A lot of attention has been given lately to the amazing double digit growth of eCommerce in the US.

Forrester Research has released a couple of critical reports that explain this phenomenon:
- State of Retailing Online 2008 (in association with Shop.org)
- U.S. E-Commerce Forecast: 2008 to 2012

Online retail will increase 17% in 2008

Forrester sets the trends for the next 5 years with online retail sales in the US of:
- $204 billion in 2008 (+17%),
- $235.4 billion in 2009 (+15%),
- $267.8 billion in 2010 (+14%),
- $301 billion in 2011 (+12%),
- and $334.7 billion in 2012 (+11%)

“E-commerce continues its double-digit year-over-year growth rate, in part because sales are shifting away from stores and in part because online shoppers are less sensitive to adverse economic conditions than the average U.S. consumer” says Sucharita Mulpuru, the Forrester analyst for the U.S. E-Commerce Forecast report.

Online sales will account for 7% of U.S. retail sales this year, up from 6% last year, the report says. Retail sales at physical stores are expected to grow at an annual rate of 2.6% from 2007 to 2012, while online sales are expected to grow approximately 14% annually for the same period.

Consumers embrace online retailing

According to Forrester, 88% of U.S. online consumers say that they have bought something online in the past. They tend to shop more and more online (when possible) rather than shopping in physical stores.

“Consumers do exhibit loyal behavior to the [online retail] channel, provided that retailers are able to meet and exceed customer expectations” Mulpuru said. “By focusing more energy on accurate product information, improved imagery/photography, and flexibility in payments and returns, and by reducing the hurdles of shipping costs, online retailers can go a long way in currying favor with shoppers.“

Trends for 2008 in the main online retail categories

Almost all retail categories are expected to sell a high percentage of goods over the Web in 2008 compared to 2007:
- Apparel +17%
- Computers +15%
- Autos +15%
- Event tickets + 31%
- Toys and baby products +22%
- Home furnishings +11%
- Jewellery +19%
- Office supplies +21%
- Sporting goods +17%

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Over the past decade the Internet has expanded its reach to an increasing number of people all over the world (1.32 billion Internet users in Dec 2007) and is almost as much a commodity as the telephone has become after it revolutionized the way we communicated with each other.

The Web as we knew it in its early stages brought us: email, online information, online shopping, online collaboration and an almost instant global reach. These applications are mainly software based and even though the Internet relies on heavy telecommunication infrastructures, our only experience of it comes through our Web Browser (Internet Explorer for example) and our Email Client (Outlook Express for example).

In the software world, it is very common to give a version number to an application. Usually the first version is called 1.0. The next version of the application (version 2.0) usually implies major technical and functional upgrades. If compared to a software driven platform, then Web 2.0 would refer to the upgrade of the technologies and functionalities of the well known Web 1.0.

Tim O’Reilly, who owns what has become the most famous IT book publishing company in North America (www.oreilly.com) coined the term “Web 2.0″ during a brainstorming session looking back and the bubble burst that marked the end of the dotcom years. He was trying to understand what had enabled the few companies that had not only survived the crash but had thrived and been successful throughout that difficult period. Some of them we all know of or have heard about: Amazon.com, Google.com, eBay.com, Craigslist.com, to name just a few.
He was working out what these companies had done differently and if we could learn from the innovations they brought to how we use the Web.

The way an Information Technologist would define Web 2.0 makes little sense to business people but here is an attempt to summarize it without sounding to nerdy:
“Web 2.0 is an important upgrade in the way websites are built and in the way a large and diverse range of people can interact with them through the exchange of content.”

These interactions involve on the one hand a great deal of IT professionals with different specialties (i.e. the suppliers or builders of technology) and on the other hand the users who are people like you and I (i.e. the consumers of technology).

Where Web 2.0 becomes interesting is when one looks at what is exchanged between suppliers and providers of technology: the data. Or in other words the content. That is where the value lies. The content is your merchandise, your company’s info, your customer’s feedback, the emails you exchange, etc.

