Shoppers force changes in online retail

A miniature shopping cart isolated on white with a blue letter "E" in the basket depicting e-commerce or online shopping.Online retailers are facing dramatic changes and they need to respond quickly if they are to survive. That’s the conclusion you can draw from research showing just how much shoppers are in control. The study from the consultancy firm PwC should be a wake-up call to online retailers as it reveals some stark messages.

For one thing, the study has found that the majority of online shoppers only buy from fewer than five websites. Indeed, 46% of the 15,000 people in the study only shop at one online retailer. In other words, the vast amount of online purchases are being concentrated into a handful of leading stores. That should come as no surprise. With Amazon, for instance, raking in around $1bn ever four to five days it dwarfs retailers like the world’s biggest online fashion store, Asos, which managed to produce an income of around $1bn  but only in 12 months. Even so, Asos itself then dwarfs other fashion retailers online. However you dice and slice the data, most online retailers are not doing well; they are only producing tiny amounts of trade compared with the giants of online shopping.

We need to ask ourselves why this situation exists. After all, the standard mantra of “online success” is that if you create a niche, a tiny niche at that, people will flock to you. The data suggest the opposite – that people are flocking to the generalists, like Amazon.

The reason is revealed in the PwC study. It’s mostly about trust. Some 86% of people in the study cited trust as the most important factor in a retailer. With the majority of people shopping at a few online retailers it is clear that these are highly trusted companies. One reason other online retailers may not be doing so well is because they have not demonstrated enough trust.

Trust is established when a company delivers the right product at the right price to the right person in the right way. Good old-fashioned marketing. Many online stores fail at several of these hurdles. They do not deliver the right product. They push products inappropriately. They have poor logistics systems in place. In other words, trust begins with having a solid business in place. Far too many online retailers are simply trying to “cash in” on the web wave without actually putting proper business systems in place – leading to lowered levels of trust.

However, trust is also established in another way – by demonstrating expertise. Amazon, for instance, is an acknowledged expert in online retail. Their shopping experience has inspired many other online retailers to offer something similar. You cannot move on the web for articles about creating a store like Amazon and the company even produces systems, like Amazon Web Services, which other retailers rely on. Throughout the web, Amazon has shown it has extensive knowledge about its “world”. Shoppers – even subconsciously – see this extensive knowledge and influence and this increases their trust. We trust people more when we believe they know a lot about something  – as I point out in my book, Click.ology: What Works in Online Shopping.

The PwC study also demonstrates how important knowledge and influence is. Shoppers said that they expected retailers to have a compelling story to tell. In other words, they don’t just want an online store – they want to shop from retailers who know lots and spread their knowledge widely. Asos was one company that discovered when it launched a magazine and blogs that sales went up. People start to trust you more when you don’t focus on selling but instead offer compelling content.

It all suggests that shoppers are driving change. If retailers do not respond by increasing trust and by demonstrating great knowledge the stranglehold of the main online retailers will merely strengthen. The PwC study should be a warning shot to online retailers – improve your business, gain more trust and fill the web with your stories and you will do well. Simply run a shop and you will be out of business before long.

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