This Year, US Online Holiday Retail Sales Will Be Up 8%

 

By Sucharita Mulpuru

 

Today, Forrester releases its 2009 US Online Holiday Retail Forecast, a deep dive into our projections for the crucial retail months of November and December.

 

We project online retail sales to reach $44.7 billion during November and December, a year-over-year increase of 8% -- evidence of the online space’s proven status as the retail industry’s growth engine. We expect this growth to be driven by the increasing number of online holiday buyers and by the large retailers gaining market share from their smaller counterparts.

 

The Index of Consumer Sentiment, as well as our own pre-holiday survey show that consumers will be shopping, but will also hold a tight grip on their purse strings. For example, 39% of online consumers plan to wait before making a purchase to see if the items they want will go on sale and 24% of online holiday buyers intend to try lower-cost alternatives to the brands they typically purchase.

 

The current economic environment makes this holiday season especially unique. Unlike previous holiday seasons, online retailers will manage to the bottom line, rather than chase sales. To this end, they plan to implement tactics like keeping leaner inventories, increasing customer engagement, or enhancing their online merchandising and social shopping tools.

 

Look to Forrester to provide you with updates and further consumer data as we roll into the holiday season. Happy selling!

A CPG Company Not Afraid To Experiment

So I'm in Cincinnati right now at P&G's self-described "Digital Hack Night" where the goal is twofold: to get their brand managers to understand a bit more about digital marketing strategies and to raise money for their "Loads of Hope" charity which is tied to Tide. For the next 2 hours, nearly 100 people--P&G brand managers, bloggers, Twitterers, authors and agency folks--are trying to use every social network--Twitter, Facebook, MySpace, YouTube--we have at our disposal with the ultimate objective of getting as many Loads of Hope tshirts sold on their eCommerce site as possible. We have a big leaderboard screen, QVC-style, that shows exactly how many unique visits we've received, what our conversion rate is and how many t-shirts we've sold (5,000+, 6% and 1,000+ by the way, respectively, at the moment).  What a great way to get non-believers in the channel to see quickly, in real time, how rapidly an idea can radiate through a network and drive sales. And they did that by allowing influencers of small and large networks to go do what they do best, with the brand that is a crown jewel of the company.  Given that the biggest objection to companies engaging social networks is "What if the message is turned against us?", P&G gets extra kudos for creating a live lab that showcases the power of viral marketing with the full understanding that there are risks but that the digital channel has characteristics like speed and reach which are unmatched in other channels.  If only every company were so fearless!
Btw, if you want to buy a t-shirt to help the cause, do it by 11am ET on March 12. 

How A "Tiny" Company Is Winning Online

[Posted by Sucharita Mulpuru]

I used to swear by one of the big online photo printers. For years, this company generously let me store thousands of my pictures and printed them beautifully and inexpensively, sending them to me promptly whenever I needed. I even used this company to make novelty products like calendars, mugs and holiday cards. In the last year or so though, I started to notice some kinks; the company overhauled their eCommerce platform and my browser seemed to crash more than usual whenever I uploaded photo batches. Furthermore, it was much more difficult to navigate through my images, page refreshes seemed to take forever and I couldn’t edit any pictures as easily as I’d done in the past. I came to dread the photo ordering process.  When it came time for me to print holiday cards this year, I just couldn’t bear the frustration of dealing with my once-favorite photo company and went Googling for another. I ran across a stationery company called Tiny Prints and printed my cards with them.  I wasn’t alone. Of the dozens of holiday cards my family received this year, nearly a quarter of them (and all the best-looking ones) were all, incidentally, from Tiny Prints. This was no coincidence. They did so many things better than their competition. Here are a few of them:

1. A shipping offer. On their Google paid search ad and on their homepage, Tiny Prints trumpeted a free shipping offer to all customers. The other company? They sent me a flier with a $10 off promotion but it had expired by the time I got around to printing holiday cards. There’s not enough that can be said about the psychology of free shipping in online retail and how effective it is at driving sales. Companies like Zappos which often have higher product prices but perpetual free shipping know this well. Sixty-one percent of holiday shoppers have told us in the past that they shop online more often with retailers that offer free shipping.
2. Product search and assortment. This was why Tiny Prints won me over. I had visited no less than a half dozen other websites looking for a cardstock quality holiday card in the color pink that would let me upload two photos of my daughters. I was ready to just go to Target and buy something generic until I went to Tiny Prints. Tiny Prints had a parametric search and quick look function that efficiently let me find exactly what I was looking for, without extra clicks, without cumbersome page refreshes. Even the process of uploading photos and viewing my proofs seemed to be easier and faster here. This religious focus on a great product detail and search results experience is well-placed. In a survey we did last year with eCommerce executives, more retailers were focusing their investments on those two priorities over anything else.
3. Fulfillment. At checkout, Tiny Prints told me exactly when I would received my purchase, and by that day, I had sure enough received my package. That degree of transparency and staying true to those details matter. It engenders trust, reduces unnecessary call center contacts and helps cultivate word-of-mouth enthusiasm. One of the biggest sources of frustration to holiday shoppers every year is that shipping takes longer than expected.