Web 2.0 is a way of building websites that maximizes the exchange of content between all Internet users through a more robust and flexible technological platform.

As with mobile phones (which are an improved version of traditional landline phones), Web 2.0 offers more freedom to use the Web in many new and improved ways but it also changes the way we interact with each other. And it is not only the way we exchange news with our friends and family but also in the way we interact with businesses and services.

Because the Internet with Web 2.0 has become mostly about content and making it easy to interact with, it has an impact on the way businesses interact with customers. As the Web is more and more part of our daily lives, we develop expectations as customers for companies to serve us on the Internet and not only through traditional means.

Will Web 2.0 impact your business? It probably already has. Whether you know it or not, your customers (as well as yourself) have increased their expectations about the services you can offer them online.

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It is very popular to come up with a host of predictions at the outset of a new year.

Here are 10 of the best predictions I have found relevant to eCommerce. Some of them have been adapted or inspired by other trends in the Web Industry.

1. Impact from a much feared recession in the US

The fluctuation of the dollar and the state of the economy in the USA will impact online retailers on both sides of the border.
A few trends will be noticeable:

- US citizens will spend more time online searching for the best buys before deciding where to buy (online or in a store)
- an increasing number of Canadians will look into shopping on US online store (shopping sprees across the border have noticeably increased in Q4 2007)
- US websites will be more inclined to having Canadian online storefronts in order to diversify their distribution and adjust their pricing strategy

2. Retailers will look into modernizing their IT infrastructure

An increasing number of retailers will start to understand the benefits of embracing the 2 digit growth eCommerce market segment. As a consequence they will start looking into upgrading their IT infrastructure to implement modern and streamlined software solution in order to delivery multi-channel sales and promotions.

Smaller retailers will struggle with the increasing need to have real-time inventory management systems to be able to compete in the marketplace. Many will have to invest in revamping their enterprise applications as well as their websites.

3. The next most popular eCommerce features on websites

eMarketer.com gives a prevision of the most popular and relevant eCommerce features for 2008:

- Alternative online payment solutions. Retailers will see the value of offering more payment gateway options than just Paypal. New solutions will be made available such as different payment gateways (Google Checkout, Bill me later, etc.) and direct debiting.

- Buy online pick up in store. Multi-channel retailers will see the competitive advantage as well as the promotional benefits of allowing customers to pick up their orders in stores. This will also contribute to maximizing their cross-channel marketing.

Read more here

4. Online retailers will spend more on online advertising

Traditional advertising spending is steadily shifting to online advertising spending. Merchants will see more and more see the value of reaching more targeted audiences and being able to professionally measure the effectiveness of online campaigns.
Online marketing tools (online ads, email campaigns, etc.) will be more naturally adopted to expand the reach of cross channel and cross media advertising campaigns.

5. eCommerce still surfing on a 2 digits growth in North America

eCommerce will keep a steady 2 digits increase in revenue in 2008. In uncertain economic times shoppers will want to maximize the value of their spending dollars and use any means to find the best deals. So it is online where, more and more, the shopping experience will begin.

6. 2008 will be all about your brand (again)

How would you choose between 2 retailers who are both listed online with the same product for the same price?

Would you compare them by the way their sites look? Would you test how easy and fast their checkout process is? Would you look at the fine print of their Terms and Conditions?
Or would you be more inclined towards the one with a brand you know and where 3rd party reviews say that they are a good and reliable online merchant?

7. Getting and betting on “cross” and “multi” channel marketing

Small and medium retailers will do very well in leveraging cross-multi channel best practices through actionable strategies. This will enable brick and mortar retailers to minimize the threat of pure online retailers who will keep on emerging in every vertical market.

8. eCommerce will engage in Social Networks

Facebook, YouTube, MySpace, and Bebo are highly popular and almost addictive websites drawing millions of users to their services every day. They have brought forth the concept of social networking by which we are able to build our own community of interests and relationships on these websites.

