August 11, 2014

E-Commerce As A Percentage Of Total Retail Sales

When working on retail projects, I repeatedly see three trends.
  1. E-Commerce is 30% to 40% of total sales (J. Crew).
  2. E-Commerce is 7% to 17% of total sales (Nordstrom).
  3. E-Commerce is 7% to 17% of total sales because the e-commerce experience isn't very good.
Both J. Crew and Nordstrom have credible e-commerce efforts.



Why the difference in performance?

The answer becomes obvious when you look at share of sales by store distance.

Go into your database, and look at % of sales derived via e-commerce, by store distance. Your trend might look like this:
  • 0 to 5 miles = 10% via e-commerce.
  • 6 to 25 miles = 30% via e-commerce.
  • 26 to 99 miles = 50% via e-commerce.
  • 100+ miles = 80% via e-commerce.
Or your trend might look like this:
  • 0 to 5 miles = 3% via e-commerce.
  • 6 to 25 miles = 7% via e-commerce.
  • 26 to 99 miles = 15% via e-commerce.
  • 100+ miles = 68% via e-commerce.
The in-store experience is key, folks. If customers love the in-store experience, then two things happen. First, customers who live near the store almost exclusively shop in the store. Second, customers who live an hour from a store are very likely to make the hour-long drive to a store. When you see this happening, you know your in-store experience is very, very credible!

If you have a good (not great) in-store experience, and you have a very credible online experience, then the trend looks like the first example. Near a store, you have a huge share of business happening in-store. But as soon as you get a few miles from the store, the customer shifts over to e-commerce - online convenience outweighs driving to the in-store experience.

Retailers that have a high percentage of e-commerce within five miles of a store (30% or more) have an opportunity to look carefully at the in-store experience. Here, customers like the brand, but not the in-store experience. Retailers really, really want to have customers in the store, right? Well, if the customer lives 1 miles from the store and won't go to the store, that means something.

I get tired of hearing folks beat retailers up about e-commerce penetration. The best retailers have such a sensational in-store experience that the customer actually wants to get in a car, drive to a store, and experience the buzz. Imagine that?

2 comments:

  1. Hey I was wondering, is there a way to increase the e-commerce rate? I'm really interested to increase my ecommerce sales. These guys ensure that it is possible through a proper content strategy: http://www.multimindgroup.com/services/social-media/ what do you think?

    ReplyDelete
  2. There's always a way to increase the e-commerce rate. What difference does it make, however, if a customer spends $200 a year with 25% in e-commerce, or spends $200 with 15% in e-commerce?

    The website you link to - those folks may be able to accomplish this. I don't have strong faith in content marketing as a way to grow a retail store business with e-commerce, especially if the customer is older than 35-40 years old. But that's based on my experience, everybody has different experiences.

    ReplyDelete

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