E-commerce vs bricks and mortar – what the numbers show / Data for Bluffers #15

06 June 2022

This week, Tom and Ed are joined by Ben Salmon from We Are Crank as they discuss the data behind e-commerce and traditional retail and how e-commerce retailers can use this information to drive sales.

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Tom

Welcome to another edition of the data for Bluffs podcast. This week, we are joined by Ben salmon from, we are crank who’s also the author of, um, great book called your numbers up, which is really a book aimed at eCommerce retailers to give them a practical guide to data, as opposed to a lot of sort of theoretical books that are out there. Ben welcome. Thanks

Ed

Tom. Thanks ed. Good to see you. It’s good

Tom

To have you on the podcast.

Ed

Thanks so much for embracing the data geekery so, uh, knowing.

Tom

Yeah. Yeah. So exactly why we’ve got you here. Um, so I guess as our, as regular listen will know, we talk about data, but really about making it easier for markets to, to understand it. And today we wanted to kind of talk specifically about the retail journey and, you know, the relationship between bricks and clicks, whether that’s, you know, traditional bricks and mortar retailers, um, who’ve moved on to eCommerce, but also newer eCommerce brands that are starting to kind of move towards bricks and mortar. Um, but before we get into all that, Ben, just tell us a little bit about yourself.

Ed

So I’m a data geek at heart, uh, starting off in the world of data and moved into marketing, um, a marketing software for quite a few years, uh, eventually ending up at agencies to try and actually do the marketing rather than just fiddle with technology and databases and Excel spreadsheets. Um, and then, uh, we set crank up about five, six years ago to help all of the marketing folks understand how they can get the most from data. Cause there’s so much of it and knowing where to focus is really, really hard. So it’s all about giving people that focus of what, what should they be doing. What’s gonna give them the biggest impact.

Tom

Great. And, and a lot of your time has been spent within sort of e-commerce and retail. Is that, that

Ed

Fair? Yeah. Most of our clients are e-commerce and retail we’ve we’ve been doing, um, quite a bit with B2B and kind of this lead generation thing that seems to be, uh, not necessarily new, but the amount of data that’s in B2B is fascinating and you can be really targeted, but you obviously just don’t get the volume and the reach cuz the audience is a lot narrower, so predominantly commerce, but more recently lead generation as well.

Tom

So I guess how I, you know, as, as I said in the intro, you know, this is that kind of bricks to clicks journey. Um, have you got any good examples, Ben of, you know, who who’s, I guess who’s done that transition from, you know, being a traditional bricks and mortar relay retailer to online.

Ed

I think my favorite example is probably someone like next cuz they’ve been hugely successful. And the way that I do this is I look at the share of revenue coming from online. But next is quite interesting cuz they’re quite a traditional retailer. Um, obviously they have the catalog business, which I think made life easier for that transition. But when we were talking just for a show, I think now 64% based on their most recent data, 64%. So 3.1 billion out of 4.9 billion in revenue came from online, which is quite surprising when you realize how much yeah. That’s how big there are as a

Tom

Business. Is, is there a benchmark, like what’s the average for the

Ed

UK? Uh, I’ll do a decimal place for you, Tom it’s 26.7 and the us is about 13 or is on, on the nose of 13 in the most recent data. So they’re punching well above the UK kind of average.

Tom

Well, above average, just a quick clarification when we say here that the us is above average. We mean they’re above average for retail spend, not online spend before we get into why we think that is and, and, and what lessons we can potentially learn. What about businesses who started off being successful online and, and are now, you know, making the four end to the high street?

Ed

I mean the one that I was aware of, um, was, uh, people like Netta Porter. They did some like experimental stores and stuff, but I had, I couldn’t point out like 10 or 20 brands have done that particularly well, probably in the same way as the traditional retailers have. And I think this is pretty harsh, but have struggled to go online and generate most of their revenue online. And I think those pure play online businesses have struggled to go offline cause they don’t necessarily know that space.

