January 29, 2010, 12:00 AM

Web retailers downplay discounts over the holidays, selling more at full price and improving profitability

Web sales grew 18% and profits rose 20% in December 2009 compared to December 2008, as e-retailers sold more products at full price, according to a study of 150 online merchants.

After a year of enticing cost-conscious consumers with heavy discounts, web sales grew 18% in December 2009 compared with December 2008 and profits increased by 20% as e-retailers sold more products at full price, according to a monthly study of 150 e-retailer clients of MyBuys Inc. that the personalization technology firm conducts for Internet Retailer.

Total revenue from items sold at list price increased nearly 30% in December, MyBuys says. Meanwhile, revenue generated by sales of discounted items increased by 19%, down substantially from the 100%-200% increases in sales of discounted items earlier in the year, the study shows. While revenue growth from discounting was substantially smaller than in prior months, the average discount offered inched up from 25.3% in December 2008 to 26.6% in December 2009.

The net result for online retailers was a growth in margins and profits, the MyBuys E-commerce Wellness Index concludes.

"Following four straight months of modest overall growth driven by heavy discounting, retailers experienced significant top-line gains driven by the most important component of the index: consumers purchasing at list price," says Robert Cell, My Buys CEO. "This bodes well for a core challenge retailers face this year, which is to increase revenue in 2010 from the levels in 2009, which were achieved with a heavy reliance on discounting. Personalization continues to be an effective, reliable strategy for increasing sales of non-discounted goods within the MyBuys client base."

The MyBuys E-commerce Wellness Index seeks to measure the health of e-retailing by aggregating total sales, non-promoted sales, discounted sales performance, depth of discounts and average order value from the product recommendations technology vendor`s more than 150 retail clients across numerous product categories; 40 of the merchants are in the Internet Retailer Top 500 Guide.

The index also measures consumer impulse response to product recommendations by tracking how many shoppers click on recommendations and how many buy them. The index showed that MyBuys clients` average order values increased 24% when orders contained personalized product recommendations.


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