Retailer in all categories wisely acknowledge the Web's influence on on- and offline spending.
Admittedly, I have retail on my mind. Becoming best friends with our local UPS and FedEx drivers this holiday season (nearly all of my purchases were online) certainly didn't hurt. Yet the real impetus behind my retail sector interest is twofold: increased desire by several retail clients to use digital media as a primary media vehicle and my upcoming speaking engagement at the 53rd Annual Retail Advertising Conference.
General Market Characteristics
According to Jupiter Research (a Jupitermedia Corp. division), total U.S. 2004 online retail sales (excluding auto, travel, and prescription drugs) totaled $66 billion, approximately 4 percent of overall retail sales. Sales are expected to grow to $130 billion, or 6 percent, by 2009. Growth will come from more people buying online and more money spent per sale.
Online buyers are slightly more affluent than overall Web users. Jupiter Research currently estimates 72 percent of Web users with household incomes $75,000 or above shop online. Though all demographic and economic segments are represented, online retail's fastest growing segments are expected to be adults aged 50-plus and lower-income consumers (those with household incomes of $15,000 or less). The same report says these segments will grow 147 percent and 44 percent, respectively, by 2009.
The Online Influence
Retailers across all categories wisely acknowledge the Internet's influence on both on- and offline spending. In some categories, this influence is obvious. When was the last time you bought a "white good" item (washer, dryer, refrigerator, dishwasher, etc.) without first conducting extensive online research? The same could be said for electronics, both hard- and software. This influence gives rise to a whole new area of focus: the multichannel consumer, of whom much has recently been written.
Even retailers that wouldn't seem significantly affected by multichannel consumers acknowledge the Internet's significance. Senior-level managers at both Target and Sears are on record as saying though online commerce represents under 5 percent of their overall sales, they're convinced 40 to 50 percent of in-store sales are influenced by the online channel. These are significant numbers; they help explain the recent resurgence in the retail sector's online advertising spending.
Multichannel Consumer Equals Multichannel Marketing
Large retailers have traditionally used a variety of elements in the marketing mix. There's certainly always been a mix of national and local media, including broadcast TV and print and a healthy dose of Sunday circulars. Online, the majority of outbound activities have focused on driving site traffic, commerce, or both. Tactics primarily revolve around affiliate and search marketing, focused CPC (define), and cost-per-sale display advertising.
From a site perspective, advertisers have worked to put Sunday circulars online, as well as improve usability and design. Many online retailers that have operated for several years used 2004 as the year to make wholesale site improvements. We saw significant relaunches of Home Depot, CircuitCity.com, and Best Buy, to name but a few.
These site improvements are beginning to pay off. According to comScore Media Metrix, the pace of unique visitor consumer traffic to retail sites is increasing at a faster rate than that of traffic to total Internet sites. In addition, the raw number of retail sites with measurable traffic (to the comScore panel) increased significantly more than the number of overall Internet sites with measurable traffic. I believe this trend will continue at least for the next year or two.
Enter Online Brand Advertising
Direct response and brand advertising aren't mutually exclusive. In the online space, all communications afford an opportunity for action. The most exciting change in the retail space is the clients' realization they need to do more traditional online advertising to drive brand preference and favorability. As we look at competitive retail spending, we see more clients across the industry take a holistic view of the Internet and devote significant resources to activities that may not be linked to an immediate sale. The challenge is to create a metrics system to accurately measure all digital marketing elements' contributions to increasing sales.
Are you up to the challenge? Have you had recent retail successes or failures and would like to share them? If so, please drop me a line.
Search and traffic sourcing are both crucial to luring shoppers to your website. In this article, "2 Successful Holiday Strategies for Online Retail", you'll learn how to use a two-pronged approach for your holiday search campaigns that combine top keywords with the best referral sites. Data in this article comes from SimilarWeb.
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