Tomorrow the Halloween decorations are in the clearance section and the supermarkets are pushing free-turkey promotions, which can only mean one thing: The (unofficial, at least) start of the holiday buying season. And if the prognosticators are right, this year is shaping up to be a winner for online retailers.
Online retail sales for 2006 are on track to exceed $211 billion, according to Forrester Research, Inc., and experts estimate about $40 billion of that spending will occur between now and the end of the year.
Jim Glassman, an economist and a resident fellow of the American Enterprise Institute for Public Policy Research, shared some insights and research data from a recent Harris Interactive poll (conducted on behalf of PayPal) that could help smaller online retailers make the most of this year's holiday spending trends. And Forrester's e-commerce diva Sucharita Mulpuru, along with her research team, offers valuable insight on how to address consumer concerns to maximize sales.
The Power of the Unplanned Purchase Glassman anticipates an increase of 20 percent or more in online holiday shopping this year versus last. He sees categories such as furniture, clothing, and electronics capturing the biggest gains. "As people have become more comfortable with the Web, the idea of buying a $2000 flat-screen TV isn't so foreign anymore," he says.
One important trend Glassman noted from the Harris study was an increase on the Web in spontaneous purchases — long a staple of bricks-and-mortar retailing. "It is a recently growing phenomenon," notes Glassman.
In fact, 45 percent of shoppers indicated that they have made at least one spontaneous purchase when shopping online in the past three months, and the respondents indicated that, on average, 10 percent of their online purchase dollars over the past three months went toward an unplanned purchase. The most frequently cited spontaneous purchases were clothing and accessories, books, CDs and DVDs.
Set Your Site for Spontaneity How can your business be a part of the action? Glassman has three tips for online sellers that should let them take advantage of the free-spending trend.
First, he says it's crucial that online sellers attract buyers with promotions. "The Web is much more competitive these days," he said. "So give them a hook, a reason to make that unplanned purchase." Indeed, in the Harris poll, shoppers who had bought something spontaneously online indicated the top factors in making that purchase were sale items (66 percent) and special promotions (59 percent).
Glassman's second tip: "Do tie-ins, like Amazon and others do," he advises. "Point out to visitors, 'You bought this, so you might like that.'" A successful tie-in will increase the total a given shopper spends in a visit, of course, and also gives your site the feel of a larger merchant.
Finally, though it seems obvious, it's worth repeating that sellers need to institute a secure, easy-to-use, seamless payment system. In addition to the traditional credit-card payment methods, that includes an online payment service such as BidPay or PayPal. In the Harris poll 53 percent of online shoppers said they had used an online payment service to complete a transaction.
In other e-commerce economic news, Forrester Research, Inc. reports in its "eCommerce Outlook for Q4" that online sales this holiday season will reach $27 billion, a 23-percent increase over last year. Even more telling, the research group states that about one-fifth of the approximately 4,000 survey respondents say they will shop for gifts primarily on the Internet.
Inspire Confidence in Prompt Delivery And yet not all is merry for Q4 predictions. Shoppers say they are not confident about product fulfillment, with 15 percent (or more than one in 10) reporting that they received orders late last year. Half of the gift-buyers also said that returning items purchased online is a "hassle," with 27 percent preferring not to buy online at all because of the potential of having to go through the ordeal.
"In order to maximize online retail sales this year, eCommerce executives must recognize that everything consumers experience after they reach a confirmation page is just as important as everything that happens prior," said Forrester Senior Analyst Sucharita Mulpuru. "By emphasizing convenience of returns during the selling process and then exceeding customer expectations for package delivery, retailers can not only reap good sales this year, but also positively influence consumer confidence to shop online in the future."
Forrester also found that toys, DVDs and videos can expect gains this year, and that a significant number of shoppers are willing to pay for extras, such as gift-wrapping, rush shipping and "product personalization," such as engraving or monogramming.
In addition to up-selling, e-tailers would be wise to focus on multi-channel marketing approaches, such as increasing the frequency of catalog mailings to bolster sales, as 41 percent of consumers say that catalogs spur them to shop online.
Mulpuru and her team end their report with the following advice for Web shop owners:
Offer free shipping, but offset it with other high-margin offerings. In addition to using coupon codes (as opposed to free blanket shipping on all transactions), retailers should give prominent home page, section page, product detail page and checkout page placement to up-sell features such as overnight and expedited shipping, and illustrate gift packaging with attractive photos that showcase how the packages will arrive to a recipient.
Monitor package delivery and fulfillment of packages. Effective online holiday package delivery continues to be a thorn in the side of the e-commerce industry. Retailers should incorporate quality control checks, such as spot checks by customer service representatives after packages have been shipped, package tracking links to the major shipping carriers and religious adherence to post-transaction surveys with a particular focus on the management of late arrivals, wrong shipments and the like.
Don't ignore reverse logistics. Emphasize the convenience of returns in key parts of the selling process — on product detail pages and at checkout. Companies such as Zappos.com address this challenge by marketing "free shipping both ways," and vendors like Newgistics bolster retail efforts by providing retailers with return labels that consumers can use at a local post office — which is perhaps the easiest solution for dealing with the hassle of returns.
Jamie Bsales is a regular contributor to Small Business Computing. Michelle Megna is managing editor of ECommerce-Guide.com.
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