Omnichannel retailers: who is winning the digital battle?

James Hammersley compares the ecommerce performance of the companies in the headlines against their key competitors and benchmarks them to find the real winners & losers.

The end of 2017 saw contrasting fortunes in the retail world. While Next posted an overall 1.5% rise in total full price sales between 1 November and 24 December, John Lewis saw an even bigger uplift with overall sales jumping 4% in the week leading up to 23 December compared to the same period a year earlier.

Fortunes couldn’t be more different for M&S, which showed a 1.4% decrease in UK sales with overall third quarter sales down by 0.1%. In a similar trend, House of Fraser reported a 2.9% slump in sales at its shops during the six weeks leading to Christmas in addition to a 7.5% deficit in online sales. The theme was recurring with Debenhams too, which announced that its sales also fell by 1.3% over the festive period.

With the ever-increasing growth of Amazon, pure-play retailers such as Asos and niche players like made.com, the pressure is on for this competitor set. This infographic dissects the digital presence and performance of these five market-leading brands.

Traffic

Insight: Revenue comes from traffic that converts. Having more traffic than your competitors is a real advantage.

Analysis: Next and John Lewis generate nearly the same level of traffic to their respective sites. In this competitor set, the traffic accumulated by Debenhams and M&S, while lower, is still substantial. House of Fraser, however, attracts around half of the level of online footfall received by Next and this points to one of the main drivers of its disappointing performance.

Paid campaign

Insight: If you are confident about your sales execution (ie customers stick on your pages and convert well) then you don’t have to outbid your competitors to gain a top three ad slot, which is where you will attract exponentially more traffic than position four or below.

Analysis: All competitors in this set have a similar average ad position with all companies achieving a high average – all have either 98 or 99 of their top 100 AdWords in the top three positions.

There are significant differences however when it comes to the effectiveness of their keyword investment. Debenhams and House of Fraser are driving the largest amount of paid traffic yet Debenhams is achieving this on less that half the amount of keywords.

Despite investing in the largest number of keywords, John Lewis is driving the second lowest amount of AdWord traffic. Marks and Spencer finds itself in a similar position.

Next performs well but is simply not making a large enough investment and is losing ground to the competition as a result.

Set this against House of Fraser’s disadvantage and you can see the second driver of poor results: House of Fraser is paying for a far greater proportion of the visits to its site than its competitors. This will be hitting margins.

Landing pages

Insight: Landing pages are a mark of how well you understand the different customer needs that you are fulfilling. More pages and more thought is being put into the marketing proposition and the following sales execution .

Analysis: When it comes to unique landing pages for their top 100 AdWords, John Lewis leads the way with 76 pages designed to cater to the specific needs of its customers. While Debenhams and House of Fraser have landing pages ranging in the mid-sixties and Next in the high fifties, it is M&S which is falling behind with nearly three times fewer pages than leaders John Lewis. A £150m investment into a new website is even more difficult to justify if you aren’t going to take your customers to where they want to be.

John Lewis has made a concerted effort to differentiate and segment its target market in order to get its customers to where they would wish to be in as few steps as possible and as a result it will be driving more sales.

Toolbox

Insight: Listening to your customers is vital – without understanding the needs and wants of a potential buyer it is near impossible to improve conversion.

Analysis: Among all these retailers, only M&S has a complete digital toolbox. Next, John Lewis and Debenhams are all missing On-Page Analytics tools which could enable them to visualise customer activity on their websites.

Next and House of Fraser are missing out on vital first-hand feedback from customers who are visiting their websites through active surveying. Only by blending customer data from a range of sources can you build and implement a successful split-testing programme that drives growth. By not investing in and applying a full toolkit you are failing to understand the points of failure in your customer experience.

What can you tell from this?

The obvious conclusion:

John Lewis continues to be the leader in this competitor set.

The inevitable conclusion:

House of Fraser’s failure to attract traffic and having to pay for it in far greater proportion than its competitors is a significant structural disadvantage. While it scores more than Next and Debenhams, the cost of achieving this performance will be squeezing margins.

The surprising conclusion:

Having spent £150m and suffered a significant hit in performance as a result of the change in platform, M&S is hardly performing ahead of this competitor set. Having declared a significant growth in online sales this analysis suggests that Next is still not performing at anything like the level it needs to establish a growth pattern that will convince skeptics that its woes are a thing of the past.

The insight:

These are five well established high street brands of whom, only one, John Lewis, comes through the analysis as having a top-quartile customer experience. A market leader has rarely performed so poorly in this analysis as Next. Great customer experiences talk to the customer and not to the brand – something Next might want to think about as it looks at building on its online growth in 2017.

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