If you weren’t shocked by the 1% growth of US retail eCommerce in October, you should have been. The industry was growing 15% six months ago, and it has now smashed into a wall.
It’s hard to believe November and December will be better, and, in fact, they will probably be worse. Which means eCommerce could actually shrink year-over-year in Q4.
At Lori’s Designer Shoes… Lori Andre, the owner, said she generally tried to avoid online promotions “because then you train the customer and they’ll expect that, and you’re not going to make any money.” But last week, traffic hit a wall and sales on the site fell by nearly a quarter. “We’ve been in business for 25 years, and never seen the bottom drop out like this,” she said..
Sales of music, movies, books, computer software, flowers and gifts have been hit the hardest, with double-digit declines, comScore said…
Plasticland, now an online boutique selling clothes, home décor and jewelry, started in 2002 as a single store in San Diego. The owners, lured by the global audience of the Web, moved it online in 2005. They were caught off guard this spring, when sales started to plummet…
Free shipping is becoming a painful imperative for all e-commerce sites. Three-quarters of online shoppers said in a comScore survey that they would shop elsewhere if a site did not offer free shipping, and nearly all sites offered it for at least some purchases.
Some companies are trying to sidestep the discount-now-and-screw-yourself-forever trap and are unloading their unsold inventory on captive discount sites:
Zappos.com, a shoe retailer based in Henderson, Nev., never runs promotions on its site. Instead, it quietly moves shoes that do not sell in six months to 6pm.com, a clearance site it acquired last year, but runs separately. This month, the company is buying more search ads for 6pm.com, where a pair of colourful slip-on Keds sneakers is on sale for $12.73 — 74 per cent off the original price on Zappos.com. Even when these extreme discounts mean selling shoes for less than Zappos.com paid for them, it is better to recoup some cash than none, said Tony Hsieh, the company’s chief executive.
The discounting is not just drastic, but is also occurring unusually early in the season. Kmart, a division of Sears Holding, initiated Black Friday prices on electronics — 40 to 50 per cent off — on Nov. 2, nearly four weeks before the real Black Friday, the busy shopping day just after Thanksgiving that usually marks the beginning of the holiday buying season.
The bottom line: Lots of companies are toast:
E-commerce experts said they expected the cutthroat price competition to be fatal to some struggling retailers. “Folks that have been on the ropes or near the ropes during the good times are going to go under. There is no question about it,” said George Michie, co-founder of the Rimm-Kaufman Group, a search marketing company..
Except for Google:
[A] major expense for online retailers seems to be rising: the cost to advertise products on the search engine Google, the source of considerable traffic and visibility for most e-commerce sites.
Over the last year and a half, prices for text ads related to women’s fashion have quadrupled, say apparel retailers. In the popular gifts category, the price to advertise alongside results for common search queries like “gift baskets” jumped 50 per cent from the 2006 holidays to 2007 and is expected to climb again this year.
See Also: eCommerce Screeches To A Halt
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