Australian Retail Adoption Plans for Online Advertising and E-tailing

Australian Retail
Adoption Plans for
Online Advertising
and E-tailing
AIMIA RESEARCH FINDINGS • MAY 2012
RESEARCH CONDUCTED BETWEEN
SEPTEMBER 2011 AND JAN 2012

SPONSORS:

Foreword
On behalf of AIMIA, it’s my pleasure to be involved in the publishing of our second independent
research report in an ongoing series: Australian Retail Adoption Plans for Online Media and
E-tailing.

There is much published in Australia about the growing adoption of e-tailing by consumers and
the impact of international e-tail competition, however, this is not the focus of this report. Our
research looks at tracking what Australian retailers themselves are doing about adopting and
evolving their “omni-channel” offering. The research aims to give retailers and our members an
independent benchmark by which to assess their own business priorities and opportunities in
this space.

This year’s research shows, as expected, growing adoption rates across the board for
interactive, digital and e-tail services as retailers reorganise resources to focus more attention
on the digital consumer, but also highlights the internal resourcing and cultural barriers that are
hampering more rapid successful implementation. The stark reality for the industry is there
are precious few senior, experienced “client side” personnel in Australia – meaning most retail
organisations are learning as they go. This places Australian retailers at a disadvantage, when
experienced international retailers enter Australia – either directly through stores or simply
through online marketing to Australian audiences.

I’d like to thank the people within AIMIA, the ACRS and our sponsor organisations for the work
that has been done to bring this important research work to fruition in 2012.

Robert Wong
Chair AIMIA Retail Industry Group
CEO CC Media iNC Network

Australian Retail Adoption Plans for Online Advertising and E-tailing • 2012 Page 2

Executive summary
The current state of online retailing and marketing in Australia
• 75% of all retailers (large and small) now have an online presence and 43% are selling online.
• 88% are advertising online (even without a website).
• Retailers are using a wider variety of digital channels/tools with email, social, video and mobile
growing rapidly over the last year.
• Almost a third of retailers are leveraging social media, but there is still uncertainty as to how to
extract maximum value from it.
• Mobile e-tailing is embryonic for most, perceived as expensive – but having huge growth
potential.
• Retailers are using their TV resources to create content – not just ads.
• SEO, email and SEM are the most popular forms of online promotional strategies.

The current barriers to online channel entry/growth
• Internal expertise, organisational culture, systems integration, and supply chain management
continue to be the biggest barriers to growth.
• Hard to find experienced senior operation staff who know e-tailing (not just technology).
• Consumers are not the problem (they get it and want it).

Retailer digital plans and goals for 2013 and beyond
• 86% of retailers will increase their online budgets to further focus on driving sales (through
both physical and online stores) and building multichannel operational capabilities.
• Retailers are reliant on a wide number of external partners to set & implement strategies.
• Most Australian retailers have accepted e-tailing is not going away.


Contents
Research overview 5

Section1: The current state of online retailing and marketing 6

Section 2: The perceived barriers to online channel growth 15

Section 3: Retailers’ digital plans and goals for 2013 & beyond 20


Research overview
To understand online retailing and marketing in Australia, AIMIA engaged Dr Sean Sands from
Monash University’s The Australian Centre For Retail Studies.

Qualitative research was first performed, consisting of 20 interviews with large Australian retailers.

This was followed by an online survey of 169 Australian retailers, and compared to a similar 2010
survey of 128 Australian retailers

Respondents represented a cross section of retailers in terms of:
• Size (revenue, number of stores)
• Retail sector
• Respondent division or department
• Structure (Pure online retailers, bricks & clicks, pure bricks & mortar)
• Franchises versus company owned


SECTION 1

The current state of
online retailing in Australia

“
It has become more of a priority for all retailers
to become active in the online and digital space.

Australia has, for a long time, hidden behind
the fact that we’re so far away from everything
... Now with the growth of e-commerce, and
the fact that there’s so many more companies
shipping to Australia from overseas, we can’t hide
behind that anymore.

