clicks and mortar strategiesIt’s estimated that e-commerce sales around the globe will soar past 1 trillion Euros by next year, with increases in the region of 20% expected.  It’s clearly a booming area, but what can online retailers do to ensure they get a piece of that pie?  With the number of Internet users estimated at around 3.5 billion, there are a number of key trends that any retailer needs to be aware of.

  1. Offline shopping costs are crucial - Online retailing doesn’t exist in a bubble, and is heavily influenced by the offline retailing world.  Studies have shown a very clear correlation between the ease and overall cost of shopping offline and the popularity of online shopping.  To cut a long story short, the easier it is to buy what you need close to you, the less likely you are to shop online.
  2. Shoppers move in packs – Aligned with the previous point, if you find one person in a neighbourhood willing to shop online, then the chances are very good that their neighbours are willing to do so also.  The inhabitants of the neighbourhood not only share many of the same costs, but they also talk to each other and share their shopping tips and tricks.  Growth in such local online shopping is typically driven by this exchange of information.
  3. Hunt for niche locations to grow your sales – Whilst there are likely to be locations where you sell heavily and earn good profits, if you want to grow your store, you need to chase the long tail, and ship to a wide variety of locations.  Over time, successful Internet retailers move beyond early and core markets and increase their coverage by absorbing customers from markets that, while geographically separate, are similar on other dimensions such as demographics and customer preferences.
  4. Find the un-serviced minority – Offline retailing is often a matter of numbers.  If you have a community of 500 people, and 50% of them are young families, then it stands to reason there will be lots of toy shops around.  However if the community is 20,000 strong, with just 1.25% of them young families, it’s much less likely to be inhabited by toy shops aplenty, despite both communities having the same number of young families.  If you can find these isolated prospects, it could be very furtile ground for your marketing efforts.
  5. Tailor your acquisition strategies – There is a temptation to use the same marketing strategy for everywhere, under the belief that as your website is in one place (ie the web) that it only needs one marketing strategy.  The reality is however that your customers are not virtual nomads, they live in real places with very different communication habits.  Some communities may be well served by print advertising, others by radio, another by word of mouth.

The implications for these changes are clear.  Online retailers will benefit enormously if they apply custom marketing strategies for different local communities.  The cost-benefit payback of different customer acquisition methods varies significantly across locations according to the characteristics of each location.  It is no longer enough to regard all customers as being location-less, when the evidence is clear in how important location is.

Here are a few things you can do to optimise your use of local information.

4 strategies for making the most of real-world information

  1. Collect address information – You want to be able to have an exact geographic picture of your customers.  Using post/zip codes you can match what you have with commercially available data on local demographics and location of real-world competitors.  You can use this to see where fertile territories are.
  2. Understand how customers interact locally – Word of mouth is a great thing, but so often attention is focussed on how to encourage it virtually.  Research shows that just as much interaction occurs in offline locations and can be extremely valuable in spreading word of you and your services amongst the community.
  3. Excite the right customer – With CRM systems you should have no excuse for not being able to delight your best customers.  These don’t have to be just those in big markets though.   There may be relatively small communities with very little competition that could be very profitable for you.
  4. Experiment locally – It’s not good enough to do any marketing that you can’t track, so make sure you experiment a lot with local campaigns, but ensure you can measure the effectiveness of what you do.  Online retailers can select local markets to “seed,” and early customers in these markets can influence how sales evolve over time. In addition, retailers can localise the user interface of their websites as different locations express brand preferences. The key is to use experiments to explore, measure and take advantage of the location effect.

There are lots of things you can do to ensure your offline work is just as effective as your online work.  Hopefully this post will give you some thoughts to get you started.