$695 million Market Gap Found in Australian Retail Industry

Posted by: Alex Danieli on LinkedIn

How might Australian retailers best differentiate themselves from competitors, improve customer engagement, and increase conversions? Consumer studies reveal that 50% of existing online customers want better retailer engagement when shopping. This gap has created a $695 million untapped market in the Australian retail industry alone.

Over the past 5 years, my team and I conducted research in Australia and Silicon Valley to learn exactly what elements of the online retail shopping experience create the most memorable event for shoppers. Our researchers found that the single most important [differentiating] element for online consumers is a holistic shopping experience. In fact, 44% of these consumers want to see the entire e-commerce model shift toward providing a complete - holistic - shopping experience.

To best deliver a holistic online shopping experience and tap into the $695 million market gap, we highlight three areas in which retailers must STOP making mistakes: Basics, Branding, and Browsing.

Basics: Expected, but not rewarded
Every online retailer - small, medium, or large - is always looking for ways to improve their conversion rates. This objective has forced the industry to become obsessed with transaction speed. The hyper focus on speed caused retailers to neglect the progress and innovation necessary to provide consumers with a complete shopping experience.

Retailers must stop relying on improved transaction speed as the mechanism for customer satisfaction and loyalty. Significantly, 55% of consumers say transaction speed does not foster brand loyalty, and 87% say transaction speed does not increase their spending amount or frequency.

Yet, time and time again, retailers tell us their online strategy is to develop a way for the shopper to transact in fewer clicks so they don’t lose the transaction. Undoubtedly, research suggests users don’t like to click more than necessary, and they are less likely to convert if they encounter such barriers. The real question is why is this the case, and what can be done to turn these lost conversions into final purchases.

Branding: Customers don’t know your story
If retailers lose a sale due to an extra click or an extra 30 seconds of time on a page, we must ask whether the consumer is truly motivated to make the purchase. To be blunt, the problem is rooted in retailers’ failure to effectively sell their brand message on their website. If the brand’s mission, vision, and values are not conveyed in such a way that draws consumers into the full experience that defines their brand, then no lightning-fast transaction will make a long-lasting difference in consumer habits.

Consider a fashion label. We know they are selling far more than a t-shirt or a dress. They are selling the lifestyle that comes with wearing it. But does the consumer know what that lifestyle looks, feels, and sounds like? If they were sold on this lifestyle rather than the product, they would be more likely to convert. It’s telling that 70% of Australian consumers do not believe online retailers effectively sell the lifestyle associated with their products.

The bottom line is that retailers need to better motivate consumers to purchase their products. A state of the art online experience can motivate disengaged consumers. However, our research shows this important element is scarce in the retail industry, creating a market gap. Again, this gap has created an enormous opportunity.

Browsing: They’re looking, but not buying
Many shoppers go online because they know exactly what they want, and the fastest possible purchase transaction should be provided to them. These consumers don’t need further motivation to purchase. However, 85% of online shoppers do browse without a specific item in mind or intent to buy, at least slightly often. These consumers present the best opportunity to retailers.

The mistake here is that retailers forego any chance to convert these shoppers because they fail to adequately engage them. The opportunity loss is two-fold. First, 42% of consumers believe an interactive shopping experience would increase the frequency of their online transactions. Second, 48% of existing retail customers would browse more often if websites became more interactive and holistic.

Consumers revealed what they want, but retailers have yet to offer it. The holistic shopping experience has been elusive. What might be done to change this?

To access this untapped $695 million market, retailers must avoid mistakes in three areas:

  • Basics. Consumers expect all transactions to be fast and easy. They don’t reward speed with loyalty or increased sales.
  • Branding. Consumers want to know and connect with brand/product stories and their associated lifestyles (think Apple).
  • Browsing. Consumers want better engagement through an interactive and holistic shopping experience.

Thinking Forward
What does it mean for a retailer to be holistic? What does this look like? What are the retailer’s first steps toward offering consumers a more holistic shopping experience?

I’ll be posting more insights about the paradigm shift toward a holistic shopping experience emerging in the e-commerce landscape. If you’d like to chat about it or contribute to the ongoing conversation, please feel free to connect with me.

Sources: 1. The 360 Mall Online Shopping Survey February 2016 (<5% margin of error). 2. The 360 Mall Online Shopping Behaviour Survey May 2017 (1000 Australian online shoppers). 3. The 360 Mall Online Shopping Research November 2016 (825 Australian 18-34yr old online shoppers, 6% margin of error).

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