E-Retailers Shift Toward Online Marketing
- 30 November, 2000 12:01
With the holiday buying season heating up, a large number of online retailers have shifted their marketing focus away from television and print ads in favor of targeted online marketing programs and are taking greater steps to keep their customers happy, according to a survey released today.
Shop.org, a Silver Spring, Md.-based trade association of online retailers, and The Boston Consulting Group (BCG) published the study, the latest in a series of quarterly surveys that they're conducting to track e-commerce companies. The third-quarter findings are based on responses from 94 online retailers, according to Shop.org.
Survey respondents said they spent an average of 64% of their marketing budgets on online media campaigns such as targeted e-mail advertisements during the third quarter -- up from 59% during this year's second quarter (see story). Only 4% of the third-quarter respondents said they had increased their spending on TV advertising.
Meanwhile, 54% of the retailers who took part in the latest survey said they plan to offer electronic and paper gift certificates to entice shoppers during this year's holiday season. Seventy percent said they had redesigned their Web sites to improve navigation or include holiday-specific content.
In addition, 65% said they've increased their order-fulfillment capabilities in an effort to avoid the late shipment problems that plagued some big-name online retailers last December. Those difficulties led the U.S. Federal Trade Commission to fine seven online retailers a total of US$1.5 million last summer and to issue warnings about on-time deliveries to more than 100 Web sites this month (see story).
James Vogtle, director of e-commerce research at Boston-based BCG, said during a teleconference today that customer satisfaction has been the top priority of online retailers for the better part of this year. "The focus has really been on getting the basics right," said Vogtle, who characterized the increased focus on customer service and fulfillment as "dramatic."
Despite the apparent retreat from off-line advertising, during the last quarter, retailers managed to attract more new customers to their Web sites at a reduced per-shopper cost, according to the most recent survey. Online retailers that participated in both the Q2 and Q3 surveys reported a 28% average increase in new customers, despite a 34% decrease in their customer-acquisition spending.
In fact, the average cost of attracting each new customer dropped from US$40 in the second quarter to $20 in the latest three-month period, thanks to what Vogtle described as more efficient spending on marketing. "You will not see the same rash of television ads [this year] that you did last holiday season," he said. "Online marketing is by far the preferred medium."
Elaine Rubin, Shop.org's chairman, said the number of online retailers that have agreed to share marketing lists and enter into co-branding partnerships has also increased. Online retailers are opening up to the advantages of teaming with other companies and are trying to drive traffic to each other's Web sites through cross-promotion deals, she said, characterizing such agreements as "a very successful and cost-effective way to market."
Despite the increased focus on targeted online marketing, subtle differences remain between multichannel retailers and pure-play e-commerce companies, Vogtle said. Companies with both brick-and-mortar retail stores and Web sites "were more likely to invest in back-office infrastructure," he said. "The pure-plays are more likely to be expanding into [different] product categories."
When asked about the likelihood that online retailers will repeat last year's shaky product shipment performance, Rubin said increased experience and investments in improving order fulfillment systems should help reduce delivery snafus. "Online retailers are more prepared than they've ever been," she said.
But some of the top e-commerce Web sites already appear to be feeling some heat in the face of the holiday rush. Online retail sites such as BestBuy.com, Egghead.com and BlueLight.com were hit by significant performance drops last Friday as the holiday shopping season began in earnest, according to report by Internet performance measurement firm Keynote Systems Inc. in San Mateo, Calif.