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The economy has been making some hints at ressurgance in the past few months, but it's nowhere near a complete rebound, and according to ComScore today, most of the bright spots in third quarter are only relative to the dismal results that occured last year. During its quarterly report "State of the US Online Retail Economy," ComScore chairman Gian Fulgoni characterized a generally dismal third quarter for retailers.

However, it's not all bad. Amid struggling revenues and rising unemployment, some retailers are increasing conversion rates and site visitations. What's their secret? Low prices and reliable online experiences. And there is promise in the fact that young, upper income earners are opening up their wallets again.

According to Fulgoni: 

"More people are buying online. Unfortunately they don't have as much spending control. They're primarily shopping or buying less often. The good news is that we are seeing continued growth in the number of people buying online."

However, those buying online are spending more time price shopping. Consumers are visiting more retail sites than ever, but making purchases at fewer sites, meaning traffic is expanding, but conversion rates are decreasing. A few retailers are bucking that trend, namely value brands like Amazon, Wal-Mart, Best Buy and Sam's Club. Also, computer companies Apple and HP saw a 10% and 7% increase in conversion rates compared to 17% and 11% increase in visitations. That points toward consumers spending money on technology — and not just on the coveted iPhone.

Meanwhile, promise lies in the fact that luxury websites are seeing increased interest. While luxury department stores are struggling, invitation-only luxury sites are thriving, according to Comscore. Gilt Groupe saw increased visitation of 199%, ideeli 222% and Rue La La increased visits 40%. Of course, that demonstrates the equivalent of window browsing, but increased interest in luxury products is good news for sector.

Even better is the fact that some high income earners are regrowing their spending levels. Third quarter spending numbers were lower than Fulgoni was hoping for in that bracket overall. While younger upper income earners were increasing their spending levels, older top earners remained hesitant to spend: "these folks have fewer degrees of freedom to recreate wealth.... they're focusing on saving."

According to comScore:

"We’re seeing clear signs that we’ve hit the bottom of the decline in e-commerce spending, and comScore expects some modest growth in the holiday season
compared to last year."

With consumers generally spending less money, retailers are focusing more time on marketing and proving value while cutting costs and overhead. But one optimistic sign for the holidays is that most consumers haven't yet started their holiday shopping — 68% to be precise. Retailers are likely to see more boosts this holiday season than last. They're also wise to make friends with an increasingly prevelant aspect of online retail: free shipping.

Meghan Keane

Published 13 November, 2009 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

721 more posts from this author

Comments (5)

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cm

I've just finished entering the details of the shipping prices for around 60 merchants into a vertical comparison tool of ours.

As such, can i just echo the point that free shipping is definately a major promotion being used by retailers.

However, in the sector in question, the "cut off" (which is obviously designed to push up basket size) ranges between £40 and £60.

Of course, if you are too ambitious (£60) then you are risking leaking customers to your competitors (£40).

Nevertheless you are in a much better position than those retailers who don't disclose shipping costs up front (calculating it by weight, the position of the moon, etc).  This, anecdotally at least, is a major turn off when you are in a crowded space.  There were some merchants we looked at that you simply could not, from the information provided on their website, work out what you were likely to be charged - this is madness surely?

Perhaps holding back shipping info isn't fatal if you are mega trusted brand, but most etailers are virtually anonymous to customers who get to them via price comp sites, voucher code sites, ppc ads, etc., and pay very little attention to the brand (sorry, but its still the elephant in the room).  As such anything that makes you difficult to use (registration, obtuse shipping rules) loses you money.

Given that everyone pays about the same for shipping to customers, it would make sense in my book to roughly match all your key competitors shipping rates and levels and then compete slightly on price (to get better coverage in certain situations - Google's shopping listings for example or other price comparison plays that don't sort by total price).  Some retailers go way lower on price but then charge a fortune for shipping, which must make their abandonment rates pretty extreme (and abandoment comes after paying for clicks - much better to have no customer than one who costs you money and still leaves without buying anything).

And if you are labouring away with a dozen different shipping options, sharing loads of unnecessary information with customers about insurance levels, weights, and other stuff they probably don't care about, then it is probably worth accepting that for most ecommerce sites (selling normal sized stuff and not fridges and the like) shipping is standardising around two offerings:

1. Standard shipping (1 - 5 days), free over a certain point and a small charge below this (and much over £3 looks pretty steep)

2. Next day, charged at a single flat fee of around £5 - £6.

Of course given that most etailers can get a next day deal for much less than £5-6, there is the opportunity to make a small margin on this, or alternatively offer it at cost (which might get you more upgrades, with each saving you the actual cost associated with "free" standard shipping).

Anyway, just my tuppence worth.

about 7 years ago

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Anonymous

Your so-called 'luxury' websites do sell luxury product.  But surely their growth is off the back of the fact that they are all discount sites and that this is a relatively new and therefore fast maturing sector?  I think the extrapolation to the luxury sector is wrong, especially as you note that department stores (full-price luxury) are struggling.

about 7 years ago

Meghan Keane

Meghan Keane, US Editor at Econsultancy

Anonymous, The online luxury category may be growing so exponentially because of discounts and their newness. But that's not to discount that people are once again buying non-essentials, which is important for recovery. Also, it is likely not causal that  comScore found younger high income earners are feeling comfortable spending, but again a good early indicator that things are picking up.

about 7 years ago

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handbag chooes

I've just finished entering the details of the shipping prices for around 60 merchants into a vertical comparison tool of ours.

about 7 years ago

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chopper

Yes, I absolutely love shopping on member-only sites for saving money online. I have been finding the best deals at Rue La La and Gilt as of late. However, you have to get to the sale fairly early when it opens because these deals are selling out so fast. I’ve hesitated on buying an item I wanted and then a few hours later it was already sold out. Such is life. Just so you know... Here are a few choice invitation codes to Members-Only shopping websites so you can check them out for yourself. Happy Shopping and Saving. Gilt Groupe Invite Code: http://www.giltgroupe.com/invite/savemoneynow RueLaLa Invite Code: http://www.ruelala.com/invite/u2nqvqzi Ideeli Invite Code: www.ideeli.com/invite/savemoneynow HauteLook Invite Code: http://www.hautelook.com/invite/savemoneynow

about 7 years ago

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