Speaker 3

I, I mean, I can think of a, a few examples of where they’re kind of a brand rather than necessarily just a store that have sort of started online and developed a following in that place and then have sought to try and capitalize on that with sort of bricks and mortar shops here in Bristols. We recently had a pop up with a store called Lucy and yak, which is my girlfriend’s and her friends are big fans of there, an online clothing retailer, retailer that I think started kind of down in Cornwall and obviously have a, a retail base across the whole country now online and are looking to sort of capitalize on some of that, that hype by moving into bricks and mortar stores. But again, that’s not, they’re not trying to make a business transition there. They’re trying to supplement their, uh, online activity. And I think that’s the difference between what next have done, right? They, you know, they, they’re now talking about yeah, 64% of their sales online. They’re they’ve really transitioned. They aren’t using online to support their retail business, sorry, their bricks and mortar business they’ve really kind of gone all in and realized that for them eCommerce or online is, is first.

Tom

You know, if we look at what’s happened with the pandemic over the last, you know, 24 months, you know, numerous headlines of, you know, is this the final nail in the coffin for the high street? And you know, as eCommerce spiked, do we have any idea of what the picture was over the last couple of years, you know, was what does the world look like now that 26% and how does that how’s that journey taken place?

Ed

You can actually see that data to see the hype, cuz obviously everyone loves a sensational statement. So the us was really interesting cuz they’ve pretty much reverted back to normal. So if you did like a 10 year line or a line just from 2018 to 2021, so kind of sort of pre COVID in a little bit post COVID, they had a big spike. I say big kind of, um, the line separated the 10 year line separated from the COVID line and now they’ve converged again. So they are lit. The us market is kind of back to normal. Like the COVID spikes happened, the online spikes happened, whereas in the UK we haven’t quite closed that gap. So we’re still marginally ahead. So, um, we would’ve expected the 10 year growth average for us to have been at 23% and we’re at 26 and a half percent. So the gap has, we’ve had a big boost and it hasn’t done that. It’s just kind of flatlined. If you like it hasn’t come back down.

Tom

Do we know what it hit at is peak? Did it, did it peak at 26 and flat or did it actually kind of go much higher than that?

Ed

No, it did. It had a weird shape, so, um, and it was all lockedlockdown relative. Yeah. So first lockdown here, it jumped to 32% from 20 right. Second lockdown people weren’t kind of as into it, they’d maybe stocked up on all the bleach and toilet role that they needed.

Tom

Yeah.

Ed

Uh, so it kind of went to from 32 down to 29%, but then in the third lockdown it jumped 35 and that was the highest, but that might be also because it was kind of end of Q4, you know, Christmas time peak trade in Q1. So 35 was the highest it’s back down to 26, but we would’ve expected it to have been about 23. If it felt followed a normal average, like a 10 year average. Whereas the us was at 11% jump to 15 and then it’s literally just flat lined back to 13 and it’s remained, remained at 13. It did go a little bit crazy, I think. Cause

Tom

Everyone not crazy and yeah, hence the headlines and now it’s, it’s it’s not returned, but it’s it’s stabilized

Ed

Bit. No, so I wouldn’t call it death of the high street. Certainly. You know, this, data’s not showing that um, the high streets are closed. What it’s showing is this says continued trajectory to move to, to online, but it’s not like 97%. Like I’m sure there’s been some tabloid 97% of people are shopping online. Yeah. Maybe, maybe 27

Tom

 

Ed

Doesn’t sound as good though. Doesn’t it?

Tom

No, exactly. They need to, they need the sensationalism. Yeah. One, one thing I thought was really interesting during the pandemic is the number of, I guess people that started opening eCommerce stores, right. You know, a lot, a lot of, a lot of brands went online. It felt like during the pandemic, the share of retail spend went up online. But also the number of E retailers went up online. No next right. Good example. Um, and all these other, you know, businesses that, that do it well, like what are the lessons that everyone else can sort of apply or things they should be looking at?

Ed

I would say I’m gonna be completely biased here, obviously being a data person, but they’re actually bothering to look at their data. So the number of senior leadership conversations I’ve had where we’ve analyzed data and we’ve shown different behavioral traits of different buyers. So, um, maybe men’s wear and women’s wear and how they buy differently. It’s not men buying men’s products. It’s people shopping in men’s wear could be male or female, right. Buying gifts or buying for themselves doesn’t really matter. But the behavioral traits are hugely different. That’s interesting. What should we do about that? You’re like, oh my world. So I think it’s the focus and the, the quality of the people and not to say the quality of the people at the board are not good. It’s the quality of people that have digital knowledge and, and are data driven. So, so many people say we’re data driven, but the reality is, do you know what tagging is really boring?

