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January 27, 2009

Online Retailers are using the Recession to make Advancements to the Online Customer Experience

In the current economical climate when ordinary brick-and-mortar stores face a downturn in sales, there is still an increase in incomes for online vendors. According to the monthly survey studies conducted by CapGemini in the UK, online purchases show a positive growth even during the current recession. As an example, online shoppers spent 16% more during November 2008 compared to the same month the previous year. According to a survey conducted by Harris Interactive® on behalf of GSI during early November, the top two reasons given by American participants who planned to shop online during the current holiday season to avoid the crowds and for convenience, i.e. they were not limited by opening hours and could shop at a time that suited them.

As customers do more and more of their shopping online, their expectations for online stores grow and their tolerance for bad online retail solutions diminish. An online survey conducted by Harris Interactive® in the UK on behalf of Tealeaf shows that almost 90% expect customer service to be as good if not better than in a regular brick-and-mortar store. However, another online survey conducted by Retail Eyes reports 8 out of 10 respondents experiencing better service in offline stores compared to online. Even though these two studies show inconsistent numbers regarding consumers’ expectations for online and offline customer services, both studies highlight the importance of the customer experience when it comes to brand or store loyalty. Almost 9 out of 10 respondents in the Harris Interactive® study (89%) had experienced problems while conducting an online transaction during the last year. Out of these almost half (49%) stated that if they encountered problems in an online shop, they most often abandoned the shopping process in favour of another online competitor’s solution. This is an increase of 12% since last year. In addition, 42% stated they were unlikely to try to use the failing site again. This can be compared with 68% of the respondents in the Retail Eyes survey who stated that having experienced bad service in a store would make them switch loyalty from one retailer to another.

Even though customers buy more online, they are selective on where and on what they spend their money. As previously highlighted, they are getting increasingly critical towards badly implemented online shops and poor customer experiences. In a recession, the most commonly used tactic for companies is to decrease spending. This often means cutting back on research and development. However, this can have dire consequences both during the recession and after it ends. Historically, companies that had the foresight and resources to invest in improving their offerings and services often experienced a boom when times improved. Companies such as Dell and Intel made such investments during the recession in the beginning of the 90’s, as well as Apple, Google and MySpace during the last credit crunch. Compared to their competitors, they could then offer solutions which were much more sophisticated as soon as the will to invest returned and it often took years for other companies in the same markets to catch up. According to Apple this strategy is being used during the current credit crunch as well, and another well known company, Amazon, has already started to release newly developed solutions for increasing their market share. An example of this is an application, ‘Amazon Mobile’ (currently available in the US), which can be installed on Apple’s IPhone which allows users to photograph items in regular stores, add them to an online shopping cart and receive information about online prices for those items (often with a discount for using the tool).

Investments in R&D during recessions are something that has been discussed and promoted in both Financial Times and Forbes as a way to prepare for the future. However, it should not be done without careful considerations on what to invest in. During recession, it becomes clearer which are the sources of income, and should be the most important for a company. Customers who are willing to spend money in good times might not necessarily be those customers who keep the company alive when a credit crunch arrives. Hence, there might be benefits in refocusing the offerings provided according to the most beneficial markets now, and in the future. An example of this strategy was adopted by Singapore Airlines, after noticing that the most reliable income was from full-fare business and first-class travellers on transcontinental routes. As a result, they cut back on short flights, and spent more to serve these customer groups. During the recession in Asia in the late 90’s, Singapore Airlines demonstrated a profit, and came out much stronger than its competitors when the downturn ended. For an online retailer this means clearly defining the target group and developing the online store to suit that group. Research at fhios has shown that is very rare that an online solution can cater for all kinds of costumers. As previously mentioned, customer service and the online experience represent a very important aspect of an online purchase. At the same time, value for money plays a vital role in times of economic downturn. According to latest figures from Hitwise, the word ‘voucher’ was the most commonly used for online search terms combined with well known brands. Customers are no longer loyal to a store or a brand as such, but instead look to the costumer service they provide and the incentive programs they offer. With the competition only a mouse click away, online retailers cannot afford to lose or alienate their customers. Instead, it is time to secure the future by giving the customers what they want but also to exceed their expectations in order to make your site their first point of call for their next online purchase.

About fhios
fhios (www.fhios.com) is a leading international customer experience research company that was founded in 2002 and have successfully conducted over 300 customer experience and usability research projects across over 30 countries, with many brand perception, customer segmentation, concept & design validation, competitive benchmarking, online communities and user needs projects to provides its clients such as  Harvey Nichols, Diageo, Habitat, HSBC, Motorola, Hilton and Shell/Ferrari with the insight to understand customers needs, goals, expectations, behaviours and experience levels when they engage with them and their competitors.

About the Author
Anneli holds an MSc in Human Computer Interaction and Interaction design from IT University of Göteborg and an MSc in Electrical Engineering from Chalmers University of Technology in Gothenburg. Her prior work experience includes a position as research assistant at the IT University of Gothenburg and as a Ph.D. student where she conducted research about persuasive computing at the Open University. The research has resulted in a few publications within the field of Human computer interaction. She speaks fluent Swedish. Anneli is a Research Consultant at fhios. (http://www.fhios.com/team.htm

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