Even though there is talk of recession, the GDP for 3rd Q 2007 in the USA was up over 3.5%, which was unexpected. This growth, in light of high oil prices, a housing credit crunch and a decrease in housing starts and sales, was driven by consumer spending.
It is my belief that as the FED eases interest rates for the last Q of 2007, we will see that this GDP growth will remain constant with consumer spending leading the drive as the marketplace comes to terms with housing and credit crunch issues. Furthermore, as online shopping and search sites such as eBay, Amazon, Ask.com, Google, Travelocity, Expedia, Orbitz and others increase their off-line spending in traditional forms of media as television, print, billboard, radio and the like to drive consumers online to find products, travel deals, and services this will have a positive residual affect for all online merchants selling products this holiday season.
To compliment these positive trends, more online consumers are comfortable with shopping online and mobile commerce and as they want to save a few “gas” dollars, and as online merchants offer shipping discounts, I predict these two factors will help push online sales past the year over year growth of 10%, comfortably. Also, while new to the US consumer, the advent of mobile shopping sites as mPoria (deals with most major carriers), iSave.com (powering iPhones) and mShopper (powering Sprint) should help add to the online shopping holiday push. The recent annoucement of Verizon partnering with Shop.com also shows that the major wireless carriers are getting savyy, and are committed to, mobile commerce.
As I speak to association and organizations, which specialize in understanding online shopping behavior patterns going into the holidays, especially the Consumer Electronics Association (“CEA”), I find that there is an emphasis on certain products per age range.
For all online electronics, sales, as I look over what sells through MerchantAdvantage and our “electronic centric” clients, we concur with CEA that almost $22 billion will be spent on all electronics for the holiday season, which began November 1.
For the younger 15-25, of course iPods, games, MP3 Players, computers and cell phones are the key items. For the “older” folks, who have full time jobs, flatscreen TV’s are very popular and the various accessories that come with it. Now that is the fun side.
With the advent of home offices, I find that online merchants that market their electronics, or better yet bundle offerings, in way that helps the 25 year old plus build their dream home office, that online electronic merchants will do well. What is very important to note, all across the world, is that people are designing their homes to support a “complete” home office, as they work out of their house or flat (apartment), and/or they want to come home, after their long day job, to a comfortable “fun office feel” to have fun online, play games, or finish up some work they did not get done at the office.
Also for all buyers of electronics, we find that people tend to forget that often the best selling items are “support” products that accompany more expensive purchases. One of our clients reminds us that sometimes the best success is selling a flat screen TV for a “reasonable” margin, with free shipping, to capture the client and then upsell them on all of the “goodies” that go well with a wonderful TV purchase. This includes vcrs, video recording devices, cables, and the highest margin item -- mounting products and tables on which to put the TV. This analogy carries over into building a home office. No one just buys a computer and works on the kitchen counter anymore. They are building self supporting media/business/entertainment areas in their home.
If there is any back lash to spending online, it won't affect electronics. I think that electronics will do well into the holiday season. Other type of online products, as garden equipment, tools, high end clothing, bath products and home accessories would be the categoris that suffer the brunt of an online shopper wanting to conserve money. The main reason is that electronics are fun and everyone wants the next best thing – at least that is how USA consumers usually act. There is perceived, and real ongoing value, to having electronics and people who buy them are always using it. So if you are not selling electronics, those online merchants will have to be more creative to grab the attention of the consumer.
All online retailers of electronics usually sell their products differently because they have to differentiate from so many online merchants selling electronics. The big boys and girls, deluge the marketplace with ad words, advertising, listing at many shopping comparison sites and then usually offer the lowest pricing, as they are volume players. But not all of them are just attracting attention and long-term value via the lowest pricing.
One client, I can’t name, who does very, very, very well, actually keeps their margins high by providing the best, and I mean best, customer service. This starts with being advertised everywhere and then when the customer calls in from their website or emails them, the customer simply is treated so well that you want to buy your products from them. I call it the "Disney" or "Neiman Marcus" affect. When everyone in your organization understands that at anytime that they speak to anyone, I mean anyone, out side of the company that that person is a potential customer.
A Real Time Tip
Always be prepared to offer “additional” products to support the product purchased. These support products often are offered at some discount. Here is the philosophy and I like it. So you get an inquiry for a flatscreen TV, MP3 player, or digital camera. The price is competitive but not the lowest on line. The online merchant follows up immediately with the customer via an email back, a phone call, or an onsight offer for additional items that pops up next to support the product desired (such as a robust memory card for a digital camera or special carrying case), to ensure that the customer knows about specials on products to support the original product. The customer then reasons that they might be able to get the original product at a lower price but certainly not the accessories. Because the customer follow up is so good, they buy the product AND the ancillary items and the online merchant manages their margins better. And the best part, you have a customer for life if you continue to treat them right!
Most electronics sellers are willing to lower their prices during the holiday season and definitely offer deep shipping discounts. I am not a big fan of the former practice, as it decreases ROI and relies on volume, per above.
On the other hand, a sales in hand is some one to market to into the future, and as long as you protect your margins, it may not be a bad thing to do. But remember, low pricing is NOT the only way you gain trust and customers.
Be creative in how you market. For instance, create specials to get people to buy now and guarantee delivery on a certain date and offer discount pricing on items if they are bought by November 30, or December 3 etc…..and make sure you upsell other items at the same time associated with the original product purchase, see above. This is always helpful as the consumer can then get a good price, ideas for associated products and know it will be delivered in time for the holiday. Netflix and BockBuster do this very well, as they suggest other film titles when a conusmer comes on line to buy a product.
All online retailers also should remember that the best way for the consumer to determine the best deals is to use review sites and then “shop” around. While my merchants might not like to hear me say to consumers that should “click away” to compare pricing, that is part of the fun and games of online shopping.
People learn by exploring and the shopping comparison sites are great places to start. Review sites, as Powerrevies.com or Buzzillions.com, are also good. These are both partners of MerchantAdvantage and friends. So I suggest online merchants should get their product catalog to these sites.
And if you need a list of shopping comparison sites to list your products to, check out MerchantAdvantage, as they support over 100 of them, all the way from PriceGrabber, Shopzilla, Yahoo! Shopping (the biggies) to PlanetOnline.com, MyCoupons.com, PriceForSure.com and Smarter.com (smaller ones). Oh yeah, and if you really want niche, check out GolfPricer.com and ToolCrib.com, very niche sites but the consumer can find great products, pricing, and special offers because they are niche shopping sites, that attract a devoted clientele, that you will find no where else. So listing your products at these sites might be very beneficial.
All in all, people have fun shopping online, so for all online retailers should play into this "known" behaviour pattern and make it fun, easy, and practical to buy products from you. It is soooo easy to hunt around and compare prices, reviews, and services that online merchants should be aware that the "Holy Grail" is not the "one time sale" when using comparison shopping engines, review sites, or other online shopping sites, but capturing a potential client for the future!
My Parting Advice....to online retailers who spend lots of money, time, and energy to get "leads" to come to their sites via the various marketing channels and search engines:
Focus on what to do when the potential client is at your site. This includes how they navigate your site, ease of finding products, offering specials, coupling product offerings and offering coupons and discounts for the future when they buy from you for the first time.
When online retailers care about their ongoing business, not just the one time sale, consumers will be very, very loyal to you and come back to your site time and time again.
Here is to a wonderful holiday shopping season for us all!
-- Chip
I just wanted to thank Ryan Brown, Everest Software, for the accolade and recommendation from the recent Internet Retailer 2008 show in Chicago to utilize MerchantAdvantage and our cost-effective, Channel Management with Chanalytics Professional and Lite products.
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