Australian Retail Adoption Plans for Online Advertising and E-tailing


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This research report from AIMIA (sponsored by Reactive) looks what Australian retailers are doing to evolve their eCommerce offering.

The research aims to give retailers and AIMIA members an independent benchmark by which to assess their own business priorities and opportunities in this space.

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Australian Retail Adoption Plans for Online Advertising and E-tailing

  1. 1. Australian RetailAdoption Plans forOnline Advertisingand E-tailingAIMIA RESEARCH FINDINGS • MAY 2012RESEARCH CONDUCTED BETWEENSEPTEMBER 2011 AND JAN 2012 SPONSORS:
  2. 2. ForewordOn behalf of AIMIA, it’s my pleasure to be involved in the publishing of our second independentresearch report in an ongoing series: Australian Retail Adoption Plans for Online Media andE-tailing.There is much published in Australia about the growing adoption of e-tailing by consumers andthe impact of international e-tail competition, however, this is not the focus of this report. Ourresearch looks at tracking what Australian retailers themselves are doing about adopting andevolving their “omni-channel” offering. The research aims to give retailers and our members anindependent benchmark by which to assess their own business priorities and opportunities inthis space.This year’s research shows, as expected, growing adoption rates across the board forinteractive, digital and e-tail services as retailers reorganise resources to focus more attentionon the digital consumer, but also highlights the internal resourcing and cultural barriers that arehampering more rapid successful implementation. The stark reality for the industry is thereare precious few senior, experienced “client side” personnel in Australia – meaning most retailorganisations are learning as they go. This places Australian retailers at a disadvantage, whenexperienced international retailers enter Australia – either directly through stores or simplythrough online marketing to Australian audiences.I’d like to thank the people within AIMIA, the ACRS and our sponsor organisations for the workthat has been done to bring this important research work to fruition in 2012.Robert WongChair AIMIA Retail Industry GroupCEO CC Media iNC NetworkAustralian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 2
  3. 3. Executive summaryThe current state of online retailing and marketing in Australia• 75% of all retailers (large and small) now have an online presence and 43% are selling online.• 88% are advertising online (even without a website).• Retailers are using a wider variety of digital channels/tools with email, social, video and mobile growing rapidly over the last year.• Almost a third of retailers are leveraging social media, but there is still uncertainty as to how to extract maximum value from it.• Mobile e-tailing is embryonic for most, perceived as expensive – but having huge growth potential.• Retailers are using their TV resources to create content – not just ads.• SEO, email and SEM are the most popular forms of online promotional strategies.The current barriers to online channel entry/growth• Internal expertise, organisational culture, systems integration, and supply chain management continue to be the biggest barriers to growth.• Hard to find experienced senior operation staff who know e-tailing (not just technology).• Consumers are not the problem (they get it and want it).Retailer digital plans and goals for 2013 and beyond• 86% of retailers will increase their online budgets to further focus on driving sales (through both physical and online stores) and building multichannel operational capabilities.• Retailers are reliant on a wide number of external partners to set & implement strategies.• Most Australian retailers have accepted e-tailing is not going away.Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 3
  4. 4. ContentsResearch overview 5Section1: The current state of online retailing and marketing 6Section 2: The perceived barriers to online channel growth 15Section 3: Retailers’ digital plans and goals for 2013 & beyond 20Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 4
  5. 5. Research overviewTo understand online retailing and marketing in Australia, AIMIA engaged Dr Sean Sands fromMonash University’s The Australian Centre For Retail Studies.Qualitative research was first performed, consisting of 20 interviews with large Australian retailers.This was followed by an online survey of 169 Australian retailers, and compared to a similar 2010survey of 128 Australian retailersRespondents represented a cross section of retailers in terms of:• Size (revenue, number of stores)• Retail sector• Respondent division or department• Structure (Pure online retailers, bricks & clicks, pure bricks & mortar)• Franchises versus company ownedAustralian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 5
