But losses mount for the home furnishings e-retailer that went public in October.
Web retailers are building out site features and planning heavy promotions to connect with online Christmas shoppers.
Retailers aren’t expecting web shoppers to stuff as many stockings or arrange as many gifts under the tree this holiday shopping season. The prospect of softer sales is pushing merchants to think up better ways to drive site traffic and launch new promotions that can turn visitors into motivated Christmas shoppers, according to Internet Retailer’s latest monthly survey.
With the holiday shopping season already in high gear, the survey finds that web retailers are launching more promotions and increasing their spending on search engine marketing. Merchants are also busy updating their e-commerce sites with new features or functions and taking steps to improve performance and customer service-all with an eye on snagging the Christmas buyer.
Posting solid holiday sales is important to merchants regardless of size. The survey finds that 55.3% of retailers count on holiday gift purchases for more than 25% of their annual sales, including 9.1% where Christmas makes up 50% or more of yearly revenue. But unlike previous years when web-based holiday sales grew by about 25%, most retailers this season are anticipating softer results as consumers deal with high energy prices, the threat of a recession and a slumping housing market. The survey-this one on holiday expectations and preparations-reveals that 76.9% of retailers expect online Christmas sales to grow by 20% or less this year, including 33.8% by 10% or less and 17.7% by no more than 5%.
Early and often
“We’re probably looking at an overall increase in holiday sales this year of about 17% to 21% and many merchants won’t be able to meet or beat that projection,” says Maris Daugherty, analyst with retail consultants J.C. Williams Group. “There aren’t going to be as many new consumers going online to Christmas shop this year and the merchants that have the deals customers want and make shopping easy are the ones that will have the best season.”
Online retailers are already planning to conduct more and varied promotions this Christmas. The survey was e-mailed in early October to all subscribers of IRNewsLink, the magazine’s e-newsletter, and all responses were collected and analyzed by Vovici Corp., which has partnered with Internet Retailer in a series of surveys on the e-retailing industry. The survey, which summarized answers from 52 chain retailers, 28 catalog companies, 95 virtual merchants and 16 consumer brand manufacturers, finds that 58.1% of merchants will offer more promotions. Almost one-quarter are planning one-day sales while others are mailing or e-mailing customers with such promotions as a gift with a purchase, early bird or invitation-only specials and buy one, get one free specials. 14% of retailers also will be applying instant rebates to online purchases.
“Retailers have to think smart about their promotions this Christmas and then act fast when they see an opportunity,” says Daugherty. “Timing will be everything and merchants need to focus promotions on their best customers and who they think is most likely to buy.”
In previous years retailers have relied on a customer favorite-free shipping-to drive sales. This year 51.1% of merchants will offer free shipping and 86.7% will keep rates the same. But to control costs, most merchants are setting conditions to qualify for free delivery. The survey notes that 84.5% of merchants will restrict free shipping with 25.9% of retailers requiring a minimum purchase of $100 and only 14.8% $25 or less.
Retailers want to eliminate or at least cut back on free shipping because it’s one of their biggest holiday-related expenses. Even if a merchant has negotiated bulk rates with carriers, small web retailers can spend 4% to 6% of total holiday sales on free shipping and larger retailers up to 12%. “One of the biggest comments we hear from retailers this holiday season is that they don’t want to spend as much on shipping because it’s such a big cost center,” says Thomas Johnson, managing director, consumer markets, for BearingPoint Inc., a New York-based business and technology consulting firm. “It’s going to be interesting to see how long retailers can stay with their no free shipping or minimal purchasing requirements as the holiday shopping season peaks and everyone gets more aggressive about making sales.”
To drive sales, more retailers are adding features and functions to their web sites and taking measures to improve performance. The survey finds that while only 12.3% experienced any serious delays or downtime during last year’s holiday shopping season, 70.2% are taking measures to improve their performance.
For instance, 31.6% are adding servers or other hardware, 18.7% have hired or installed a third-party performance monitoring service or application and 16.1% have pre-tested higher levels of anticipated traffic from both inside and outside the firewall. Ensuring that sites don’t crash or that consumers don’t click away because of slow loading pages is important to retailers, especially over the long Thanksgiving weekend and the Monday after Thanksgiving. “Many retail sites see record traffic around Thanksgiving because the bargain hunters are out in force and this may be the only time many shoppers and gift buyers have to research a wish list,” says Johnson. “Retailers need to put forth their best site performance because it might be their only chance to attract new visitors and repeat shoppers who will make a purchase later on.”
Searching for shoppers
Retailers will certainly be letting visitors and shoppers know how to find their e-commerce sites this Christmas, especially through more pay-per-click advertising. Despite discontent two years ago over what some retailers felt were high prices for cost-per-click advertising, the survey finds that only 3.7% of merchants are cutting out keyword campaigns altogether over the holidays while 9.6% will increase spending by 25% or more and 10.7% will keep paid search spending the same amount as last year.