Losing loyal online customers carries a high price, finds new report

‘How to pull customers online’ research report launched by Webloyalty, the company behind the Shopper Discounts & Rewards programme

Date – 20 November 2008

Online retailers must provide a shopping experience more akin to a physical store’s if they want customers to increase their spending. These are the findings in a new report by retail industry experts Verdict Consulting. The report, entitled ‘How to pull customers online’ was conducted on behalf of Webloyalty – a leading provider of incremental revenue for e-businesses – who owns and operates the online rewards, savings and protection programme Shopper Discounts & Rewards (www.shopperdiscountsandrewards.co.uk).

With online sales predicted to grow by 129% over the next five years, according to the Verdict Consulting report, online retailers have a large commercial incentive if they can apply the techniques used by physical stores, such as John Lewis, to tempt customers to increase their discretionary spend when they shop online.

But – says Verdict – it’s not just about boosting unplanned customer spending. Getting the basics right such as easy navigation at the point of purchase and offering more choice and better value for money are equally important for generating loyal customers.

Even so, until sites improve, Verdict calculates that levels of online loyalty are still some 10% lower than in physical shops as we stand today.

According to the Verdict Consulting report, online customers abandon almost a quarter (24.8%) of their shopping carts before sales are completed. This equates to around 95m transactions a year so businesses that employ strategies to prevent shopping cart abandonment have the opportunity to claw back significant potential lost revenue.

The reasons customers abandon their carts range from well-established concerns over giving out their personal financial details, to high delivery charges and illogical or poorly designed navigation of some sites.

But if online retailers can get it right, almost a fifth of respondents (19%) sampled by Verdict said they would be loyal customers if a website was easy to navigate and offered good service and competitive prices.

According to Verdict report, commissioned by Webloyalty, if a large online retailer converted only 1% more in sales from its average site traffic it could expect to boost revenues by almost £700,000 a year. Even smaller sites could make £27,000 more from their existing traffic, while a medium-sized site could expect to generate an uplift of over £180,000 a year.

Martin Child, Managing Director Europe of Webloyalty, thinks e-retailers have much to learn about generating incremental revenue from offline retailers.

Child says: “Offline, retailers have become sophisticated at utilising space in their stores to generate incremental revenue. It is all about maximising their high levels of footfall. The same principle applies online, where web traffic can help generate much-needed incremental revenue for retailers. As the battle for customers increasingly moves online, the retailers that get this right will be the big winners.”