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Most retailers are counting on the web for growth in 2009, with sales expected to rise 11%
It’s not the breakneck speed of past years, but U.S. online retail sales, including event and movie tickets, will climb at a rate of about 11% this year to $156.1 billion, up from $141.3 billion in 2008, according to “State of Retailing Online 2009: Marketing Report.”
It’s not the breakneck speed of past years, but U.S. online retail sales, including event and movie tickets, will climb at a rate of about 11% this year to $156.1 billion, up from $141.3 billion in 2008, according to “State of Retailing Online 2009: Marketing Report.” This is the latest edition of the annual report from research and advisory firm Forrester Research Inc. and Shop.org, the online retailing arm of the National Retail Federation, a retail industry trade association.
So it’s no wonder that four out of five retailers figure the web channel will be more effective than physical stores in getting through the recession.
In the first of what will be three parts, the 2009 marketing edition of the State of Retailing Online report projects that retail e-commerce sales will account for 6% of total retail sales this year, up from 5% in 2008, when online sales grew 13% from 2007.
While Internet sales growth continues to outpace traditional retail sales, however, 54% of online retailers expect overall retail growth to slow during the next 12 months, and 57% acknowledge the economy is hurting their profits, the report says.
Though many retailers expect lower overall sales this year, 80% of the 117 retailers surveyed in the report say the web is better suited than other channels to withstand the recession, and one-third say the downturn has helped them capture greater market share, the study found. Retailers report that their conversion rates continue to hover between 3% and 3.5% as they have for years, the report notes.
Still, retailers are being extra careful this year in controlling costs, the report says.
“Retailers everywhere are trying to get their arms around a pullback in consumer spending, and online retailers are no exception,” says 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 e-mail to grow their businesses.”
30% of the online retailers surveyed, for example, are spending less than originally planned on web retail operations this year. Among retailers cutting costs, 88% will scale back hiring and staffing plans and 56% will spend less on search marketing.
But some retailers also see the downturn as an opportunity to increase market share and are proceeding with new initiatives. 46% have no plans to cut back original budgets, while 24% will spend more on their online business than originally planned. Companies planning to spend more will increase investments in areas such as search (80%), e-mail (65%) and social marketing (60%).
A majority of retailers (88%) listed e-mail as a high priority for the year, largely to retain customers, the study found. 71% plan to send segmented e-mails to customers based on stated preferences and purchase data. In addition, 55% will use e-mails to highlight new product availability and to extend invitations to participate in surveys or gather customer feedback, while 53% will use e-mails to feature online-only promotions.
Other highlights of the report include:
- Search engine marketing is most often mentioned among effective acquisition tactics (83%), followed by organic traffic (51%) and affiliate programs (41%)
- E-mail is the most-mentioned successful tactic overall (cited by 89%), followed by pay-for-performance search placement (80%) and SEO/natural search (53%)
- Retailers with more than $100 million in online sales manage an average of 1.13 million paid search terms, on average pay 51 cents per click, and realize on average $5.29 in revenue per click
- Retailers with between $10 million and $100 million in annual online sales manage on average 210,462 search terms, on average pay 44 cents per click, and realize on average $19.87 in revenue per click
- Retailers with less than $10 million in online sales manage on average 23,466 search terms, on average pay 52 cents per click, and realize on average $11.37 in paid revenue per click.