U.K. Online Shopping Set to Explode

LONDON (05/09/2000) - Online retailing in the U.K. can expect to experience sustained growth within the next five years, with shoppers forecast to spend 20 billion pounds (US$30.5 billion) on purchases made over the Internet in 2005, Fletcher Research Ltd. announced at its Retail Online forum.

A full 7.5 percent of all purchases will be made online in the U.K. by 2005, according to the Fletcher report, "UK Online Retail: From Minority to Mainstream," released at the conference, ending today. In 1999, only 0.25 percent of all retail sales were online, according to Shobhit Kakkar, an analyst at Fletcher Research .

The report forecasts that by the end of this year, 1.7 billion pounds will be spent by U.K. consumers on "e-shopping." The online leisure travel market will account for 490 million pounds of the projected 2000 revenue total, with the computer product market hitting sales of 410 million pounds this year, Kakkar said.

Retail Online guest speakers agreed with Fletcher's predictions of strong growth in the U.K. market and discussed ways that companies can use the Internet to its best advantage.

"The real challenge is to build the brand on the Internet," said Ruben Rodriguez, the person who heads up U.K. operations as a vice president for eToys Inc. "The key issues in online retailing are how you deliver your product to the customer and how you help them when there are problems. Loyalty is key," he added.

"Customers have to trust who they are buying from," agreed QXL.com PLC Chief Executive Officer Jim Rose. When it comes to surviving in a crowed and consolidating market, such as the online auction market that the U.K.-based QXL.com resides in, a company has to build up its brand name and aggressively expand its presence, Rose said.

"The issue is about critical mass. For example, we have to have a lot of buyers and a lot of sellers, (and size alone) is making us a player in the European market. I must get five to 10 e-mails a week from smaller online auction companies looking to sell or 'partner' with us," Rose said.

Along with offering the online consumer choice, service and ease of use, an online retailer has to focus on building its brand, which must be done with large and targeted advertising campaigns. "You've got to try and reach those consumers who don't know about you with advertising, which is where we spend a large part of our resources," said Daniel Gestetner, managing director for the U.K.-based comparison shopping site ShopSmart Ltd.

But Gestetner was quick to point out how expensive such campaigns are, citing online book seller Amazon.com Inc. "Amazon said last year they spent $70 per customer on advertising, and those figures are similar in the U.K. when it comes to what's needed to produce brand recognition," Gestetner said.

According to Fletcher analyst Kakkar, Amazon's efforts are paying off. "Amazon has comfortably the largest share of the U.K. online book sellers market, though there's a growing challenge from traditional retailers and new online book sellers," he said.

"The big names in online retailing -- like the Amazons and the Yahoos -- are going to have the advantage over the recognized brick and mortar retailers that move online. But you've got to get the jump on them," eToys' Rodriguez advised the audience of e-tailers.

All of the forum speakers strongly stressed that online retailers have to personalize the e-shopping experience while also creating online communities.

"You have to make your shopping site a passion center," ShopSmart's Gestetner said.

Furthermore, e-tailers must create strong customer support systems to not only satisfy the customer and create return business but to collect useful information from them as well.

"In Scandinavia, we sometimes send flowers to our top customers, and if there is a gap of 1 to 3 months, we contact them to ask them how we can better serve them and let them know about deals they may be interested in," QXL.com's Rose said.

QXL.com, like the other e-tailers speaking at the forum, also sends out random e-mail surveys and keeps track of a customer's online buying patterns in order to "harvest" that information, Rose said. "There are rewards for information gathering," and for helping your customer realize what they want to buy, Rose said.

Such segmentation and information harvesting is important no matter what the product, concurred Brian Nelson, who serves as vice president of e-commerce for direct PC vendor Gateway 2000 Inc. "We have a client knowledge team that just tracks online customer information. We think that with that data we can understand where you are in the technology cycle and help you through it faster," Nelson said.

In fact, eToys feels that the information it gathers from customers is such a potential gold mine that it keeps its customer service in-house. "We do not outsource customer service because we feel it's a key way of keeping dialogue with the customer," Rodriguez said. "With some of that information, we can e-mail the customer targeted value-added offers," he added.

The message from all corners of the Online Retail conference was that e-tailers have to focus on the customer and what each customer individually wants, in order to drawn their lucrative business. "At other conferences I've been to, there's been a lot of talk about the sexy technology and tools. What is really great about everything I'm hearing here is the focus on the customer," Rose said. "It's so true; it's the customer, customer, customer."

Fletcher Research was acquired by Forrester Research Inc. in November 1999, and will be renamed Forrester UK Ltd. at the end of the second quarter of this year.

Fletcher Research, located in London, can be contacted at +4207-631-0202, or at http://www.fletch.co.uk/. Forrester, in Cambridge, Massachusetts, can be reached at +1-617-497-7090 or at http://www.forrester.com/. eToys, located in Santa Monica, California, can be contacted at +1-310-664-8100, or at http://www.etoys.com/. QXL.com, in London, can be reached at +44-208-96-2700 or at http://www.qxl.com. Gateway 2000 Inc., based in North Sioux City, South Dakota, can be reached at +1-605-232-2000 or at http://www.gateway.com/.

Shopsmart, located in London, can be contacted at +44-208-208-8800, or at http://www.shopsmart.com/.

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