Do online retailers still have a trust problem?

Matthew Elmas

4th Oct 2017

Online retail currently represents around 11 per cent of total retail sales (excluding food), but that figure is slated to skyrocket to 19 per cent by 2023, after Amazon cements its position in the local market, according to UBS analyst Ben Gilbert.

Established brands are paying attention. Premier Investments, Myer, Super Retail Group, Specialty Fashion Group and Billabong International, just to name a few, are all pouring millions into online and omnichannel over the next 12 months, after many found the channel was one of the few bright spots they could tout to investors during the recent full-year reporting season.

This means online retail is about to get a lot more competitive, and unfortunately for pureplay brands, it seems that there are still some lingering biases working against them.

KPMG research from earlier this year found that only 36 per cent of Australian and New Zealand customers made their most recent online purchase with a pureplay retailer, compared to 45 per cent in North America and 70 per cent in Asia.

However, 43 per cent of customers made their last online purchase from a multi-channel retailer with a bricks-and-mortar presence.

It’s a sign that either Australia’s pureplay space isn’t well-serviced enough, there’s still a lack of brand penetration in the online space, or that shoppers are still struggling to trust online-only businesses – likely a mix of all three.

Familiarity breeds trust

For Catch Group, which recently revealed turnover of $306 million in FY17, it’s a multimillion-dollar question.

Catch CEO Nati Harpaz has recently invested several million dollars into a long-term TV advertising campaign designed to breach the crucial household name barrier by embedding Catch’s brand proposition into the list of retail businesses most Australians are familiar with.

According to Harpaz, that brand value is ultimately something that is built up over time, with the latest campaign serving as an important step in Catch’s journey, but bricks-and-mortar retailers do maintain an advantage.

“Customers trust a brand that they know, that they’ve interacted with and have had a good experience, and that memory is relatively short,” he says.

“Bricks-and-mortar retailers obviously have an advantage given their physical presence…but that doesn’t mean online retailers can’t do the same through enhanced service and customer experience.”

Catch isn’t the first online retailer to buy TV space – Deals Direct experimented in the space in 2007-8 under now National Online Retailers Association (NORA) chief Paul Greenberg – but it is one of the only local players with the scale to justify marketing on the small screen.

Other companies, such as online fashion player Showpo, are still dealing with many of the legitimacy concerns that once upon a time ran in news segments about e-commerce.

“We have customers saying, ‘Is this store legitimate?’, worried that they’ll get their credit card stolen. That’s a top-level trust [issue], then there’s the next-level down, which is, ‘How do I get returns?’, ‘Will this fit me?’,” Showpo CMO Mark Baarste tells IRW.

Baarste believes that the stakes are higher for pureplay businesses to get it right and provide a consistent offer, particularly in the fast-paced world of fashion.

But he said Showpo’s focus on getting all the little things right will play to its favour as bricks-and-mortar retailers become more visible online, from heavy investment in dedicated customer service staff to encouraging shoppers to leave reviews on third-party websites to legitimise positive feedback by separating it from the brand.

Amazon has changed the equation

Brosa CEO and co-founder Ivan Lim is less convinced that there is a trust issue at play with Aussie shoppers and that companies like Amazon have normalised the online acquisition of goods and services in western markets, making home furnishings a logical extension.

He tells IRW that the ‘tech company’ philosophy that newer online brands like Brosa have built into their businesses will enable success amid investment from established brands.

“We’re looking to build technology to give customers an amazing digital experience, whether that’s through being able to track delivery trucks all the way into your home, being able to engage with a stylist online, or having your own style profile,” he says.

Lim has opted to build his own software that integrates directly with third-party logistics providers, giving Brosa much more control over the end-to-end shopping experience.

Brosa also has a bricks-and-mortar studio, which Lim says alleviates the concerns of a certain segment of shoppers that need a more than just a website to shop from. However, he believes that ultimately using the flexibility of e-commerce to provide a more fashionable and compelling offer is the best way to drive visibility, and ultimately trust.

When it comes to visibility, an increasing concern among many retailers, trust undoubtedly plays a crucial role, but in the ocean that is the internet, so does discoverability.

According to Speedmaster CEO Jason Kencevski, when online retailers get it wrong, the consumer question is: ‘Do these people even exist?’, so pureplays ultimately receive less chances to convince shoppers than other retailers with physical stores.

He believes that the success of e-commerce is a double-edged sword – as larger brands have gained traction and ultimately established trust, they have made it more difficult for others to gain traction online.

“E-commerce has definitely come along way, but I feel that there’s been a big shift in the last three to four years. Because online is more trustworthy, it’s been very difficult for non-brand names to get traction.”

His answer? Marketplaces. Kencevski believes the search engines of the online retail space, such as Ebay and before long Amazon, are the best opportunity smaller online traders have to get their products featured next to larger companies, effectively throwing much of the trust equation on marketplaces themselves.

But Amazon, widely recognised as a double-edged sword of its own, is understood to carry as many risks as opportunity for the sector, an X-factor that will surely disrupt the trust and visibility equation for both bricks-and-mortar and pureplay brands alike in the coming years.

Nati Harpaz is the chairman of Octomedia, Internet Retailing’s parent company.

A version of this story first appeared in issue 2159 of sister publication, Inside Retail Weekly. To subscribe, click here.