Review: Online Retail and the Amazon Effect: Prolific North Roundtable Discussion

The retail landscape continues to undergo a dramatic transformation. The number of new shops is decreasing, the pace of closures is quickening, and more and more of us resort to the keyboard instead of the high street.

Indeed, the most recent data from the Office for National Statistics confirm that online sales now make up 18% of total retail sales – as of October 2018 – compared to just 5.3% 10 years ago.

Much of this transformation has been driven by the behemothic growth of Amazon, which in September became the second company to reach a stock market value of $1 trillion, just weeks after Apple hit the same milestone.

But what impact is Amazon’s dominance having on the ground? How are smaller online retailers adapting to their ruthless pursuit of scale and low prices? We assembled a varied group of online retailers to relate their experiences. The group also considered the impact of GDPR, the most important change in data privacy regulation in 20 years.

Chaired by: Patsy Perry, Senior Lecturer in Fashion Marketing, The University of Manchester

Attendees

• Diane Wehrle, Marketing and Insights Director, Springboard
• Jennifer Bailey, Founder, Calla Shoes
• Kofi Richardson, Head of Web Development, G2S
• Jason Peters, Senior CRM Manager, Music Magpie
• Anne Davidson, Founder, Giggle Knickers
• Melanie McGuirk, Partner, Pannone Corporate
• Amy Chandler, Partner, Pannone Corporate

The Amazon Effect

Anne Davidson (Giggle Knickers) said that in her experience, working with Amazon as a sales channel was a nightmare. They are there purely for the customers, she said, and don’t see retailers as customers. Working with them was more trouble than it was worth.

Kofi Richardson (G2S) said that, in his opinion, bricks and mortar shops needed to focus on the experience and what you can’t get online.

Jason Peters (Music Magpie) said that his company did have a high street brand, That’s Entertainment, but that it had been forced to close it down because it was simply not profitable, with high business rates a major factor. He said that Amazon were big partners for them now – their growth was now in tech and mobile phones, and bricks and mortar stores just didn’t make sense any more. They were having to adjust because the nature of physical media was changing.

He added that a big focus for the company now was trying to differentiate on trust – through reviews, service, the whole customer process. He said getting a five-star rating on Trustpilot had been a differentiator.

Jennifer Bailey (Calla Shoes) said that her company operated in such a niche area (shoes for women with bunions) that it had no real competition on Amazon. In her experience it was much more difficult to convert customers on Amazon as opposed to their own website as theirs contained so much more information about their products and how they could help people. As her typical customer was between 50 and 55, their buying habits were different – if they buy one pair and like them and like the customer experience, they’ll probably just buy another pair rather than buy a few and send any back they don’t like in the way a typical ASOS shopper would.

Kofi Richardson (G2S) commented about how the unboxing experience was so important now as it gave a great first impression of that brand.

Jennifer Bailey (Calla Shoes) said the reality was she could offer better value for money if she sold her products online, and that while she would love to one day see her products in John Lewis, it would only be for brand awareness reasons as she would be unlikely to make any money out of it.

Diane Wehrle (Springboard) sought to reiterate the resilience of the high street by noting that 83% of money spent shopping was spent in a physical store, despite the exponential growth in spending online. People shop in a different way now too, she added – many research online first and then go to fewer actual shops because they know where to go. People don’t just go “shopping for hours” anymore. The pressure is therefore higher on retailers to convert those fewer customers.

She added that the onus was on retailers nowadays to ensure that there was complete synergy between customers’ online and in-store experience. She recalled an incident when a shop said it was out of her desired shoe and that it would take up to five days to get it for her, despite the fact she could order it on next-day delivery from that shop’s own website.

How have customers changed?

Kofi Richardson (G2S) said that customers are definitely more demanding than they used to be, reflected by the fact that G2S now has an in-house customer relations team.

Jason Peters (Music Magpie) said his company also focuses very tightly on the customer journey. He said that customers are very switched on – they know much more than they used to, and that as a result Music Magpie was constantly iterating its experience to keep up.

Kofi Richardson (G2S) said that feedback from customers was invaluable to them – getting repeat purchases was difficult and feedback helped with the job of persuading customers to come back and, for instance, match that kettle to that microwave.

Jennifer Bailey (Calla Shoes) said that customer expectations were now sometimes unrealistic. She has people who expect her company to replace their shoes when they have worn out, or demand to know exactly where a delivery is if it is delayed in transit.

Diane Wehrle (Springboard) said that as consumers we have higher expectations – we have power and we exercise it. Thirty or forty years ago you just went back to the store, but now you can put it on social media.

GDPR – a good thing or bad thing?

Kofi Richardson (G2S) said it had been a good thing for their company – everything it needed to do to become compliant has led to the company becoming ISO 27001 qualified. He said that was a mark of trust and probably wouldn’t have happened without GDPR.

Jason Peters (Music Magpie) said it had been a positive thing for Music Magpie too as it gave the company a good reason to explore exactly what was going on with all of its data. The company was 10 years old and had so much data that it didn’t need, so it was a useful opportunity to do some spring-cleaning. He said that there was no template approach to this process – every business’s life cycle was different and had different data sources. Now the company was properly looking at its data from a customer experience perspective and a risk perspective, and three years ago it wasn’t doing that.

Amy Chandler (Pannone Corporate) said that Pannone Corporate had worked with many companies in relation to their GDPR compliance. In relation to retailers, she said that data can be collected in various ways (especially online) and that this data can be very valuable for online retailers, for example for the purposes of tailoring content and advertising to online users, but that companies do have to consider the data issues in relation to such technologies – e.g. what data may be collected and how, how it may be used, and whether there are any issues from a GDPR perspective.

In relation to targeted online advertising, Jason Peters (Music Magpie) pointed out that customers do now expect relevance so it was a trade-off: you have my data and I’ll have a better experience. Companies don’t want to know people’s deep dark secrets, they just want to be relevant.

In terms of the requirement to obtain consent to send marketing communications, Amy Chandler (Pannone Corporate) said that there had been a lot of confusion about this, and particularly the position regarding existing customers. It was also discussed whether email prompts, such as an email to remind a customer that they have left items in a shopping cart – ‘have you forgotten something?’ would constitute marketing.

Jason Peters (Music Magpie) suggested that technology needed to catch up with the legislation, but that the main marketing cloud tools were still behind the curve.