UK Online Retailers Must Return To Merchandising Basics, Says Forrester
Larger ranges result in worsening user experiences and damage retailers’ potential to grow revenues, according to a new Report by Forrester Research (Nasdaq: FORR). UK retailers must limit apparent range sizes and address the needs of mainstream shoppers who lack product knowledge. Online merchants must return to basics and adopt merchandising principles that help customers make the best buying decisions.
“Merchants are making a mistake in rapidly expanding their Net ranges,” said Forrester analyst Mike Honor. “They believe an absence of online space constraints lets them replicate the offline concepts of destination stores and category killers. This belief ignores the fact that large assortments in one place are less attractive online than off. The concept of a one-stop shop is rooted in the offline world, but the Web is poor for browsing masses of products. Low online switching costs make the Web the perfect comparison destination.”
Winning retailers will derive competitive advantage from being constructive merchandisers. Forrester defines constructive merchandising as, “helping customers make the best buying decisions, by recognizing that customer needs differ, and by addressing different needs via configuration, content and choice”. These techniques let Web sites adapt to the needs of different browsers, steering them through the buying process. Solution-based ranges help the needs-aware consumers, and user-defined ranges let the category-aware consumers serve themselves. Online content gives retailers another lever to differentiate product. Proactive recommendations suit the lazier needs-aware, and content on-demand lets the category-aware stay in control.
Average Web site conversion rates of 2% to 3% demonstrate that shoppers engage less with the retailer’s offer online than off. Online, retailers need to replicate the salesperson’s ability to articulate customer needs and provide comparative information. Decision-making frameworks convert needs-aware customers, and flexible comparison tools serve category-aware customers.
“But before merchants introduce constructive merchandising tools, they must understand how to integrate them into an easily navigable site,” Honor added. “They must segment their range, let shoppers choose the way they interact with the category and make needs-focused browsing the default. They must gauge their current level of merchandising and prioritise appropriate improvements.
“Having become constructive merchandisers, retailers can consider continuing with range expansion plans. Having designed a site that can be easily navigated by all types of shopper, retailers can begin introducing more sophisticated merchandising techniques. The starting point is to evaluate current merchandising performance. Retailers must then plan for an overhaul of current merchandising, prioritising configuration.”