Silos, Cycle Teams and Chief Customer Officers: Key Take Aways from Sheerluxe 2014

Posted by James Dunford Wood 20 May 14

Another year, another Sheerluxe. There’s no other ecommerce event in London quite like it, and this is in no small part down to its irrepressible creator, Georgie Coleridge Cole, who choreographs the whole event.

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As we arrive we’re all given coloured stickers and instructed to sit in front of other coloured stickers on big round tables, then told to mix it up a bit midway through. I still have no idea what these coloured stickers do - I think they are supposed to match up retailers with service providers, but since I ended up sitting next to a service provider, being one myself, I was not entirely sure.

We kicked off, as last year, with a ‘keynote’ overview of the general health of the industry - this time by Neil Saunders of Conlumino, who gave us cheery stats on how we had now climbed out of the recession and people were spending in shops again. However, not too cheery, as the consensus is that we shall never return to those heady days of 6-8 per cent online retail growth - more like 2-3 per cent. And in order to grow an online retail business, it’s all about stealing market share. Ouch.

So here are my key take aways. There was a lot here for the online retailer, but for me there were a number of specific significant highlights.

1. The way to beat Amazon - become a silo business

This theme was kicked off in the third talk of the day by Adam Black, formerly of Feather and Black and now creator of the Secret Linen Store. The only way to compete with monoliths like Amazon, he maintained, as well as the high street generalists like John Lewis, was to own your niche - do one thing very well, and be known for that.

He contrasted the eye-watering margins that high street retailers now need to achieve to stay afloat - for example M&S, who in the 1980s used to work with gross margins of 30-40 per cent, and who now aim for closer to 70 per cent - with the advantages of being an online retailer. As an example he gave his own business selling bed linen online, sourced and shipped directly from the factory in Portugal, where he could survive with margins closer to 30 per cent - and price accordingly.

The only high street retailers that could still afford to trade on lower margins were those who owned their own shops. Today, one of the biggest killers is the cost of leasing prime site property. So far so good for the online retailer.

This was reinforced by one of the next speakers, John Thomson, the MD of Astley Clarke. He opened on how the luxury jewellery brand had lost its way, with too many product lines, too many SKUs and too many categories. Designers had been let loose to create all kinds of new jewellery - and the challenge over the past 18 months had been to consolidate and focus on a smaller but more consistent collection.

He also spoke about SEO, and about how Astley Clarke had been able to dominate a number of jewellery-related search queries - for example, ‘morganite’. Here was another advantage of concentrating resources in a niche - the ability to write unbeatable content around it. After Panda, Penguin and Hummingbird, Google is increasingly favouring niche expertise - another compelling reason for retailers to sharpen their focus.

The most powerful niches, of course, are those which intersect with a niche demographic, as is the case with Mothercare, who spoke on the second day. Their market is a data analyst’s dream, as you know exactly what types of products mothers will be looking for particular periods in the growing cycle - from preparing for a baby’s arrival, shopping for cots and prams, to their first and second birthday presents, and so on. There were a number of childrens' retailers in the room - AlexandAlexa, I Love Gorgeous, Little Citizens - and clearly being able to target their customers in a very predictable way is a big advantage.

2. The British Cycling Team Analogy - how incremental improvements can help you win

Cath Daly of Warehouse gave a fascinating talk on how Warehouse had started to lose focus in a different way - by becoming identified too heavily with sales and promotions. Her challenge had been to re-educate not just her customers, but also her executive team, about the merits of a less discount-driven strategy - because in a tough market, where revenues were flat, incremental improvements in the depth and frequency of promotional campaigns could, over time, have a significant impact on the bottom line.

The prime example she cited was the achievement of the British cycling team’s performance director, whose mantra had been all about making 1000 small incremental improvements to every part of the cycling team’s hardware and performance - which all added up to a lot of golds.

Cath explained how, where once Warehouse would have offered, say, 25 per cent off for 15 days, now they offered a 20 per cent discount for 10 days, and so subtly but steadily they had made their female consumers wait longer for sale periods and raised their full price revenues. The result was that while revenues stayed flat because of the tough market, margins and profit had grown. Whereas in 2012 they had 200 days where goods were on sale or part of a promotion, the following year it was less than 70. Like Astley Clarke, the message was also 'edit down' - meaning fewer SKUs, so they could concentrate on being a category killer. Shoppers no longer want endless choice - they want expert curation, but in a way that is consistent and can be trusted to offer products they’ll like.

3. Why every business needs a chief customer officer

I have blogged on this topic before, and it was also subject of choice of Rosie Freshwater, MD of Leapfrogg - how the customer must be at the centre of everything retailers do. All too often online retailers, because they can't see their customers, forget this. And to do this successfully, there must be someone within your organisation whose role revolves around championing the customer and the customer-centric focus of the business.

This role - increasingly called CCO or Chief Customer Officer - needs to start with understanding who customers are by drilling down into the data. Who are sale customers? Who are heroes? How long does it take for particular cohorts to generate repeat customers, and what are the main AOV segments? As Andrew Wilson, the final speaker of the conference, put it: AOV is bunkum. It’s the customer AOV segments you need to analyse.

After all, the best clue to the overall health of a business are its customers - for example how quickly are your hero customers growing? Or your repeat customer rate? Rosie explained that when Leapfrogg acquire a new client, the first thing they do is a customer audit to show how big, (if nothing else changed) their business would be in a year’s time based on current customer acquisition and retention rates. Is this a sinking business in need of serious remedial help, or a growing one with great opportunities to leverage that growth?

She also pointed out - as we do all the time - that SME retailers are severely stretched for manpower and resources, so the challenge is to focus all available firepower on those marketing initiatives that will provide the best statistical impact. What's the biggest lost opportunity?

4. Fresh perspectives on email marketing

Elisabeth Ling, who spoke early on the second day, was fascinating about what worked for childrens' retailer AlexandAlexa when it came to email marketing. Now, I have to declare an interest here - Elisabeth is an non-exec here at Ometria. But listening to her talk, it makes me realise how lucky we are to have her on the team.

Here are a few simple strategies she recommended.

  • First, have a lightbox to capture emails on entry. This increased their email acquisition rate by 200 per cent, and every retailer should be doing it.

  • Second, leverage your product catalogue by testing a range of products on all your messaging and advertising channels - and even consider using product-led ads for lead generation. Don’t get fixated with that first conversion. In some ways it’s more important to grow your email list. And make sure the script you use is dynamic - there is no point in promoting products that are out of stock (which can easily happen if emails are opened some weeks after sending) - and this needs to be super simple to manage.

  • Third, remember that over 50 per cent of your emails will most likely be read on a mobile device, so make sure they are optimised.

  • Fourth, don’t forget your transactional emails as a way to promote that next sale, build your list, or nurture customer goodwill.

  • Fifth, don’t spend too long designing emails - they just need to be super simple and scalable to manage, and it’s amazing what formats will win out after a bit of testing.

  • And last, learn from the big beasts like eBay (her former employer) and Amazon - what works for them will most likely work for you.

There were numerous other speakers, from our own CEO Ivan Mazour, presenting alongside Charlotte Tilbury on how Ometria is helping them match offline and online visitors via an in-store app, to the Canadian (glad I got that right) one-of-a-kind Parry Malm of Howling Mad Marketing, who started his talk by drawing a straight historical line between steam ships carrying letters, via transatlantic telegraph cables, to email, and maintained: ‘what’s the big deal?’ Entertaining stuff. We weren’t fooled.

 

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