e-retail in the uk- verdict sample pages

August 2014

E- Retail in the UK | Verdict Channel Report page 2

Key Findings

Online growth slows, but remains far ahead of total retail

While online growth from 2014e to 2019e is set to be slower than that of the previous five

years, expenditure is increasing significantly faster than total retail. This will result in online

spend as a proportion of total retail growing from just 7.1% in 2009 to 15.7% in 2019e, and

we expect this to continue to grow. The main driver of growth over the next five years to

2019 will be high clothing & footwear online expenditure growth, and will result in the sector

moving from being the third largest sector in 2014 to the largest in 2019.

More fulfilment choice increases convenience

The increasing penetration of both click & collect and PUDO delivery services is making

online shopping even more convenient for shoppers, attracting those who would previously

have been put off due to scheduling issues for deliveries – primarily full time workers –

which is supporting expenditure growth. Providing a strong click & collect service has

become a basic expectation from shoppers in many sectors; however, the PUDO market

remains fragmented, with a number of operators that have slightly differing services.

Spend per head growth remains high

Spend per head will grow rapidly over the five years to 2019, up 33.4%, driven by

increased purchases of bigger ticket items, growth of high value food & grocery

weekly/monthly regular shops, and bulk buying clothing & footwear products with the

expectation of returning many items. The impact of clothing & footwear shoppers returning

so many items is a significant, and growing, cost burden to online retailers, and we expect

that they will attempt to address this by passing on at least some of the cost to shoppers.

As a result, this trend should have less of an impact in the subsequent years from 2019.

August 2014


Online shopping by device

Tablet expenditure growth continues unabated

Figure 1: Proportion of total online spend, by device (%), 2013

Desktop/laptop75.1%

Mobile phone6.5%

Tablet18.4%

Source: Verdict V E R D I C T

Spend via tablets accounts for 18.4% of online expenditure in 2013, up from 11.3% in

2012. This rapid growth is not replicated in mobile phone expenditure, with the proportion

growing by just 1.5 percentage points from 2012 to 2013. This shift toward mobile devices

does not mean that there is a big movement toward shopping on the move. In fact, the vast

majority of tablet expenditure is in the home, and simply represents the shift from laptops to

tablets, which are easier and quicker to use.

August 2014


Outlook & Trends

The second coming of social commerce

Social media’s retail involvement has been limited to acting as affiliates, but the complete

migration of Twitter and Facebook usage to mobile platforms has given them another

opportunity to take a more central role in e-commerce, as Facebook’s latest ‘buy’ button

experiment attests.

Facebook trialing ‘buy’ button

Facebook is trialing a ‘buy’ button within advertised posts in timelines so that consumers

can purchase without ever leaving Facebook. The social network plans to hold the payment

details so that consumers can purchase further items from other retailers without having to

key in payment details again.

Figure 2: Facebook announcing new integration of e-commerce, 2014

Source: Verdict, Facebook V E R D I C T

August 2014


Pre-purchase experience is key

Six of the 10 most used retailers outperform the online market average for

satisfaction

Figure 3: Shopper satisfaction with the top 10 most frequently used online retailers pre- and

post-purchase (%), 2013

75.0

80.0

85.0

90.0

95.0

100.0

75.0 80.0 85.0 90.0 95.0 100.0

Post purchase satisfaction (%)

Pre

-pu

rch

ase

sati

sfa

cti

on

(%

)

Average market satisfaction

Note: both Tesco's and Asda’s scores are for their online non-food offer; online food & grocery purchases are not included.


Three of the 10 most visited online retailers are pureplays, and it is unsurprising to see all

of them outperform the market in terms of customer satisfaction. This is because Amazon,

eBay and ASOS are online specialists that are constantly innovating to ensure that their

offer remains compelling and that customers can order and take receipt of their purchases

quickly and conveniently. These pureplays have to ensure that they are as competitive as

possible, because without any stores to drive interest in the brand or products that they sell,

they rely more heavily on customer endorsements. Ensuring that the shopper journey is as

simple and easy as possible makes this happen, encouraging return visits and

recommendations.

August 2014


Online customer Shopping Journey

Drivers of purchasing

The pre-purchase phase of the online shopping decision process is a key stage in choosing

the right retailer, but will also create a lasting impression for the shopper, which can decide

whether they return to purchase again. Initially, there are factors that shoppers have

preconceived views on regarding the items that online shopping or physical shopping are

better for. Price is the most prominent driver for shopping online, while refunds and

customer service are areas that physical shopping is viewed to be better for.

Purchase decisions happening fast

Figure 4: How long shoppers spent researching before making their last purchase (%), 2013

10.0%

45.8%22.1%

11.8%

3.9%

6.4%

Instant (impulse purchase)

Less than 30 minutes

More than 30 minutes butless than an hour

One to two hours

Two to five hours

More than five hours


The decision to make a purchase is happening very quickly for the majority of online

shoppers, making it particularly important to display and provide information on products

effectively. For their last online purchase, 55.8% of shoppers bought after browsing for

under 30 minutes, and 77.9% made the purchase after less than an hour of browsing. This

is less time than would be spent browsing in physical stores, but, critically, they are also

able to compare many retailers in a lot less time. With price being such an important factor

for shoppers, having competitive pricing is a must for retailers competing at the value end

of the market.

August 2014


Shopping on-the-go remains limited

Figure 5: Penetration of on-the-go mobile shopping by age group (%), 2013

3.8

3.2

1.8

1.31.2

0.9

15-24 25-34 35-44 45-54 55-64 65+

%


This shows the penetration of each age group where the last product purchased online was

done so on-the-go (in a public place/travelling or in a store).

Just as with impulse purchasing, young shoppers make more use of shopping on-the-go

than older ones. However, penetration remains very low across all demographics, with the

practice of shopping while out of the home still impractical. If more retailers integrate mobile

wallets into their websites, and mobile wallets become more widely used, shopping on-the-

go will grow much faster. Storing payment and delivery details on a mobile wallet makes

purchasing on a mobile phone much easier, as well as more trustworthy for those shoppers

concerned about security over public networks.

August 2014


Click & Collect

Click & collect substantially outperforms total online market to 2019

The forecast 81.9% growth in the click & collect market means that, in the five years to

2019, it will outperform the total online market by 36.4 percentage points. This growth partly

reflects the greater number of retailers that will start offering this service, enabling them to

make their offer more convenient for customers, and also the improvements that existing

retailers will make to their click & collect service.

By 2019, click & collect will have become a mainstream fulfilment option for online

shoppers because of the added convenience, and will come to be expected by customers

who will continue to want to avoid having to pay for home delivery. The clothing & footwear

and food & grocery departments will drive this growth with expenditure increases of 106.0%

and 246.2%, respectively.

Figure 6: Standalone collection points like those offered by Tesco at tube stations will become

more prominent, 2014

Source: Tesco, Verdict V E R D I C T

August 2014


PUDO

Locker penetration low but set to rise

Figure 7: Penetration of online shoppers who have used PUDO services (%), 2013

37.2

32.7

15.6

Picked up fromconvenience store (eg.

Collect +)

Delivery to local PostOffice or other delivery

hub

Picked up from a locker

%


For more information on this report please contact us at [email protected]

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