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Retailers discovering that most consumers are online browsers, not online buyers Curt Cherewayko The recent closure of the online shopping sites of Canadian Tire Corp. and Hudson’s Bay Company subsidiaries Zellers Inc., The Bay and Home Outfitters has shown that e-commerce site operators are a long way from figuring out what makes online shoppers tick. The two Canadian retail stalwarts discovered that many of their website visitors were simply browsing, keen to do product research but reluctant to click the check-out button and empty their virtual shopping carts. Online retailers in B.C. are also discovering that e-commerce may never entirely supplant the social experience of visiting a bricks-and-mortar retail store. Vancouver-based retailer London Drugs struggled when it first ventured into the online shopping space a decade ago. It had incorrectly gambled on what segments would be popular with online shoppers.
The company took a step back and re-organized its online strategy, treating its online store as a new location unto itself. Today, London Drugs’ photo-finishing site and its health-care site, where consumers can refill prescriptions and find health-care information, generate most of the company’s online traffic. In both segments, the social experience plays little-to-no role during a transaction. “I think that what everyone forgot was that we as humans are social,” said Wynne Powell, London Drugs president. “If you get good service at a place, [shopping] is a social function in many cases.” According to StatsCan, Canadians spent $12.8billion shopping online in 2007, up61% from2005. Powell said that online business is an important segment of London Drugs. But he added that online sales pale in comparison with sales generated at its retail locations. “If we pulled the e-commerce site out of our company and shut it down, would it be a mortal disaster? No, it’s just another component of London Drugs that we supply to our customers. [They] are telling us they want this particular convenience.” Vancouver’s Mountain Equipment Co-op (MEC) expressed similar sentiments. Although its online sales increased to more than $14 million in 2008 from $7 million in 2004, they represent only about 5% of the outdoor equipment and clothing retailer’s total sales. And while the company’s website averages 625,000 unique visits each month, only about 1% of visitors will buy at the site. “Our experience suggests that conversion is never going to be as high online as it is in-store because people need to see the product first-hand – to touch it and try it on,” said Tim Southam, MEC’s public affairs manager. He noted that many online retailers struggle with the logistical requirements of fulfilling an e-commerce sale. Because MEC has had a mail-order service for 35 years, it’s been able to leverage that business to fulfil web orders. Southam said warranties and return policies go a long way to ensuring that online purchases meet customer satisfaction. As well, website enhancements such as product reviews provide consumers with the additional information or insight required before they will get in line at the virtual cash register. Founded in 2005, HealthPricer Interactive Ltd. (TSX-V: HPC) originally developed a comparison-shopping search engine for the health-care sector. That evolved into a search engine platform that it sold to online health-care stores. The company’s revenue has historically been driven by commission on sales at websites that join its comparison- shopping search engine. The company is now shifting toward an advertising-driven model, targeting the 70 million North Americans that visit health-care websites each month. The move acknowledges that there are many more online browsers than there are online buyers. According to StatsCan, 43% of Canadians went online to window-shop in 2007. Meanwhile, only 7% of health-care product purchases are made online. “What we know is that consumers today go online to research,” said Brown. By moving toward an ad-driven business model, HealthPricer can target both the 7% of consumers who buy health-care products and those that are interested in products. But Brown noted that retailers shouldn’t underestimate the amount of walk-in business that’s triggered from that initial browse online. Of the Canadians that window-shopped online in 2007, 64% subsequently made a purchase directly from a bricks-and-mortar store outlet.•
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Business in Vancouver March 24-30, 2009; issue 1013 |
