Shop.org: Analysts, Executives Dissect Online Holiday Shopping Season

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ATLANTA - So how was the holiday season for online retailers and what did they learn?


A panel of analysts and e-commerce executives from leading retailers gathered yesterday to recap key issues at Shop.org's FirstLook 2006 event. One of the topics brought up by moderator and Shopzilla chairman Chuck Davis was free shipping.


"We think it's a great lever," said Steven Goldsmith, vice president of apparel, footwear, jewelry and watches at Amazon, Seattle.


Amazon has offered conditional free shipping as an online shopping inducement for almost 10 years.


The panelist from QVC, on the other hand, said free shipping didn't make sense since the value proposition already was the lowest price. But an upgrade shipping program doubled sales on days when offered.


For apparel retailer J. Jill, 50 percent of its total business comes from its 191 stores. A free shipping offer only to online customers wouldn't be adequate.


"A big part of our proposition is to have promotions that can be redeemed across all channels," said Andrea Gulli, operating vice president of e-commerce and credit marketing for J. Jill.


Asked which period during the holidays was most promotional, Gulli pointed to the Thanksgiving weekend as well as Cyber Monday, a term that now has caught on with online retailers and the media.


Amazon noticed price drops in the marketplace over the holidays, but the retailer typically doesn't incentivize beyond free shipping.


Analysts from JupiterResearch noticed purchases clustered around Thanksgiving and closer to Christmas. Nielsen//NetRatings senior retail analyst Heather Dougherty saw heavy promotional activity helping drive that trend as consumers feared rising gas prices and higher heating costs.


"The gauntlet was thrown down quite early," Dougherty said.


Nielsen//NetRatings research confirmed a last-minute shopping spree. Fifteen percent of e-commerce sales came through in the final week before Christmas.


Dougherty said retailers like J. Crew were innovative enough to take advantage of New York's transit strike that week to send e-mails offering free shipping for online purchases if consumers couldn't get to the store.


In fact, a longer holiday season allowed Amazon to move its shipping deadline from Dec. 18 to Dec. 20 and express to Dec. 22. J. Jill moved its shipping deadline to Dec. 21 - two days ahead of last year.


Multichannel advantage


QVC vice president of interactive marketing and business development Robert Myers saw the influence of traditional retailers in the heavy promotional atmosphere.


"Looks like bricks-and-mortar retailers were pretty aggressive," Myers said.


While eBay and Amazon held their own over the holidays, industry research showed most of the top 10 growing sites belonged to multichannel retailers. Black Friday - the day after Thanksgiving Day - generated considerable traffic to Walmart.com, Dougherty said.


While Internet-only retailers are still formidable players, "I see catalogers coming in with the top conversion rates," Dougherty said.


Consumers are reading catalogs and then shopping online at those sites, she said.


To close the gap, Goldsmith said Amazon offered a multichannel experience through his company's numerous alliances with other retailers.


The store is of crucial importance when it comes to returns. Shopzilla's Davis cited Best Buy and Circuit City as examples of retailers that not only accepted returns of online purchases, but also in-store pickup. That strategy pays off for them as well as J. Jill.


"Twenty percent of returns on direct sales come back through stores," Gulli said. "It's much easier to get the customer to buy something that way than to just have them ship it [back]."


Search finds customers


Davis raised the issue of search engine optimization and its paid placement counterpart.


"We're still seeing the majority of business coming from paid search," Gulli said, adding that she noticed a "very competitive position for nonbranded search. Nonbranded words were driving much more new customers."


Amazon's Goldsmith said his company's paid search budget went up in the fourth quarter. The retailer tracks performance down to keyword level.


"We're willing to invest more in certain categories," Goldsmith said. "We're going to invest in a way that customers are aware that Amazon carries the item. It's not so much [because of] the lifetime value [of the customer]."


QVC relied on both organic and paid search during the holidays, keeping mind the degree to which search is affecting offline sales.


"The consumer is so much smarter today," Myers said.


Strong year forecasted


The panelists were nearly unanimous in their optimism for e-commerce's prospects this year.


Nielsen//NetRatings' Dougherty said e-commerce growth in 2006 will be strong, with more in-store pickup and tighter channel integration. Gian Fulgoni, chairman of comScore Networks, expected growth in the "23 to 26 percent level" and a similar closer bond between online and offline.


J. Jill's Gulli mentioned the growing customer adoption of broadband and sees "more applications in time for the holidays. As the experience gets better, traffic should go up."


However, JupiterResearch vice president and research director Zia Daniell Widger expected retailer "margins will be squeezed" this year.


While Amazon's Goldsmith predicted double-digit sales growth for this year, he did caution that specialty retailers stood the best chance. Their unique offering sets them apart from others. He also said big-brand retailers would do well this year.


"I don't think you want to be in the middle," Goldsmith said. "Either you grow big or you specialize."


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