Online retailers must ‘focus on their strengths’ and build brand equity

The increase in cost per acquisition (CPA) in ecommerce has presented a major challenge for retailers of all stripes, and with lower conversion rates coming from many marketing channels, some retailers have decided to switch up their tactics.

Andy Mulcahy, Strategy and Insight Director at IMRG, the UK’s Ecommerce Association, observes that some have started using email as a brand storytelling channel rather than focusing on conversions.

“If you know that conversion, actually, isn’t going to be that great … I think building the brand equity is something that some have focused on, in the expectation that at some point, the economy will recover a bit … and then they should be the ones to benefit.”

Mulcahy has spent more than 13 years working in the heart of online retail. As such, he has his finger on the pulse of ecommerce trends and data, allowing him to make a clear-eyed assessment of exactly what is happening in online retail; where the dynamics currently shaping ecommerce came from; and what we could see next.

Econsultancy’s Global Partnerships Director, Damian McAlonan, spoke to Mulcahy in a wide-ranging keynote session at Ecommerce Expo 2023 that examined ecommerce’s recent highs and lows, how the customer journey is evolving, which categories have enjoyed success in spite of the recession, and why it pays to be a memorable retailer. Here are some of the key highlights.

‘Know your strengths’: Build brand equity when conversion may be suffering

Even during tough times, being the go-to retailer in a customer’s mind is highly beneficial. Mulcahy explained: “If you think to yourself, ‘I need this product’ – you know, in your mind, which retailer you’ll go to to get that. A lot of people will have in their mind already [which retailer they’ll go to].”

This type of established association benefited retailers with a multichannel footprint during lockdowns, as customers who were already used to buying or searching for a particular product with a specific retailer would simply visit the retailer’s ecommerce website. “People who would go to a high street retailer to usually do the shopping just went to the online equivalent of that, so they didn’t go online and search for the products. ‘I go to Boots; now I go to Boots.com’.”

Mulcahy added that this momentum helped to sustain multichannel retailers during later uncertainty. “What that enabled them to do was build customer acquisition – building out quite a big database; and I think they’ve been able to sweat that [difficult period] a little bit better.”

You have to find… your strengths, and really focus on those…

Big, long-standing retail brands tend to have more accumulated brand equity (although it’s by no means a given), but for smaller retailers who are trying to stand out in the mind of the customer, Mulcahy emphasised the importance of being attentive to the customer experience and finding your forte.

“Every different business has its own nuances; you might go to a retailer because you like the way that they do it – it can be anything. It could be, ‘They deliver really fast’, or ‘They’ve got really good customer service’, or, ‘I like the information – they’re very good at helping you find out what you’re doing’.

“It’s different for everybody; you have to find out what’re your strengths, and really focus on those strengths.”

‘Smart merchandising’ required as more web traffic hits product pages

Looking at wider trends in ecommerce behaviour, Mulcahy noted that there has been a change in the way that customers visit websites – which might not be what ecommerce retailers would expect. “We traditionally think that people will go to a homepage – so you set up your homepage, ‘This is our front window, this is where people are coming to.’

“But actually, more traffic is coming through product pages, which really changes the type of journey that someone would have. … When you land on a product page, you look at that product – ‘Do I want it, or do I not want it?’ And then, perhaps, bounce off if you don’t want it.”

More traffic is coming through [ecommerce] product pages, which really changes the type of journey someone would have.

This makes it harder to retain the customer on a retailer’s website if they aren’t interested in the specific product they searched for, or to invite them to browse and explore other categories, which homepages are generally optimised for.

What can retailers do to counteract this? Mulcahy recommended implementing related product recommendations on product pages, such as ‘Customers who viewed this also bought…’ to highlight other items that might interest visitors. “If it’s not exactly what [they] want – a bit of smart merchandising is the thing.”

Health and beauty ecommerce growth: “It actually does well when times are difficult”

In June, the IMRG published data on ecommerce performance in H1 2023 that showed that the Health and Beauty category was experiencing “astronomical” growth of +17.3% year on year – so high that it was improving total market performance for online retail as a whole. Reviewing these figures in his keynote presentation, Mulcahy commented, “Health and beauty is having a blinder – if you’re in health and beauty, you’re in the right category.”

He noted that health and beauty enjoyed a “lively start” to the year, followed by extremely strong performance during Mother’s Day 2023 and continued positive results afterwards, with makeup performing especially well as a subcategory that accounts for a large percentage of beauty.

When McAlonan asked Mulcahy which of the year’s trends had surprised him most, Mulcahy singled out beauty’s strong performance, but added, “[It’s] only surprising until you rationalise it, really … When you speak to beauty retailers, they say that it’s a bit recession-proof – it’s quite a low-cost purchase, so people can keep doing it; it makes them look good and feel good; and people might cut back on some other stuff [to save money].

“So, it actually does well when times are difficult.” This trend of consumers spending money on smaller, more affordable luxuries in difficult economic times is so strongly associated with the beauty category that it has been dubbed ‘the lipstick effect’.