There’s no boundaries for Australian retailers, we
have to embrace it.
—EYEWEAR RETAILER


Channel adoption
75% of retailers now have an online presence

78%
The vast majority of retailers with 75%

multiple stores have an online presence
(78%). This means they have a consistent
online website which may have online 46%

purchasing capability.

Even small single stores are putting more
effort towards online, with 46% having an
online presence.

All Multiple Single

Retailers who have an online presence

Almost a third of retailers are leveraging social media, but there is still
uncertainty as to how to extract maximum value from it.

Retailers are beginning to understand the nature of social media
and its business value.

Social media is being used to engage customers and gather
insights, but not necessarily as a direct sales channel.

It is used primarily for engagement and tracking brand
conversations.

Some retailers fear losing control of their reputation because
they don’t control the messages.

Facebook is the most dominant social network for retailers.

Social media is a work in progress.


Retailers are exploring a range of digital channels to reach customers

73%
Website
55%

Physical store (strip) 69%
83%

Physical store (mall) 50%
54%

Online - email offer 47%

43%
Social networking sites

33%
Catalogue - paper based
41%

31%
Online - video content

30%
Online catalogue
31%

26%
Mobile (iPhone app, SMS)
19%

20%
Shopping comparison sites

19%
Online - coupons

19%
Call centres
18%

19%
Online - consumer review sites

10%
Self-service or information kiosks
6% 2011/12

9%
Mail order 2010
18%

Clearly, physical stores are still important for For online channels, website is still the most
retailers, but an increasing array of go to market common, but email, social networks, online
channels are being explored. catalogues, video and mobile are on the rise.


Smart mobile is being used to make customer interactions easier

Mobile is seen as a key tool being used by consumers – in-store,
for pre-purchase research and location-based information.

Retailers recognise the importance of using mobile micro-sites
or apps to enable customers to easily view and access their web
content, but not all have detailed strategies in this area.

They see mobile as being able to integrate the online channel
further – social media, online, couponing, location-based
information, catalogues.

They believe the link between mobile and social media is
important as consumers also access social media from their
smart phone, but do not have highly developed strategies.

Retailers perceive the cost of creating mobile micro sites as an
inhibitor.

Video is used to bring content, products and processes to life

Fashion, electronics and hardware categories appear to be
strongest in using video, where they can leverage advertising
resources to create content.

Video content is seen as important by most retailers.


Multichannel is evolving rapidly

Many of Australia’s larger retailers moving to e-tail enablement
across their product range. David Jones announced in April
2012, that they are embarking on a major project to be able to
photograph up to 90,000 products and make them available as
part of their E-tail strategy.


Use of online throughout the Consumer Decision
Making Process
Online capabilities are changing as capability increases

There are varying degrees of online capability amongst retailers, with a spectrum from:

Informational
• Retailers offer the online channel for information, such as store locators and product
information.
• Retailers at this stage of adoption tend to either see transactional capabilities as too difficult
or as sufficient for their customers, i.e. their product categories do not lend themselves to
online transactions.
• These retailers tend to focus on rudimentary objectives and measures for online, such as
website traffic numbers.

Fully integrated and transactional
• These retailers strive to manage integrated multiple channels to deliver seamless information,
education, purchase, support, and even entertainment across platforms.
• These retailers are beginning to look at conversion, contributing brand metrics and ROI.

The primary role of a retailer’s website is advertising, but other uses
are developing as capability increases

63%
Loyalty or repeat purchase Sample percentage
4.4 who have implemented
Importance —
Feedback 65% mean rating (1–7)
4.9

After-sales service 55%
4.9

Transacting 43%
4.8

88%
Advertising
6.0

Online advertising was deemed the most After-sales service and transacting are
important and had the highest penetration important but show lower implementations
at 88%. The way advertising is presented on due to the organisational complexity in offering
the website can vary from simple broad sale them.
messages to full product and price display.

Loyalty and feedback are deemed important,
but most functionality is rudimentary, e.g. few
link loyalty schemes to online behaviour.


