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Ecommerce growth does not need to mean slowed in-store conversions: report

Online fashion retail is poised for rapid growth, but that does not mean that in-store retail will falter or become less important, according to a new report by Fashionbi.

Although less than 5 percent of luxury goods are sold online, that number is expected to skyrocket to 20 percent by 2020, thanks in part to dependably large growth in the Asia-Pacific region. As this rapid growth takes place, brands must enable omnichannel interactions that provide consumers with one, smooth, inter-linked brand experience rather than thinking of them as separate digital, mobile and in-store platforms.

“Online is not there to cannibalize offline, it is there to support it,” said Ambika Zutshi, CEO of Fashionbi. “Today, if a consumer starts his research online, he may end up buying that product offline (Web-rooming) or vice-versa (showrooming).

“It is important for a brand to, first of all, be present on all the possible touchpoints and make them work together in order to offer a ‘brand experience’ rather than a ‘channel experience’ to a customer – in short, going omnichannel,” she said. “It is not by chance that Chanel announced its ecommerce launch by the end of 2016. Today being online is not just ‘nice’, it is a ‘must’ for the overall growth of a brand.”

Online Fashion Retail” examines growth trends in online and fashion retail, both in general and by country/region and also looks at the relationship between online and in-store retail through “Web rooming” and “showrooming.” The findings show that with so many consumers doing research on mobile devices while shopping in a store, brands must find ways to cross-pollinate different channels into a unified approach.

Omnichannel efforts
Only 44 percent of respondents conduct all research and complete their purchases exclusively in-store when shopping for apparel and footwear, while 49 percent do so when shopping jewelry and watches, meaning that more than half of consumers use the Web at some point in their purchasing journey, with numbers expected to continue growing.

In the online market attractiveness score index, the United States, China and the United Kingdom rank highest, with China being particularly noteworthy. A full 30 percent of the country’s online consumer shops online without having a particular product or brand in mind, underscoring the importance of Web advertising and effective, localized ecommerce platforms.

Russia, Europe’s biggest Internet user, is quickly growing its online consumer-base, making it another valuable market for navigable and localized ecommerce platforms, which extend to language and payment options.

Although these markets and several others stand out for quick adoption of trends, fast growth or other reasons, brands must be aware that any market is prone to showrooming and Web-rooming, meaning that merely splitting up bricks-and-mortar and online sales and looking at them separately does not necessarily convey the use of or effectiveness of either platform; consumers will go between the two all through the shopping and purchasing process.

These processes are more efficiently enabled when brands run their own ecommerce platforms, but numerous brands are opting for third-party online retailers such as Net-A-Porter and Yoox.

“Although I’m a deep supporter of managing ecommerce in-house, I do understand it demands a lot of resources, knowledge, tools and investments,” Ms. Zutshi said. “Hence, the brands still prefer to at least start on the third party sites, before going solo. The fact that such grand players as Yoox or Net-A-Porter have a ready platform, technology and resources to manage fully the brand’s channel, is a big plus.

“These platforms also take care of multiple other aspects for the brands such as email marketing, mobile application development, new market ‘test’ launches (including Web site translation, warehousing, local customer-care support etc.),” she said. “These third retailers have the power, budget and market knowledge to support a brand without wasting too much of a time in research or gaining expertise.”

Mobile is equally important, with the study finding that mobile shoppers spend 25 percent more in-store than those who merely use their phone to occasionally assist with in-store shopping, a finding that could incentivize brands to develop mobile-friendly Web sites or apps.

Almost 90 percent of consumers say they would buy a product elsewhere if it were discounted at least 10 percent, while 8 of 10 shoppers use mobile phones to research while in-store, meaning that as many as 70 percent of consumers could be lured to another store with effective mobile advertising. Although luxury brands are currently averse to discounting merchandise, there are indications that could change in the future.

While they cannot be generalized, millennials as a group are driving brands to embrace digital channels and focus their energies on value-driven marketing that speaks to an idea beyond product. While there is a necessity to change, panelists at the Luxury Retail Summit: Holiday Focus 2015 agreed that those in the luxury sector are generally behind on embracing the new retail world.

In particular, it was discussed that going forward, there will be two groups: brands that discount and those that do not (see story).

Maximizing reach
Although the respondents only said they would leave for a discount of the same product, it also may suggest that brands and retailers could sway consumers by using geotargeting and mobile advertising to promote special offers.

As an example showing how an increase in online sales does not need to negatively impact offline sales, Burberry’s Runway-to-Reality, in which viewers could purchase items directly from the runway, is cited as increasing online sales but not altering in-store revenue. Innovative technological touchpoints such as this, which has been mimicked by other brands since, allow impulse purchases, which can maximize ecommerce effectiveness without losing bricks-and-mortar successes.

Brands will need to take big steps in the ecommerce space in order to maximize reach.

Global heterogeneity presents many obstacles for brands looking to maximize their share through localization efforts, according to a new report from L2.

The share of ecommerce sales in the luxury industry has tripled since 2009 and is set to triple again by 2025, but obstacles such as currency, language, selection and payment method may make it difficult for brands to expand and capitalize on their reach. As social media, the Web and the development of BRIC and Asian nations and of Sub-Saharan Africa in the future give brands more visibility, it is essential that they monetize global consumers (see story).

“It is now more important than ever to understand your customers and provide them with a seamless shopping experience,” Ms. Zutshi said. “Today, there are a plethora of online marketplaces and shopping platforms, but what sets them apart is not only the products or the deals they sell but how easy they are making that sale for that potential customer.

“Imagine a Chinese customer shopping on an ecommerce Web site that is not translated in Mandarin, doesn’t accept Chinese bank cards or payment systems like Alipay and takes about a week to deliver goods to his doorstep,” she said. “Now that would be a major turn-off, wouldn’t it?”

Final Take
Forrest Cardamenis, editorial assistant on Luxury Daily, New York