Money is tight but Christmas shoppers are having a ball
Downturn? What downturn? Many retail analysts were asking themselves that question when they saw the figures for online shopping in the past couple of weeks.
According to comScore ( www.comscore.com ), shoppers spent $534m at retail sites in the US on Black Friday, the day after Thanksgiving. (The Friday being so named because stores make the most money on that day, and are therefore “in the black”).
That figure was 1% up on last year, which isn’t a great deal, but it bucked the High Street trend. Online shopping activity was up by 11%.
The apparent discrepancy between the two figures is explained by the fact that retailers were offering huge discounts, so spending increased only slightly.
In the UK, last Monday, December 8, which has come to be known as “Cyber Monday”, saw retailers piling on extra servers to cope with the surge in demand.
They were all aware of what happened to Debenhams ( www.debenhams.com ) when its site crashed in late November under the weight of traffic caused by a snap sale.
Much of the lost custom went to its rivals, such as Marks & Spencer ( www.marksandspencer.com ).
The internet trade body IMRG ( www.imrg.org ) predicts that online Christmas shopping could reach £13.6bn this year in the UK alone. If its forecast is correct, web-based sales, while not breaking any records, will escape the worst effects of the downturn.
The internet has made the greatest inroads in areas where price is the only deciding factor, such as electronic goods and DVDs.
The CD and DVD specialist Play ( www.play.com ) actually reported a 30% increase in takings on December 1, compared with the corresponding Monday in 2007.
So far, so good. But what happens in January? Most online retailers have discounted their prices so heavily that you might think it would be difficult to cut them even further for the traditional New Year sales.
In fact, many retailers have already planned even bigger discounts and are aiming to drive traffic to their sites with the help of promotional codes or coupons.
Getting hold of these codes and coupons has become such big business that an increasing number of websites are being established solely to spread the word.
At the likes of www.januarysale.org.uk , www.retailmenot.com , www.fatwallet.com , www.couponcode.com and www.thebudgetfashionista.com , there are already special offers from some major retailers extending through to March 2009.
The problem for merchants is that as the codes become more widely known, they lose control of the discounts being offered.
So, for example, a company might budget for a limited run of coupons and send them to regular customers.
Once the word leaks out on the internet, however, several hundred thousand people may claim the discount. The flip side of this coin, though, is that it can greatly increase visitor traffic.
When outdoor clothing specialist Sierra Trading Post ( www.sierratradingpost.com ) sent out a code to just 1,000 customers in a print run of 50 million catalogues, it expected to make an extra $2,000 in sales.
Somebody posted it online and sales increased by $300,000.
When CouponCabin ( www.couponcabin.com ) started out five years ago, it offered only a handful of codes – and most of the retailers didn’t like it.
Now, the big merchants willingly supply the information. The site boasts around 1,000 new codes every week. The lesson, then, is that if you offer discounts in January, expect the promotional code to reach many more people than you originally intended.
It’s also worth pointing out that the competition in online selling has suddenly increased with the European Commission’s decision to increase the threshold at which customs duty must be paid on imported goods from £18 to £105.
The move obviously makes it more attractive for UK buyers to shop at websites outside the EU for items costing up to £105.
It’s yet another example of how, in these tight economic times, the customer with cash to spend is well and truly king.