Is e-retail growth set to slow as much as predicted?

Online retail sales growth is set to slow dramatically over the next five years, according to Verdict, which reckons there will be little more than 12% per annum increases compared with the chunky 35% achieved over the previous 10 years. [see report by Internet Retailing].

How many fewer times will we be pressing this button?

Its report 'E-retail 2010 and Beyond' paints a worrying scenario for retailers who have been very reliant on this new channel as total retail sales have increased by a paltry 4.2% over the period 1999 to 2004 and by 1.8% between 2004 and 2009, according to Verdict figures.

The retail specialists are entirely correct to say that a slowdown in online growth will occur on the back of the numbers of people going online for the first time radically reducing compared with the previous go-go years - it reckons online shopper numbers will increase by only four million by 2014.

It is also factoring in a serious slowdown in the spending power of the most valuable online shoppers - the 35 to 44-year olds - as the tough economic backdrop starts to rein in their previously rapacious shopping habits.

However, things might not be quite as bad as the well respected research house is predicting. What it might be underestimating a little in its numbers is the increase in online sales that will be attributed to the growing spending power of the younger audience as they age.

For instance, there will be many previously non-earning youngsters beginning to spend online for the first time as they get jobs (the fortunate ones, that is). The effect of this ageing of an increasingly technology literate population will ripple across all categories.

It's greatest effect could be at the extreme end of the scale where the 55+ grouping will contribute significantly more to online shopping growth over time. Whereas there are many people in this bracket who currently do not shop online they will continuously be replaced over time by people who do shop online.

Silver surfers: there will be more of them

Their numbers will continue to grow to the point where this age bracket is no different to any other. This must be music to the ears of Marks & Spencer (and its internet strategy) as its core shopper falls into this age bracket.

So although growth in online sales is clearly going to slow down it will be interesting to see whether the particularly bearish scenario painted by Verdict ultimately comes to fruition.

Retailers could be so much more loyal to their customers

Retailers recognise that customer databases and CRM (customer relationship marketing) systems provide them with the best returns on investment among their marketing activities. But almost half then admit their systems are ineffective.

It's time to get a handle on customer data

The Loyalty Report for 2010 from The Logic Group (undertaken by Ipsos MORI) found that 21% of retailers believed CRM delivered the best bang for their buck, compared with the likes of online advertising at 12%, PR at 11%, direct mail at 6%, and sponsorship at a piddling 2%.

This is powerful stuff but what then throws things is that a massive 46% of  retailers surveyed admitted that their CRM systems or customer databases were ineffective at accurately analysing and profiling their customers.

Part of the problem for many is that they are unable to bring together the relevant information from across their organisations. This bodes rather badly for retailers as the industry grapples with moving towards a multi-channel future. A mere 25% of retailers expressed confidence in having the highest levels of visibility over their customer data.

Despite this rather poor level of control, the survey found that among the supermarkets the customer still has a fair degree of loyalty towards them. Sixty three per cent of the general public felt loyal to the major grocers - admittedly a lower level than the 72% in 2009.

This is pretty impressive when compared with other retail categories such as clothes shops with 30% loyalty and department stores with 27%. However, all these retail categories beat most other industries including hotels that mustered loyalty from only 11% of people, bars/clubs and pubs achieved 24% loyalty levels and cimemas and theatres 24%.

If you want true loyalty then get one of these

Beyond this core of loyal shoppers the rest of the country's consumers appear to be a pretty apathetic lot, with around a third of people who have loyalty cards not remembering to use them when they shop with the relevant retailer. Clearly there is more engagement needed with this large chunk of card holders.

Maybe this apathy is down to the widely held belief that loyalty programmes are chiefly designed to benefit the retailer rather than the customer. A massive 60% of the general public think this is the case, which suggests retailers are failing badly in delivering value to their loyalty scheme members.

This is clearly a big mistake. But since 46% admit to having ineffective control over their customer data then maybe this isn't really a great surprise. Either way, it is surely something that needs addressing sooner rather than later.

Multi-channel/E-commerce Top 70 Survey

If you were unable to make it to the Retail Systems Multi-channel Conference on September 15 then you will have missed the launch of the Top 70 survey of the 'Movers & Shakers in Multi-channel and E-commerce'.

