Ecommerce, still a fraction of overall retail sales, now defines the entire economic sector, and the only constant is change, change, change

DENVER, CO – Every year the “experts” trot out the new numbers predicting Holiday Sales and trends for another Christmas season, and every year they are somewhat correct with a few annual surprises thrown in to make it all interesting.

No matter what actually took place for Christmas 2011 when all the numbers are totaled up, two things are abundantly clear already: 1) the Internet as a sales and research channel will grow – again – in importance in the overall retail environment; and, 2) mobile technology will drastically alter the way retailers and e-tailers alike do business from now on.

In other words, no matter what kind of person or entity you are – traditional brick-and-mortar seller or fully integrated online tech wizard merchant – and whatever your Internet strategy may be, from nonexistent to highly sophisticated, if you stand pat even for a moment you’ll be ten steps behind the competition.

Here at Unleaded Group we are unusually attuned to ecommerce in that we specialize in building websites using the world leader in online shopping technology, Magento. And, like most everyone else we’re getting a quick education on translating all that expertise to the exploding mobile environment. But even we are astonished with what’s occurring.

Consider the overall numbers. Retail sales this Christmas season are predicted by many different sources to be around $470 billion in the U.S., an increase over last year in the 2.8 percent to 3 percent range. Last year the increase was 5 percent over the 2009 numbers, but 2008 and 2009 were particularly poor retail years what with being in the throes of the recession and all. The 10-year average for holiday sales growth is but 2.6 percent, so it seems that retail has been a particularly flat economic sector for some time.

The more telling number is on the Internet side of the ledger. This year holiday online sales are predicted to grow over last year by some 15 percent, to nearly $60 billion total. While that is only some 13% of the overall retail number, the shift from traditional retail to online continues apace: online sales for Christmas 2010 rose 12 percent over the previous year, and these double-digit increases far outpacing the overall retail sector have been occurring for several years.

Pre-shopping

On the one hand, it could be argued that leaves over $400 billion in traditional retail sales for the Christmas season 2011, a healthy number. But look deeper into the predictions and the trends and the overall view is not that healthy for brick-and-mortar. According to a study by Shopper Sciences, 42 percent of shoppers will conduct significant “pre-shopping” time on the Internet researching products before they actually buy – and this includes purchases made online or in traditional retail shops and stores.

What that clearly means is that nearly half of the people who walk into a store to buy already know more about the product – details, prices, comparisons, competitors – than just about any clerk they will encounter. To put a finer point on this, Shopper Sciences study shows that with shoppers who have already identified a brand, 85 percent of them have conducted pre-shopping activities online. All indications are that these percentages tend to be even higher in younger demographics, so if the product and service targets Gen X, Millennials, Gen Y and Echo Boomers, the Internet becomes even a greater factor.

Influence

Then there’s the issue of influence. “Pre-shopping” research, according to all reports, includes more than just product and price information, but rather a complete run through peer-group commentary, customer feedback, and increasingly through recommendations – either negative or positive – in one’s Facebook/Twitter, et al, friends circles. These so-called “influencers” represent ever-widening concentric circles of friends and their friends, etc., they snare a high number of people who weren’t even doing research on that product but will consider it given the recommendation from such trusted sources, and they’ll pass it all on to even more people.

Just to give you an idea of how powerful the retailers – brick-and-mortar and online only alike – feel the social media string of influence has become in just a relatively short time, consider that now many of them are building shopping carts right on Facebook. This feature from the iconic social media network is called the Social Shopping Cart, and it is set up specifically for friends to share opinions on products and where e-tailers/retailers can interface their own online shopping carts to facilitate instant commerce right on Facebook.

Talk about power and influence: the circle(s) of friends know who is considering what, they have all seen the collective wisdom of peers and friends who chime in, they know what was bought, for how much, and where – and importantly, they know everything instantly – good and bad -- about the buying experience, the shipping experience and how well, or how poorly, the product fit the consumer’s expectations. In the old days you would have had to been on television to reach that many people, which happened rarely. Now it happens nearly every time, so the retailer and the e-tailer alike have to insure that every single step in the sales process is perfect to drive future sales or, if something does go wrong, doesn’t kill the business. No other time in history, except maybe in a small town where everyone knows everyone else’s business, have shop keepers large and small had to pay this much attention to the details.

Competition

Let’s not forget the effect all of this has on one simple business concept: competition. The bar has been raised, the standards are higher, and reputations can be made or wasted in the blink of an eye. It is imperative to stay competitive in every aspect of business.

One of the key competitive arenas, of course, is price, and no other time ever has that been such an issue. In the old days – say three years ago – people could comparison shop by driving around, or surfing the web, or looking at newspaper advertisements, all relatively time consuming. These days, however, they just take their smart phone and scan the bar codes. New apps for smart mobile devices will instantly provide complete product information through a simple scan, and they will also provide pricing information – instantly – at other stores. You simply say, “Here at Macy’s you want $4.99 for this scarf; Gimbel’s has it for $3.49,” and voila!, price check on aisle 9. This technology is so powerful and prevalent that stores like Wal-Mart have incorporated the instant price match into their advertising.

And, of course, other things go into the price than simply sticker price. That same app that scans bar codes and gives competitive pricing also shows where the same product can be had online – and which e-tailers offer it with free shipping. This forces two things: first, the local store has to compete with more than just the local retail community, but rather with the entire shopping universe; and, second, all the e-tailers are more or less forced to provide free shipping. Plus, there’s always the sticky wicket of sales tax – local stores must charge in jurisdictions that carry the levy, but many online sales don’t include local sales tax, although many states are gearing up to collect these revenues. On big-ticket items a sales tax bite could be a major influence on where to purchase.

Change and more change

The major retail trends that are shaping up for Christmas 2011 – and beyond – is that the Internet is now not a luxury, but an absolute necessity, for any kind of merchant (physical location and cyberspace alike), that social networks are playing a significant and increasing role in buying decisions, and that mobile devices are now key drivers of competition and influence.

This clearly means that every retailer must have a complete online strategy: internet, social media and mobile capabilities, that merchants far and wide must keep every vigilant in their pricing and customer service, and that every online strategy must be looked at and adjusted on a constant basis.

The only constant for merchants is change, change, change.