The truth about free shipping, social commerce and more

2 Comments | This entry was posted in eCommerce, Events, Retail Trends

Retail’s BIG ShowAs a loyal Summit attendee, I was excited to attend Sucharita Mulpuru‘s “A Look Back…and Forward…at Retail eCommerce Trends, 2011-2012″ session today at Retail’s BIG Show, especially on the heels of such a successful digital shopping season. The session offered a positive overview of how the holidays played out for retailers and a look ahead to see how some of the trends are shaping up for 2012.

The online pie continues to grow, according to data presented by Mulpuru, which doesn’t surprise any of the retailers who experienced record sales and growth last year.  Specifically, the 2011 holiday season revealed four key trends.

Sucharita Mulpuru, Vice President and Principal Analyst, Forrester Research

Consumers now expect free shipping. Fifty-five percent of consumers expect free shipping on all orders. Also, shipping clubs such as Amazon Prime and ShopRunner are growing. 

Search and email still win. During the 2011 holiday season, paid search represented 37% and email was 17% of retailers’ marketing spend.

Mobile is making everyone’s job a lot harder. Mobile shopping is definitely growing, and retailers are investing and planning in the channel, but it’s clear that direct sales are only part of the picture. Meanwhile, cross-channel is having a greater impact. People are using their mobile devices to do a lot more than just buy – they’re checking store hours, locating nearby stores, using special mobile shopping apps and more.

Social commerce is not quite living up to what retailers expected. In fact, social networks are pretty negligible as a source of measured sales. But many retailer still have prioritized social networks.

So how do the lessons learned during the 2011 holiday season affect the near future of digital retail? Well, sometime soon, web retail will comprise 20% of holiday retail spend in the U.S. Deep discounts, deals and free shipping are now a cost of doing business. Email and search will continue to grow. Retailers need to focus now on mobile optimization. Meanwhile, Facebook’s influence exists, but it’s smaller than retailers had originally thought.

Also, there are four major technology companies that affect everything going on in digital retail, according to Mulpuru: Amazon, Google, Apple and Facebook. Digital retailers should use them as models of agility and hiring. Nordstrom is an example of a retailer that modeled itself after an innovative, experimental tech company with its Nordstrom Innovation Lab, which operates quickly executed experiments to see if anything sticks.

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One Comment

  1. Posted January 18, 2012 at 10:39 am | Permalink

    Great post Megan! Was an excellent talk by Sucharita. I’d add a few more highlights of the talk:

    - Sucharita pointed out how large a share of Holiday spending had become: 15% in 2011 up from 6% in 2005. And that these sales were not growing the retail pie, but explicitly coming from offline. The implication is that online is reaching the point of impacting offline retail with a force analogous to what online did to music industry. Big box retail in particular may be wrong place at the wrong time. While Sucharita didn’t elaborate, my own assumption is that if you take that volume of holiday sales out of physical stores, it may be more than economics of those stores can bear.

    - Related to the former point, Sucharita noted a third of all online shopping trips start on Amazon. One third starting at the site that more and more retailers are coming to recognize as an existential threat. And compounding that problem is the fact that Amazon is tapping into high margin revenues beyond just selling products (like AWS, marketplace, product ads). Sucharita commented that Amazon’s massive role in retail means that calling them “the ‘Walmart of the web is a vast understatement. It’s just ‘the Walmart.’”

    - Elaborating on Megan’s notes on social. Sucharita quoted a retailer as saying “the silence was deafening” in terms of social’s impact on sales. Research showed it impacted less than 1% of sales and Sucharita suggested we were on verge of entering the “post social era” in which retailers would finally move on from trying to force social to be a transactional vehicle.

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