Fear not as the link here gives you access to the list of the 70 people that are doing good things in this dynamic part of the retail sector.

http://www.docstoc.com/docs/document-preview.aspx?doc_id=54766009

The list was created by Retailinsider.com from canvassing the opinions and views of many people in the retail industry. The final 70 are a mixture of big players in the sector and others that are heading upwards and will likely make big waves as they progress through their careers.

It is hoped that the survey will prompt some debate in the retail industry and if you are disappointed to not be included in this year's list then there is always the 2011 survey that will likely be extended to a Top 100 format. Good luck.

If you found this content interesting then do please subscribe to Retailinsider.com by simply entering your email in the box on the left of this page. Many thanks.

We've simply got far too many shops

The recession and growth of the internet have had a big impact on shop lettings, which has resulted in 13% of units in shopping areas now vacant (voids), according to the Local Data Company (LDC).

Empty shops: coming to a high street like yours, and staying.

The situation could be even worse than that for landlords when you consider that without charity shops then another 5% could be added to the voids level.

The LDC found that the voids level of 13% for 2010 represented a significant rise from the 10.5% of last year, thereby pretty much confirming the widely held view that things will get worse before they get better for retailers.

The killer question with regard to shop lettings is whether they will in fact get better again in our lifetimes?

With approaching 10% of total retail sales now conducted online why would retailers need more shops? Making things worse is that alternative uses for the vacant shops - banking, travel and betting - relate to sectors that are all having their own issues with trade increasingly going online.

Indicative of the growing problems was the comment of Ralph Topping, chief executive of William Hill, who recently suggested (FT July 31/August 1) that betting shop numbers would likely fall from 9,000 to 7,500. This is all sapping demand for shops and leading to the question of how many do we actually need?

Not even William Hill can save us.

The Centre for Retail Research calculates that we have 300,000 shop units in the UK at present and suggests that by 2013 (when we will likely emerge fully from the recession) it will be clear that there are between 5% and 10% too many shops. I don't need a calculator to work out that this equates to as many as 30,000 unwanted stores.

For those people who still like to stroll down a high street to shop rather than sit in front of a PC this will make rather sad and worrying reading. But it just might be the case that this is the new reality for retail and we'd all better get used to it asap.

Retail sector heading for big downer

The arguments for a downgrade across the retail sector are growing as the last remaining positive in the industry - the clothing retailers - are starting to take a hit from weaker consumer consumption and growing pressure on margins.

Plenty of these over the retail sector right now

In a lengthy note from broker Singer Capital Markets the message was crystal clear - the sector is heading for a fall and it is now time to exit a growing number of retail shares. The company has downgraed its forecasts on 17 stocks (by as much as 10%) and this is against a backdrop of its numbers being 10% below City analyst consensus.

Taking the hit are Marks & Spencer, Home Retail and Topps Tiles, which join the Singer 'Sell' list comprising Asos and Carpetright. The broker has also downgraded JD Sports, Dunelm, Supergroup and Mothercare from 'Buy' to 'Fair Value'.

Sale tag now attached to the retail industry

These moves come despite the sector having underperformed so far in H2. But Singer reckons the risks on the downside will deliver even more gloom as the year progresses and we move into 2011.

Among its key concerns are:

• weak earnings trends on the back of a slack labour market
• input price inflation
• earnings inflation not keeping up with that of goods/services thereby eroding spending power
• rising interest costs in a weak mortgage market
• weakening house prices affecting consumer confidence
• return of price inflation in food

This cocktail of doom will likely result in like-for-like sales in the General Retail sector falling by 2.5% in 2011, which compares with a general expectation of negative 1.0% in 2010.

This makes it rather surprising that the sector is trading on a PE (price/earnings multiple) of 11x for calendar year 2011 (albeit skewed by highly-rated stocks like Asos), which puts it at a premium to the market average.

This could well be inappropriate when considering the dark clouds looming on the short and mid-term horizon. Even a buoyant Christmas may be insufficient to fend of this level of negative market characteristics.