Shopping, E-Commerce and Nervous ‘Etailers’

Many people argue that in an economic downturn the best thing to do is to market more aggressively. Yet that’s not what most businesses are doing; they’re trying to preserve cash and cut costs. AdAge reports that, according to a recent Shop.org survey online retailers are even tightening budgets:

30% of online retail marketers said they were trimming marketing budgets, while 16% said they were reducing promotional spending. 

Later in the article Deloitte’s annual holiday survey is quoted as reason for optimism among etailers:

Deloitte’s annual holiday survey also presents several compelling reasons to maintain spending online. The category is ranked by consumers as the No. 2 shopping destination this year behind discount department stores. A full 21% of consumers plan to shop primarily or entirely online this season, up from 19% last year. And 24% of total dollars spent this season are expected to be spent online, compared with 22% last year.

The reality is more complex than this line suggests: “A full 21% of consumers plan to shop primarily or entirely online this season, up from 19% last year.”

First, it implies that online and local store shopping are zero-sum or parallel universes. They’re not. The overwhelming majority of consumers will “shop” online, doing product research and checking prices. A tiny minority of them will actually purchase online. Most people, even in this beleaguered shopping season, will go to stores to make purchases.

In general, more people are buying things online — chiefly for reasons of convenience and availability, rather than price. In some cases price is the determining factor that causes someone to buy online. I acknowledge that the piece is about online retailers and so it’s arguably not relevant to the subject of the article to discuss multi-channel issues. The larger point, however, is that the Internet is being used by consumers to determine what to buy in stores. 

Over time, the Internet will support fewer online retailers because the local inventory data will be good enough and widely distributed enough to let people know where they can buy things today. Over at Local Mobile Search I wrote briefly about TheFind’s iPhone application. Increasingly tools like this — that bridge the online and offline worlds — will be common and adopted by consumers. 

Yesterday I spoke at some length with NearbyNow, which has lots of stuff cooking, and is getting lots of requests for its data. (The cadre of product data providers includes Krillion, ShopLocal, Shopatron, Where2GetIt, Channel Intelligence.) As I’ve tried to argue many many times, product search/shopping should be considered part of local because of where people spend their money: locally. That hasn’t been visible to most involved parties because of the challenges of tracking people from the Internet to the POS. However all that is getting easier. (Every NearbyNow in-store pickup includes a unique code that confirms the person showed up and bought the item.)

I’m astounded in fact by the sophistication of NearbyNow’s marketing on behalf of its retailers. It’s now doing time-based mobile marketing for retailers in the email and SMS messages that confirm availability of products to consumers. These offers/messages have very high response rates according to CEO Scott Dunlap. 

Meanwhile, pure e-commerce is sputtering:

And while shopping traffic is down overall because people are spending less money, online “shopping” (research, price comparisons) will continue to be relatively strong because consumers want more information before buying. 

The irony is that mobile may be a driver of e-commerce in the future in the following scenarios

I’m in the store, I confirm I want product X, I check prices on my iPhone or other mobile device and buy through Amazon or other trusted online retailer. Alternatively if the item isn’t in stock at that moment and I can’t find it nearby I might buy it online while I’m in the store. 

This is the increasingly complex and “multi-channel” nature of shopping, but it’s still overwhelmingly about the store. In my mind this does argue for continued online marketing because that’s increasingly where consumers are doing their research — even if they don’t wind up buying online.

Really the only option for the no-name, unbranded (i.e., not Amazon, Zappos, etc.) e-commerce companies is deep discounting with no shipping fees. I agree, they have every reason to be nervous.