Ed

And it’s really hard and it takes a load of effort and you don’t see the results of that necessarily straight away, but it dramatically improves your business. So I say, focus, there we go. Focus and knowledge on at a board level though. Not none of this, you know, the classic, oh, we should be targeting millennials. Great. How many of you millennials? Oh, uh, none of you. So how about you get maybe a millennial on the board? Oh, they can’t, em got enough experience, but you’re targeting millennials. So maybe they’ve got more experience than anyone here. it’s, it’s kind of one of those. We should be more digital. Great. Anyone here got digital experience? Nope. Cool. um, so it’s kind of that, that kind of focus and, uh, Sue and the team at next are just incredible. They’re fantastic.

Speaker 3

When we think about online sales and online customers, there’s a tendency, I think with some people to, to think about them as different to their in-store customers. I was wondering if you had any information or any experience with that sort of transition, understanding the extent to which your, the, the existing customers are transitioning to online purchase is their method of purchasing versus moving online to attract new

Ed

Customers. I think it’s worth saying that stores have a really positive impact impact for brands and does actually drive a lot of online spending. It’s kind of like having a massive billboard that people can touch and interact with kind of, if your in-store point of sale doesn’t capture customer data and some people’s doesn’t, which is absolutely fine, but it isn’t capturing postcode or information like for, to cath on do a brilliant job of this, by the way, as my, one of my favorite examples, they are amazing. So what they do is they say, um, oh, do you want me to save that receipt for you? So you can basically have a 365 day returns policy. That’s our 365 day rep returns policy. There’s an actual benefit. Not, can I have your email address? Cause I want email the email, the receipt, or you want to email a receipt for 2 99 per sauce.

Ed

de Kath, uh, do a, do a lovely job. So they capture the data. They give you a year’s return policy. All of your receipts are online. You can see whether you bought them in, in store and you can see whether you bought them online. So in that example, they’ve got the data. If you didn’t have the data, I’d look at store catchment areas, I’d look at postcode and surrounding postcodes and see the delivery, um, delivery data for online customers and see if they fall within that catchment area of a store. There’s all sorts of clever stuff people do with drive time analysis and understanding, you know, what a catchment for store is that retailers know way better than me. And they do it all this time with store planning. But I think trying to look at them together as one, rather than separate. So to answer your question, ed, I think it’s about, of those online buyers actually allocating that and rewarding the store staff as part of that service, motivating them, not punishing them, saying that these guys, your customers, right, they’re gonna come to your store, maybe for returns or maybe for browsing.

Ed

They might not buy in that store, but you should get rewarded for it. So rather having these separate profit and loss accounts, actually we reward the stores and give stores bonuses based on the catchment error for online.

Tom

That’s really interesting, pretty

Ed

Radical, but

Tom

Well, it’s, it’s interest. We did a project with, um, they’re a high street betting shop, but it was exactly that there, you know, a significant chunk of revenue was being driven online. So, you know, they believed that there was no need for the high street stores. And, you know, we, we take a slightly different lens. We looked at sort of where word of mouth was, was driving those sales, but word of mouth surprise, surprise on the thread of conversation was linked heavily to proximity of, of a store. You know, so, you know, to the degree, I think, you know, we actually, well, it actually got, um, found out that people were going in the store to gamble on their phones, you know, so it really was. And, and, and I, and I always think that’s a really interesting angle for, well, it’s a really interesting benefit that digital first retailers miss out on. Right? The, the question I was gonna ask, um, then is if we look at a lot of these retailers who I guess to Ed’s point have had a catchment of users who have transitioned from shopping in store, but they’re the same users, but shopping online are a lot of these retailers still missing out on the, the broader benefits of eCommerce where you can sell to a much wider catchment, if that makes sense.