  6. 6. SECTION 1 The current state of online retailing in Australia“ It has become more of a priority for all retailers to become active in the online and digital space. Australia has, for a long time, hidden behind the fact that we’re so far away from everything ... Now with the growth of e-commerce, and the fact that there’s so many more companies shipping to Australia from overseas, we can’t hide behind that anymore. There’s no boundaries for Australian retailers, we have to embrace it. —EYEWEAR RETAILER Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 6
  7. 7. Channel adoption75% of retailers now have an online presence 78%The vast majority of retailers with 75%multiple stores have an online presence(78%). This means they have a consistentonline website which may have online 46%purchasing capability.Even small single stores are putting moreeffort towards online, with 46% having anonline presence. All Multiple Single Retailers who have an online presenceAlmost a third of retailers are leveraging social media, but there is stilluncertainty as to how to extract maximum value from it.Retailers are beginning to understand the nature of social mediaand its business value.Social media is being used to engage customers and gatherinsights, but not necessarily as a direct sales channel.It is used primarily for engagement and tracking brandconversations.Some retailers fear losing control of their reputation becausethey don’t control the messages.Facebook is the most dominant social network for retailers.Social media is a work in progress.Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 7
  8. 8. Retailers are exploring a range of digital channels to reach customers 73% Website 55% Physical store (strip) 69% 83% Physical store (mall) 50% 54% Online - email offer 47% 43% Social networking sites 33% Catalogue - paper based 41% 31% Online - video content 30% Online catalogue 31% 26% Mobile (iPhone app, SMS) 19% 20% Shopping comparison sites 19% Online - coupons 19% Call centres 18% 19% Online - consumer review sites 10% Self-service or information kiosks 6% 2011/12 9% Mail order 2010 18%Clearly, physical stores are still important for For online channels, website is still the mostretailers, but an increasing array of go to market common, but email, social networks, onlinechannels are being explored. catalogues, video and mobile are on the rise.Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 8
  9. 9. Smart mobile is being used to make customer interactions easierMobile is seen as a key tool being used by consumers – in-store,for pre-purchase research and location-based information.Retailers recognise the importance of using mobile micro-sitesor apps to enable customers to easily view and access their webcontent, but not all have detailed strategies in this area.They see mobile as being able to integrate the online channelfurther – social media, online, couponing, location-basedinformation, catalogues.They believe the link between mobile and social media isimportant as consumers also access social media from theirsmart phone, but do not have highly developed strategies.Retailers perceive the cost of creating mobile micro sites as aninhibitor.Video is used to bring content, products and processes to lifeFashion, electronics and hardware categories appear to bestrongest in using video, where they can leverage advertisingresources to create content.Video content is seen as important by most retailers.Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 9
  10. 10. Multichannel is evolving rapidlyMany of Australia’s larger retailers moving to e-tail enablementacross their product range. David Jones announced in April2012, that they are embarking on a major project to be able tophotograph up to 90,000 products and make them available aspart of their E-tail strategy.Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 10
  11. 11. Use of online throughout the Consumer DecisionMaking ProcessOnline capabilities are changing as capability increasesThere are varying degrees of online capability amongst retailers, with a spectrum from:Informational• Retailers offer the online channel for information, such as store locators and product information.• Retailers at this stage of adoption tend to either see transactional capabilities as too difficult or as sufficient for their customers, i.e. their product categories do not lend themselves to online transactions.• These retailers tend to focus on rudimentary objectives and measures for online, such as website traffic numbers.Fully integrated and transactional• These retailers strive to manage integrated multiple channels to deliver seamless information, education, purchase, support, and even entertainment across platforms.• These retailers are beginning to look at conversion, contributing brand metrics and ROI.The primary role of a retailer’s website is advertising, but other usesare developing as capability increases 63% Loyalty or repeat purchase Sample percentage 4.4 who have implemented Importance — Feedback 65% mean rating (1–7) 4.9 After-sales service 55% 4.9 Transacting 43% 4.8 88% Advertising 6.0Online advertising was deemed the most After-sales service and transacting areimportant and had the highest penetration important but show lower implementationsat 88%. The way advertising is presented on due to the organisational complexity in offeringthe website can vary from simple broad sale them.messages to full product and price display.Loyalty and feedback are deemed important,but most functionality is rudimentary, e.g. fewlink loyalty schemes to online behaviour.Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 11
