Online shopping is growing significantly. In 2009 internet sales represented 3.5 percent of total retail sales in the UK. BEM reports on how ecommerce is helping businesses to improve bottom line profitability.
We may have turned the corner where the economy is concerned with the country heading out of recession. Cautionary news from the Office of National Statistics has revealed that retail sales values rose by 4.4 percent, when compared to March 2009. This equated to a volume increase of 2.2 percent. The news on the high street is one of caution as consumers keep their hands firmly in their pocket awaiting the spending cuts that are set to be announced post-May.
However, the proportion of online sales against high street sales continues to grow, with research carried out by eBay in 2009 revealing that retailers believe that having an online presence has helped their business to survive the recession, giving them access to new markets, locally, nationally and internationally.
According to Alexandra Weston, partner at Langleys Solicitors in Lincoln, online businesses are particularly important to the rural economy with a recent survey by the National Federation of Enterprise Agencies showing that 44 percent of online businesses are based in rural areas. However, slow broadband speed persists in rural areas and is a barrier to more businesses getting online.
“The increase in online sales has been matched by an increase in regulation to protect consumers when they are purchasing online. But the majority of ecommerce businesses in the UK are not operating in accordance with the law,” confirmed Weston.
She continued: “A study by OFT in 2009 revealed that over 79 percent of online businesses failed to comply with key legislation. “In addition to the regulations that apply to selling online, businesses alsoneed to think about copyright, contract law and consumer protection legislation. Another key issue is dataprotection particularly as it became law in April that businesses can be fined up to £500,000 if they lose individuals’ data.
“It is sensible for new online businesses to seek legal advice to guide them through the complex web of legislation and regulation and for businesses that are already online to review their website to ensure that they are compliant,” she concluded.
SMEs undoubtedly face specific challenges around developing and maintained revenue streams and profitability using ecommerce.
Bruce Hallas managing director of Marmalade Box believes that traditional ecommerce requires investment in capital and skills that many SMEs struggle to justify and absorb. He said: “One of the most significant challenges to ecommerce is the threat of a breach of system security exposing the business and its customers and causing disruption.
“Get information security wrong and the impact on cashflow can be severe. “For example, credit card processing requires compliance with the credit card industry standards. Get it wrong and you could carry the cost of the breach of security, the direct loss from the compromised accounts and restrictions upon your ability to accept credit card transactions in the future.
“The importance of building secure and resilient systems is there to protect your cashflow and profit as much as your clients and customer data. There’s even evidence that customers will pay a premium for that additional reassurance that a well thought out management process can deliver.
“Marmalade Box was recently selected by Hewlett Packard as an information security adviser, on a three year UK government project. The role will focus on the opportunities and challenges SMEs face around cloud computing with regards to confidentiality and availability. Cloud computing is forecasted to be the next big thing with clear financial and operating efficiencies for SME deployment. Cloud service providers can leverage global systems and economies to drive the cost of service delivery down, reducing the cost of ecommerce and IT systems and providing the security skills SMEs have to date struggled hard to afford or develop to manage risk to cashflow and profitability,” he concluded.
Investing in your internet function and delivery is crucial to enable easier access by consumers to browse and buy and one East Midlands-based company has done just that achieving great success in the first month of going live. Ollerton-based fruit and savoury pie manufacturer Lime Tree Pantry received an Innovation Support Grant of £5,967 from the Food & Drink iNet, which it match funded to support the redevelopment of its website and online functions.
Managing director Damien Toms revealed that the company’s previous website had been antiquated and in need of a complete overhaul in order to make it fit for purpose. After attending an event organised by the iNet, Toms became aware of the ISG available to the business, which he utilised in order to develop the new website.
He confirmed: “We were looking to invest in our website as we wanted to develop the back-end systems and software that would allow us to communicate more efficiently and effectively with our online customers. My attendance at the Food & Drink iNet event coincided with this and we were fortunate to secure a grant from them to revamp the website.
“The new site had an immediate affect. In the first week of it going live we experienced a massive leap in online sales from the usual £333 per week to £2,331; an increase of 600 percent!
“In addition to the increase in sales, we’ve had some great feedback from our customers, who are excited by our new online presence and the added value and interaction that the website is providing.
The website has created a much more focused, user friendly facility. “One of the advantages of the internet as a route to market is the relatively small associated costs of maintenance and continued development. This compares to our other customer facing sales, such as farmers markets and independent retail.
“There’s also a considerabe advantage to the customer, as it offers greater flexibility, plus it’s not affected by the weather, people can do their ordering from the comfort of their own home at any time of day. The internet is now playing a larger part in our sales, through it’s still a relatively small percentage of our overall sales and turnover. It’s an area, now that we have the new website, which has the opportunity for strong growth.
“As a company, we’ll be looking to expand on the success of our new site and our own ecommerce capabilities, though further investment in online facilities. This will help us meet the requirements of our exiting customers as well as appeal to new customers more appropriately.”
Derbyshire-based The Dolls House Emporium has been computerised since 1982, with a website for around 15 years. According to its managing director Jackie Lee the business is always keen to embrace new technologies and has been committed to continuously developing its online function. She said: “We like to maximise the benefits of each new web opportunity at the earliest opportunity, and our web team of four are fully employed on this mission. We also have multi-currency sites, so we can sell in Euros and US$ to our overseas customers, helping to expand our geographical reach.
“As over half our sales come from orders placed on our website, ecommerce is vital to us. We have a 220 page catalogue, but we can show the customer more, explain more, and interact with them on our website. “We have always invested substantially in our systems and they are fully integrated. The orders placed on the website show the live stock situation and in the rare event that an item is out of stock, it is placed on back order or, if not expected within 28 days, the ETA is given. The order is in our warehouse for dispatch within five minutes of receipt and dispatched the same day.”
Commenting on the challenge to deliver solutions that are easily accessible to consumers, Lee added: “We do some very complex offers, such as loyalty schemes, discounts, reactivation programmes, etc. All our offers are fully systemized; they have to work across all channels consistently whether a customer is ordering by phone, mail or internet. We’ve just about covered every permutation now and our ‘purchase planning’ solution ensures that we have stock in the right place at the right time, by forecasting what we will sell at whatever discount we choose, or whatever customer criteria, after ironing out quirks such as seasonality and pervious offers on the products involved. This would be extremely challenging (if not impossible) without our ‘purchase planning’ software.
Consequently, our order-fill rate is very high and we don’t lose sales by being out of stock, even though our suppliers require very long lead times. “Shopping in person now has to be a pleasant experience, rather than a fight around a shopping centre. Stores have to offer something which is not readily available online, or in the supermarket, or they will lose sales and margin to competitors offering it online.
“We have a very full schedule of developments over the next six months, including converting our site to the latest coding platform to enable us to take advantage of the most up-to-date development; implementing a (fully automated) trigger email campaign; managing our own product reviews (currently outsourced) and having a page turning catalogue on our website replicating our actual catalogue. In addition, we see online social interaction as key to building and maintaining a loyal customer base. We already have an active forum, blog and Facebook strategy in place, and we’re on Twitter and Youtube! We will continue to develop our social media applications to build up our community.”