Ed

Yeah. So I think I, I always, I always say there’s kind of two things. It does brilliantly, uh, eCommerce one, it allows you to launch in a market at relatively low cost. Obviously it depends on the eCommerce platform and the integrators that you’re using and the translations that you’re doing, but, you know, you can get to market super fast, assuming your logistics are there. Of course, you know, um, distribution centers aside, and you’ve got that relationship set up, but there’s, there’s amazing people that do that, you know, even Amazon do it, don’t you don’t they for as a service, but they’re amazing dis distributors out there. So I think assuming you’ve got the logistics and that you’ve got the ability to launch in that market, both from a knowledge targeting campaign, uh, agency translations perspective, you’ve got the products or price correctly, I think absolutely you can get to market super fast.

Ed

I just think if you’re gonna do a national rollout in Spain and you wanna roll out 250 stores, it’s gonna take time, right. It just will. And, and they take time and it costs a lot of money. You might not see that return quite that quickly, whereas you can launch in market in a new country. I mean, you could even potentially just do affiliates in a market like super fast without doing anything. So I think that’s one benefit is time to market and you could probably test a market before you do a physical store rollout. The second thing I, think’s really interesting that people often again, has gotta go back to data. Why wouldn’t it, um, is looking at the lifetime value that you have by using that customer data and seeing how much they’re worth. So, Dan McCarthy always talks about this Emory university talks about lifetime value analysis, and actually it’s okay potentially to have a smaller margin or cost, you know, profit from cost pro acquisition.

Ed

You can pay more to acquire a customer if you know, they’re can have long lifetime value. And I think that’s often something you automatically get in eCommerce. I’m not saying you do it for marketing, cuz you’ve gotta get opt in. But at the same time, you can still model that data and look, build lookalikes and go and acquire similar people and understand the data and understand, for example, for your high value customers. What’s the best channel to acquire people through. If you’re only looking at that single purchase and 4, 3, 4, 5% of customers come back or 10%, if you’re lucky, then surely you would invest in the channels that are gonna drive more of those 10% than, than those at the 90%. But people don’t look at it like that, cuz it’s actually quite hard to look at that data and connect it to a channel and connect it to a campaign, connect it to a camp mm-hmm to a category, connect it to, um, all that targeting stuff.

Ed

So I think that would be the things that I think eCommerce gives you is that ability to, first of all, get the data, um, or other way around, first of all, you know, roll out in a market and then secondly, get the data. And then the only aside on the data piece, um, Avan Ash always talks really interestingly about incrementality. So don’t stand two foot within the door of a shop, handing people a five pound off voucher, cuz they’re already in your store, which is effectively what we do online. Right? We, we hound people to death. They might have been an existing customer. They might have just bought something and then they go on the voucher site and they get a discount. So if your audience is, I don’t know, people that live in London that are interested in motorbikes and you’ve got a load of outdoor products, actually, if you’re only advertising to them, you’re just advertising to yourself. Most of which might be returning customers. All of a sudden you go, oh, there’s a load of people. We do a lot of outdoor stuff. It’s really cool. Actually. We’re gonna advertise people live in London who are cyclists and they’re completely different audience. Let’s see if we can increase that. ASCO’s incrementality getting to people that haven’t previously considered us rather than effectively handing out five pound vouchers at the entrance five foot at the entrance of the store.

Tom

Yeah. We, we talk about that with, um, referral, you know, especially if you think about kind of word of mouth, you, you, you you’ll probably have similar situations where you’ve heard stuff from friends and you’re gonna buy so pharmacist a good example. They’re an online butcher, no link, no customer. Um, but I, I use their stuff a lot and I’ve recommended them to friends. So friends have decided to buy and then they’ve gone, uh, mate, I’m gonna buy from farmlands, got a discount code. All right. So they were gonna buy anyway. Um, but I give them a discount code and then FarmOn give me a discount code. Now I don’t, I have not recommended them because of the discount code. I’ve recommended cause I’ve enjoyed them. So they’re giving off 15% yeah. Here where and everywhere for purchase that were gonna happen at full price. You just think, no, don’t give away. And if you understand where people are driving the referrals for you or you know, where the data’s showing these referrals don’t as I love the analogy, don’t stand in the doorway, just giving people off on the way in. It’s like, thanks for coming to our shop, have a discount. Like, all right.

