As the online holiday shopping season comes to a close, we’re in the process of pulling together our final thoughts on this season. Last month, we predicted that the season would grow 15% over the previous year and by all accounts, that number should more or less be in the ballpark of what actually happened.
I worked with the great team at Bizrate Insights again this holiday season to survey online holiday shoppers and their attitudes and here were some of the highlights from that research:
The web is cannibalizing Black Friday sales; 80% of online buyers we surveyed agreed with the statement “I prefer to shop online rather than go to crowded stores during the Thanksgiving weekend.”
Email is very much alive; shoppers said they find out about holiday deals through email more than any other marketing channel including search, social networks and mobile texts combined.
Approximately 12% of web buyers now say they belong to shipping clubs (e.g. Amazon Prime); that is up from 9% last year.
Sixteen percent of online buyers said they shopped with their mobile devices over the Thanksgiving weekend this year, up from 9% last year.
While mobile shopping is the most notable difference this year, retailers that mastered the basics of great values, extensive assortments and effective marketing campaigns should have fared best. We’ll be releasing a holiday post-mortem in January as well as our 2012-2017 online retail forecast in early Q1; stay tuned for final figures.
As the debate around mandating an online sales tax rages on, Forrester remains convinced that 2012 will see no significant national change to the current tax structure. As stated in my new report, “What You Need To Know About The Online Sales Tax” and a previous blog post around the issue, some are framing the debate in such a way that online-only companies like Amazon and eBay are tax-shirking delinquents; they’re not. Not only are they in compliance with current law, Amazon, who was at one point resolutely opposed to any new legislation, has made concessions to voluntarily start collecting tax and in fact, physical retailers may soon regret their staunch stances as the balancing act that Amazon avoided around nexus kept them squarely away from physical stores to date. Now, that may change and create yet another headache for retailers as Amazon reportedly ponders stores.
So what does this all mean? There is likely to be a few more years of heated debate around the issue followed by a number of possible outcomes. eBusiness professionals should stay abreast of situation, but realize that this is not likely to be a game changer for the following reasons:
Tax has a negligible impact on online shopping behavior. In a survey that was conducted in partnership with Bizrate Insights, we found only 8% of consumers said that tax was a priority consideration. Furthermore, only around one quarter of buyers said that the introduction of a sales tax would cause them to switch retailers.
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.
Forrester recently published the “State Of Retailing Online 2011: Merchandising, Headcount, And Global Strategies” report in conjunction with our friends at Shop.org. It is available on Shop.org (with a subscription) now.
Some of the reports highlights include:
Online retail continues to steal market share from other channels. “The State Of Retailing Online, 2011” survey shows an average growth rate of 28% for online retailers over the past year — this has been driven by improvements in retail execution including higher conversion rates, higher average order values, and strong repeat shopper revenue.
Investment in site merchandising drives conversion increase. While some tactics such as “ratings and reviews” are perennial merchandising investment favorites, more retailers now also are investing in merchandising through new channels, such as mobile. This report categorizes each of the 80 tactics reviewed as an industry standard, area of opportunity, investment area, or unproven tactic.
Headcount growth lags as overall eCommerce growth charges forward. Retailers maintain conservative growth plans — less than 10% — that largely don’t match up with the year-over-year growth of web retail overall. Focus currently is on mobile, marketing, merchandising, IT, and analytics.
Global expansion will be an investment focus, but not top priority. While 37% of retailers cited international commerce as very important, most global businesses still haven’t fully committed to that lofty title — remote management of global services, accepting returns shipped only to their home country, and English-only sites and customer service are still common practices for these “global” online retailers.
We discovered some interesting information about how consumers are using tablets in recent research with Bizrate Insights: that shoppers who have tablets often prefer to browse and buy on those devices and that tablet ownership increases the amount of time that people spend online altogether. One company that caught onto that trend even before we fielded our data was Siva Kumar, CEO of the shopping aggregator TheFind. I ran into Siva several months ago at Channel Advisor's Catalyst summit where he showed me an impressive demo (on his iPad, natch) of Catalogue, a magazine-like compendium of all my favorite store catalogs (see below). Given his hands-on experience bringing a multiretailer tablet experience to life, I thought it would be interesting to get a t-commerce pioneer's POV:
Siva, do you think tablet commerce will be something retailers need to explicitly watch?
