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Online growth propped up by discounting

Online growth in the first few months of this year has been like “smoke and mirrors”, with sales propped up by discounting and shoppers increasingly seeing ecommerce as a promotion-led environment, pure-play and multichannel retailers have warned.

Those Drapers spoke to that have not continued to heavily discount post-Christmas reported a lull in online transactions during the first two months of 2015, particularly in January. The Office for National Statistics reported that last month online sales increased 12% year on year.

The owner of one major footwear etailer said that while many are experiencing growth online, “the market is all promotion-led”.

“Since we went off Sale in January, sales have slowed but we’re still seeing growth on last year. They will click through to see the promoted lines but might end up buying something else at full price so the margin balances out,” he added.

Contemporary womenswear brand Unique 21 launched online in December and has picked up wholesale accounts with the likes of Asos.com, Joy and Lipsy. Head of marketing Kerry Liddell said: “We had a really successful December then there was a dip in January. It’s probably because people spent too much the month before but I think it’s also the case that if you haven’t got a Sale going on it’s hard. It is now starting to pick up again.”

Others such as Andrew Hall, operations manager at women’s young fashion etailer Pink Boutique, said the sales dip wasn’t as big as expected going into the new year and they are now giving a final push to clear Sale stock.

This extends to retailers that operate bricks-and-mortar stores with an online presence.

Chris O’Dea, owner of premium menswear store OD’s in St Helens, said: “Online is tricky. It’s fabulous when we’re in Sale, around 70% of our total online transactions are done then, but full price is difficult. At full price I would say fewer than 10% of our sales happen online.”

Physical stores, largely in London, have been receiving a boost in recent days from London Fashion Week and Chinese new year, which both fell on the same weekend on February 21-22, and half-term holidays.

Readers' comments (3)

  • One of the major reasons retailers saw a huge backlog in their back-end systems after Black Friday 2014 was because of hype-driven, time-sensitive and heavy discount marketing techniques. These poor marketing tactics encouraged shoppers to buy things that they didn't actually want, causing an influx in product returns among usually non-returning customers during the already unusually high holiday returns period. Returns hit many retailers mid-December, while they were too busy to deal with processing returns - and then came the backlog. This not only damaged profits, but also damaged customer lifetime value, as the customer rarely came to purchase what they originally intended.

    What we can learn from Black Friday 2014 and apply to marketing for ecommerce, is that hype-driven, heavy discounted sales aren't always the best way to encourage a customer to buy. If you push them to buy what they don't want, they'll just bring it back to you in two weeks' time. In order to guarantee that your marketing team is effective, retailers need to start measuring success based on total profits and not misleading initial sales.

    Clear Returns uses our patented data-analytics software to reveal trends in problem products, disappointed customers and returns fraud, and offers solutions to retailers so that they can tackle and eventually overcome this growing industry-wide problem.

    Vicky Brock, CEO, Clear Returns

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  • These stats suggest online growth is reaching a level of maturity and slowing. Presumably it will force e-tailers to continue discounting as they seek to meet growth targets.

    That said, it should motivate physical retailers to invest more in stores, including the people working within.

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  • Targets should be thrown in the bin. They are not relevant. Online has brought out the very worst in brands and retailers combined who are hopelessly inept and badly managed.

    It's all about profit, profit and profit. Turnover for turnovers sake is for fools.

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