Online retailing in the U.K. can expect to experience sustained growth within
the next five years, with shoppers forecast to spend £20 billion on purchases
made over the Internet in 2005, Fletcher announced at its Retail Online forum.
A full 7.5 percent of all purchases will be made online in the U.K. by 2005,
according to the Fletcher report, "UK Online Retail: From Minority to
Mainstream," released at the conference, ending today. In 1999, only 0.25
percent of all retail sales were online, according to Shobhit Kakkar, an analyst
at Fletcher Research .
The report forecasts that by the end of this year, 1.7 billion pounds will be
spent by U.K. consumers on "e-shopping." The online leisure travel market will
account for £490 million of the projected 2000 revenue total, with the computer
product market hitting sales of £410 million this year, Kakkar said.
Retail Online guest speakers agreed with Fletcher's predictions of strong growth
in the U.K. market and discussed ways that companies can use the Internet to its
"The real challenge is to build the brand on the Internet," said Ruben
Rodriguez, the person who heads up U.K. operations as a vice president for
eToys. "The key issues in online retailing are how you deliver your product to
the customer and how you help them when there are problems. Loyalty is key," he
"Customers have to trust who they are buying from," agreed QXL.com PLC Chief
Executive Officer Jim Rose. When it comes to surviving in a crowded and
consolidating market, such as the online auction market that the U.K.-based
QXL.com resides in, a company has to build up its brand name and aggressively
expand its presence, Rose said.
"The issue is about critical mass. For example, we have to have a lot of buyers
and a lot of sellers, (and size alone) is making us a player in the European
market. I must get five to 10 e-mails a week from smaller online auction
companies looking to sell or 'partner' with us," Rose said.
Along with offering the online consumer choice, service and ease of use, an
online retailer has to focus on building its brand, which must be done with
large and targeted advertising campaigns. "You've got to try and reach those
consumers who don't know about you with advertising, which is where we spend a
large part of our resources," said Daniel Gestetner, managing director for the
U.K.-based comparison shopping site ShopSmart.
But Gestetner was quick to point out how expensive such campaigns are, citing
online book seller Amazon.com. "Amazon said last year they spent £45 per
customer on advertising and those figures are similar in the U.K. when it comes
to what's needed to produce brand recognition," Gestetner said.
According to Fletcher analyst Kakkar, Amazon's efforts are paying off. "Amazon
has comfortably the largest share of the U.K. online book sellers market, though
there's a growing challenge from traditional retailers and new online book
sellers," he said.
"The big names in online retailing -- like the Amazons and the Yahoos -- are
going to have the advantage over the recognized brick and mortar retailers that
move online. But you've got to get the jump on them," eToys' Rodriguez advised
the audience of e-tailers.
All of the forum speakers strongly stressed that online retailers have to
personalize the e-shopping experience while also creating online communities.
"You have to make your shopping site a passion centre," ShopSmart's Gestetner
Furthermore, e-tailers must create strong customer support systems to not only
satisfy the customer and create return business but to collect useful
information from them as well.
"In Scandinavia, we sometimes send flowers to our top customers, and if there is
a gap of one to three months, we contact them to ask them how we can better
serve them and let them know about deals they may be interested in," QXL.com's
QXL.com, like the other e-tailers speaking at the forum, also sends out random
e-mail surveys and keeps track of a customer's online buying patterns in order
to "harvest" that information, Rose said. "There are rewards for information
gathering," and for helping your customer realise what they want to buy, Rose
Such segmentation and information harvesting is important no matter what the
product, concurred Brian Nelson, who serves as vice president of e-commerce for
direct PC vendor Gateway 2000. "We have a client knowledge team that just tracks
online customer information. We think that with that data we can understand
where you are in the technology cycle and help you through it faster," Nelson
In fact, eToys feels that the information it gathers from customers is such a
potential gold mine that it keeps its customer service in-house. "We do not
outsource customer service because we feel it's a key way of keeping dialogue
with the customer," Rodriguez said. "With some of that information, we can
e-mail the customer targeted value-added offers," he added.