SEO, email marketing & SEM are still the most popular media for
advertising & promotion

Mean rating of popular media usage
1.0 7.0

Search engine optimisation 5.9
5.8

Email marketing 5.7
5.8

Search engine marketing 5.5
5.3

Traditional media 5.3
5.5

Online catalogues 4.8
4.8

Social networking widgets 4.7
4.3

Mobile marketing 4.4

Performance based online media 4.4

Syndicated content 4.3

Banner advertising 4.3
4.0

Online video advertising 4.3
3.7

Price comparison websites 4.2
3.9

Syndicated content 4.1

Ad networks 4.0
3.5

3.9 2011/12
Affiliate programmes
3.9
2010
3.8
Online couponing

Traditional media still lags behind online and interactive media.

The top 3 digital media are: The least popular media are:
• Search engine optimisation • Online coupons
• Email marketing • Affiliate programs
• Search engine marketing • Ad networks


On average 43% of retailers are selling online, but retailers with 50-100 stores
are rapidly embracing online selling

73%
71%

42% 43%
38%

28% 25%

1 store 2-10 stores 11-30 stores 31-50 stores 51-100 stores 100+ stores All

Retailers who sell online

Small single retailers are resource and market Larger stores 100+ are slower and are often
constrained. impeded by franchise and organisational
momentum.
Stores with 50-100 stores are embracing online
more rapidly. This is because they have resource
capacity and realise online selling offers them an
increased footprint.


Customer, Sales and Revenue outcomes

Online stores are becoming top performing stores

Many multichannel retailers commented that their online store is
fast becoming a top performing store.
Leading multichannel retailers measure the online store relative
to physical stores.
Some online stores have developed into their own profit centres,
therefore reinvesting based on profit.

Online’s share of revenue can be high for smaller retailers

44% 50%
40%
30% 33%
1 store 2-30 stores 32%
22%
17% 20% 19% 20% 20%
14%
11% 10%
31-100 stores 100+ stores 7% 10%
0% 0% 0% 0% 0% 0% 0% 0%

Less than 3% 3-5% 5-10% 10-50% 50-99% 100% I don’t
know

In the majority of cases retailers confirm that 33% of retailers with 100+ stores do not know
e-tail sales are less than 5%. how much online sales contribute to their total
sales revenue, which suggests it is not significant.
Some smaller retailers are recording a much
higher e-tail sales share.

One in five retailers say 60-99% of their customers are active online shoppers

31%
20% 17%
10%
9% 7%
2% 4%

I don’t 100% 60-99% 40-60% 20-60% 10-20% Less than None
know 10%

Retailers have said significant numbers of their Only 4% of retailers believe none of their
customer base are active online shoppers. customers shop online.
20% of retailers surveyed said that 60%-99% of 31% of the sample did not know – which
their customers are active online shoppers. indicates many retailers are not actively
considering this metric.


SECTION 2

The barriers & enablers
to growth online

“
In the next 18-24 months, the online landscape
is going to be significantly different to what it
looks like today.

At the moment, there are not that many big
brands trading online, and I guess the consumer
is probably thinking, “Why isn’t X brand or Y
brand online?”

It’s exciting that some major players are now
making the decision to venture into the online
space ... it’s going to give consumers more
confidence to shop online.

—FOOD RETAILER


Barriers
Retailer barriers focus on systems, supply chain and people

Mean rating of current retail systems
1.0 7.0

Integration of systems with existing
business model 5.0

Changes to supply chain management 4.7

Internal skill sets in e-commerce 4.6

Physical distribution of goods 4.4

Organisational resistance to change 4.4

Franchisee pressure 4.3

Fulfillment management & customer
4.3
experience
Buying products that are conducive to 4.0
online selling
Warranty & returns management 3.9

Measuring ROI 3.9

Management support 3.7

Other 5.9

Systems integration and supply chain While several retailers are moving towards
management are the most common barriers. dedicated internal resources, there is still a lack
of sufficient expertise.

Customer barriers are relatively low

Mean rating of customer barriers
1.0 7.0

Shopping online 4.1

Payment concerns 3.8

Security of personal information
3.7

Spam concerns
3.7

Australian retailers believe customers are fairly this is more reflective of Australian retailer
comfortable with buying online. competitiveness, rather than a consumer
barrier).
Shipping costs were nominated as the biggest
barriers to customers shopping online (but


Strategy development
Overall, organisations are placing greater priority on the online channel

Retailers are placing greater priority on:

Resources: especially people – some retailers are moving
towards creating a multichannel division. However, there are
significant problems in securing experienced skilled staff for
online e-tailing.

