PayPal posts another quarter with double-digit revenue growth. PayPal may soon be a payment option for shoppers on Chinese international marketplace AliExpress.
As channel shifting continues, retailers step up their investments in web technology.
As consumers demonstrate they like the convenience of online shopping,
retailers are stepping up their investments in the web channel
By Kurt Peters
Last year’s booming growth in online retailing may have cooled a bit, but consumers are still shifting their buying to the web. While total retail sales grew 6.9% through June, online sales grew 13% through mid June, reaching $21 billion from $18.6 billion, comScore Networks Inc.’s Media Metrix reports. Average weekly online sales so far this year are $875 million vs. $775 million a year ago.
One of the standout categories is online apparel, where sales for the year are running 37% ahead of last year, averaging $135 million a week, comScore reports. In fact, online apparel sales are picking up steam, averaging $141 million a week for the six weeks ending June 1, 51% ahead of the same six weeks last year. “While this trend echoes strength in offline retail sales, the scale of growth suggests a continued shift in apparel buying from offline to online,” comScore says.
Walking into higher sales
The general trend in increasing sales is reflected at individual sites and the particular boost in apparel is evident at individual apparel sites. Shoe retailer Zappos.com, for instance, is on track this year to double sales to $65 million from last year’s $32 million. Toy and game site eHobbies.com also expects to double online sales this year, while auto accessories retailer J.C. Whitney Inc. has experienced accelerating growth throughout the year-as high as 40% year-over-year the first two weeks in June. Drugstore.com Inc. and ShopNBC.com expect smaller growth-but still outpacing total retail sales growth; 10% at Drugstore and 8% at ShopNBC.
The growth is general in the online retailing sector and reflects a commitment by retailers to getting the basics in place as a foundation for more growth. “All of our clients are looking for incremental gains,” says Jim Okamura, Chicago-based partner with retail consultants J.C. Williams. “They’re doing a lot of the basic blocking and tackling. They’re asking how e-mail campaigns will affect sales, whether a catalog drop will get returns, or they’re refining the search capabilities of their sites.”
While it’s clear that consumers are becoming more comfortable buying online, each site has its own reason for growth. Zappos.com CEO Tony Hsieh attributes his site`s fast growth, in part, to a high level of customer service that pays shipping both ways-out to the customer and back to the warehouse if the shoes don’t fit or aren’t right in some other way. “Buying shoes online can initially be a scary process for people,” Hsieh says. “But Zappos has withstood when other dot-coms have failed because we provide the best customer experience, such as free shipping both ways. Even though free shipping of both orders and returns has cost us more, it has enabled us to keep our customers longer.”
Similarly, eHobbies.com president Seth Greenberg attributes growth to a number of initiatives, including an innovative site-search box that eHobbies places on affiliate partners’ sites. The search box on affiliate sites allows visitors to search eHobbies’ database for products. A customer either navigates the search function through a series of drop-down menus or inputs a search term. When the customer clicks Go, the browser either launches a new window displaying eHobbies.com or sends the user directly to eHobbies.com. Those searches are now responsible for as much as 10% of eHobbies’ sales, Greenberg says, and he expects that portion to continue to grow. “We’re just scratching the surface,” he says. “I still have some key strategic sites I want to get to.”
The growth at JCWhitney.com is the result of channel shifting as customers adopt the convenience of online shopping, says Geoff Robertson, director of technology at Chicago-based J.C. Whitney. Online sales in January and February were 10% higher than January and February 2002, while March and April sales were up 15-20% over the same months a year earlier. Then suddenly in early June, growth accelerated to 40% over the same weeks a year ago. Meanwhile, companywide sales were flat. “Channel switching is continuing,” Robertson says. “A lot more of our Internet sales are coming from the catalog; customers like the convenience.”
At the same time that volume is growing, J.C. Whitney’s average order value is increasing. In May, it was 5-10% above May 2002, Robertson says. He attributes that to the growth of products available at the web site. J.C. Whitney is growing its online catalog to all 55,000 SKUs, which, when applied to all the makes and models of cars they can fit, represents 3 million variations of products. “As more product goes up on the site, people buy more,” Robertson says. “It’s so fundamental.”
Placing the right products in front of shoppers at the right time is one of the key elements of retailing that is growing in importance online. Drugstore.com, for instance, is re-designing its pages to present fewer but better targeted and merchandised products to customers, says Ramer Holtan, customer retention manager. “One of the directions we’re going is simplification,” he says. “We want to present customers with fewer but clearer options. Our pages had become more and more crowded and confusing, so we decided to stop just adding things and start taking away.”
Now, even though Holtan says Drugstore.com continues to live up to its boast that it offers way more products than a corner drugstore, it is presenting products in a more directed fashion. “We’re homing in on specific messages and value,” he says.
Directed marketing is becoming the norm in external marketing efforts as well. Internet search is becoming the marketing technique of choice for many retailers. Retailers are attracted to search by the fact that consumers searching on a product are already in the mind to buy it. Thus retailers are stepping up their search efforts, with nearly two-thirds of marketing executives who use search engines recently surveyed by Jupiter planning to increase their spending on search. They also are refining their tactics and undertaking such initiatives as directing customers straight to the product page from search results.