Retailers Believe Online Shopping Will Weather Economic Slowdown Better Than Offline Channels
Despite a struggling economy, the majority of online retailers continue to be cautiously optimistic about how their businesses will perform during the next 12 months.
This was a key finding from "The State of Retailing Online 2008: Profitability, Economy & Multichannel Report," the third in a three-part series of reports from Washington, D.C.-based Shop.org based on surveys conducted by Cambridge, Mass.-based Forrester Research.
The report draws from two surveys: the first, fielded in February/March 2008, had 125 retail respondents, and the second, conducted in June/July 2008, had 63 participants.
From the combined surveys, 72 percent of online retailers said they believe that the online channel is better suited to withstand an economic slowdown than offline channels.
In addition, 35 percent of online retailers surveyed said they expect their online businesses to perform better than expected in the next 12 months, while 33 percent expect their online businesses to perform as expected.
This mostly optimistic outlook is driven primarily by past results. For instance, the report notes that 81 percent of online retailers surveyed reported that their e-commerce businesses were profitable in 2007.
In addition, 49 percent of online retailers said their average conversion rate in 2007 was higher than in 2006, and that 36 percent of total sales for the online retailers were driven by repeat customers — greater than in 2006.
But due to their negative outlook for the U.S. economy, 37 percent of survey respondents said they've lowered their online sales expectations for the coming 12 months.
The report advises that online retailers must still execute well to capture possible sales. Additionally, it cautions that those sales may not necessarily yield the highest margins due to increased input costs and the pressure to offer promotions such as free shipping.
The report is available to Shop.org members and can also be purchased directly at www.shop.org/soro08. Forrester RoleView clients can access the report directly on www.forrester.com as part of their subscription service beginning Oct. 17.