Online E-Tailing:
Both Opportunity and Challenge

One need only be reminded of the recent Adidas All Blacks jersey kafuffle to understand the opportunities and challenges of online shopping. Never have economic boundaries been more blurred than they are now with greater broadband access to the Internet and the rapid uptake of smart phones and Internet-enabled tablet devices giving customers ready access to goods around the world.

While online shopping is hardly new, its popularity, convenience and security has increased dramatically in recent years. Research about its impact on New Zealand retailers is in its infancy, but some statistics and projections do exist.

Research company Nielsen, based on a survey of 12,000 people, estimates that Kiwis spent approximately $2.3 billion online over the past year, including second-hand items, of which $500 million is estimated to have been spent on overseas purchases.
Nielsen further estimates that in 2001, only 10% of New Zealanders over the age of 18 shopped online. Today, the figure is believed to be around 46%.
Pricewaterhouse-Coopers has estimated online sales make up around 9% of the retail market in the UK while Australia and New Zealand stand at just 5.5% and 5.1%, respectively, leaving lots of room for growth.
In their 2011 research paper done in conjunction with Frost & Sullivan, PwC predicts that online shopping will grow at least twice as fast as the total retail market over the next four years.
PwC further estimates that 95% of Australian shoppers use the Internet for research on product information, price comparisons and online reviews prior to purchase. Over 65% of in-store purchases are initiated on the web. NZ results are similar.
Statistics NZ reports that the number of broadband subscribers increased by 14% from June 2010 to 2011 to a total of 1.5 million (85% of all Internet connections), meaning more people can easily access goods worldwide. PwC notes that clothing and footwear are amongst those categories that are the most vulnerable to overseas competition.

With few exceptions such as Ezibuy and Glassons, New Zealand is years behind many countries as far as online retailing is concerned. This is a worry given that increasing numbers of customers are being enticed by overseas websites offering a much wider variety of goods at cheaper prices, including free shipping. The high NZ dollar doesn't help either, making imports cheaper for the domestic customer and exports dearer for the international buyer.

There is also the fact of customer resistance to buying clothes and shoes online with the issue of liking fit, materials and colour. Finding a way to overcome this resistance, perhaps through the technology of online "mirrors" and very liberal return policies, could be the holy grail of online fashion selling.

So what can NZ fashion retailers do?

It's crucial to have an online presence to at least build brand awareness. It doesn't have to be a complicated website, but it must be attractive and very user-friendly. A website combined with social media such as Twitter and Facebook can help to build a community of customers with whom you can engage.

Engagement is critical not only for developing customer loyalty; but it's also a great way to get customer feedback, create some excitement about what's on offer, and make it easier for customers to share your information with their social network. The one caveat, though, is to remember that unflattering word-of-mouth travels much faster than does favourable news. Be truthful, transparent and consistent in your online dealings. If you've made a mistake, own it and rectify it as soon as possible; and let folks know you've fixed the problem.

If you're a smaller fashion retailer you don't need to have your own shopping (vs. brand awareness) website as there are opportunities to team with the likes of Trade Me and eBay to set up an online store through them. It will cost you a small percentage-of-sales fee but could save you heaps of time and money not having to manage your own e-commerce website. As with any shopping site, keep the merchandise fresh, changing featured items often. The easiest way to lose customer interest is to have a static website.

Keep this opportunity in mind.

One positive thing to keep in mind is that while the Internet brings overseas competitors to your doorstep, it also brings overseas customers. Think bigger when you consider your online strategy. Treat online retailing as an important marketing channel. Take advantage of the fact that you're a Kiwi e-tailer. Highlight that as part of your unique selling proposition. Who knows, you might be able to follow other stores whose online sales far exceed their in-store results. Now wouldn't that be a win!

Submitted by Managing Director, Gaye Harford in collaboration with Lorraine Warshaw