Online Shopping Shows Resilience, 35% of E-tailers Expect Growth

September 30, 2008

This article is included in these additional categories:

Retail & E-Commerce

Nearly three fourths (72%) of internet retailers say the online channel is more likely to withstand an economic slowdown than offline channels, and most are cautiously optimistic about their business performance in the next 12 months, according to a? study from Shop.org conducted by Forrester Research.

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The 11th annual “State of Retailing Online 2008: Profitability, Economy, and Multichannel Report” found that 35% of online retailers expect their online business to perform better than expected in the next 12 months, while another third (33%) anticipate their online business will perform the same as expected.

Additional findings:

  • 81% of online retailers report that their e-commerce business was profitable in 2007, and 75% said it was also more profitable last year than in 2006.
  • Almost half (49%) of online retailers say their average conversion rate in 2007 was higher than in 2006, and that 36% total sales for the online retailers were driven by repeat customers – higher than in 2006.
  • Because of their outlook for the US economy, 37% of survey respondents have lowered their expectations for their online business performance in the next 12 months.

Online retailers are still challenged in creating cohesive customer experiences among multiple sales channels, the report said. While many web teams continue to operate in silos, apart from store and catalog teams, multichannel retailers report that half of online customers also shop in the company’s stores or through its catalogs, exemplifying why online employees should have a vested interest in stores’ performance and vice versa.

To address this, Forrester said, online retailers must devise practical, measurable goals and incentives to motivate employees in all parts of the company?- whether they are tied directly to the web or not?- to promote sales in all channels that the retailer offers.

In the report, Forrester also advises online retailers to execute well to capture possible sales, but that those sales may not necessarily be the highest-margin revenue because of increased input costs and the pressure to offer promotions such as free shipping.

“Although the online sales growth rate will be lower than in years’ past because of lowered consumer confidence and credit working against all of retail, the good news is that this growth will still outpace nearly every other sector of consumer spending,” said Sucharita Mulpuru, Forrester Research principal analyst and lead author of the report.

About the research: The report draws from two surveys conducted over the course 2008. The first, fielded in February/March 2008, had 125 retail respondents, while the second, fielded in June/July 2008, had 63 participants.

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