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Is e-commerce more resilient than other channels?

September 17, 2008

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Las Vegas—Despite a struggling economy throughout most of this year, 72 percent of e-tailers believe the online channel is better suited to withstand an economic slowdown than offline channels.

According to The State of Retailing Online 2008, the 11th annual Shop.org study conducted by Forrester Research Inc., about one-third (35 percent) of online retailers surveyed said they expect their e-commerce business to perform better than expected in the next 12 months, while another third (33 percent) anticipate their online business will perform the same as expected.

This optimistic outlook is driven primarily by past results. According to the report, 81 percent of online retailers surveyed reported that their e-commerce business was profitable in 2007, and 75 percent were also more profitable last year than in 2006. Almost half (49 percent) of online retailers said their average conversion rate in 2007 was higher than in 2006, and that 36 percent of total sales were driven by repeat customers—higher than in 2006.

"Internet retailers have good reason for optimism as budget-focused shoppers head to the Web for value and convenience," Shop.org Executive Director Scott Silverman said in a media release. "Online retailers are well-positioned to make the best of a potentially lean holiday season."

Due to their outlook on the U.S. economy, however, 37 percent of online retailers surveyed said they've lowered their expectations for their e-commerce performance in the next 12 months.

The report advises that online retailers must still execute well to capture possible sales. In addition, it cautions that those sales might not necessarily be the highest-margin revenue due to increased input costs and the pressure to offer promotions such as free shipping.

"Although the online sales growth rate will be lower than in years' past because of lowered consumer confidence and credit working against all of retail, the good news is that this growth will still outpace nearly every other sector of consumer spending," Sucharita Mulpuru, Forrester Research principal analyst and lead author of the report, said in the release. "Given that the Web appears to be a preferred channel for many consumers during an economic downturn, retailers would be well-served to provide offers that motivate customers to buy and to encourage the online channel to drive sales in a channel-agnostic manner in order to provide benefits to the entire business."

The State of Retailing Online 2008: Profitability, Economy and Multichannel Report draws from two surveys conducted over the course of this year. The first survey, fielded in February/March 2008, had 125 retail respondents, while the second survey, fielded in June/July 2008, had 63 participants. The report is currently available to Shop.org members and can also be purchased directly at Shop.org/Soro08.
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