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Marketing costs multiply in competitive e-tail sector


Online retail sales figures appear to be constantly escalating, painting a rosy picture of the e-tail sector in the UK. However, with competition getting fiercer CEO of health & beauty retailer Aaron Chatterley says more and more marketing investment is required to stay ahead of the crowd.

I have written before about the disconnect between the weakness of high street and the strength of online retail sales figures.

And the latest figures from IMRG and Capgemini have underlined the divergence in the fortunes of the two retail channels.

Last week the IMRG-Capgemini e-Retail Sales index showed that £5.2 billion was spent online in April – a year-on-year increase of 20 per cent. That is the equivalent of £84 per person in the UK. And that is a staggering sum.

Yes, the bank holiday and the fine weather boosted alcohol sales (£174 million – double the amount on 2009), but even taking that into account, there is no denying that high street fortunes are suffering not just because of the economic downturn, but also because of rapidly changing consumer behaviour towards online retail.

There is really no reason to labour the point, because the data is unequivocal. There is simply no arguing with the statistics. Even clothing – one of those sectors that isn’t supposed to be suited to e-tail – was up 32 per cent in April, according to IMRG and Capgemini.

I’m not sure there is anything that can’t now be sold online, with online marketplace eBay testament to the fact that you can flog just about anything – including unwanted and bizarre looking wedding hats!

Consumers generally do not have an issue using the internet to make key purchases. It has taken some time, but the sector has won the confidence of consumers who are no longer deterred by hysterical tales of internet fraud.

Even in sectors where you might imagine e-tail is going to struggle, companies are booming. The stock argument trotted out is that some product categories will never sell in high volumes online because of the need to touch, small, feel and try on before purchase.

In beauty and cosmetics, Feelunique and others have proved that argument to be nonsense.

I accept there are some items that may never sell online in huge volumes. A straw poll of my office indicated that items colleagues would never buy online include shoes, cars, jeans, furniture, medicines and sports wear. Personally, I would never buy a car without parking myself in the driver’s seat first.

So while we might accept that it is relatively easy to set up an e-tail business and there are relatively few product categories that do not prosper in the online sales environment, there are still issues to content with.

All too often new e-tailers lack any appreciation of how to market to an online audience. The general belief is that if you build they will come. You can build the most fantastic website and have a desirable products set and pricing but if you don’t understand online marketing you’re dead in the water. That’s why sadly so many online retailers come and go so quickly, in many different sectors, not just beauty.

Of course, there may be product categories where there are still gaps in the market and the cost of visibility is still relatively low. But I couldn’t tell you what they were – and if I could, I would be busy putting a start-up together to fill the gap, rather than telling everyone about it!

While the size of the UK e-tail industry continues to expand rapidly, the cost of entry increases by a proportional amount. Logic dictates that the bigger the market, the more entrants we will see. But as competition gets more intense, so does the difficulty and cost of securing visibility. Eyeballs cost money – just like they always have done.

Forget about consumer willingness to shop online and the warm fuzzy glow we all get when we see the IMRG-Capgemini numbers; the reality is that e-tailers are having to spend more than ever on marketing to retain their position.

All the myriad of fantastic little e-tailers out there have to understand that reality.

Note: The views expressed here are those of Aaron Chatterley and do not necessarily represent the views of Retail Gazette.

Published on Tuesday 31 May by Editorial Assistant

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