April 8, 2008 - In a year where retail industry sales are expected to
experience sluggish growth, Americans will continue to flock to the
Internet for clothing, computers, and even cars, according to the
National Retail Federation.
According to The State of Retailing Online 2008, the 11th annual
Shop.org study conducted by Forrester Research, Inc. of 125 retailers,
online retail will continue to be a bright spot in the industry with
retail sales rising 17 per cent this year to $204 billion. Apparel
($26.6 billion), computers ($23.9 billion), and autos ($19.3 billion)
will be the largest three sales categories. The State of Retailing
Online 2008: Marketing Report, the first of a three-part series of
reports based on the study, was released this morning.
As the number of people new to the Internet begins to wane, online
retailers are constantly struggling between investing in strategies
that retain current customers or those that attract new ones. According
to the report, online retailers allocate 53 per cent of their marketing
budgets to online customer acquisition and 21 per cent of marketing
dollars to online customer retention. However, retailers are finding
that traditional acquisition programs such as search engine or
affiliate marketing may also serve as retention tools that attract
existing customers as well as new shoppers.
According to the survey, retailers report 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 per cent) use pay-for-performance
search placement, and 79 per cent said they will make this tactic an
even greater priority this year. Companies are also using offline
marketing tactics to drive customers to the web, with catalogs and
other direct mail pieces taking priority over methods like television
and newspaper advertising.
Though free shipping offers have proven to get some consumers over the
obstacle of shopping online in the past, the study showed that
retailers’ are less interested in promoting free shipping options this
year. While 85 per cent of online retailers said they used some
shipping with conditions promotions in the past, just 35 per cent said
that they would focus more on these types of promotions in 2008.
Instead, retailers are eager to experiment with Social Computing
initiatives to attract customers – 65 per cent and 55 per cent of
retailers respectively said that social network advertisements and
widgets would be categories of increased focus this year. 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 retailers to continue
investments in proven techniques like email marketing and free shipping
promotions to drive sales.
The entire report can be purchased at Shop.org.
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