Calling All Online Retailers! We Want To Hear From You!

[Posted by Patti Freeman Evans]

Forrester just kicked-off our 2009 Retail Executive Survey, and we want your input.

This survey looks at online retailers' organizations and topics relevant to the challenges currently facing their roles including:

 

·     eBusiness technology decisions

·     Globalization

·     Social media and mobile trends

·     Online customer service

·     Online merchandizing tactics

·     And more!

The survey takes just about 15 minutes to complete and all of the data will be used anonymously and in aggregate. And as a thank you for completing this survey, you will be able to access the data to help benchmark against your peers once the survey is closed.

 

The results from the survey will serve Forrester's eBusiness and retail research agenda; we look forward to gaining insight from your responses!

 

Click here to take the survey.

  

Affiliate Marketing Still Growing

Despite unfavorable economic conditions which have slowed affiliate marketing growth in 2009, US online marketers will still be spending a total of $1.9 billion of their budgets on affiliate marketing fees. Furthermore, we expect affiliate marketing to return to double-digit growth in 2010 and we anticipate affiliate marketing to become a $4 billion market by 2014.

 

Better affiliate site content and an increasingly transparent dialogue between affiliates and marketers act as growth drivers.  But there is little evidence that the emergence of social networking sites will drive significant traffic for affiliates in the term of this forecast.  Thus, the marketplace will remain closely tied to the search arena.

 

Over the next five years, financial service providers and retailers will remain the top affiliate marketing spenders, with online education following closely. Transaction-generating activity on affiliate sites will continue to be driven by paid or natural search results. Forrester believes that social networks will not bring lucrative leads to affiliate sites within the next five years.

 

For detailed findings, we encourage you to read the whole report.

Nothing Certain Except Death And (Online) Sales Tax (?) – Or is it?

by Patti Freeman Evans

 

As we reported back in May, online retailers should prepare to charge sales tax in certain markets, even if they do not plan to do so across the country. Cash-strapped states are looking to tap any potential source of revenue (California, for example, has been working through an onerous $26 billion budget gap) and have in recent months been proposing legislation to require online retailers to submit tax in states in which they deliver.

Since the report’s publication, however, the governors of Hawaii and California have struck down the requirement for retailers to collect online sales tax with strokes of the veto pen. As a result, Overstock.com, which had dropped its online affiliates in California and Hawaii when the legislation still had a shot, reestablished its ties with its Californian and Hawaiian affiliates.

What all this boils down to is that the precedent that New York established by requiring the collection of use taxes on goods purchased by online shoppers within a state doesn’t appear to be gaining real traction —at least, not at present. Forrester will continue to monitor these debates, inarguably intensified by the current recession, and their potential impacts on eBusiness & Channel Strategy Professionals in the months to come.

Don't be distracted by headline-grabbing stats

Over the last week or so, a number of firms have published scary headlines and stats like, "Retail E-Commerce Growth Drops Sharply". We agree that it is a tough market all around and that the 12% growth rate we project for this holiday season is not what we might have projected had the economy not tanked. Today the Census Bureau's estat numbers for 3rd quarter 2008 online sales came out at only a 5% growth over last year. Not great and reflective of the very soft back to school season and all the uncertainly in the financial, housing, international and political markets. But also not the sole number to rely on. And, 3rd quarter is does not project fourth quarter directly and we do expect much stronger growth for the remaining holiday season. Online is still a good deal livelier than what we are hearing from offline sources. So, we still expect to see growth at the 12% rate this holiday season.

Don't let's let the news that is clearly trying for attention rather than realism sway us to alarmist reactions. For example, according to Hitwise traffic data- the share of traffic to retail sites is about where it was last year - so you could interpret that as no growth. But, reality says that other categories like News and Media and Financial have increased their share -due to the election and the economy mostly - that would affect the share of other categories -remember these are share numbers not total numbers. So, looking beyond the headline to what is real will help us not panic and to stay focused on getting the job we know how to do done.

Buy Now Pay Later Promos

This weekend, Saks Fifth Avenue ran a full page ad in the NYTimes promoting "The Gift of Time. Enjoy no interest and no payments for 12 months on item purchases of $2,000 or more." I'm not surprised. This is a great message for those who may not be as liquid as they once were and for those who hope this economic situation will abate in mid '09.

