January 17th, 2011

Are online loyalty schemes the key to retaining growth?

Independent analyst Verdict Research recently revealed that although online expenditure will increase by more than 56% to £35 billion by 2014, growth is expected to slow considerably from previous years.

Verdict forecasts average annual online growth between 2009 and 2014 will be 12% compared with an average of 35% per annum over the previous decade. The number of online shoppers is also heading towards saturation, meaning retailers are going to have to work much harder to gain and keep customers. The latest VAT rise and impending government cuts are also likely to be a factor in retail performance for 2011, as consumers may be looking to make spending cut backs.

After a decade of rapid incline, it was clear that the rapid online growth rate could not be sustained indefinitely, and the next step for etailers is to work out how to utilise the most of every opportunity. More and more brands are creating online presence, and more choice means more competition. The next step for etailers needs to be how to personalise the online experience – looking at ways to set your site apart from competitors and provide a convenient, enjoyable, quick shopping experience. In fact all the factors consumers demand from a physical store.

Building customer loyalty and retaining current shoppers is equally as important as acquiring new ones, and loyalty schemes are going to be a way of rewarding return. This also has the power to incentivise higher spends. The online sector is likely to look at how reward schemes, which have helped to revolutionise brands like Tesco, can be implemented online. I have noticed that websites are already looking at ways to engage their existing customers – apps, social media and email rewards schemes, and this is the way to retain and grow existing customer bases.

I believe that the market will get tougher – the next five years will continue to shift and the fluid nature of the etail sector will mean it is largely dependent on advancing technology to remain as relevant as possible.

Keeping your Website as user friendly as possible is undoubtedly imperative, and utilising as many new facilities as possible, as well as keeping product listings bang up to date. The way in which customer loyalty is rewarded is likely to progress, and no doubt we will see whether loyalty schemes are enough to encourage online growth rates to increase as rapidly as they have been.