traditional retailers. An online survey by IMRG identifies physical delivery services as the area of e-tailing most in need of improvement.
At the moment, the majority of food retailers use employees to pick Internet-ordered products from the stores’ shelves. This has potential to cause delivery bottlenecks at busy times of the year.
One of the exceptions is Asda, which uses depots in Croydon and Watford to pick orders received as part of its Asda @t home shopping scheme. Currently covering the area bounded by the M25 motorway, the service will be extended to other parts of the UK next year. These depots will initially use a store-based picking model.
“At the moment, we pick goods from a depot model. That’s the fundamental difference between us and our competitors,” says Sheena Forde, Asda’s director of e-commerce. “One of the main things about this is it brings convenience to our customers.”
Mike Winch, chairman of e-business solutions company Crimsonwing and former Safeway CIO, explains, “I am sure you will find that 80% of orders are picked in stores. At this time of year, sending pickers round to get peoples’ orders can be tough.”
As far as Winch is concerned, dedicated central warehouses to deal with online ordering are the answer. He predicts, “Once you get sufficient volumes going through, you will have to go to a central distribution model.”
At IMRG, Roper sees one of the main problems for retailers being a skills shortage. He says, “There is very little in the traditional retail background that prepares you for life on the Internet.
There is also little in an Internet background that prepares you for the rigours of retailing.”
Two years ago, HTML skills may have been sufficient to build the first corporate Web sites - effectively online brochures - but that isn’t the case now. Roper adds, “Lack of human resources with e-business acumen is generally cited as the biggest logistical problem.” In many ways, this type of skills shortage is inevitable, thanks largely to the fact e-tailing is still in its infancy. Nonetheless, it is an added worry for retailers, who must now face up to the reality of paying top dollar to get the best people. Overall, the message is retailers are moving in the right direction. But they still have some way to go before they meet customers’ online needs. Winch says, “I think the actual promise has not been fully delivered. It should be quicker and more customised.” Indeed, he believes pervasive devices such as personal digital assistants and even wireless application protocol phones will soon replace the PC as the prime delivery channel for e-business. He explains, “I think more and more remote customer relationship management will be done through pervasive devices. We are probably no more than 12 months away from this.”
Case study: E-Garden takes the needle out of Christmas
The Christmas rush is not all sleepless nights for retailers. Indeed, the E-Garden Web site has a fairly unique e-business offering for the festive season.
Describing itself as “the most inspirational garden site on the Web”, E-Garden has been selling real Christmas trees online since the end of September. The trees range in size from 5ft to 7ft with deliveries taking place from mid-December onwards.
Set up two years ago, E-Garden is a good example of how niche retail markets are fuelling growth of e-business. Geared towards the younger person who is perhaps new to gardening, it also provides an alternative for people who don’t have time to visit a garden centre.
Brian Vass, managing director of E-Garden, explains, “There are 18 million gardeners in the UK of more than 25% were online two years ago when we started, so there was a huge gap in the market. Since then, our site has shown continual growth and I see no
Read more on Business applications
Shoppers spent a total of £5.2bn online in October, a year-on-year growth of 23% and the highest October growth since before the recession.