As anyone in retail will tell you, ecommerce has seen explosive growth in the last 18 months. The Salesforce Shopping Index, a global analysis of nearly 2,000 digital commerce sites globally identified that global ecommerce grew 58% in the last year, and UK ecommerce grew 98%, the third fastest-growing nation that the survey looked at.

Given the growth, particularly as a result of the pandemic, we wanted to understand the differences in consumer behaviour between ecommerce and in-store transactions.

Thus, we focused on the “Clothing and Accessories” and “Supermarkets and Groceries” categories, as it provided many retailers for comparison (as compared to the Coffee Shop category, for example, which is predominantly in-store).

Analysis of our own spend data highlights a noticeable difference in achieving customer loyalty between online and in-store retailers. In order to become a loyal customer to an online retailer, customers need to spend more frequently and at higher value than they do to become loyal to a bricks and mortar retailer, as shown in the table below.

Ultimately, customer loyalty is harder to achieve for online retailers. Interestingly, for supermarkets, the customer annual value required in 2021, for both in-store and online, is lower than 2020 (but still higher than 2019); this could be a result of the lockdown - in 2020 there were fewer opportunities for discretionary spending, people spent more time at home, resulting in larger grocery spend.

We obtained some interesting perspectives from our panel of experts as to what might be driving this. Tom Peace, MD of The Loyalty People, a leading customer loyalty and CRM consultancy, said that “Shopper mind-sets when they are online is to either find an item fast or research for a cheaper alternative, simply because they can do so easily”. He noted that, by its nature, this is very different from an in-store shopping experience, where the product choice is more limited, the price is set and there is a real friction to moving between alternative stores. He says that “As a result, by nature online shoppers are more promiscuous and loyalty harder to achieve”.

As Pete Markey, CMO at Boots UK agreed with the findings here and commented, “Online is very competitive. People google to find products where they find hundreds of recommendations and this is where having a loyalty scheme really helps.” Pete noted that it’s important to differentiate and tailor the customer experience, “to gain customers and keep them.” He added, “You’ve got to keep them for the long-term.”

Jonathan De Mello, Equity Retail Partner at CWM Retail Consulting, agreed with Tom’s assessment, saying, “Online shoppers... are more promiscuous, they search around more now, maybe because they had more time during lockdown”. Jonathan De Mello also reflected on some of the other differences between the online and in-store shopping experience, saying: “When shopping online, users are more intentional in their shopping and more price sensitive. They know what they are looking for and so retailers see less incidental purchases.”

As shown in the table above, the average transaction value for loyal customers is consistently higher online than in-store. Nikhita Hyett, MD for Europe of a leading global online payment provider BlueSnap, works exclusively with online retailers and so had some real insights into the drivers behind a higher average transaction value (ATV) for online vs in-store purchases. She believes that “online, people spend more and therefore have a higher ATV, mostly due to returns & refunds as people often order two sizes to be safe and then send one back. However, in-store you’ll see people spend less but more frequently”.

She believes that for online retailers, true loyalty is driven by providing a seamless customer experience: “I would suggest that in fact, loyalty is harder to acquire online, but if you get your customer experience right, then it should be easier to keep people loyal”.

Adrian Swinscoe, a customer service and customer experience advisor, and author of Punk CX, reflects on some of the technical benefits that online retailers should be able to drive: “Online sales benefit from ‘saving customer card details’ and makes the buying process so much easier for customers”.

Jonathan Adrian also highlights an important point about the customer experience, which he estimates represents up to 40% of what drives customer loyalty and repeat purchase – What he calls the “issues resolution process”. Moreover, this is not just if a customer has an issue that they need resolving, but also their expectation that the retailer will be able to do the right thing and help the customer in the instance of an issue arising.

Specifically in relation to returns policies, Tessa Unsworth, former PPS executive, said that “Returns and return policies are also critical to keep in mind and affect how often a customer shops with a particular retailer”. She went on to provide specific examples of this saying, “people might buy Whistles clothing from John Lewis rather than from Whistles’ own website simply because they believe in better issue resolution”.

Martin Newman, an advisor on customer-centric transformation and consumer experience, believes that a key factor in all of this is trust. He states, “There is a trust component from having a physical retail space that impacts loyalty. Customers have inherent trust in a business with a physical shop, while ordering online requires that same baseline level of trust to be established, and exceeded”.

Based on this, Martin Newman believes that “future winning brands will have omni-channel approaches to work around this trust issue”. Providing a trusted omni-channel customer experience was something that Marcus East, Chief Digital Officer at T-Mobile, referred to as well. He noted, “M&S saw 60% of online orders with in-store pick up. These were great loyal customers, as they received an omni-channel experience”. He says that they have brought this thinking to T-Mobile as a business, saying “T-Mobile makes a point about the human experience in-store; everything is magenta, music is playing, employees high five customers when they come in, there are lots of smiles. Customers feel good”.

“Boots, like the grocers, remained open during lockdown so that helped”, commented Pete Markey, Chief Marketing Officer at Boots UK when considering this data, “but we did see a shift towards online.” Pete believes that consumers still need to become more confident online, but notes that, as they do, they tend to stick to online shopping. Reiterating an earlier point he said, “The need for differentiation is key. You’ve got to be able to cut through the noise that people will find when they google something. Building true loyalty is the only way to do this.”

If you would like to read more about our insights on customer loyalty, read our white paper ‘The Tipping Point of Loyalty’.