Tom

I, I wonder where there’s lessons that eCommerce retailers could learn from kind of traditional bricks and mortar. I kind of guess be interesting to get your view. But one thing we certainly see a lot is if you are an eCommerce retailer in, in the UK, for example, the whole of your UK is, is the market. So you’ve got this tremendous reach and therefore you think you should be selling to the whole of the UK, right? So you, you might have your first thousand sales in a thousand towns, right? So you’re not really have any, you don’t have any brand recognition in every, in any town. Whereas if you open your first shop in a town, your first thousand sales often have a lot of buzz and a lot of referrals kind of, you know, you, you generate some noise in that town. And I just wonder what your view of that is. Is there, are there lessons there in terms of if you’re starting out or it’s your first few, first, first few years as, as an e-commerce retailer, whether you should be looking at the whole country or whether there’s bits you can say, take from, from that kind of bricks and mortar playbook.

Ed

So I, I act, no, I think it’s a, a bloody good one, actually, Tom cuz the amount of time and effort and cost that goes into launching a store is huge. You know, you think of all the location data or the mapping info Esri or whoever is that have got those mapping tools and those store planning tools. It’s funny. Yeah. I don’t really know unless you’re a, like a big brand on launching a new market with a lot of money. Why would you target the whole of a country? Like I’m gonna target all of them, like everyone in the whole country. Whereas actually if you said, yeah, but what, isn’t it funny that I actually I’ve realized that 85% of your customers are already in Lagos, you would go, Mmm. Okay. I’ll just spend on my money there then. So I don’t, I think a lot of that rigor isn’t necessarily done and certainly on Facebook, there’s a very much a, um, people, a shotgun approach or kind of just see, throw enough wall and then analyze the data afterwards. And I think there’s a lot of that analysis and planning that could be done up. It would make a massive difference. Certainly. You know, if you’re spending all this money on a, on a, launching a retail store with a footprint, you wanna maximize that, that store catchment area. If you apply the same principle to digital marketing where you can actually turn it on and turn it off and learn from it, why wouldn’t you do that?

Tom

But like how, how do people who are listening kind of get started with this? You know, cuz it’s, it’s all very well to say, use the data, but like how do we, how do we start to bring these, these kind of cultures of measurement into, into the businesses to, to help them help ’em grow, help them move forward?

Ed

I think it’s about first of all, being able to measure the right stuff,

Tom

You know, you know what my next question’s gonna be. Don’t you

Ed

I can tell you now it’s not like some visits and sessions, right? So it’s about measuring the right information kind of top down. So, um, there was a large us retailer. We were just talking about it, just set, pull the call, they published their annual results. Um, head of online published family results. I said, yeah, brilliant. This is super cool. Um, bear in mind, they were the head of online. I said, oh, what is your, what’s your contribution from online for your business? So they sent me a link to the investor report. Okay. So of little bit, bit straight anyway, read the annual report, looked through it. They told, they told me the amount of revenue per square foot, um, across their real estate didn’t publish anything in their annual report. The revenue that did digital contributed or the contribution of digital. Um, so I was like, oh bit weird.

Ed

Even ahead of online. Didn’t even know that number. Whereas you go to like someone I keep going on about Sue neck, but she’ll know that number and other people I’ve met have had huge growth and they know that number. So I think it’s about knowing that number and others within the business. And I kind of put it into four, four camps. And the last one is the one that most people measure first. So number one is outcomes. So outcomes is revenue for me, revenue and costs. So how much money are you making? Is that money increasing over time? Uh, are your costs increasing over time? What does that look like now? Everyone says, oh yeah, yeah. We, we measure that. You’ll be surprised. right in a dig in. I I’m talking about in, in a digital context and you know, you get these dashboards with 16,000 KPIs.

Ed

I think the, the interesting thing in KPIs, the first letter stands for key. So like if you’ve got 16,000 of these things, then metrics, they’re not KPIs, it’s just a brain dump stuff. So number one is outcomes. What are you trying to do? Make money. I’m talking e-commerce yeah. Number two, I call performance. What are the things that have made the outcome work? Things like conversion rate cost per acquisition. I think that’s, that’s quite interesting. But if you look at conversion rate conversion, rate’s gone up or down, which is therefore meant money’s gone up or down, but it doesn’t tell you why. So the next one is diagnostics. Why is conversion rate gone up? Cause we had less basket abandonments oh, that’s really cool. We have more people add to basket, right? So that’s my third one, which is the diagnostics I’m picking it all.

