According to the 11th annual Shop.org study conducted by Forrester Research among 125 retailers, online retail will continue to gain strength with retail sales expected to rise 17% this year to $204 billion. In a difficult economic year where retail industry sales are expected to experience sluggish growth at best, the study predicts that Americans will continue to flock to the Internet to purchase clothing, computers, and even cars. Expected volumes for the three largest sales categories are: Apparel ($26.6 billion), computers ($23.9 billion), and cars ($19.3 billion).
Scott Silverman, CEO of Shop.org., stated: “From higher shipping costs to changes in consumer shopping habits, online retailers are not immune to the current economic climate. 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.”
As the number of people new to the Internet begins to ebb, online retailers are constantly debating whether to invest in strategies that retain current customers or those that attract new ones. According to the report, online retailers allocate 53% of their marketing budgets to online customer acquisition and 21% of their marketing dollars to online customer retention. Retailers are reportedly discovering 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.
“What’s spearheading online retail sales growth is a tale of two shoppers that visit the web for very different reasons,” said Sucharita Mulpuru, Forrester Research principal analyst. “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.”
He advised: “Retailers would be wise to recognize there are significant opportunities within both audiences and should market to them accordingly.”
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 channel. As a result, nearly all online retailers surveyed (90%) 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 customers to the web, with catalogs and other direct mail pieces taking priority over methods like television and newspaper advertising.
