Despite economy, online sales continue to climb
Online retail sales to reach $204 billion this year
April 08, 2008
Scottsdale, Ariz.—Although retail sales are expected to experience sluggish growth this year, Americans will continue to flock to the Internet to buy clothing, computers and even cars, according to a new study from
Shop.org.
In fact, The State of Retailing Online 2008: Marketing Report shows that online retail sales are expected to increase 17 percent this year to $204 billion for 125 retailers surveyed.
"From higher shipping costs to changes in consumer shopping habits, online retailers are not immune to the current economic climate," Shop.org Executive Director Scott Silverman said in a media release issued today. "But the fact that online sales will increase substantially this year demonstrates the resilience of the channel and is a testament to the value and convenience most customers find when shopping online."
According to the report, online retailers allocate 53 percent of their marketing budgets to online customer acquisition and 21 percent to online customer retention.
"What's spearheading online retail sales growth is a tale of two shoppers that visit the Web for very different reasons," said Sucharita Mulpuru, principal analyst at Forrester Research, which conducted the study for Shop.org, and lead author of the report. "The casual shopper goes online to look for the best price, leveraging the transparency of the Internet to save money. However, more affluent customers appreciate the convenience of shopping online and are not necessarily looking for the best deal. Retailers would be wise to recognize there are significant opportunities within both audiences and should market to them accordingly."
Online retailers reported that search engine marketing continues to be the most effective way to reach new customers, citing 35 percent of sales coming from that initiative. As a result, nearly all online retailers surveyed (90 percent) use pay-for-performance search placement, and 79 percent said they will make this tactic an even greater priority this year.
Companies are also using offline marketing tactics to drive consumers to their sites, with catalogs and other direct-mail pieces taking priority over methods such as television and newspaper advertising.
Although free shipping offers have drawn some consumers to shop online in the past, the study shows that online retailers are less interested in promoting this option this year. While 85 percent of online retailers said they used some shipping-with-conditions promotions in the past, just 35 percent said they would focus more on these types of promotions in 2008.
Instead, online retailers will experiment this year with Social Computing initiatives such as social-network advertisements (65 percent) and widgets (55 percent) to attract consumers.
According to Shop.org, however, Social Computing efforts to this point have been considered more effective for brand building and less proven for driving revenue or sales conversion. Therefore, the report advises online retailers to continue investments in proven techniques such as e-mail marketing and free shipping promotions to drive sales.
The State of Retailing Online 2008: Marketing Report is the first of a three-part series of reports based on the study. It is currently available to Shop.org members and can also be purchased directly at
Shop.org/soro08.
Forrester RoleView clients will be able to access the report directly on
Forrester.com as part of their subscription service starting on May 7.
Shop.org is the division of the National Retail Federation for online retailers. Founded in 1996, Shop.org's 700 members include the 10 largest U.S. retailers and more than 60 percent of the top 100 e-tailers, as categorized by
Internet Retailer magazine.
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