Mobile, site merchandising and basic marketing, including search optimization, are the top-3 priorities for North-American retailers in 2016, according to a recent study conducted by Shop.org, Forrester Research and Bizrate Insights. The study, which was conducted among 195 North-American retailers, also reported that retail sales generated from smartphones rose 53% year-over-year and that many retailers struggle to grow their businesses due to rising cost and increasing competition.
Top-3 Retailer Priorities
The study, titled “The State of Retailing Online 2016: Key Metrics, Business Objectives and Mobile,” asked retailers in North-America what their top-3 priorities for 2016 were. More than half (59%) of respondents indicated that mobile and basic marketing were their most important activities, while 41% said that site merchandising was a leading priority for 2016. Many retailers were also planning to work on checkout redesign, omnichannel development and overall site redesign.
The Shop.org, Forrester Research and Bizrate Insights study revealed that among survey respondents smartphone sales increased by 53% year-over-year in 2015 and now accounts for 17% of retailers’ total online sales. Other research firms, including BI Intelligence, have estimated the mobile share of ecommerce to range from 20% to 25% of total ecommerce sales, but that also included tablet sales. Overall retailers recognize the importance of mobile commerce. One-third of retailers participating in the survey said they plan to increase their mobile investments more than 20% in 2016 and another 34 % will grow their investments between 1% and 20%. The report also found greater willingness to invest in making it easier for mobile consumers to shop on a mobile website versus through an app. This is important because today consumers are spending the majority of their commerce-related browsing time in browsers rather than apps.
Social commerce activities and integration with social media platforms received a surprisingly low priority rating from the survey participants. Social-driven retail sales may still only drive a small share of total online ecommerce sales, but it is rising at a fast pace. Social media platforms not only allow retailers to drive direct sales via an embedded “Buy” buttons on social media posts, but also through referring traffic to the retailers’ websites and apps. The top-500 retailers in the US earned $3.3 billion from social shopping in 2014, up 26% from 2013, according to the Internet Retailer’s Social Media 500. That is well ahead of the roughly 16% growth rate for the total ecommerce sales in the US.
Growth and Profitability
While online retail sales is growing much faster than stores sales, not all online retailers are sharing in the benefits. An increasing number of online retailers are having difficulty growing their business due in part to high customer acquisition and shipping costs and rising competition. The Shop.org, Forrester Research and Bizrate Insights report data shows that overall ecommerce sales were flat in 2015 for 17% of 195 retailers participating in the survey. As primarily reasons for stagnating online sales the report cited:
Growing competition. Online retailers are facing more competition than ever. More than 800,000 online stores in the US alone are now fighting for market share, recognition and relevance with assortment. And then there is the continuing overall presence of Amazon. A recent analysis by investment firm Macquarie Research concluded that Amazon would account for 51% of US online sales growth in 2015 and 24% of all US retail growth.
Price-conscious consumers want steeper discounts. Another factors that is squeezing online growth is the increasing number of cash-strapped US consumers seeking ever steeper discounts, putting more pressure on already thin margins.
Rising costs. Rising shipping and customer acquisition costs are, in part, the reason retailers are having difficulty growing their online businesses, according to the Shop.org, Forrester Research and Bizrate Insights report. Consumers are spreading out their purchasing across online channels, forcing retailers to spread out their online marketing budgets among paid search, affiliate marketing, email and social. This leads to increasing overall campaign management cost. Other expenses are surging as well. According to the report retailers are now spending 9% of online revenues on information technology, up from 5% in 2013. The average marketing cost per order is now $20, with half of retailers indicating it had increased in the past year. The average cost to fulfill an order is currently $10, with 27% of retailers revealing it had increased over the last year.
Underperforming websites. The report reveals that the median conversion rate for retailers responding to the survey was 3%. Their site abandonment rate was 49%. The median average order value was $103, but $120 for repeat customers. Even matching a conversion rate of 3% poses currently a key challenge for mobile commerce. Consumers are spending considerable time shopping on smartphones, but are making relatively few purchases and although 65% of retailers participating in the report survey said they are gradually improving conversion rates, 59% still had mobile conversion rates under 3%.
Many retailers only have themselves to blame for underperformance on mobile, as many still do not have a mobile-optimized website or dedicated mobile site. Going forward the report suggests retailers pay special attention to mobile engagement since consumer interaction with mobile social media content is still limited. Other research has indicated that social media users are 35% less likely to share a brand’s or retailer’s social post on mobile than they are on desktop computers.
The report also offers suggestions on how retailers could improve their financial situation. For instance, retailers could generate more repeat orders by offering a wider selection of merchandise, including by offering “marketplace” sections on their sites where other merchants can sell products in exchange for a cut of the sale price. In addition, retailers that operate in-stores pick-up programs, which can reduce the cost of shipping items to consumers’ homes, could audit and optimize their programs for fulfilling orders from stores.