Online Retailers ‘Resilient, Not Immune’ to Challenging Holiday Season

November 14, 2008

This article is included in these additional categories:

Retail & E-Commerce

Though the holiday season will be challenging across the board for retailers, online merchants – though less sunny this year than last – are not all doom and gloom, according to the 2008 eHoliday Study, conducted by Shopzilla for Shop.org, the National Retail Federation‘s digital division, reports Retailer Daily.

More than half of online retailers (56.1%) expect their holiday sales to increase at least 15% over last year – although last year’s survey had found that three-fourths (77.5%) expected their sales to grow more than 15%.

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“Online retailers are resilient, but not immune, to the challenges of this holiday season,” said Scott Silverman, executive director of Shop.org. “Retailers will be heavily promotional to attract shoppers on a budget, but have also invested in new site features to improve the online buying experience.”

Below, additional findings from the study.

Shipping

Despite an increase in transportation costs, retailers do not plan to cut back on popular free shipping promotions: This year, the majority of retailers (78%) plan to offer free shipping with conditions* at some point during the holiday season, consistent with last year’s levels.

Retailers are compensating for increased shipping costs by renegotiating terms with shipping providers (40.4%), closely managing company headcount (33.3%), and reducing other promotions (15.8%).

In addition, one-fifth (21.3%) of retailers say they will require a higher purchase amount for customers to be eligible for free shipping, and one in ten (10.6%) will cut back on usage of free shipping with no conditions.

Website Features

Many retailers have rolled out new website features to improve the customer experience. Features like improved site search, which 42.9% of retailers added or improved since last holiday season, will help customers navigate sites more easily.

Other features, like product video (42.6%) and customer reviews (32.7%) can give shoppers more information to make buying decisions.

For price-focused shoppers, retailers have added and enhanced both clearance-sale pages (27.1%) and featured-sale pages (31.3%).

In addition, retailers continue to experiment with social networking: Nearly one-fourth (25.0%) of online retailers added a Facebook page this year.

Shopping Online

As in previous years, consumers acknowledge that 24-hour shopping convenience is one of the main reasons they choose to buy online (58.6% this year vs. 58.5% last year).

Shoppers’ other top reasons for buying online instead of in stores include not wanting to fight crowds (41.1%), easy price comparisons (36.4%), and free shipping (33.3%).

Also, nearly one in four shoppers (23.1%) says they are spending more online due to high gas prices, more than double the number which said the same last year (9.0%).

Consumers who plan to spend less online this year seem to be reacting to their economic circumstances, not to previous online experiences:

  • One in five shoppers (20.1%) say they simply have less money to spend this year for the holidays, while 10.6% cited a poor economy as a factor.
  • One in ten (11.0%) plans to spend less online this year due to high shipping charges.

“As budget-focused consumers begin holiday shopping, many are starting on the web to look for gift ideas and research products,” said Helen Malani, Shopzilla’s Online Shopping Expert. “Whether they make those holiday purchases online or in stores, the internet will have a tremendous influence on holiday sales this year.”

Promoting Websites

With the internet becoming more of a mainstay in the retail landscape, many retailers will be using their storefronts to promote company websites this holiday season:

  • Three-fourths (74.3%) of multichannel retailers will offer email registration in stores for customers who don’t yet subscribe.
  • Nearly as many (71.4%) will advertise websites in stores and more than half (51.4%) offer the ability for store associates to place an online order for customers.

* Free shipping with conditions means that a customer must purchase a certain item or a certain number of or dollar amount of merchandise before receiving the offer.

About the study: The eHoliday Study (pdf), now in its seventh year, provides a snapshot of the holiday activities of large and small online retailers, many of which have been in business for at least nine years; it also includes the sentiments of online holiday shoppers. The study, conducted by BizRate Research, a Shopzilla company, for Shop.org, surveyed 2,040 online buyers (defined as anyone who has made an online purchase in the last 12 months) from September 29 to October 3, 2008, as well as 60 online retailers from October 1-20, 2008.

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