September 24, 2012

Retail's Impact on E-Commerce

Have you ever run a query, within a retail trade area, of how e-commerce customers and retail customers interact with each other?

It's worth running!

Look at all customers who purchased between September 2010 and August 2011.  Within this audience, analyze e-commerce buyers and then retail buyers during the period of September 2011 and August 2012.

Among e-commerce buyers:
  • Repurchase Rate = 40%.
  • If customer buys, 50% purchase online.
  • If customer buys, 60% purchase in-store (this means that some buy from both channels, that's why the percentage does not equal 100%).
Among retail buyers:
  • Repurchase Rate = 55%.
  • If customer buys, 15% purchase online.
  • If customer buys, 90% purchase in-store.
This story comes up, over and over and over again.  What does it mean?
  • E-commerce buyers move to stores.  In fact, in our example, e-commerce buyers prefer stores over e-commerce in the future.  This means your web analytics software application is likely to completely misread the effectiveness of your website.
  • Retail customers have minimal interest in e-commerce.  This doesn't mean that retail customer don't like your website, no, it usually means the opposite ... your retail shopper researches online and buys in-store.
It is terribly hard to grow a retail website to more than 20% of annual sales when the dynamics look like this (and honestly, they usually look like this).  Your "brand" is anchored in the retail experience.

In these instances, retail draws customers away from e-commerce.  Some retailers know this, they use their website as a customer acquisition tool designed to fuel future retail comp store sales increases.

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