It also might hit home to wary older customers. In fact, according to our recent consumer survey, where we asked: Given the current state of the US economy, how are you planning to change your holiday shopping habits? Customers over 45 years old are more likely to say they will spend less overall and avoid any major purchases. So retailers whose customer base skews older, might try the same tactic Saks has launched.

Dismal Retail News

Following the same path we have been on for the last many months, Wal-Mart showed strength almost singularly in the offline retail panoply. The overall results reported yesterday and today show the worst growth rate since the commerce department started tracking retail in aggregate. A decline of 2.8 percent is rough. And, even taking out auto, fuel and building supplies, the rest of retail declined by .5 percent, which in itself shows that every sector is being hit--even lux. We'll look for online third quarter results for the online retail market out soon and cross our fingers.

Retailers Focus on Multiple Holiday Sales Driving Tactics, in Addition to Search

According to the 2008 JupiterResearch Executive Survey results, online retailers continue to put search engine marketing spending at the top of their holiday sales driving tactics. Nonetheless, this trend is more subdued when compared to previous years. The JupiterResearch US Paid Search Forecast, 2008 to 2013 notes that paid search will grow 26 percent in 2008 (to $11.4 billion) and continue at a compound annual growth rate of 13 percent, however attention is starting to shift from paid search to more aggressive search engine optimization (SEO) campaigns.

15 percent less online retailers cite increasing their search engine marketing spending for the holiday season among the top three sales-driving tactics. According to the 2008 JupiterResearch Retail Executive Survey, 40 percent of online retailers will increase search marketing spending as a holiday sales-driving tactic this year. Though a high overall total percentage, this is still 15 points less retailers than the previous year. Online retailers already spend 40 percent of their budgets on search, thus the slowing of this spending increase signals a wider focus on other tactics.

A growing number of retailers increase spending on holiday sales-driving tactics like promotions and online advertising. 27 percent of online retailers will increase spending on affiliate marketing (a 14 percent increase over the previous year) whereas 18 percent will increase spending on banner advertising. Amplified concentration on other sales driving tactics, in addition to search, reflects a slight shift of online retailers' attention towards higher website exposure and more competitive pricing. This strategy should pay off as, according to the 2008 JupiterResearch Group Consumer Survey, 31 percent of online users will do more research online before purchasing products this holiday season, in order to make sure they get the best price.

By Patti Freeman Evans & Cristina Bugnaru

Amazon Rocks

I know, we are in the depths of an economic quagmire, but could we just take a sec to recognize that the biggest online retailer just posted a 31% increase in revenue. That is huge given the situation and that they have been around for more than 10 years. Hard to count how many companies were still growing at that pace that far into it. I think Amazon's performance goes to show you that focus on merchandise selection and value, exceeding customer expectations on delivery and good customer service after the fact go a long way with customers.

Yes, they and eBay have tempered guidance for Q4 and the year, but realistically who hasn't.

Online Sales and the Economic Environment: Q2 Update

News regarding the economic situation continues to be relatively gloomy and has been reflected in the Q2 results that offline retailers have been reporting. For example JC Penny reported Q2 comp store sales declined 4.3% versus last year, Abercrombie and Fitch Q2 comp store sales were also down by 11% versus last year.

Wal-Mart US (+4.6% w/o fuel increase versus Q2 2007, in contrast to a 1.2% increase for Q2 2007 versus Q2 2006) continues to do well on the strength of its overall low price positioning and those product lines that contain necessities rather than discretionary items. This performance shows a continued trend of consumers trading away from mid-market stores down to off-price sellers.

Online sellers like Amazon (US net revenue +35% versus a year ago); Overstock (over 20% growth in gross bookings) and eBay (WW GMV +8%) continue to post healthy increases supporting the notion that online continues to be strong. However, online sellers are beginning to lower expectations for the second half of the year in spite of their success thus far.

In contrast to the strong online performance by some of the top retailers, the census bureau's Q2 ecommerce sales increase is posted at 9.5% versus Q2 2007 - the smallest increase ever and a 22% increase for Q2 2007 versus 2006.

The slightly positive effect of the economic stimulus checks is pretty much played through now and will not have an effect on the coming months.

The prolonged nature of the economic slowdown and increasing consumer prices (e.g. gas, food), with no real relief in site this year, are beginning to wear on the online consumers. Thus, we believe that the overall online growth rate for 2008 may be slightly softer than Jupiter originally projected.

By Patti Freeman Evans & Vikram Sehgal