Absolutely yes. Online shopping today is very much a chore. It is search-driven, and while search is useful, expedient, and powerful, it is not particularly fun or exciting. More importantly, search leaves little room for retailers to do what they do best, which is to merchandise their wares to consumers. Conversely, tablet shopping, with its high-resolution graphics, touchscreens, and more tactile interactivity offer game changing potential that may create the means by which eCommerce could grow to be as much as 20% of retail commerce by 2020.
What are the most important things to watch in developing content for a tablet device?
While all eyes in the online retail space seem to be on social networks and smartphones these days, we’re seeing an emerging trend with tablets that could be the most interesting of all. Only 9% of web shoppers now have tablet devices, but here’s the big deal — most of those people already own smartphones (as well as PCs, of course), and they are saying that they actually prefer to use their tablets for shopping. Not only that, but the ownership of the tablet device itself actually increases the amount of time that people spend online. And we’re anticipating a hockey stick in tablet adoption in the next five years on top of all that. You can read more about these findings in the report my colleague Sarah Rotman Epps and I just wrote titled, “Why Tablet Commerce May Trump Mobile Commerce,” which is based on findings from our joint research on online shoppers with Bizrate Insights. Some of the most compelling aspects that are helping to drive the shopping experience on the device:
The larger screen. Not surprising, given the choice between a smartphone and a tablet, consumers find it a lot easier to use the latter to surf the net, click on links, and type in the critical biodata to purchase something online, especially since PayPal Express doesn’t seem to be integrated onto most mobile commerce sites yet.
The portability. Consumers love taking their tablets around the house and on the go. The living room is the most common room where the tablet is used, but out of the home is also popular, particularly at restaurants and in airports.
A significant portion of transactions online already collect sales tax because people purchase from online stores like BestBuy.com or Walmart.com, so the real amount that is being “lost” is less than the numbers being bandied around would have you believe, and not enough to make up anyone’s deficit, maybe a small city somewhere but probably not much more.
In my ongoing-yet-fruitless quest to find the great social commerce success story, I’ll talk to anyone who will talk to me about the topic. I talked this week to a "venture capitalist" who shall remain nameless, and we had the following conversation:
VC: I’ve seen social commerce success. I have. I’ve seen commerce success on Facebook.
Me: Really? Are you referring to maybe one of the marketplaces on Facebook? Or ShopSocially?
VC: No, no one’s heard of this company. No one in the Valley has heard of this company. Only I know about this company.
Me: And this is a business that can scale?
VC: It’s sooooo scalable. I’ve seen it scale.
VC: They make millions and millions of dollars. I’ve seen it.
Me: Can you tell me who you’re talking about?
VC: I . . . I’m not at liberty to say the name. They want to stay under the radar. They don’t want anyone to know about their secret sauce.
Me: Really? They’ve discovered something that no one, not Silicon Valley, not Facebook’s army of developers, not any retailer in the world has yet to discover?
VC: Hey, I don’t need YOU to believe me! I’m happy to just make my money.
After social commerce, mobile commerce is the most heavily debated topic-du-jour among retailers these days. One thing that both social and mobile commerce have in common is that they are both small. Teeny in fact. Forrester’s Mobile Commerce Forecast, 2011 To 2016, which launched today, shows that retailers can expect 2% of their online web sales (yes, I said web sales which means a minuscule percent of overall retail) to be transacted through mobile devices in 2011. While we also expect mobile commerce sales to grow 40% each year for the next five years, we’re still talking small numbers overall (7% of web sales penetration by 2016). Why so small you may ask. After all, aren’t smartphones changing the way we consume web content? Some things to consider:
Tablets. We don’t include tablet shopping in our definition of mobile shopping, but the creation (and subsequent explosion in sales) of this device is probably the single biggest inhibitor to the growth of “mobile commerce.” Data that we gathered with Bizrate Insights (to be released separately and soon) indicates that most tablet owners also own smartphones, and many of those people naturally prefer to shop on the device that has the larger screen when given the choice.
Shopping never leads web behavior. In any list of activities that people do on the Internet, shopping nearly always ranks below things like “reading news” or “using social networks.” Even those activities are not universal among the smartphone set, so it would be premature to expect that shopping would rank high on the list (which it, of course, doesn’t).