Are retailers playing it too safe in the modern age? Marie Despringhere at Optimizely says experimentation is essential to boost revenue
The retail industry is in constant flux and over the past decade, it has undergone significant change.
Ecommerce’s introduction posed a serious threat to bricks and mortar shopping, creating ripples that caused retailers of all shapes and sizes to re-think their long-term business strategies.
Today, ecommerce is staple in the industry and the novelty of online shopping has worn off. For many, it is no longer a competitive advantage.
This means that retailers, both ecommerce and multi-channel, need to constantly evolve their thinking to edge out the competition and drive sales. With inflation rising and wage growth stagnating, consumers are feeling the pinch and innovation and the customer experience are more important than ever.
Humans have always experimented to support or refute an idea or hypothesis. Historically, experimentation has been the best way to accumulate insights into cause-and-effect that showcase what actions occur when a particular factor is manipulated.
Without it, society as we know it would look very different. Antibiotics, controlled aviation, the electric generator and countless other moments in science that we consider “revolutionary” would be beyond the bounds of possibility.
But it’s not just science, medicine and electricity that have benefited from experimentation. As online retail sales growth slows, retailers have much to gain from running experiments themselves.
This is particularly true online. For years, European consumers have used multiple devices along their path to purchase goods and services, but retailers still struggle to connect them through the purchasing cycle.
Experimentation can be elementary
One anomaly is Evans Cycles. Since its inception, the company has consistently evolved, adding features and functionality to keep pace with customer’s online shopping needs.
However, despite its heritage in innovation, the retailer had little to no insight into user behaviour online. It was unable to capture real-time data about the user journey to guide decision-making, optimise their website roadmap and increase sales.
To overcome this problem, the cycle merchant started listening to its customers and testing hypotheses based on user feedback.
Quickly, it found a kink in the purchasing journey that was contributing to “drop offs” and negatively impacting sales of particular brands of bike.
The team hypothesised that the greyed-out “add to basket” button was giving consumers the impression that the bikes were out of stock, despite plenty of stock being available.
After testing a version of the product page that made the basket button more visible and
colourful, Evans Cycles saw a 49% uplift in the add to basket metric and a 4.3% increase in revenue generated.
Experimentation drives ecommerce growth
Experimentation can play a major role in revenue growth for organisations of all sizes and stages of maturity. Retailers that adopt a strong experimentation philosophy and put continuous optimisation at the core will reap rewards, while those with low experimentation maturity are almost guaranteed to experience lower sales.
eTail, the global ecommerce event series, recently partnered with Optimizely to explore this hypothesis more closely. The two companies polled 136 leading retail executives and found that 50% of respondents saw greater than 5% commerce growth – a rise that they attributed to testing year-over-year.
One retailer was able to quantify the direct impact of its experimentation campaign: a $200,000 boost in revenue.
Like Evans Cycles, almost one third of the sample reported that the purchase phase is where their tests are most successful. This can be attributed to the need for retailers to generate new business through testing.
While we may see a shift towards customer retention in the future, there is clear link between positive experimentation and growth at the online point of sale.
To innovate is to experiment
According to our latest research, a purposeful testing strategy will help a retailer to report an uplift in revenue of over 20%. However, an experimentation campaign is only as good as the solutions that measure the results and the teams that own the testing.
While budget can hold organisations back from running an experimentation programme, the value of winning experiments can contribute significantly to the revenue creation potential of digital platforms – an untapped opportunity for many.
And as retailers cross swords for ownership of mobile and web-based platforms, the practice of experimentation and personalisation is by far the best way to test, iterate and double-down on revenue generating tactics. In short, in order to innovate one has to experiment.