Ed

And the last one and I say this again, the last one, the least important. The last one we should get to not the first one is sessions, visitors and all of, all of the volume stuff, which is context. So I call that volume. Yes. We generated more cash. Brilliant. Our conversion rate was flat. Okay. Our Georgia value was flat fine. The, the add to cart, cart completion rates didn’t change. Great. But we had a lot more visitors in. Okay. That’s great. It’s nice to know that. What I haven’t said is, well, sessions were up 23% and, and conversion rate was up. Oh. And by the way, we generated more cash. I’ve started at cash at the, at the beginning and worked backwards, which then says, what other volume metrics are there? Maybe views maybe, maybe likes maybe, maybe click through rate, but they’re the, they they’re contacts on me.

Ed

I literally couldn’t care less if you had a billion views, if no one clicks through and no one buys. Yeah. It’s great for brand awareness. Don’t get me wrong. I’m in trading mode now. So I’m in, how do I make money? How do I fill the till there’s a whole conversation to be had about brand awareness and those billion views do get your reach and do get your awareness and do get you that kind of back of mind, I’m gonna go and visit on another channel, but I’m not talking about that. Now I’m talking about if you wanna measure whether that YouTube video or that TikTok video or that email campaign, all of those things are valid things. If you wanna know they, whether they generated revenue, look at the revenue, don’t look at the likes. Don’t look at the views. Don’t look at the clickthrough rate. I couldn’t care less about any of that until it results in cash. Now that’s pretty harsh. And I’m looking at it very much from a trading perspective, of course, but they’re my four in that order.

Tom

I think that’s why we got on when we first spoke then. Cause it’s very much what we preach. You know, ads can be what ads or content whenever it might be, they can all be very good at refreshing memory and causing organic activity. You know, if me and you have been in the pub and you’ve mentioned a brand and then I see an ad for that brand, the ad’s done its job, cuz it’s reminded me of a, a slightly ha hazy conversation from a few weeks before, but I’ve not taken any action. And if you take the flip side of that, you know, the metrics first’re like, well the ad that ad’s not performing or that campaign’s not performing, but actually if you look at the revenue, it’s like, oh no, we’re, we’re getting this outsized revenue response. So, um, ed, are there any, some from your side sort of, you know, actionable things people can start to do to, I guess capitalize a lot of, of a lot of what we’ve talked about here?

Speaker 3

Well, I mean, I, I was gonna kind of bring up something on that, on that volume point. Basically. I, I kind of think of that often as, as brand level stuff, your eCommerce ads, while they may be there first and foremost, to try and drive eCommerce sales, they can also drive in store sales. And in particular, if you are a brand that people think of as an in-store brand, you know, people have a filter themselves on, oh, I saw an ad for this pair of trainers in, in, in this shop, which I think of as a bricks and mortar shop, I’m gonna go and buy them at the weekend. And that’s because the person has their point of view on it. Yeah. And I think what we see is that not just people have points of view on these things, but communities have points of view on these things and groups of friends have points of view on, on, on things like this. So, and I think that’s something we see we see a lot is is that, that when you, when you want to market and activate those communities and potentially move those communities online, you kind of have to think about it from that sort of word of mouth perspective. You can use the offline world to spread all this online activity.

Tom

Yeah. A and I guess, you know, this is probably a bigger point for, for another day, but especially when you’re dealing with communities, you’ve gotta understand the experience behind it as well. Because if I’m a, if I’m a group of friends and our activity is going to the clothes shops together, and then afterwards we go out for lunch, you are not gonna drive those people onto your online shop. Right. You’re more likely to, if you remove that option, they’re more likely to potentially shop elsewhere. Right. Because for them it’s the experience of going out with friends. So that’s a lens. I’ve not thought of it. I like that. So I guess with that, let’s, we’ll, we’ll call today’s session time. Um, so I guess thank you everyone for, for listening to another episode, entertaining boys. It’s good to see you. Yeah, well hopefully we can do it again. And likewise ed, thanks for, uh, sort of carrying me as usual. and yeah, we’ll see you all in two weeks time.

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