In its second-largest acquisition, Amazon buys the company for $970 million.
E-retailers will get honest answers about what they face at next month’s Internet Retailer conference. Here’s a preview and the agenda.
Patrick Byrne gets right to the point: “Online retailers should be extremely defensive financially. They should look everywhere to strip capital out of their business because capital is going to be more expensive.”
The good news for e-retailers, says the Overstock.com Inc. CEO, is that they need less capital than bricks-and-mortar retailers. A key for getting through the recession for web merchants, he says, will be to leverage all the ways the Internet allows them to use technology in place of physical assets to generate sales.
“The more they’re moving electrons around rather than boxes, the better off they’re going to be.”
That’s the message Byrne will deliver in his keynote address June 16 at the Internet Retailer Conference & Exhibition in Boston. And other speakers are readying remarks along the same lines: The days of a rising e-commerce tide lifting all boats are over. Now e-retailers must be smarter, and make harder choices, if they are to survive and prosper.
At evogear.com, that’s meant refocusing on its core business, and away from experiments in social media and travel planning services, says Nathan Decker, head of e-commerce at skiing and snowboarding e-retailer evo who will be speaking on “How product ratings and reviews affect more than just sales.”
“We’ve been a high-growth company and growth tends to wash away a lot of problems that might otherwise be noticeable,” Decker says. “As we’ve slowed a little in growth, we’re shifting to a focus on the core of what we do: getting orders from customers, shipping the right thing without mistakes, inexpensively. I’m curious to see if that’s the tack other retailers are taking.”
Decker is heading to the right place to find his e-retailing peers, because the Internet Retailer Conference & Exhibition is the largest event in e-commerce, attracting more than 5,000 attendees last year in Chicago. In fact, IRCE was named the fastest-growing conference in North America last fall by industry publication Tradeshow Week, taking the top spot among 13,000 trade shows held in the U.S. each year.
This year’s conference agenda features 91 sessions and 178 speakers. The first and last day will feature all-day workshops-search engine marketing and sessions focused on small retailers on June 15, and mobile commerce and e-mail marketing June 18.
In between there will be four concurrent tracks each day, focusing on such topics as online marketing, merchandising, web site design, fulfillment, payments, security, social networks and the economics of online retailing. There are sessions designed for multichannel as well as web-only retailers, and for catalogers and consumer goods manufacturers.
Featured speaker Mark Kuhns, vice president of e-commerce at Under Armour, will address how consumer manufacturers can use the web to tighten relationships with customers. Executives of such companies as Barneys New York, Petco and CVS will present the retail chain perspective. And Stephanie Tilenius, general manager for North America at eBay Inc., will discuss the major strategic shifts under way at the online auction giant.
In addition, IRCE will feature the largest display of e-retailing technology anywhere. Some 350 companies are expected to exhibit this year in a 130,000-square-foot exhibit hall, 30% larger than last year’s.
By the numbers
But before they decide whether and what to buy, e-retailers attending IRCE will want to know how consumers are reacting to the economic downturn, and whether there are any signs that online sales are improving.
Providing a detailed look at the latest data will be Gian Fulgoni, chairman of comScore Inc., which tracks consumer behavior online. Fulgoni, whose presentation on “Understanding Consumer Behavior in an Uncertain Economy,” follows Byrne’s keynote address, will drill down into comScore’s observations of 2 million consumers who permit comScore to track their Internet activity.
From that data, comScore was able to conclude that spending among higher-income consumers held up well during the past holiday season-online shoppers with household incomes above $100,000 spent 17% more during the season as overall web sales dropped 3%. However, affluent consumers pulled back early in 2009 as the stock market declines made them feel less wealthy, Fulgoni says, and their online spending increased only 8% in January.
Overall, e-commerce grew 2% in both January and February over a year ago, which Fulgoni considers a strong showing when overall retail sales were declining. And because online retailers have lower costs and can offer lower prices, e-commerce should gain market share from bricks-and-mortar retailers, Fulgoni says.
“It wouldn’t surprise me if when we come out of this recession that e-commerce isn’t stronger than when it went in as the economically challenging conditions make the Internet look more attractive to people,” he says.
In order to ensure they’re still in business when the recession ends, e-retailers are looking hard at costs and tailoring their web sites to cater to increasingly price-conscious shoppers. Speakers at IRCE will dig into both strategies.
Buy versus build
Drugstore.com, for example, cut its cost per order by 20% in 2008 as a result of a concerted effort begun in late 2007 to renegotiate agreements with shipping services and merchandise suppliers, says Tracy Wright, chief financial officer, who will speak on “Understanding web site financials: managing to success.”
That cost-cutting campaign helped the web-only retailer become profitable in the fourth quarter of 2008. And it put it in a position to expand its selection this year when prestige cosmetics brands, such as Bare Escentuals, which previously sold only through department stores, agreed to let Drugstore.com sell their products, Wright says.
“Those were huge wins for us,” she says. “We’re seeing prestige beauty vendors increasingly looking online to stop the decline in their growth.”
For Overstock’s Byrne, one of the big ways online retailers can reduce costs is by taking advantage of the improved software available from vendors-which reduces the need for e-retailers to build and maintain complex applications themselves.