UK online companies have increased e-commerce sales six times as fast in the past three years as those based purely offline, according to a new report by the Boston Consulting Group.
The future of British e-commerce looks rosy too, with 23 per cent of retail sales on these shores predicted to be made online in 2016, almost 10 percentage points more than in 2010. It’s an exciting time for e-commerce, but the online marketplace is tough, not just because price competition is fierce but due to the plethora of technological innovations and alternative strategies used by both big business and disruptive start-ups to pull in trade. Selling online is both more cut-throat, and more sophisticated than ever.
Jonathan Ambrose, founder of property auction website PropertyBid, says that cash-strapped consumers are less willing to pay a set price for certain goods and services, and more likely to shop around or search for a discount. This view prompted him to start a business which allows would-be tenants to bid online for properties rather than accepting a fixed rent. ‘Consumers have less money [today] and I believe it will be more beneficial for companies to ask “How much are you willing to pay for this?” instead of presenting them with a fixed price,’ says Ambrose.
It’s a trend also exploited by Anyvan.co.uk, which allows couriers and hauliers to compete for removal jobs via a similar bidding system. Founder Angus Elphinstone had previously run another removal company, but says customers became more price-conscious when the recession hit in 2008. He advises entrepreneurs looking to employ the auction model to look after both buyer and seller. ‘With eBay, the seller sells an item for the best price and the buyer believes they have a good deal. With Anyvan, the customer saves money and the transport provider makes money [and gets exposure]. Make sure both parties benefit.’
The collaborative consumption model
Another e-commerce trend that has taken advantage of the economically squeezed populace is ‘collaborative consumption’ whereby consumers can make use of others’ possessions. People can now rent cars (easycar.com), household goods (rentmyitems.com) and stay at the houses of others through a mediated service (OneFineStay.com).
Greg Marsh, founder of One Fine Stay says, ‘When the recession hit, a lot of consumers took stock and asked themselves how they can make the most of what they already own.
‘Currently, we take it for granted in Britain that you own things because you might occasionally use them. But in ten years’ time, people will be much more sensitive about assets that are manufactured but aren’t being used and a lot of businesses will emerge to take advantage of that.’
Marsh refuses to reveal the turnover of the venture-backed company, but says that within 18 months, the site has attracted 500 members in London with an average house value of £1.4 million, and has taken on more than 100 staff.
Using augmented reality to boost sales
For retailers that are already established, the realisation is dawning that a website should be more than just an online brochure or catalogue. Jonathan Chippindale, CEO of creative agency Holition, says that he started his business because he found the marketing of many online retail brands old-fashioned and one-dimensional. ‘A lot of brands, particularly luxury ones, focus on a great store experience, powerful advertising and strong PR but they’ve been slightly wary of online,’ he says. ‘Many of the ones that are all about quality of product and service still see the web as an impersonal channel to communicate products.’
One measure Holition offers to boost e-commerce sites is augmented reality (AR), a technology that enhances perceptions of reality through visual effects. Watch manufacturer Tissot decided to employ the technology to allow potential customers to ‘try on’ and interact with a number of different watch styles, colours and sizes, as if they were really wearing the watch. The ‘virtual watch’ is brought to life with a real-time light reflecting technology that enables the consumer to experience the different facets of its design at the twist of their wrist. The company says that following its AR display outside Selfridges on London’s Oxford Street, sales increased by 85 per cent during the two-week period and the company achieved 50,000 YouTube hits in a week.
Chippindale explains that, to put AR capabilities in place, a computer model of the product is created and an interface designed. He says that it can cost ‘anywhere between £5,000 and £150,000’ depending on the size of the project.
Another technology that Chippindale expects to see more of is image recognition. ‘Brands such as Net A Porter have done some image recognition work where people can go up to a wall displaying a photograph of a product and use a smartphone to recognise the photograph. It’s fun because people can buy products standing in the street by pointing their phone at a wall.’
Group e-commerce director of Shop Direct Group Jonathan Wall says that digital fingerprint technology is another possible trend for e-commerce in the near future. He says, ‘People are using their mobile in their downtime, and while many e-commerce sites are selling through this means the conversion rate for desktop is better. So being able to identify customers through their fingerprint across multiple devices gives you a much better view of the customer’s habits and a greater understanding of conversion rates.’
Furthermore, Wall adds that geolocation will be useful for e-commerce operators to see where potential customers are on the high street and targeting them with offers.
The first ‘winmarket’ in e-commerce
Sometimes companies can achieve success in e-commerce by putting out brand new ideas. Christoph Klinger is set to launch Yipiii.co.uk, which claims to be the first ‘winmarket’ in the history of e-commerce, giving people the chance to win their shopping online before they buy it. Once they’ve set up their own Yipiii.co.uk account and deposited some funds, UK shoppers will be able to spin a virtual wheel in an attempt to bag some 500,000 products from recognisable shopping brands. If they win, the product is delivered to them at no extra cost, and if they don’t, their money is safe.
Klinger, who expects his company to turn over £70 million in three years’ time says, ‘We looked for something that didn’t exist and asked ourselves why no-one had thought of it. The answer was that it’s enormously complex and you also need a gaming licence, which isn’t easy to get. Overall though, the big idea is to put out something different and ultimately revolutionise e-commerce.’
The importance of businesses having a social media presence may be considered old news by now, but there still are many e-commerce companies that aren’t managing the process effectively, according to Christina Grzasko, director at e-commerce agency Anya Media. ‘Businesses are being told they should be on Facebook but they still don’t know why. The reason is to engage with your customer base.’
Grzasko uses an example of a client of Anya Media that sells waterproof bags for people who do adventure sports. ‘They get customers to send in pictures of the things they’ve done with the products. The presence is effective because they’ve got a community going – users are starting to meet up through it because they happen to be in the same part of the world. People are going on it for their own reasons rather than because they were told they would get a discount if they click “like”.’
Andy Mulcahy, head of communications for e-commerce lobbying group IMRG agrees that the solutions offered by retailers that will have the best chance of success are those that incorporate social elements as part of their operation. ‘The internet is becoming a more social and interactive space and consumers want to engage with brands that innovate and involve them rather than just market products to them blindly.
‘Cross-border trade will boom over the next few years and retailers that get their research done comprehensively so they identify the areas appropriate for their business model will succeed here.’