2010 has been a challenging year for Canadian retailers. The Canadian Retail Sales indicator released by Statistics Canada for the last few months showed that consumer activity is not progressing as the market expected it would. Reitmans Canada Ltd., the largest publicly traded specialty fashion retailer in Canada, also reported 2010 third-quarter sales lower than a year ago.
Besides the tough economic environment, retailers are bracing the tide of U.S. and European retailers who have been aggressively entering the Canadian market this past year. Added to that, the U.S. retailers are just that much more aggressive with their pricing, offers and promotions and in inventing more occasions and reasons to shop. In light of which, Canadian consumers are crossing the border — both physically and online — to shop with U.S. retailers.
This trend is impacting not only market share and profitability for Canadian retailers, but also their ability to survive in this new retail climate. Just last week, Boutique Jacob Inc. filed for creditor protection.
Canadian retailers have long predicted this day would come and now the reality is kicking in. Visionary retailers such as Lululemon Athletica have long been prepared for this eventuality — and today the company is making great strides. One of its keys to success is its strategic investment in e-commerce. Lululemon, in its latest 10-Q financial report, reported net revenue from its direct-to-consumer segment (mostly through the Internet) increased 285% to $32.8 million, whereas overall company revenue grew at 60% (still is very impressive). Aldo is another great example. Its cautious yet strategic investment in e-commerce has allowed the company to defend its dominant position in the Canadian marketplace while successfully competing with U.S. retailers to gain market share across the U.S. border.
This year is a significant one for Canadian specialty apparel retailers in e-commerce. Many have finally launched their e-commerce sites. These include Garage, La Maison Simons, La Canadienne, Le Chateau and few others. And just last week, Reitmans also launched its long-awaited e-commerce site. We can expect this trend to continue into 2011. Aritzia announced on its Facebook page that it is working on launching its Web site. Whether a strategic move on the part of Canadian retailers or simply something they had to, a bigger Canadian online retail presence is all a good news for shoppers, brands and the Canadian retail market overall.
Having a Web site will open many doors and possibilities for these new e-commerce and multi-channel retailers to unleash their growth potentials. But to succeed, Canadian retailers must strategically position e-commerce as part of an overall corporate growth strategy and not just another "store." And that understanding is what differentiates a winning multi-channel retailer from the others. It is mission-critical that these newcomers to e-commerce continue to build on established competencies and business know-how when expanding online.
Here are some of the key areas that newcomers need to consider... especially when creating strategic direction, allocating resources and setting priorities for the coming year.
- User experience – Rule #1: speed, speed, speed. Make sure your Web site is fast to load. The consumer simply has no patience for Web sites that are slow. Also, make sure to provide all the Web site features that are expected in today's online shopping, such as site search, guest checkout and multiple product viewing.
- Online merchandising – You are not in the business if you simply assign your products to their respective categories and leave it at that. Shoppers want to know what you have in store for them — and they want to know quickly. You need to translate your merchandising point-of-view and fashion promises online to attract and "seduce" your audience. A new skill you will need to acquire is the ability to speak directly to your customer about fashion trends, sale events, the must-have. Optimizing the product assortment will be another big opportunity. Eventually, you will be in a position to leverage the online channel to assist in product development, buying and planning processes.
- Online marketing – Now the marketing function must take into account online marketing programs such as email, search and affiliates as well as social media through Facebook, Twitter and other major social platforms. You must build an integrated marketing plan to drive sales, to acquire customer, and to build on customer loyalty and branding.
- Contents – Content is king. Content such as how to winterize your boots allows you to merchandise and market on the Web, blogs, Facebook, Twitter and more. In this digital social age today, content gets social and it sells.
- Delivery – Customers want it now and want it fast. Instant gratification is the rule of doing business online. It is a must to provide the lowest shipping fees — free if possible — in the fastest time allowable.
- Multi-channel experience – Shoppers do not see themselves interacting with a store or a Web site. Instead, they see themselves interacting with a brand. They want to be recognized when they visit a store, go online or call the 1-800 number. They also expect to be able to do everything from inquiring about their order to making an exchange or return with the channel of their choice.
- Customer service – Great companies are built on the fulfilled promise of great customer service. Legendary companies such as Lands’ End exist and remain strong company today mostly due to their impeccable customer service. In selling online, your store is open 24/7 and therefore, your customers expect you to be ready to provide customer service 24/7 and not just during regular business hours. This is a cost of doing business online and must be built into your P&L. In addition, today’s customers expect to interact with you through many different mediums — from a store visit to a phone call to email, chat and more.
- Analytics – Three must-haves for business doing online: a clear e-commerce P&L, a set of measurable objectives, your ability to test and react. And if you can’t measure it, you can’t manage it.
- U.S. market – The Canadian market is only about one-tenth the size of the U.S market size. Smart retailers such as Aldo have long been crossing the border to do business. Certainly it will be easier to establish a brand if you already have a brick-and-mortar presence in the U.S. However, it is also proven that you can create a successful brand without a brick-and-mortar presence. Zappos.com is a fine example of this. The world is your marketplace when you're doing business online!
- New partnerships – Your Web site and its contents will open the door to new distribution channels and partnerships. Amazon.com, eBay, ASOS Marketplace are among the possibilities for reaching new customer segments and new markets.
- Technology – It is mission-critical that retailers understand how each technology plays a role in the lives of today's consumers. Whether it is mobile bar code scanning to enable customers to obtain additional product information during store visits or making your latest runway show available for viewing on iPad or the iPhone, retailers must keep up with the change. The sheer speed of the change will be unprecedented. Just as we are optimizing the Web site, along comes the iPhone app, Facebook, iPad app. What next?
- Talent agenda – Last but not least. This new business requires a different skill set for success. Certain areas such as online marketing are easier to fill or outsource. Others, such as online merchandising and web analytics, are much more unique and therefore more difficult to fill. These areas might need to be developed in-house over time. Structuring the organization to work both within its functional areas and with its cross-channel counterparts is mission critical.