August 31, 2001, 12:00 AM

Online retailers cut widely to gain profitability, says study

At least one-third of retailers who are selling online have cut staff or promotions while 46% have renegotiated portal deals and 23% have canceled them altogether.

Kurt Peters

Executive Editor

Operators of retail web sties who have trimmed customer acquisition costs and overall marketing costs aren`t stopping there in their drive toward profitability, according to new data from Consulting Group`s “State of Online Retailing" study. 94% of the online retailers surveyed in Q2 2001 for the ongoing study say they’ve made moves specifically to address profitability in the past six months, and they’re pursuing a broad range of measures to get there.

Half of the retailers say they’ve implemented retention programs to maximize spending by existing customers. Nearly a third of the retailers say they’ve reduced staff as a means of cutting expenses, a sharp increase from the 11% who said they’d cut staff during the second quarter a year ago. 33% said they had increased prices during Q2 versus 12% last year, and 35% said they had reduced or eliminated discounts and promotions. 35% said they had taken major steps to improve fulfillment efficiency.

Reducing the cost of portal deals has become a top priority for online retailers in the past year. Almost half say they’ve renegotiated their portal deals since last year and 23% say they’d completely canceled them.

Another 23% say they’ve deferred site upgrades this year. While it represents a short-term cost-saving tactic, warn study researchers, failure to make needed upgrades could cost retailers in the long run if it diminishes the customer experience online.


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