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With £84m of internet sales lost over the 2005 Xmas period due to underperforming websites and downtime, UK retailers must stop the rot ahead of the predicted 163% channel growth over the next 5 years.
Leading retail analyst Verdict Research, commissioned by Xansa and Akamai, surveyed 52 major UK retailers to assess the impact of a legacy of under-investment in the increasingly critical area of online retailing. The results paint a picture of infrastructure creaking at the seams to deal with even existing volumes, let alone the 30% year on year increases predicted.
Is £84m (or 2.2% of sales) that important to the industry - or can both pure internet and hybrid retailers be complacent enough to see it as a drop in the ocean? The fact is that the impact goes far beyond each £1 lost. The true impact is on the customer's relationship with the retailer - and on their view of the retailer's brand across all channels, not just online. A negative online experience will extend to in-store tills.
Today's retailer must treat their online channel as more than just a bolt-on if they are to build a complete relationship with the ever more fickle and demanding customer and not see them defect to the competition.
Many of today's online retail sites have evolved in a way which can most diplomatically be referred to as 'entrepreneurial' - brought into this world in the mid nineties and then developed one step ahead of a market which nobody believed would grow in the way it has.
And whilst some retailers have grasped the nettle of addressing outdated approaches to infrastructure, website development, service management and back-office integration, others continue to plaster over the cracks in the hope that the problem will go away. Think again.
The harsh reality is that although the current loss rate of 2.2% is scary enough when projected as £222m by Xmas 2010, losses will not remain at this level and can only increase as currently creaking websites simply burst at the seams and the internet itself changes shape. Where the level will settle is anyone's guess.
Scaremongering or a call to action?
Xansa and Akamai believe that there are cost effective approaches to securing a stable, performant, scaleable, secure and truly integrated online experience for tomorrow⿿s customer. From a competitive position, retailers need to respond today if they are to be prepared for Xmas 2006.
Working together, Xansa and Akamai offer UK retailers customised solutions where expertise in both in-store and line of business retail can be combined with website performance, reliability and security. For example, joint retail customers that leverage Akamai and Xansa can combine best-in-class technology with resources and expertise to achieve multi-channel marketing and to merge their online and in-store operations.
Key points and comment from the research:
All comments relate to the 52 retailers sampled - see the full Verdict report for detail.
Website underperformance
15% of retailers suffered underperformance of one type or another. A challenge to this relatively low figure is that most retailers do not actually monitor performance for the end-user but solely in terms of their own infrastructure performance at best. It is generally accepted that today's customer demands good but also consistent performance as a matter of course.
Website downtime
17% of retailers experienced complete site downtime. This figure was the easiest component to calculate for the overall estimate of some 181 complete sales days lost over the festive period.
Quantifying business impact
64% of retailers did employ some measure of underperformance/downtime impact but 79% of these limited this measure to a simplistic view of direct customer sale and not the broader impacts on their brand or competition.
Alternative infrastructure
70% of retailers do employ some means of dealing with peak volumes ranging from pseudo on-demand infrastructure through to a smaller number with a more expansive CDN (Content Delivery Network) approach. The telling fact here was that 75% of those experiencing problems had no alternative approach in place.
Read the full Verdict research report:
