News
Economy forces online retailers to shift focus

May 5, 2009 – The economy is forcing online retailers to change their
marketing tactics in order to acquire and retain customers, according
to findings from The State of Retailing Online 2009, the 12th annual
Shop.org study.

The economy is forcing online retailers to change their marketing
tactics in order to acquire and retain customers, according to findings
from The State of Retailing Online 2009, the 12th annual Shop.org
study. The survey of 117 online retailers also found that, while the
number of companies focusing on customer retention has nearly doubled
in the past year, many retailers see the recession as an opportunity to
capture market share from weakened competition.
 
While Internet sales continue to outpace traditional retail sales,
companies are realistic about current challenges. According to the
survey, half of respondents (54%) expect overall retail growth to slow
during the next 12 months and 57 percent acknowledge the economic
slowdown is hurting their company’s bottom line. That said, companies
are bullish about web operations: four out of five retailers think the
web is better suited than other channels to withstand the recession and
one-third say the downturn has enabled them to capture greater market
share. Illustrating the resilience of the web, retailers report that
their conversion rates continue to hover between 3 percent and 3.5
percent as they have for years.
 
“Retailers everywhere are trying to get their arms around a pullback in
consumer spending, and online retailers are no exception,” said Scott
Silverman, executive director of Shop.org. “Online retailers are trying
to weather this economic storm by doing more with less, making smart
spending decisions, and leveraging effective, affordable tactics like
email to grow their businesses.”
 
Under pressure from the economy, nearly one-third of companies (30%)
are spending less than originally planned on web retail operations this
year. Among retailers cutting costs, most (88%) will scale back hiring
and staffing plans and slightly more than half (56%) will spend less on
search. Others see the economy as an opportunity to increase market
share and are charging ahead with new initiatives. Almost half of
retailers surveyed (46%) have no plans to cut back original budgets and
will spend as planned on their web business, while one in four
retailers (24%) will spend more on their online business than
originally planned. Companies planning to spend more will increase
investments in several areas, including search (80% of respondents),
email (65%), and social marketing (60%).
 
Despite the focus on customer retention, many retailers — primarily
multichannel retailers — say their efforts at customer acquisition will
be higher this year than last year. But for those retailers that
operate primarily online, customer retention (which has historically
been a distant second goal for this group) is now critical.
 
According to the survey, a majority of retailers (88%) list email as a
high priority for the year, largely to retain customers. Almost
three-fourths of retailers (71%) plan to send segmented emails to
customers based on stated preferences or purchase data. In addition,
more than half will use emails that highlight new product availability
(55%), extend invitations to participate in surveys or garner customer
feedback (55%), and feature online-only promotions (53%).
 
“Because consumers continue to spend online, interactive marketing
spend to drive web sales remains a lucrative investment,” said
Sucharita Mulpuru, Forrester Research principal analyst and author of
the report. “While other retail channels struggle, eCommerce managers
have a unique opportunity to drive more sales and test different
tactics that resonate with consumers.”