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Date:03 July 2012

Growth ambitions and investment plans – multi-channel versus pureplay

Many online retailers harbour ambitious growth plans for 2012, despite an uncertain economic outlook.  As we saw in previous research from Eccomplished, published here, well over a quarter expect to grow revenues by more than 20%, whilst only one retailer in a hundred expects online revenues to decline this year.

But how do those growth ambitions, and the precise mix of investments designed to deliver them, differ between multi-channel and pure-play online retailers?

Pure plays more cautious?
In terms of the general picture, growth ambitions for 2012 do not differ significantly between the multi-channels and the pure plays – 73% of pure plays plan to grow by between 1% and 20%, compared with 79% of multi-channel retailers.  


However, there is a small but significant divergence at the margins, as can be seen from the first two rows of the chart above:

• 4% of online only retailers expect a decline in revenues this year, something that none of the multi-channel retailers foresee
• Only 4% of pure plays expect revenue growth of more than 50%, compared with 10% of their multi-channel competitors.

On the whole, this suggests that the pure play retailers, with all their eggs in one basket, are more circumspect – perhaps informed by their experiences of 2011.  Last year:

• Only 4% of pure plays significantly beat their targets and 15% fell short
• By comparison, 15% of multi-channel retailers saw revenues way ahead of expectations, and 11% failed to hit their targets.

Overall, the pure plays were more likely to suffer a contraction in revenues and less likely to see really significant growth.  It seems that trend is expected to continue this year.

Customer (loyalty) is king

When it comes to targeting investment to drive those growth plans, there is a more obvious divergence between the two.  In general terms, the pure plays are taking a more targeted, focused approach – perhaps reflecting tighter budgets – whilst the multi-channel retailers seem to be investing almost across the board.



From the table above, it is clear that the pure plays’ biggest single focus is on customer loyalty (88%) – clearly responding to one of the biggest challenges facing any online retailer, or indeed a multi-channel retailer’s online channel.

In fact, while the pure plays’ number two priority – enhanced delivery 73% - is essentially a ‘hygiene factor’, convenient and effective delivery does have an important impact on customer satisfaction and loyalty.

Meanwhile, investments in analytics bottom of the list of priorities (58%) – perhaps because the majority already have sophisticated systems in place and must target limited budgets on more pressing enhancements.  

Interestingly, the reverse is true for the multi-channel retailers, for whom investments in analytics (68%) are an equal top priority along with the introduction of new channel to market (69%) and, once again, customer loyalty (69%).

Barriers to growth?

While both pure-play (69%) and multi-channel retailers (73%) cite the economy as the single most critical barrier to growth, thereafter their concerns digress.
 
 

For the lean pure-play retailers they are more limited by resources (62%) than by budget (58%) while multi-channel retailers are more constrained by budget (69%) and access to technology (50%).

Longer term priorities for success

Pure play and multi-channel retailers are similarly focused on attribution as the single biggest capability to enable performance and success (77% and 73%), clearly prioritising the ability to track performance and invest accordingly.



Both though are clearly focused on the benefits of personalisation, targeted and rich content as they strive to engage customers and drive loyalty and long term revenues.

• Pure-play top 4 investment priorities: attribution (77%), targeted promotions (62%), rich content (62%) and user generated content (62%).
• Multi-channel top 4 investment priorities: attribution (73%), rich content (70%), targeted promotions (69%) and ratings and reviews (69%).

In summary

Across the board, then, investments designed to drive loyalty are right up there with the most important.  We should not be entirely surprised.  

For the pure plays, this remains the hardest nut to crack – developing a loyal customer base consisting of people who spend, and spend regularly, remains the Holy Grail for online retailers.  There is much less emphasis on investments designed to engage new customers.

For the multi-channel retailers there is clearly a mixed approach to investment – initiatives designed to drive loyalty are complemented by investments whose goal is to help attract news ones (e.g. introducing new channels).

About the research

Based on original research, commissioned by Eccomplished in partnership with RichRelevance and Intelligent Reach and carried out by Coleman Parkes. It draws on 100 detailed interviews with eCommerce Directors and Heads of eCommerce from UK based companies with more than £3 million annual online revenues. All interviews were undertaken on the telephone using an agreed set of questions. MRS Code of Conduct rules regarding respondent and client confidentiality and anonymity were respected throughout.

Eccomplished is a free resource for online retailers, providing research and insight into how online consumers are behaving and retailers responding.  Eccomplished is run on behalf of its members, leading ecommerce experts including RichRelevance, Intelligent Reach (formerly Ultimate Feed) and SaleCycle.

For further information please contact Stephen@eccomplished or Emily@eccomplished.com