  12. 12. SEO, email marketing & SEM are still the most popular media foradvertising & promotion Mean rating of popular media usage 1.0 7.0 Search engine optimisation 5.9 5.8 Email marketing 5.7 5.8 Search engine marketing 5.5 5.3 Traditional media 5.3 5.5 Online catalogues 4.8 4.8 Social networking widgets 4.7 4.3 Mobile marketing 4.4 Performance based online media 4.4 Syndicated content 4.3 Banner advertising 4.3 4.0 Online video advertising 4.3 3.7 Price comparison websites 4.2 3.9 Syndicated content 4.1 Ad networks 4.0 3.5 3.9 2011/12 Affiliate programmes 3.9 2010 3.8 Online couponingTraditional media still lags behind online and interactive media.The top 3 digital media are: The least popular media are:• Search engine optimisation • Online coupons• Email marketing • Affiliate programs• Search engine marketing • Ad networksAustralian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 12
  13. 13. On average 43% of retailers are selling online, but retailers with 50-100 storesare rapidly embracing online selling 73% 71% 42% 43% 38% 28% 25% 1 store 2-10 stores 11-30 stores 31-50 stores 51-100 stores 100+ stores All Retailers who sell onlineSmall single retailers are resource and market Larger stores 100+ are slower and are oftenconstrained. impeded by franchise and organisational momentum.Stores with 50-100 stores are embracing onlinemore rapidly. This is because they have resourcecapacity and realise online selling offers them anincreased footprint.Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 13
  14. 14. Customer, Sales and Revenue outcomes Online stores are becoming top performing stores Many multichannel retailers commented that their online store is fast becoming a top performing store. Leading multichannel retailers measure the online store relative to physical stores. Some online stores have developed into their own profit centres, therefore reinvesting based on profit. Online’s share of revenue can be high for smaller retailers 44% 50% 40% 30% 33%1 store 2-30 stores 32% 22% 17% 20% 19% 20% 20% 14% 11% 10%31-100 stores 100+ stores 7% 10% 0% 0% 0% 0% 0% 0% 0% 0% Less than 3% 3-5% 5-10% 10-50% 50-99% 100% I don’t know In the majority of cases retailers confirm that 33% of retailers with 100+ stores do not know e-tail sales are less than 5%. how much online sales contribute to their total sales revenue, which suggests it is not significant. Some smaller retailers are recording a much higher e-tail sales share. One in five retailers say 60-99% of their customers are active online shoppers 31% 20% 17% 10% 9% 7% 2% 4% I don’t 100% 60-99% 40-60% 20-60% 10-20% Less than None know 10% Retailers have said significant numbers of their Only 4% of retailers believe none of their customer base are active online shoppers. customers shop online. 20% of retailers surveyed said that 60%-99% of 31% of the sample did not know – which their customers are active online shoppers. indicates many retailers are not actively considering this metric. Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 14
  15. 15. SECTION 2 The barriers & enablers to growth online“ In the next 18-24 months, the online landscape is going to be significantly different to what it looks like today. At the moment, there are not that many big brands trading online, and I guess the consumer is probably thinking, “Why isn’t X brand or Y brand online?” It’s exciting that some major players are now making the decision to venture into the online space ... it’s going to give consumers more confidence to shop online. —FOOD RETAILER Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 15
  16. 16. BarriersRetailer barriers focus on systems, supply chain and people Mean rating of current retail systems 1.0 7.0 Integration of systems with existing business model 5.0Changes to supply chain management 4.7 Internal skill sets in e-commerce 4.6 Physical distribution of goods 4.4 Organisational resistance to change 4.4 Franchisee pressure 4.3 Fulfillment management & customer 4.3 experienceBuying products that are conducive to 4.0 online selling Warranty & returns management 3.9 Measuring ROI 3.9 Management support 3.7 Other 5.9Systems integration and supply chain While several retailers are moving towardsmanagement are the most common barriers. dedicated internal resources, there is still a lack of sufficient expertise.Customer barriers are relatively low Mean rating of customer barriers 1.0 7.0 Shopping online 4.1 Payment concerns 3.8 Security of personal information 3.7 Spam concerns 3.7Australian retailers believe customers are fairly this is more reflective of Australian retailercomfortable with buying online. competitiveness, rather than a consumer barrier).Shipping costs were nominated as the biggestbarriers to customers shopping online (butAustralian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 16
