Wednesday, November 23, 2005
The Online Shopping Advantage
Four out of five online retailers plan to offer free shipping this holiday season despite high gas prices. That's because four out of five online shoppers say free shipping can make or break a deal, according to a recent survey. "I think it's the most effective marketing that retailers are using," said Rob Solomon, general manager of Yahoo Shopping.
The pressure is on online retailers to be more creative this holiday shopping season for a couple reasons: The economy is threatening their fast-growth sales pattern and precious days for holiday sales are slipping away. At least 60 percent of online shoppers say they begin shopping by the end of October, according to the Shop.org/BizRate Research Online Holiday Mood Study.
Meanwhile, analysts expect a challenging economy to moderate what has been the torrid percentage growth of online sales.
JupiterResearch reported Tuesday that it expects online holiday sales to rise 18 percent to US$26 billion, the smallest percentage increase in five years. Forrester Research predicted a 25 percent increase to $18 billion. The eMarketer, another online marketing and research firm, sees 22 percent growth to $26 billion. Different companies use different time periods and even categories in their estimates, so projections can vary widely.
While the percentages sound impressive, online sales make up a small fraction of retail sales.
Store sales are expected to total about $435 billion for the holidays, according to the National Retail Federation, up about 5 percent from 2004. The online industry will walk a fine line in using the fuel issue to attract buyers. The convenience of shopping at home is a selling point, as is saving gas. But emphasizing gas costs could remind people they don't have as much to spend, said Scott Silverman, executive director of Shop.org, an association of online retailers. Patti Freeman Evans, an analyst with JupiterResearch, doesn't think that will stop the trend toward marketing free shipping. Freeman Evans says some online retailers have been emphasizing fuel savings in their pitches, including eBags, which specializes in purses, with e-mails that talk about paying too much at the pump.
Higher shipping costs may squeeze margins, she says, but many companies will manage it.
For example, Amazon.com, the giant online retailer, uses the U.S. Postal Service, which does not add a fuel surcharge as do UPS and FedEx. The company also has distribution centers around the country, so packages don't have to be sent by air, which is more expensive. "The market is maturing and there's more competition," said Silverman of Shop.org. "You need to be more aggressive in marketing and promotion."
According to the Shop.org/BizRate study, online retailers are expanding their advertising horizons, using TV, radio, billboards and direct mail to get their message out. Another critical feature: search. "If your search site doesn't work, people will get frustrated and leave quickly," Silverman said. As for the hot categories, the usual suspects show up: consumer electronics, books, music, DVDs and clothing. "There is some trepidation and consumer confidence isn't as high," Yahoo's Solomon said of retail sales. "The Internet is a much better place to find bargains and values."
Brought to you by Guardian eCommerce Privacy Seal Program.
The pressure is on online retailers to be more creative this holiday shopping season for a couple reasons: The economy is threatening their fast-growth sales pattern and precious days for holiday sales are slipping away. At least 60 percent of online shoppers say they begin shopping by the end of October, according to the Shop.org/BizRate Research Online Holiday Mood Study.
Meanwhile, analysts expect a challenging economy to moderate what has been the torrid percentage growth of online sales.
JupiterResearch reported Tuesday that it expects online holiday sales to rise 18 percent to US$26 billion, the smallest percentage increase in five years. Forrester Research predicted a 25 percent increase to $18 billion. The eMarketer, another online marketing and research firm, sees 22 percent growth to $26 billion. Different companies use different time periods and even categories in their estimates, so projections can vary widely.
While the percentages sound impressive, online sales make up a small fraction of retail sales.
Store sales are expected to total about $435 billion for the holidays, according to the National Retail Federation, up about 5 percent from 2004. The online industry will walk a fine line in using the fuel issue to attract buyers. The convenience of shopping at home is a selling point, as is saving gas. But emphasizing gas costs could remind people they don't have as much to spend, said Scott Silverman, executive director of Shop.org, an association of online retailers. Patti Freeman Evans, an analyst with JupiterResearch, doesn't think that will stop the trend toward marketing free shipping. Freeman Evans says some online retailers have been emphasizing fuel savings in their pitches, including eBags, which specializes in purses, with e-mails that talk about paying too much at the pump.
Higher shipping costs may squeeze margins, she says, but many companies will manage it.
For example, Amazon.com, the giant online retailer, uses the U.S. Postal Service, which does not add a fuel surcharge as do UPS and FedEx. The company also has distribution centers around the country, so packages don't have to be sent by air, which is more expensive. "The market is maturing and there's more competition," said Silverman of Shop.org. "You need to be more aggressive in marketing and promotion."
According to the Shop.org/BizRate study, online retailers are expanding their advertising horizons, using TV, radio, billboards and direct mail to get their message out. Another critical feature: search. "If your search site doesn't work, people will get frustrated and leave quickly," Silverman said. As for the hot categories, the usual suspects show up: consumer electronics, books, music, DVDs and clothing. "There is some trepidation and consumer confidence isn't as high," Yahoo's Solomon said of retail sales. "The Internet is a much better place to find bargains and values."
Brought to you by Guardian eCommerce Privacy Seal Program.
