The E-commerce sector comprises businesses selling goods online. Businesses may be pure e-commerce players, but can also have other sales channels include physical stores, paper catalogues, face to face or phone-based selling.
Over the last 20 years, as broadband speeds have increased, smart phones become ubiquitous, and website technology improved, e-commerce has replaced many transactions previously undertaken in stores, or other non-digital channels. Covid-19, and the enforced closure of physical retail premises, has led to further acceleration in this trend, and in particular increased e-commerce penetration in grocery shopping.
The UK has been at the vanguard of e-commerce adoption, with one of the highest penetrations of e-commerce as a % of retail spend in Europe, and of the world (at 19%). This is continuing to increase, and provides a strong tailwind for businesses participating in the sector
In Fairgrove’s experience, the most successful businesses typically have a clear understanding of their target end customer, how to market to them and how to serve them. They will use a mixture of channels successfully to build their customer base and have a strong understanding of how to build both reach and engagement through these channels. Larger converting marketing methods often include: organic search (Search Engine Optimisation (SEO)), pay-per-click (PPC) advertising, email marketing, social media (Facebook/Instagram/YouTube depending on nature of product), display ads, digital PR, use of affiliate networks and paid influencers. Offline methods might include paper catalogues, and use of other traditional media.
Customer engagement with the website is critical. Features to increase customer engagement often include product reviews, mobile optimisation to improve purchase experience, quality of photography, website loading speed as well as simplified checkout processes.
Customer service levels are critical to support customer engagement, and maintain good online customer brand reputation. This can be facilitated by strong customer support (typically multichannel including voice, email and live chat), helped by appropriate stock levels driven by an inventory management system with strong forecasting capability to avoid stock outs. Returns policies need to be transparent, and adhered to.
The key challenges in e-commerce for developing players is to be heard, and to scale economically, both domestically and internationally. Deep understanding of customer costs of acquisition, customer behaviour, customer lifetime value and the scale of the segment being addressed can give comfort to investors and management teams on the size of opportunities.
Risks to be addressed include where “product” players are also evolving their strategy to sell more direct to consumers. In the sports segment, where Fairgrove has undertaken a number of projects, Nike and Adidas have both committed to expanding their direct-to-consumer engagement, which in some geographies may threaten pureplay sports retailers, but can also be complementary.
Amazon’s ongoing growth and continued dominance also needs to be assessed, with retailers assessing which products can be sold economically through Amazon marketplace and where this doesn’t make sense.
Fairgrove has experience of the following sub-sectors within e-commerce in both the UK and internationally:
- Affiliate Marketing
- Automotive (New/Used Vehicles & Aftermarket)
- Sports (e.g. Football, Darts, Water Sports)
- Other Specialist Lines (e.g. Photographic Equipment)
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