Holidays prove the power of online shopping
David Kaplan / Houston Chronicle
The 2010 Christmas shopping season is over, but trends that came out of it should reverberate for years to come. They point to the growing importance of the digital world in retail.
Online sales increased dramatically this holiday season, and consumers took advantage of mobile marketing and mobile shopping and looked for more deals of the day online.
“Online retail is now like a tropical storm working its way into a hurricane and growing exponentially — it’s a little scary for traditional retail,” said Jeff Green, a Phoenix-based retail feasibility consultant.
“The growth of online retail sales is forever, and it’s across the board,” said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm in New York City.
The impact of online retail will have implications for retail real estate, including the size and number of stores, he said.
“The No. 1 problem in the industry is that retailers are over-stored,” Davidowitz said, and the online sales boom is intensifying it.
Online holiday sales rose more than 15 percent this season over last, according to SpendingPulse, a MasterCard report, with consumers spending about $36 billion online.
As a whole, the retail industry saw a 5.5 percent increase in sales for the holiday season, the strongest performance in five years, SpendingPulse reported, with consumers spending $584 billion over the holidays.
“Men are moving to online shopping in a big way,” noted Suzy Sandberg, president of PM Digital, a New York-based agency that provides search engine marketing for retailers including Nautica, Eileen Fisher and The North Face.
Mobile marketing and mobile shopping were also big themes of the holiday season. Consumers used their smart phones to receive texts about sales and coupons, search for product information and deals, and shop online.
Mobile shopping is still in its infancy, Sandberg said. Currently, the numbers of people doing mobile shopping – ordering items using their phones – are relatively small, but the potential growth is gigantic, she said.
The mobile shopping experience is still a bit clumsy and connections can be slow, similar to how online shopping with desktops in 2004 was slower than it is now, she said.
Similarly, some consumers have concerns about credit card security when they order by smart phone, but such worries will only be temporary, she said.
A flash sale, in which a retailer or website offers a drastic discount online for a limited time, as well as online deal-of-the-day coupons, have also become popular, Sandberg said. Deal-of-the-day sites such as Groupon negotiate big discounts on goods, services and events, then pass on the deals to subscribers in a daily e-mail. The Houston Chronicle has its own version at dailydeal.chron.com/ that offers 50 percent to 90 percent discounts.
Retailers relied on different promotion strategies this season, for both online and brick-and-mortar shopping.
In previous years, when the economy was weaker, drastic markdowns were a common holiday theme, but not in 2010. Retailers were not as desperate. As a whole, retailers managed their inventories and promotions well this season, Davidowitz said. “They didn’t have to go berserk and promote out of panic.”
The consumer was more predictable, partly because of the somewhat improved economy, he said. “That helped retailers tremendously.”
With online retail in particular, the big sales were more spread out, Sandberg said. In past years retailers typically focused all their big promotions on Cyber Monday, but this year they had a lot more online deals on Black Friday and other days, she said.
“I bought more than half my gifts online this year and expect to do even more in the years to follow,” said Laura Castle, a desktop support manager for Harris County. She likes avoiding bad traffic, she said.
Picking out colors and textures is more of a challenge when shopping online, she said: “So far I’ve been lucky.”
Like many consumers, Dana Benson, a communications writer in the Texas Medical Center, likes the convenience of online shopping. She’s often too busy to shop in stores, she said.
“I particularly shop online at stores I’m familiar with, because I know what size I wear. I don’t shop online for my daughter’s clothes – she’s still growing,” Benson said.
When a store offers free shipping, it’s an added online incentive, she said.
Free shipping is certainly not free for retailers, Sandberg said, but many of them feel it is a necessity if they are to compete with online retail giants such as Amazon.
One surprise this season was how many people were buying apparel for themselves, said Green, the retail consultant.
Pent-up demand was part of it, as were appealing price points, he said.