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Article: What to Believe, Surveys or Instinct?

This week’s article arises from a recent conversation whereby a small retail business owner commented that, “I don’t buy on the internet, neither do my friends, why should I add ecommerce? I just want an information website”.

I felt compelled to point out that many small businesses are continuing to transform their key business processes and leverage the internet for improving their business and enhancing their competitive edge. They are companies that have come to understand how e-business is about improving customer relationship management and implementing other Internet business solutions (IBS) such as ecommerce help them save money and expand their business with new and existing customers. A further minor point was that GartnerG2, a research service that is part of Gartner Inc., said that more than 77 million U.S. adults alone now buy products online throughout the year.

Another recently published survey indicated that 50.2 % of Canadian small businesses are currently using or implementing IBS. A further 20.3% intend to adopt IBS within the next 3 years, while 28.4% have no intention of adopting IBS. Interesting percentage of slow or non-adopters, especially when you consider the companies that adopted IBS have realized substantial financial benefits. On average, revenues increased by 7%, and costs decreased by 9.5 % in the case of cost of goods sold and 7.5 % for sales, general and administrative costs. Furthermore, satisfaction with IBS among adopters was high.

Another reason given by our small business owner to not implement e-commerce was dealing with such issues as customs and transportation. This really is an issue of growth, sales volume and expected profits. Do you want them? Yes or no? Especially when the U.S. Department of Commerce stated that the second-quarter 2002 US retail e-commerce sales were an estimated $10.243 billion, an increase of about 24 percent from the second quarter of 2001.

In fact, BizRate.com is predicting online sales over the holiday season to peak at $8 billion, a 24 percent increase over last year, bringing in $16.9 billion for the entire fourth quarter, which marks a 35 percent increase. That’s a good sized pie just next door.

With the number of online shoppers continuing to grow, U.S. consumers are also spending more online, thereby creating a healthy prognosis for Internet retailers across the board and resulting in falling customer acquisition costs. According to Shop.org and the Boston Consulting Group the average customer acquisition cost per new customer has dipped from a high of $38US in 1999 to $29US in 2000 to $14US in 2001. Retailers also reduced expenses by reining-in marketing costs, which fell from $26US per order in 1999 to $12US per order last year.

In fact, with the exception of 2001 when spending dropped to $866 from 2000's $969, the average annual online expenditures among U.S. Internet users (ages 14+) are expected to rise steadily. BizRate.com forecasts $1,249US in 2003 and $1,400US for 2004.

That is just the US market. What about Europe?  GartnerG2, forecasts that Europeans will spend an estimated $15.77 billion over the holiday season, topping North American shoppers who are expected to shell out an estimated $15.66 billion.  Actually, Europe, not North America, is expected to lead the world in online holiday spending this season, albeit not by much, says a new Internet sales forecast. Why? Better sales channel integration by retailers.

The gains in Europe are being fueled by companies integrating their mail order and Web presence, using multiple channels, browsing printed catalogs and then ordering online, especially in the clothing, sports equipment and toy industries.

What about the rest of the world? GartnerG2 said that worldwide online holiday sales in 2002 are projected to total $38.2 billion, a 48.4 percent increase from the same period last year. Figures exclude travel-related purchases and movie and event ticket sales. The research unit also predicts that the Asia/Pacific area will be third in holiday sales with $3.32 billion; followed by Japan (broken out separately) at $1.93 billion, with "every place else" coming in at $1.52 billion.

So, take a survey of your instincts and compare results. Establishing an ecommerce enabled website may now make good business sense.  - John Shenton - November, 2002
 

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N.B.** The articles were first published in the Times (Montreal, Canada) and written by John Shenton as special contributor to the Times Technology Section. Articles and Reports written by us may be printed or displayed on your website providing they are kept intact and a link/attribution to this website or Internet Merchandising Systems plus authorship is displayed.

 

 

 

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