December 7, 2009

No Time to Lose for Online Retailers

Gian M. Fulgoni Gian M. Fulgoni
Chairman Emeritus

One of the fascinating things that’s become clear this holiday shopping season is that many retailers launched their marketing programs earlier this year, with a strong emphasis on price discounts and other financial incentives such as free shipping. I think retailers entered the season knowing that consumers were cash strapped and so offered a wide array of attractive promotions well ahead of Cyber Monday - and even Black Friday - in an effort to get consumers to open their wallets and spend earlier in the season.

Data from our friends at ShopLocal also show that the level of promotional incentives offered online was much higher in 2009 than in 2008. In fact, Thanksgiving Day is the only day in November in which the offer count was higher in 2008 than 2009 – which is kind of moot considering that the stores weren’t open on Thanksgiving!

To a large extent, it appears that retailers succeeded in generating sales lifts earlier in the season, as you can see in the table below, which shows the growth rates versus the prior year for online sales on Black Friday and Cyber Monday, as measured by comScore’s data:

Last year, strong online growth didn’t occur until Cyber Monday. This year, however, with promotions and discounts being offered earlier through aggressive programs that featured heavy use of e-mail and social networking programs, we saw online sales jump significantly on Black Friday, typically a day when the offline holiday buying season begins. I suspect that many of the larger multi-channel retailers concluded that there was no reason – in today’s day and age when many consumers would rather shop online from home rather than fight the crowds in retail stores – to not leverage Black Friday as an online shopping day. This activity appears to have pulled some of the growth one might have expected on Cyber Monday over to Black Friday instead.

Another interesting observation from comScore’s data is that, as in prior years, over 50% of all sales on Cyber Monday in 2009 occurred from work computers. While, at first blush, it might be tempting to think that, with broadband connections now prevalent at home, consumers would shop online from home, the evidence is clear that many consumers still prefer to shop online at work. In fact, this why we have always seen a jump of 50% or more in online buying from Black Friday (a work holiday for most) to Cyber Monday (when most consumers return to work). Privacy is an important driver of that behavior, since one can shop and buy gifts at work without concern that a family member might be looking over one’s shoulder. In addition, most workers have some time to themselves during a typical workday (e.g. lunch breaks) when they can shop online without fear of retribution from their employer.

One final note. It’s important to recognize the impact that social network marketing programs are likely having this year since a marked change appears to have occurred in the marketing efforts of many retailers with the inclusion of social networks in their marketing efforts – presumably to take advantage of their cost effectiveness and extensive reach on consumer behavior. In a recent comScore survey, fully 28% of consumers said that social media has had some influence over their holiday purchase decisions already this season. Consider that Twitter had 19 million site visitors in October of this year, up 12-fold vs. year ago. In that same period of time, Facebook’s visitor base has more than doubled, rising from 45 million monthly visitors in October 2008 of 2008 to 97 million today. That’s an incremental 52 million people using the service in only one year! With this kind of reach, it’s clear that social networking can play a prominent role in any retailer’s communication programs.