Rumors of Online Retail’s Demise Have Been Greatly Exaggerated

The mainstream press continues to pound away at the Internet industry, making it sound like it was a brief but happy fad that let us all believe that nerds and Gen Xers could have cool jobs, make loads of money, and become media darlings and modern heroes. Like the Pet Rock or the tulip bulb frenzy of 1637, it was new, charming, and sometimes scary, and it made a small percentage of participants rich.

Also, the market is persistent in its punishment of the Internet phenomenon by reducing market caps for e-tailers and other online entities that had the gall to go public to only a fraction of their once-mighty value. Some have even been driven into extinction.

Yet, in spite of all the unadulterated schadenfreude that has been displayed as of late, there is news that the death knell has been tolled too early.

The Commerce Department said in a report issued for third quarter 2000 activity that e-commerce was able to post a 15.3 percent sales gain in the period between July and September with total sales coming in at $6.37 billion. This is in spite of overall retail sales being nearly static for the same period. (There was actually a slight decrease in sales, just under half a percent.)

It was the best growth performance yet for e-commerce during the relatively short time the government has been measuring such activity. It compared to a 5.5 percent gain in the second quarter and only just less than a 1 percent increase in the first quarter of Y2K.

So, while folks were dropping the shopping in the traditional retail space, they were logging on and making purchases.

Yes, Virginia, people do shop online.

And it’s only going to continue to grow. Granted, overall, online retail sales still only account for about just over three-quarters of one percent of all retail sales during third quarter, but, no surprise, sales over the Internet are growing; even some private economists predict that e-commerce could ultimately account for the biggest part of retail sales over the next 20 years.

So, what does this mean for you, the media buyer and/or planner?

Well, first of all, if you have any clients that are still wondering whether or not the Internet is a viable medium for introducing commercially motivated value propositions or whether or not a fulfillment mechanism is necessary for their web presence, the answer is yes.

But more important for you as an advertiser is that the use of shopping sites with advertising opportunities is a sound tactic.

Why?

Well, simply put, the numbers are there. Loads of people are going to shopping sites, and if they aren’t actually spending money there, at least they are there to think about what it is that they do want to eventually spend money on, whether they do it online or ultimately in a terrestrial location. According to @plan, more than 40 million people actually purchased something online in the last 30 days.

What else?

Well, if you are using your advertising to serve as a genuine auxiliary sales channel, then advertising in a commercial context serves that purpose well. I have clients who advertise in the shopping environment with some great success. Certainly, it depends on the product, but shopping sites have done very well for many of my clients.

Propinquitous advertising (that is, advertising at the point of purchase) has always served many retailers well. Particularly if what you have to sell is a low-consideration purchase item. It’s no accident that candy bars, gum, and The National Enquirer are found right there at the checkout stand. You are done with your shopping; there is nothing else to think about… the mind is clear…

“Hey, I’d LOVE a pack of gum!”

And finally, there are the deals. Though I don’t wish to be pegged as the “pay-for-performance guy,” I must say that advertisers can really get some great CPMs, CPCs, and, in some cases, CPA buys that are hard to pass up.

So, the time is still ripe for shopping sites. Don’t think the opportunities aren’t there, because they are. And don’t let the “doom and gloomers” in the press get you down.

The Internet is here to stay. The online advertising industry is here to stay. And online retail is CERTAINLY here to stay. No passing fancy, no flash in the pan. It is all still very real. The figures mentioned above don’t even take into account travel, financial services, or entertainment transactions, leaving the online commerce figures understated.

We have only just begun, my friends.

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