Online sales increase almost 3%, but HSN’s total sales dip by the same amount.
Shoppers learned during the recession how to use the web to find great deals. They’re not going back to their old ways.
Staffers at Macys.com detected a new pattern in customer behavior last spring: consumers would add items to shopping carts, leave the site and then return with discount codes they had found on the web sites of Macy’s affiliates. Only then would they complete their purchases.
“We said, maybe we should just do this ourselves,” says Kent Anderson, president of Macys.com, the e-commerce arm of the Macy’s Inc. department store chain.
And that’s what Macy’s did, making its promotional codes more prominent on Macys.com. The shopping cart page now includes a box with a header that says, “Have a promo code?” and a link to “Find one now.” That link takes a customer to a Macys.com page listing current discount codes.
A sales boost
Making those codes easier to find means the consumer no longer has to search the web for those savings, Anderson says. And it also saves Macy’s the affiliate fee, typically 4-5% of the purchase amount. Anderson won’t disclose how much the change boosted sales, but says, “It was far larger than we thought it was going to be.”
“The number of checkout transactions that included a promotional coupon this year versus last year went up as the consumer is increasingly value-conscious,” Anderson says. “That’s the behavior change we’re seeing in the current economy-if they can save money on free shipping or some other discount, it’s meaningful to them.”
That change in the behavior of Macys.com customers, and the retailer’s response, illustrates how the recession changed online shopping. In the sharpest economic downturn of the Internet era, consumers learned how to use the web to find better deals-and retailers had little choice but to adapt.
“The customer has learned that it doesn’t take much to get a great deal,” says Lois Huff, senior vice president of Retail Forward, a consulting firm that recently became part of Kantar Retail. “Technology is enabling you to get a great deal, and future technology will make it even easier.”
Even with the economy perking up, consumers remain fixated on the web as the place to hunt for bargains. In a December survey of online shoppers, 68% said they were using online search more often to find good deals, according to search marketing agency Performics, which sponsored the survey conducted by ROIResearch.
This poses a big challenge for online retailers: How do they compete for the loyalty of consumers who are more savvy in using the web to compare price and quality, without simply offering deep discounts? There’s no easy answer. But the starting point has to be carefully studying the data to see how consumer behavior changed during the recession, and how some online retailers are finding ways to appeal to the more value-conscious web shopper.
Race to the web
On the bright side, from an e-retailer’s perspective, the recession led more consumers to shop on the web. That at least gives e-retailers the first shot at making the sale.
The shift from store to web showed up dramatically as the holiday season kicked off last Thanksgiving weekend. On the Monday after Thanksgiving, the number of consumers shopping online grew 6% to 8.7 million from 8.2 million a year earlier, reported web measurement firm comScore Inc. By contrast, foot traffic to bricks-and-mortar stores over the Thanksgiving weekend declined 1.1%, according to ShopperTrak.
Over the course of the holiday season, there was a 3.7% increase in the number of consumers shopping online, according to web analytics firm Coremetrics. ComScore put the increase in online shoppers at 10%. Even before the holiday season, three out of four online adults were shopping online, based on April 2009 data from the Pew Internet & American Life Project.
More striking were indications of consumers shopping the web more widely. The number of consumers shopping at a particular department store site jumped 152% and at sporting gear and apparel sites 55% on the Friday after Thanksgiving, Coremetrics says.
That suggests consumers, increasingly comfortable shopping the web, responded to online offers, even though they may not previously have shopped online for that kind of merchandise before, says John Squire, chief strategy officer at Coremetrics.
The shift from store to web was mirrored in sales results for the holiday season: The U.S. Commerce Department says online retail sales increased 14.4% in the fourth quarter versus a year earlier, while total retail sales grew only 2.2%.
But bargain-hunting was the order of the day in 2009. And consumers increasingly started looking for deals on Google and other search engines, reflected in the 22% increase in search engines’ traffic in December, according to comScore. That’s a substantial jump given that online consumers were already widely using search engines before the economic downturn.
Search engines attracted more traffic and sent more of that traffic to retail sites-8% more visits to major e-retail sites came from search engines in December 2009 than from the same month a year earlier, reports Experian Hitwise, which measures online activity.
But that traffic didn’t necessarily turn into sales, as consumers often looked quickly, then moved on. Sessions in which a visitor left a retail site after viewing just one page-the so-called bounce rate-increased by more than 39% year over year to 30.9% on the Friday after Thanksgiving and nearly 18% to 28.9% on the Monday after the holiday, Coremetrics says.
“Consumers have gotten quite a bit more surgical about what they’re looking for,” says Squire of Coremetrics. “If they don’t find it right away, they leave.”
By product, not retailer
Value-conscious consumers were also more likely to start a shopping trip by searching for a product and less likely to search for a retailer’s name.
Searches for retailer names were down 9% in the mass merchant and wholesale club category and 3% in department stores in the fourth quarter of 2009 versus a year earlier, says analyst Dillon McGovern of web research firm Compete, part of Kantar Media.