2008 should see the emergence of best practices that will leverage these social networking websites for online merchants with advertising and branding campaigns targeting social niches.

9. The eCommerce market will experience some consolidation

This a bit far fetched and very speculative but as the revenue growth of eCommerce becomes more and more noticeable, medium and major retailers will see the benefits in acquiring profitable online retailers in order to broaden their online presence and product range.

10. No mass adoption for mobile eCommerce

The iPhone (from Apple) is the first serious attempt to provide an enjoyable surfing experience on the Internet with a mobile device. 2008 should a be very interesting year in terms of seeing a range of new devices competing with the iPhone but unless there is a dramatic change in data plan pricing and a massif adoption of these new generation (and still rather expensive) smart phones there won’t be any mass mobile online shopping.

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To follow-up on my latest post, here is some fresh information from eMarketer.com whose latest article is on “Holidays season eCommerce projections” in the US.

Even though the holiday season sales are expected to slow down in the US, TNS Retail Forward predicts that:

“[...] online sales would be the bright spot for retailing, bringing in nearly $42 billion in the fourth quarter of 2007, up from $35 billion in the fourth quarter of 2006.”

According to BurstMedia:

• 80% of US consumers said they would research gifts online.
• More than one-half of adult Internet users expected to make a holiday gift purchase online, up from 37.6% who did so in 2006.
• Respondents who expected to purchase gifts online this holiday season estimated they would spend 42.5% of their holiday budget on the Internet.

In times of economical slowdowns, shoppers seem to take advantage of eCommerce sites in order to find the best deals by price comparing and finding online seasonal promotions.

This is good news for retailers who have invested in eCommerce as they will continue to benefit from the online channel as sales decrease in brick and mortar stores.

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With Christmas around the corner, retailers should be gearing up to take advantage of the biggest seasonal buying rush of the year.

Here are a few statistics from the US Census Bureau on eCommerce during the fourth quarter of 2006. This gives an idea of the sales potential during the holiday season:

• $33.9 billion total U.S. retail e-commerce sales for the last quarter of 2006
• 32 % increase compared to the third quarter of 2006
• 25 % increase from the fourth quarter of 2005 while total retail sales increased 4.0 % in the same period
• eCommerce sales in Q4 of 2006 accounted for 3.3 % of total retail sales

These figures reinforce the point that eCommerce is consistently on the rise and that more and more shoppers buy online, even more so for Christmas.

Here are some insights from Omniture* in partnership with JupiterResearch** taken from their (free) webinar on online Retail Strategies for Holiday Sales on how to take full advantage of your eCommerce website.

1. Online holiday shoppers look for deals:

• 24% made sure to get the lowest price
• 15% only bought at sites where they got discounts
• 15% only bought at sites where they got free shipping
• 11% check online for off-line in store specials

2. Most useful online shopping features for online holiday shoppers:

• 52% want to see upfront shipping costs and estimated delivery date on product page or in shopping cart
• 48% want the option to search results by product attribute
• 46% want to add items to cart to save for later
• 40% want to be able to checkout without having to register
• 35% want to see product reviews

3. When it comes to last minute purchases:

• 36% of online holiday shoppers preferred to buy gifts in a physical store
• 29% of online holiday buyers were positively influenced by shipping cut-off information
• 37% will still buy after ground cut-off dates

In order to be successful with your online sales strategy this upcoming holiday season,

• offer your customers great seasonal deals (free shipping, online coupons, special day promotions, etc.)
• give up front all the shipping information that your customers need to evaluate their costs and delivery times.
• simplify your checkout process, maybe you can skip the registration process and get back to your customer later
• offer the option of saving the shopping cart for later. This would require a registration and would enable you to follow up with customers who haven’t completed their buy.

By combining strong seasonal promotion strategies, easy to find shipping information and an efficient checkout process, you should be able to maximize your online sales during the Christmas season.

*Omniture is one of the leading US based Web Analytics solution providers.
**JupiterResearch is one of the major US based Internet market research companies.

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