Raymond Snoddy continues his series of Raconteur interviews in conversation with a leader of the online retail revolution
Alex Baldock, chief executive of online retailer Shop Direct, believes a massive shift is affecting retail – and not just the obvious move to online.
“People talk about it as the mobile revolution and that is one way of looking at it. We prefer to look at it as the ever-connected customer,” he says.
The big implication for retailers, some of whom understand more than others, is that it is connectivity that is changing the behaviour of customers. Four out of five smartphone-users, for instance, are connected all day and engage in multiple tasks.
“Retail is competing as never before for attention and spend, not just against other retailers, but against other forms of activity completely, such as gaming and entertainment,” argues 43-year-old Mr Baldock, who runs six online department store brands under the Shop Direct corporate banner.
The origins of the company, which has annual revenues of £1.7 billion and five million customers, goes all the way back to the catalogue companies of Littlewoods and GUS, before the business was bought by the Barclay brothers, Sir David and Sir Frederick.
Already 40 per cent of Shop Direct’s sales come from mobile devices, compared with the industry average of 30 per cent for non-food mobile sales.
The challenge for retail now, Mr Baldock says, is that while tablets account for nearly two thirds of all mobile retail sales, it’s also the area where consumers are least satisfied with the shopping experience.
“Retailers would be well advised not to count on customers cutting them any slack. Not everyone is doing a good job,” insists the executive who sounds as if he is permanently switched on himself. Relaxation on Sunday mornings often takes the shape of running the equivalent of a half marathon before his four young children are awake.
The big implication for retailers is that it is connectivity that is changing the behaviour of customers
Mr Baldock goes further and argues that, even when you have got your customer experience working well on a tablet or a mobile, this is only the first step. Retailers then have to find a way of fitting into the “connected clamour” of a customer’s day and the fact that the path to an actual purchase can be fragmented.
The Shop Direct executive tells the real story of how one of his customers bought a Myleene Klass red dress at Very.co.uk, the company’s more aspirational brand. A luxury version, Very Exclusive, will launch at London Fashion Week next February. The customer read about the dress in the Very magazine, was reminded by a party dress promotional e-mail, browsed online, looked at alternatives, discussed it with friends on social media before choosing payment and delivery options.
“This whole journey took a week and five different interactions with the Very website on three different devices before she bought it on her laptop at 10pm one evening while watching telly,” says Mr Baldock, who visits the homes of individual customers several times a year, as do all Shop Direct executives.
Shop Direct knows a great deal about its customers because more than 85 per cent of sales are already online and there are close to 900,000 clicks a day on the company’s websites, all of which can be sampled.
Paper catalogues are still printed, but their number is in sharp decline and has fallen from 14 million to around 1.5 million over the past five years.
Uniquely, more than 90 per cent of sales also involve some form of Shop Direct’s own credit systems, giving the company valuable risk assessment information on customers, who are generally not the most affluent.
Despite all the data, Shop Direct, which has had no physical shops since the sale of its Littlewoods stores in 2006, is trying to get even closer to how its customers behave by setting up a user experience lab at its Liverpool headquarters.
At the lab, staff watch as customers browse on Shop Direct sites and respond to variants on the customer experience. The aim is to further develop “funnel analytics” – finding ways to improve the average online industry conversion rate from visits to sales of about 2.7 per cent.
Tiny details, such as the colour of the conversion button, can make a difference. Yellow works particularly well for some customers. Predictive text is important. Too many key strokes put shoppers off.
The addition of “persuasive messages”, where customers see pop-ups that highlight a best seller, or whether a particular item is about to run out of stock, also helps sales. So far persuasive messaging has lifted conversion rates by almost 3 per cent.
“We did 12 experiments, such as persuasive, last year. We will do 1,500 next year, building on the user experience in the lab,” says Mr Baldock, who believes that mining Shop Direct’s extensive data amounts to “the Crown Jewels” of his business.
Increasing personalisation is another likely outcome, and competitive advantage, for online retailing. “Selfridges cannot lay out the store differently for every customer who walks through the door, but we can,” says the Shop Direct chief executive.
The wealth of data means the individual customer experience can be tailored to cover everything from the order in which products are presented, to how they are merchandised and promoted, and the credit terms offered.
The overall approach, Mr Baldock insists, means Shop Direct has not been hurt by the rise of cut-price competitors. The company “man-marks” individual prices of rivals and makes sure the overall package, including customer credit, adds up to “value for money”.
The future will be the same only much more so, the Shop Direct executive believes.
By the end of the decade there will still be bricks-and-mortar stores for those who do “the immersive experience” well, but they will have to do it well.
Migration online will continue and the retail industry, in five years’ time, is going to place an even greater premium on knowing the customer.
“The retailers that can marshal this data and turn it into easy experiences for the customer, and tailor this experience to make it relevant to them, those are the businesses that are going to prosper,” says Mr Baldock, who obviously believes Shop Direct will be one of those businesses.
In the meantime, one personal challenge remains, coping as an unrepentant Chelsea fan living in the football-crazy city of Liverpool.