Systems: mainly backend and support infrastructure. Retailers
are thinking more deeply about multichannel integration, as
opposed to stand alone e-tail businesses.

Budgets are being allocated, but this tended to be tied to short
term marketing/ sales performance.

Organisational structure is evolving

The composition of the digital/ online team within an
organisation differed across retailers.

Savvy retailers were looking to recruit multichannel directors/
managers and also attempting to create cross-functional teams.

Sometimes a stand alone unit had been created within the
organisation, with the common reporting line to general
management.

Often the structure remained within the marketing team.

Support typically still sits within marketing, but in some instances
it lies with senior management.


Online strategy development is shifting away from the Marketing Department

Within the marketing department 36%
51%

Across multiple departments 27%
22%

Within a standalone business unit 20%
20%

There is no organised online 14%
2011/12
operation/function 8%

2010
Other 3%
0%

The Marketing Department is still the most Slightly more retailers are managing the online
common area from which the online strategy strategy across multiple departments.
is developed, however it is substantially lower
than in 2010.

Although strategy is driven primarily by senior management, an abundance of
external resources are being used
Senior management 67%
70%

Agencies 36%
37%

Technical support 31%
38%

Other internal staff 30%
38%

External industry contacts 21%
24%

e-tailing specialists 20%

We do not obtain support 14%
5%

External industry contacts 13%
15%

External retailers 10%
9%

Senior consultants 9%
13%

Industry bodies 3%
2011/12
2%

2010
Other 2%
2%

Only 14% of retailers do not engage external strategy support.
36% of retailers rely on agencies.
31% use external technical support.
Consultants play a minor role, at 9%.


Smaller retailers are prioritising online spend

65%

34% 37% 33%
29%
26%
22% 20%
17% 17% 17% 15% 17% 17%
13%
5% 6% 9% 6% 8%
0% 4% 0% 0% 0%

I don’t know None Up to 10% 10 to 20% More than 20%

Online retailing — %
share of total marketing
budget Total 1 store 2-30 stores 31-100 stores 100+ stores

Budget does not sit within marketing Over 20% of larger chains have their online budget sit
outside of Marketing.
100+ stores 25%

29% of retailers with 100+ stores dedicate up to 10%
31-100 stores 23%
of their marketing budget to online.
2-30 stores 9% 65% of retailers with 31 – 100 stores dedicate up to
10% of their marketing budget.
1 store 22%
Over 30% of small chains and single stores dedicate
Total 16% over 10% of their marketing budget to online.


SECTION 3

Retailers’ plans
for 2013+

“
The online channel is extremely important –
number one.

It has become a new revenue channel for
the business; 12 months ago we weren’t
trading online.

It’s become a profit centre in its own right.
We are seeing it as one of the channels
that is going to give us significant growth
over the next 12 – 24 months.

—ELECTONICS RETAILER


Budgets
83% of retailers will spend more on online

Survey on budget allocation

It will decrease 3%

It will remain the same 14%

It will increase 83%

Retailers expect the share of advertising budget There is clear evidence from this study that
allocated to online activities will increase over retailers will be spending more on capital
the next 3 years. development as well as marketing.

Email marketing, SEO and online catalogues are the most important tools
for advertising and promotion in 2012/3

Email marketing 60%
67%

SEO 56%
57%

Online catalogues 37%
47%

Banner advertising 28%
24%

Social networking widgets 28%
24%

Online coupons 19%

Mobile marketing 18%
16%

Online video content 17%

SEM 17%
36%

Ad networks 12 %
2%

Click-through advertising 4%
9%

Syndicated content 3%
2011/12
9%

3% 2010
Affiliate programmes
12%

Retailers were asked to rate the three most But there is also clear evidence that retailers
important digital tools for the next 12 months. are increasing spend across a variety of online
advertising vehicles (e.g. online coupons).
The top 3 are:
• Email Marketing
• SEO
• Online catalogues