In the end, I ultimately spent a bit more than what I had planned to, but that was a tradeoff I willingly made to save time and get exactly what I wanted — which are the main reasons consumers in general shop online.

What Keeps People Shopping

Forrester recently released our 2008 Customer Experience Index, a ranking of 114 companies by consumers who responded to an online survey asking how useful, easy to work with and enjoyable the various companies were. Get this, six of the top eight were retailers. The top retailer on the list? Barnes & Noble. So, what does this mean for retailers?

1. A great customer experience is a must-have in brutally-competitive, margin-thin industries that comprise most of the retail landscape.  It is not an option. Not surprisingly, the ten worst performers in the index were TV, wireless and web service providers and health insurance companies--regulated industries that give consumers no choice but to interact with them.

2. A great customer experience is needed just to keep you in the game. Companies like Borders, Toys R Us and Circuit City also scored very well on our list in spite of the fact that they are all in poor financial predicaments. Can you imagine how much worse off these companies would be if they didn't have a great customer experience? We know that good customer experiences drive loyalty, and those loyal customers are often the ones that keep store traffic robust and inventory moving. A personal example-I was at a local shopping complex this weekend and needed to kill some time. So I went to one of my favorite stores, Barnes & Noble and ended up spending money I hadn't planned on spending when I first walked into the store. That sort of impulse revenue creation is the direct tie between customer experience and sales. This of course is all the more imperative in an economic downturn.

3. Good customer experiences mean different things for different retailers. Knowing the core attributes of your brand (e.g. low prices, value, quality products, product support, product selection) and then choosing to deliver most aggressively against those factors that matter to customers (and ignoring those factors that do not matter) in a particular retail environment are critical. Let's take Wal-Mart as an example. Their core value proposition is everyday low prices. So an "enjoyable" experience at Wal-Mart is finding those unbelievably low prices during every visit, not talking to a knowledgeable sales associate or finding deep product selections. Wal-Mart gets what matters most to their shoppers, as do all the best retailers out there.

It's not that bad out there

Can we please put a moratorium on all the gloomy news?  Duke just released a study of CFOs where the key finding is that we're in for at least another 12 months of stagnation.  Will someone acknowledge that there is a glimmer of hope in, of all places, at least one part of the retail world which according to conventional wisdom, should just be getting pummeled?  I've been maintaining that eCommerce is insulated from the worst of it because there continues to be channel shift because it's just easier to shop online and perhaps most compelling, it's a channel where consumers can easily find the best price for anything they want to buy. I have two sets of datapoints to support this.  The first is the Chase Paymentech Pulse Index which captures actual transactions from 25 of the top web merchants. Through Tuesday, December 9, the last 33 days of online shopping have actually been great. In fact, consumers have, when measured on a YOY calendar basis, spent 15% more this year than last year. This is remarkable given that Thanksgiving fell later in November this year and we've had fewer days to build upon the momentum that Black Friday always creates. Our second set of datapoints come from a survey that Forrester did last week with Shop.org.  About 90 retailers responded, and over half of them said that sales have been up in November (including Cyber Monday which happened to fall on December 1 this year). The average November increase for these retailers was actually a hair over 7%--again, remarkable given that we had a very late Thanksgiving this year and we're just now in the heart of the online holiday shopping season.  As for the winners in all this, it's not surprising that the better performers tend to be larger retailers with multichannel operations. Also, sellers of certain products like the iPhone and iPod no doubt experienced better sales than otherwise because of the popularity of those items.

Now if I had a dime for every time someone asked me if we were going to revise our forecast downward (back in October, we said that holiday sales would be 12% higher than last year), I'd be very wealthy.  And after looking at these figures, we feel vindicated for sticking to our guns.