In four years Shop Direct has gone from selling the majority of its products via twice yearly catalogue to an entirely digital operation that sell the majority of its products via the mobile web.
British catalogue retailer Shop Direct has transformed itself from a paper-based into a pure-play digital business.
In 2012, 72% of sales came from catalogues. In 2016 it will be 0%. Today Shop Direct’s £1.8 billion business is 100% digital.
The first mobile web sale was booked in early 2010, now mobile accounts for a whopping 61% of revenue and is still growing strongly. And how has it effected the bottom line? Well, last financial year pre-tax profits for the group were up 78%.
Jonathan Wall, Group ecommerce director, explains to ClickZ how mobile came to dominate Shop Direct’s business.
Tell me about how things have changed since you put out your last catalogue.
There has been a huge transformation of the business from being a catalogue to an online retailer. Our last catalogue was produced in April 2015. It was a huge piece of work preparing for this as a business, but in the end the last catalogue went quite quietly.
You might have thought that a business that had been producing catalogues for 80 years would have a bit of a fanfare or even a civil ceremony around the last catalogue. But thankfully as a business we had already moved on.
We didn’t want to remove our catalogues until our customers were predominantly online. But we had reached the stage when our customers had started to say: “Why are you still sending this to me? That’s not what makes me buy from you.”
Are you able to tell how much business you might have lost, presumably there were some customers who didn’t shop online?
Of the small number of people who were using the catalogue, most were also buying online. For the tiny minority who don’t want to browse online, there’s still an option to receive and shop from brochures.
But this was about the transforming the way we do business. If you are only producing two catalogues a year it dictates the whole way the business works internally – this means you are producing fashion and setting up products for every six months.
So it was having a major effect on the business and how we worked.
So your cycle of buying was determined by production of the catalogue?
Absolutely. Because our summer catalogue come out in January we would have to have bikinis on the shelf in January when people were still buying woolly jumpers and warm coats.
So removing the catalogue gave us a big advantage with respect to buying and merchandising and how we stocked our shelves.
And were you able to use your analytics to see what proportion of customers stayed with you as you moved online?
We used hold-out groups. We’d pick a set of similar customers and we send some of them a catalogue and not to others.
It soon became obvious from those hold-out groups that those customers who didn’t receive the catalogue still continued to shop with us. It showed that the catalogue was not incremental and customers just weren’t valuing it as much as they used to.
So how much of the business is mobile these days? How quickly did you see mobile growing and what stage are you at now?
So we took our first mobile order in the beginning of 2010. By the end of 2010 mobile was only about 2% or 3% of our orders, but it was nearly 7% of our visitors.
It rapidly became apparent that mobile was going to be a huge part of our business. So we focused heavily on getting our mobile web journey right.
Back then there was a disparity of devices – Android was just starting off, there was iOS, BlackBerry, Windows, Symbian was still around.
That meant we would have needed to develop lots of apps, so we decided we would just have one journey across all browsers, which is why we focused on mobile web. Unlike most of our competitors were developing apps for all these different services.
What proportion of the business is digital and what proportion of that is mobile? Do you measure in revenue or orders? And is it still growing?
100% of our business is digital and 61% is mobile. That’s revenue. And yes, mobile is still growing very strongly.
Tablet is slowing down, but mobile web is having its second surge of growth at the moment.
Why is mobile surging now? Why is tablet slowing down?
Now that smartphones have larger screen sizes, people just aren’t using tablets as much. Everything else is growing, while tablet stays the same, so it is declining as a proportion of our business.
When it comes to a shopping experience the tablet just isn’t as important to the customer as it has been.
We do a lot of research with our customers, but we have done some special home sessions recently. It is obvious that customers don’t think about getting their laptop or tablet out any more.
When they’re sitting on the couch and see something they want to buy on the TV, the mobile phone is the first thing they pick up, rather than their tablet.
Do you think this is down to improvements in mobile phones, networks or mobile websites?
I think it is a result of many things. First, mobile sites are much better now. Everyone is doing a reasonable job – and in some cases a good job – of delivering a decent mobile experience.
Second, the technology is getting much stronger: people are getting better WIFI in their homes, mobile screens are getting bigger and customer behavior is changing, they’re becoming much more comfortable with mobile devices.
Have you stuck with the mobile web-only approach?
We stuck with mobile web until December 2014 when we launched our first iOS transactional app. We’d had various apps before, such as catalogue apps, but nothing that allowed purchases.
But in December 2014 we took the decision to launch an iOS app for Very and then in July 2015 an Android app also for Very.
We knew it was a good app, but we were delighted by how receptive our customers have been to it.
Are your apps native, hybrid or web-based apps? I believe that retailers often go for hybrid apps as they are easier to integrate into backend e-commerce systems than native apps.
We have a hybrid app… this is a conversation that comes up very often with our ecommerce team. We have a hybrid app where we use the best of native app development where it is needed.
So, for instance, on my account, where customers can see the balance on their credit account or see where all their orders are, is native.
Any where we want special features, where native development will help, we are absolutely native. So roughly 50% of the customer journey is native – all the non-shopping is in a native environment.
However once they enter the shopping experience it is mobile web.
So when it comes to purchasing, it’s a web app?
Yes it’s mobile web. The first reason that we do this is because it is one code base, though there is slightly different code between the hybrid app and the normal mobile web.
The second reason is that we have developed a reasonably good journey for our customers in their shopping experience and we believed this experience is still optimized within a mobile web app.
It is a really interesting one this, because there are some retailers who are going purely native, some who are taking the same course as us, and some retailers who still have an automated experience using one of the companies that just turn your mobile website into an app.
There is still a market for that sort of solution but we believe the best way is hybrid.
Are you able to track customers from web to mobile to app? If I put a product in my basket on my laptop will that be in my basket on the mobile web and app also?
Yes, if you place a product in your basket or save for later on the desktop or whatever device, when you get into your app it will still be there.
So who is downloading your app, is this existing customers on the desktop/mobile web or new business?
Predominantly it is existing customers coming onto the app as opposed to bringing in new ones. But we still use mobile web as our main acquisition tool.
How do you use mobile web as an acquisition tool? What’s proving most effective?
We use the usual suspects, such as Google and Facebook to drive people to the mobile website. Once they have shopped with us, we will deliver messages saying “Download our app now”.
They will be targeted on our sites, but we also target potential customers off-site, identifying them using cookies.
Google, Facebook and display advertising in general have been the most effective ways to get people to download our apps. This is our first 12 months of app, so we are still learning in this area.
But Google want to use us – along with our agency SOMO – as a case study, as we’ve had great success with using data we already have on our customers to target them off site with ads to download our app.
What is your customer demographic if I am allowed to ask?
Miss Very is our bullseye customer – she is a 25 to 45 year old woman with children and a partner.
Obviously we have customers across the entire spectrum, but Miss Very is how we like to portray our target customer to our teams so they have a better understanding.
Do you have pictures of her on the wall?
Absolutely. But she is actually a real person, she isn’t a caricature.
When we brought Miss Very into the business it helped our teams get a really clear understanding of who they were marketing to – who we were trying to deliver our message to. It has really helped us in our brand marketing.
What level of customer loyalty do you have?
We don’t share the numbers, but we do have a lot of loyal customers. So many of our customers hold an account with us – so our customers have the option to pay now on a cash account or on a credit or debit card or they can use one of our finance offerings.
Plus, we are a department store that sells a lot of products across a lot of categories.
Want to know more about the challenges and benefits of digital transformation? Make sure you check out Shift, our new event in London this May.