Goals and strategies
Advertising and enabling e-tailing are key focus areas

Main focus areas for online in the next 12 months

Enable online selling 31%
41%

Advertising & promotion 25%
45%

None of these areas 16%
4%

Increasing retail brand awareness 16%

Optimise the mix/efficiency of 7%
advertising options 2011/12

Encourage post-purchase interaction 4% 2010
10%

The main focus areas for online for the next 12 months are:
• Enabling online selling
• Advertising and promotion
• Increasing retail brand awareness online

Retailers will focus on online sales and leveraging insights

Retailers are focused on increasing sales through the online channel:
• As it enables an extended footprint.
• To retain some of the online dollars spent with overseas online
retailers.
• To convert online customers into purchasers.

Many retailers plan to gain and leverage customer insights:
• By leveraging their online/social community using survey tools and
social media posts.
• Using consumer reviews.
• Integrating CRM programs to improve offerings and
communication.


Driving traffic to both physical and online stores are the most important
online sales strategies
The most important online advertising strategies in the next 12 months

Driving traffic to website 88%
88%

Driving traffic to physical stores 85%
69%

Building a customer database for 44%
marketing 62%

Building an e-commerce capable website 41%
56%

Establishing a dedicated internal 23%
online division 15% 2011/12

Other 19% 2010
10%

Respondents were asked to rate the three As in 2010, the most important strategies in
most important online advertising strategies for 2012 were:
enabling online selling for their organisation in
• Driving traffic to stores
the next 12 months.
• Traffic to websites
• Building customer databases

18% of retailers believe group buying will impact them in 2012

Perception of buying groups’ impact
on retailing for the year ahead

Respondents were asked if they
41% 41%
perceived buying groups as having an
impact on retailing for the year ahead.
18%

Only 18% believed there would be an
impact, whilst 41% were unsure.
Yes, some No, no Don’t
effect effect know


“
The reality is, businesses that don’t embrace
online in the next 12-24 months won’t have
a business in the long run.

Executives in most organisations are now
realising that they need to be online. And
it’s not good enough just to have a presence
nowadays ...

Consumers out there have an expectation,
and unless you are serious about it, they’re
going to work out pretty quickly that you’re
not serious about the channel and they
won’t engage with you. Ultimately that will
affect your bricks and mortar business.

—ELECTONICS RETAILER


Sponsors & acknowledgements
Sponsors

Reactive is a digital agency specialising in strategy, creative, technology
and marketing with 100 staff across our five offices in Melbourne, Sydney,
London, Auckland and New York. Our reputation is one of excellence and
reactive.com innovation in the online channel—evidenced not only by the quality of work
that we do but also by the results we achieve for our clients. Over the past
fifteen years, we have designed, built and marketed eCommerce Web sites
for some of Australia and the world’s most prestigious retail brands, such
as Rip Curl, General Pants Co, British Airways, Bras N Things, GAZMAN,
Crumpler, Berlei, Emu Australia and Tesco.

The iNC Network is the largest digital catalogue distribution network in
Australia, reaching in excess of 4 million Australians every monthacross
multiple digital devices including pc, mobile and tablets. We work with
Australia’s largest store retailers to reach online consumers whether they
are in their home, in transit or at work, to drive both off and online sales.
iNC is part of CC Media and the APN News Media Limited.
incnetwork.com.au/

The Australian Centre for Retail Studies (ACRS) is an independent retail and
consumer research centre based within the Department of Marketing in the
Faculty of Business and Economics at Monash University, Caulfield Campus. The
ACRS provides a range of research and consulting services to the private sector
and government clients, with a particular emphasis on retail and consumer
research. Research priorities are developed in consultation with industry clients
and promote research-based knowledge and thought leadership.

Acknowledgements
AIMIA would like to acknowledge the AIMIA Victoria committee, the AIMIA Retail Industry Group and Janine Wiedermann
(report editor) and Dr Sean Sands from the ACRS in combining to produce this report.

If you would like more information regarding this report, to inquire about sponsorship of the 2013 report please contact:
Robert Wong – AIMIA Retail Industry Group Chair—robertw@ccmedia.com.au 0419238768—or www.aimia.com.au


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