  17. 17. Strategy developmentOverall, organisations are placing greater priority on the online channelRetailers are placing greater priority on:Resources: especially people – some retailers are movingtowards creating a multichannel division. However, there aresignificant problems in securing experienced skilled staff foronline e-tailing.Systems: mainly backend and support infrastructure. Retailersare thinking more deeply about multichannel integration, asopposed to stand alone e-tail businesses.Budgets are being allocated, but this tended to be tied to shortterm marketing/ sales performance.Organisational structure is evolvingThe composition of the digital/ online team within anorganisation differed across retailers.Savvy retailers were looking to recruit multichannel directors/managers and also attempting to create cross-functional teams.Sometimes a stand alone unit had been created within theorganisation, with the common reporting line to generalmanagement.Often the structure remained within the marketing team.Support typically still sits within marketing, but in some instancesit lies with senior management.Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 17
  18. 18. Online strategy development is shifting away from the Marketing Department Within the marketing department 36% 51% Across multiple departments 27% 22% Within a standalone business unit 20% 20% There is no organised online 14% 2011/12 operation/function 8% 2010 Other 3% 0%The Marketing Department is still the most Slightly more retailers are managing the onlinecommon area from which the online strategy strategy across multiple developed, however it is substantially lowerthan in 2010.Although strategy is driven primarily by senior management, an abundance ofexternal resources are being used Senior management 67% 70% Agencies 36% 37% Technical support 31% 38% Other internal staff 30% 38% External industry contacts 21% 24% e-tailing specialists 20% We do not obtain support 14% 5% External industry contacts 13% 15% External retailers 10% 9% Senior consultants 9% 13% Industry bodies 3% 2011/12 2% 2010 Other 2% 2%Only 14% of retailers do not engage external strategy support.36% of retailers rely on agencies.31% use external technical support.Consultants play a minor role, at 9%.Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 18
  19. 19. Smaller retailers are prioritising online spend 65% 34% 37% 33% 29% 26% 22% 20% 17% 17% 17% 15% 17% 17% 13% 5% 6% 9% 6% 8% 0% 4% 0% 0% 0% I don’t know None Up to 10% 10 to 20% More than 20% Online retailing — % share of total marketing budget Total 1 store 2-30 stores 31-100 stores 100+ stores Budget does not sit within marketing Over 20% of larger chains have their online budget sit outside of Marketing. 100+ stores 25% 29% of retailers with 100+ stores dedicate up to 10%31-100 stores 23% of their marketing budget to online. 2-30 stores 9% 65% of retailers with 31 – 100 stores dedicate up to 10% of their marketing budget. 1 store 22% Over 30% of small chains and single stores dedicate Total 16% over 10% of their marketing budget to online. Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 19
  20. 20. SECTION 3 Retailers’ plans for 2013+“ The online channel is extremely important – number one. It has become a new revenue channel for the business; 12 months ago we weren’t trading online. It’s become a profit centre in its own right. We are seeing it as one of the channels that is going to give us significant growth over the next 12 – 24 months. —ELECTONICS RETAILER Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 20
  21. 21. Budgets83% of retailers will spend more on online Survey on budget allocation It will decrease 3% It will remain the same 14% It will increase 83%Retailers expect the share of advertising budget There is clear evidence from this study thatallocated to online activities will increase over retailers will be spending more on capitalthe next 3 years. development as well as marketing.Email marketing, SEO and online catalogues are the most important toolsfor advertising and promotion in 2012/3 Email marketing 60% 67% SEO 56% 57% Online catalogues 37% 47% Banner advertising 28% 24% Social networking widgets 28% 24% Online coupons 19% Mobile marketing 18% 16% Online video content 17% SEM 17% 36% Ad networks 12 % 2% Click-through advertising 4% 9% Syndicated content 3% 2011/12 9% 3% 2010 Affiliate programmes 12%Retailers were asked to rate the three most But there is also clear evidence that retailersimportant digital tools for the next 12 months. are increasing spend across a variety of online advertising vehicles (e.g. online coupons).The top 3 are:• Email Marketing• SEO• Online cataloguesAustralian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 21
