The latest statistics on online holiday shopping are remarkable for a couple of reasons:
- Internet does change everything; it just takes somewhat longer than some visionaries in early 90s predicted.
- A YOY increase of 25% is remarkable but remember that it is simply a channel shift. So it mostly benefits online-only retailers while those retailers that have both offline and online businesses will see mixed results. While margins on online sales are relatively higher, if the sales came at the expense of offline sales, they need a change in their channel strategy.
- Early skeptics had hypothesized that apparel/clothing are what draw people to malls, and other than what was already being sold through catalogs, there was not much growth potential in this category. Apparently these skeptics were wrong. It is the largest category at this time.
- Another interesting category that is seeing tremendous growth is jewelry. Even Amazon.com mentions that it was a high-growth category for them as well. Who would have imagined that people will buy diamonds over the Internet? (Related article: Amazon.com is a leader in ebusiness and content management)
- And remember the folks who said that malls are not going away? Well, according to the 2004 eSpending report, 36 percent of respondents cited a preference to avoid crowds as the top reason to buy online rather than visit a store. I am not saying that malls are going away anytime soon either but it does show that while malls may have a social value, it does not mean that shopping will be the outcome.
What does the latest ecommerce data mean for you?
- Ask the following questions about your business: What percentage of your business is online? Have you benchmarked yourself against industry leaders? Do you need a change in strategy to grow your online business? If you have physical stores, what will you do with them as you shift sales online?
- If your business moves online, how can you reduce your cost of doing business even further? Do you really need your back-end operations to be based in the United States? Is an offshore location an option for you? What is your online advertising strategy? How will you increase awareness about your website and online store? As a management consultant in love with Walmart, I would strongly suggest that you study how a company that targets the masses with lowest price products is pushing its online store.
- A clear message that we have received from consumers is that holiday shopping is no longer perceived as fun. Based on what your business is, think what it means for you? How about automating the whole gift-giving process? How about offering high-value holiday activities to consumers as they waste less time in holiday shopping and look for more fun things to do during the holidays?
- Another trend is to shop online but to pick up the product in a store. Shipping cost continues to be an issue and the lower prices online may become meaningless if shipping cost is added. This is telling us that consumers do not enjoy spending time in a store, being harassed by aggressive salespeople, particularly in stores like Circuit City and Best Buy, but they don't mind making a trip to pick up their package. Is opening pick-up locations in major cities an option? Can you partner with, say UPS or Fedex, and offer pick up option with no shipping?
- And finally, it is not just holiday online shopping that is booming. There is an overall growth going on in ecommerce. See what it means for you and develop an online strategy.
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