I was honoured to read our research quoted on the Retail Systems blog last week. The post draws attention to the underlying opportunities that online retailers are missing.

It is true that online sales continue to grow at a staggering rate – up 18% this Christmas from 2009 and accounted for about 10.6% of all retail sales. Without a doubt, this is phenomenal growth at a time when household budgets are under the cosh and overall retail sales were down. But if we dig a little further into the figures we see that there is a weakness that is hidden by this topline growth.

Within our TrendSpot Christmas project we survey what people expect to spend at Christmas and then compare what they actually did against this. This extra analysis uncovers an important insight: Online sales should have been higher.

If online retailers were on top of their game, they would have achieved higher sales in both 2009 and 2010. In 2010, 89% of people had planned to shop online but in fact only 81% actually did and of those, 68% experienced some kind of problem and 25% spent less as a result. In short, less was spent online than customers had intended.

The bad weather partly explains this poor performance, with snow delaying deliveries. However, customers also spent less online than they had planned in 2009, when 48% experienced problems and 29% reported stock shortages, indicating retailers weren’t keeping up with demand.

The online retail sector needs to grow up and come of age. Here, I strongly agree with the conclusion of Scott Thompson, Retail Systems, “Online retail will no doubt continue to perform strongly during 2011, but the Intersperience research shows that there is much work to be done on the customer service/satisfaction side of things”

Online retail needs to improve in the following 5 ways;

1. Fulfillment and customer satisfaction. An area that the Christmas data shows to fall short of expectations.
2. Customer service. One area where online retail falls far short of the high street.
3. Understand customer needs. Online shoppers are not homogenous. Understand the different needs of each segment and design services to meet each.
4. Improve the customer experience. This has improved in leaps and bounds in recent years but each customer group will have a different browsing style and level of confidence. Serve each differently.
5. Becoming truly multi-channel. Partly about a ubiquitous presence on all channels but increasingly about understanding the ‘role’ that each channel plays in supporting the other. For example, mobile is unlikely to be a key transactional channel just yet but it does play an important role in the decision making process.

Our February eJournal will have a feature on this issue. Sign up here. It will be published mid-February.

See also "Online sales fail to meet expectations"; 1 in 6 gifts go missing

See also "Online shopping fans"; Under 25's enjoy online shopping less than over 25's