  22. 22. Goals and strategiesAdvertising and enabling e-tailing are key focus areas Main focus areas for online in the next 12 months Enable online selling 31% 41% Advertising & promotion 25% 45% None of these areas 16% 4% Increasing retail brand awareness 16% Optimise the mix/efficiency of 7% advertising options 2011/12 Encourage post-purchase interaction 4% 2010 10%The main focus areas for online for the next 12 months are:• Enabling online selling• Advertising and promotion• Increasing retail brand awareness onlineRetailers will focus on online sales and leveraging insightsRetailers are focused on increasing sales through the online channel:• As it enables an extended footprint.• To retain some of the online dollars spent with overseas online retailers.• To convert online customers into purchasers.Many retailers plan to gain and leverage customer insights:• By leveraging their online/social community using survey tools and social media posts.• Using consumer reviews.• Integrating CRM programs to improve offerings and communication.Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 22
  23. 23. Driving traffic to both physical and online stores are the most important online sales strategies The most important online advertising strategies in the next 12 months Driving traffic to website 88% 88% Driving traffic to physical stores 85% 69% Building a customer database for 44% marketing 62% Building an e-commerce capable website 41% 56% Establishing a dedicated internal 23% online division 15% 2011/12 Other 19% 2010 10%Respondents were asked to rate the three As in 2010, the most important strategies inmost important online advertising strategies for 2012 were:enabling online selling for their organisation in • Driving traffic to storesthe next 12 months. • Traffic to websites • Building customer databases 18% of retailers believe group buying will impact them in 2012 Perception of buying groups’ impact on retailing for the year ahead Respondents were asked if they 41% 41% perceived buying groups as having an impact on retailing for the year ahead. 18% Only 18% believed there would be an impact, whilst 41% were unsure. Yes, some No, no Don’t effect effect know Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 23
  24. 24. “ The reality is, businesses that don’t embrace online in the next 12-24 months won’t have a business in the long run. Executives in most organisations are now realising that they need to be online. And it’s not good enough just to have a presence nowadays ... Consumers out there have an expectation, and unless you are serious about it, they’re going to work out pretty quickly that you’re not serious about the channel and they won’t engage with you. Ultimately that will affect your bricks and mortar business. —ELECTONICS RETAILERAustralian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 24
  25. 25. Sponsors & acknowledgementsSponsors Reactive is a digital agency specialising in strategy, creative, technology and marketing with 100 staff across our five offices in Melbourne, Sydney, London, Auckland and New York. Our reputation is one of excellence innovation in the online channel—evidenced not only by the quality of work that we do but also by the results we achieve for our clients. Over the past fifteen years, we have designed, built and marketed eCommerce Web sites for some of Australia and the world’s most prestigious retail brands, such as Rip Curl, General Pants Co, British Airways, Bras N Things, GAZMAN, Crumpler, Berlei, Emu Australia and Tesco. The iNC Network is the largest digital catalogue distribution network in Australia, reaching in excess of 4 million Australians every monthacross multiple digital devices including pc, mobile and tablets. We work with Australia’s largest store retailers to reach online consumers whether they are in their home, in transit or at work, to drive both off and online sales. iNC is part of CC Media and the APN News Media The Australian Centre for Retail Studies (ACRS) is an independent retail and consumer research centre based within the Department of Marketing in the Faculty of Business and Economics at Monash University, Caulfield Campus. The ACRS provides a range of research and consulting services to the private sector and government clients, with a particular emphasis on retail and consumer research. Research priorities are developed in consultation with industry clients and promote research-based knowledge and thought leadership.AcknowledgementsAIMIA would like to acknowledge the AIMIA Victoria committee, the AIMIA Retail Industry Group and Janine Wiedermann(report editor) and Dr Sean Sands from the ACRS in combining to produce this report.If you would like more information regarding this report, to inquire about sponsorship of the 2013 report please contact:Robert Wong – AIMIA Retail Industry Group Chair— 0419238768—or Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 25