Forrester’s “US Online Holiday Retail Forecast, 2011” launches today, revealing strong growth despite a shaky economy. November and December alone are expected to pull in nearly 60 billion dollars in online revenue, a 15% increase over 2010 and about one-third of overall online sales volume for the year. Much of the growth comes as a result of web shoppers doing more of their holiday shopping online and is enhanced by:
Customers hunting down deals. The web has always been the channel for finding value, but as shoppers are more likely to have their smartphones in hand, and as the US unemployment rates continues to approach a double-digit percent, expect even more browsing online for great values. Deal-related keyword searches spike around the holidays and many opportunistic customers actually look to load up on products from their own personal wishlists given the ubiquitous availability of offers.
Key dates getting bigger. The trend for the last several years has been that Cybermonday is the biggest shopping day of the year for web retailers. This has become a self-fulfilling prophecy as retailers now provide rich sales and offers on those dates, further driving customers to expect fabulous values at the same time.
After months of drama, Groupon finally had its IPO last week, concluding perhaps the most anticipated event in the daily deals space. Now, however, is the even bigger challenge of actually proving out its valuation. The obstacles aren’t small and we lay them out in a report out today called Myths and Truths About Daily Deals. We define daily deals as both the purveyors of prepaid vouchers like Groupon and Living Social as well as the flash sale sites like Gilt Groupe and Woot. Two of the biggest challenges for prepaid voucher companies are the following:
Little incrementality especially for core Groupon businesses like restaurants or even national retailer deals. The majority of consumers who redeem prepaid vouchers (80% in the case of clothing or shoe stores, for instance) were already customers of the brand, and more than half say they would have purchased anyway without the voucher.
Email won’t drive growth moving forward. While Groupon vaunts the size of its “subscriber base” (i.e., email addresses), all evidence points to the medium becoming less important. A significant portion of people who once subscribed to these emails no longer do, and many simply don’t want to because they have no need for more clutter in their inboxes. On the other hand, we’ve heard anecdotally that revenues for these sites are increasingly coming from organic traffic, which can be good so long as a daily deal company can continue to keep its brand top-of-mind for consumers. Marketing and sales, however, are two of the expenses that Groupon has loudly vowed to reduce.