Reports of the death of the high street have been greatly exaggerated. From big data to location targeting and social media, Hugo Cox discovers how virtual and actual smaller retailers are tracking down digital channels that work for them
“Pivot” is one of those words beloved of management consultants and MBA graduates. It describes the process by which firms start off down one business line, but switch – pivot – when they see that a related business is where the money is.
London-based Artfinder provides a recent case. When it launched, in 2011, its sights were set on providing the art world with its own IMDB, the online film encyclopaedia bought by Amazon in 1998. By last November, it had a website full of traffic, supported by recognition software that lets you identify works of art by photographing them on your phone. It also boasted more than 100,000 Facebook fans and an engaging app. But it had no revenue.
“We realised there was a demand out there for selling art online,” says Claire Howard-Jones, Artfinder’s marketing director. “So we stopped being an art information service and launched the e-commerce website.”
To find out what people wanted to buy, Artfinder employed a focus group. This revealed that people with £500 to spend prefer an original oil painting that they could call their own, even though it holds its value less than a limited-edition print from a famous artist. With their stock heavily biased in favour of reproductions, this was a crucial insight.
After a traditional start with the focus group, customer feedback has come thick and fast through digital channels. For example, the team assumed that people took several months to make up their mind about what art to buy. But when they experimented with emailed discount codes, they found that even strangers to the website would buy within an hour, if given a modest welcome gift of £20.
The shift to e-commerce has transformed Artfinder’s business model: sales doubled every month in the first three months of 2013. But it has also forged a new way of working for the firm. “Test and learn – this is probably the most important insight,” Ms Howard-Jones concludes. “And don’t think you always know how people will buy your product.”
Three years ago, with fewer customers on the high street and rents in shopping centres becoming prohibitive, this Edgware Road-based premium watch seller was searching for an online strategy.
“People were talking about individuals who had set up businesses on eBay in the United States and had become millionaires almost overnight,” recalls David Epstein, e-commerce director at Peter Burrowes, which owns WatchWarehouse. “[So] we realised that moving online didn’t have to mean doing it all yourself.”
WatchWarehouse got help from a devoted eBay enterprise programme team, tasked with facilitating business-to-consumer (B2C) marketplaces within the traditional customer-to-customer (C2C) platform. This included advice about keywords for listings, recommendations for software providers and tips about social media.
On the high street, WatchWarehouse had always led on customer service. But the firm quickly realised that online expectations were huge: customers have no patience with unfilled orders, unanswered emails or displayed stock that turns out to be unavailable. A new philosophy was born which the firm has adopted for all its e-commerce activities, notably its recent website. “It’s an article of faith in which we’ve trained our whole team: the content and the product have to match,” says Mr Epstein.
One of the key benefits that platforms such as eBay provide firms like WatchWarehouse is data aggregation. With thousands of similar retailers using their service, they can produce detailed insight into customer needs, which smaller businesses (SMEs) couldn’t afford to research by themselves.
Alastair Lukies, chief executive of mobile payments company Monitise, believes that retail SMEs should look increasingly to their banks for these aggregation services. Banks have stacks of granular data on people’s purchasing habits, including what they spend on most, when they spend and through which channels. SMEs are high-margin clients for banks and will look to use this information to win and keep their business.
Mr Lukies believes the banks won’t stop there. “Why wouldn’t they put together a marketplace which offers their retail customers preferential rates at their SME customers’ shops?” he asks. There are clearly projects in the pipeline, but he’s giving nothing more away.
With little time and modest marketing budgets, working out which digital channels to concentrate on is vital for retail SMEs.
After two years of selling extreme running, cycling and triathlon races through its website, the Endurancelife team had a suite of electronic newsletters, blogs, paper advertising and brand ambassadors.
“But [despite all that] we weren’t seeing the results we’d hoped for,” says the firm’s director, James Barker. “And in the absence of accurate measurement data for how these channels were performing relative to each other, we couldn’t see where we were going wrong.”
More by luck than judgement, Mr Barker admits, Endurancelife chose to focus on Facebook. “Businesses were just starting to use Facebook more intelligently and we were attracted by the instant feedback it offered,” he explains.
By concentrating on a single social channel, the firm soon worked out what was working. “We simply look at the total numbers of ‘likes’ and comments to gauge what is engaging our followers,” he says. “Any number of likes over 50 is a success for us – it’s as simple as that. We used to put things up which got five or six ‘likes’ and thought it was working – [but] now I think it was just adding low-quality content and turning people off.”
Soon Endurancelife was using Facebook for research and development. “Our order sizes aren’t huge and we can’t pay the best consultants to advise on what next year’s best colour scheme is going to be, so we started posting proposed designs and waiting for comment,” Mr Barker says. Facebook solved the firm’s advertising conundrum, too. Paper ads were expensive and untrackable; through Facebook, Endurancelife can reach 30 to 35-year-old males who like triathlons in the South West of England, he explains.
Endurancelife had started out ten years ago as an online booking platform for other firms’ events, before realising that the hot space was putting on or running events themselves. When the community was large enough, the firm added an online store, comprising popular endurance products and their own line of merchandise. This now provides about a fifth of its revenue.
Position data from mobile phone operators is a gold mine for local bricks-and-mortar retailers looking to lure in potential customers nearby. O2’s Priority Moments provides local businesses with a simple platform for mining it, which it extended last June to SMEs alongside national chains.
“I heard about Priority Moments from a couple of O2 reps at a local festival in Rochdale where we had a stall,” says Hash Ali. He runs Perito’s, a casual dining restaurant serving Portuguese and Mexican food in Rochdale, which is about to launch franchise outlets in Manchester and Bolton.
Mr Ali quickly learnt he had to offer proper discounts through the service to get people in. But when they came, they came in droves. From his first offer – 30 per cent off the total food bill – he got 108 customers over two weeks, half of whom arrived immediately, and he reckons about 50 of these customers returned.
“I got the hang of it quickly by pretending I was a customer and wondering what would get me in,” he says. “We also noticed that we tended to get a rush of customers in the last couple of days before an offer expires [the typical duration is two weeks] so we needed to be ready for that.”
Alongside the mobile marketing facilitated by O2, Perito’s has prioritised its social strategy to build loyalty. A Google search reveals that its Facebook page and the “Perito’s community” section of the website both come up ahead of the website homepage. A YouTube “Man v Perito’s” channel features videos of tattooed local rugby players ploughing their way through 20 hot wings in the 20-minute challenge.
Indeed, there’s not much that Perito’s doesn’t share with its customers. The website features status updates on the franchise roll-out: fans in Manchester will now be pleased to learn that “a decision has been made to progress talks with a site”.