Shop.org Blog

One of the highlights of the 2008 State of Retailing Online Marketing Report was a warning to online retailers that they should be cautious about investing in advertising on social networking sites. Our survey found that this type of advertising usually costs more than other types such as paid search and isn’t nearly as large a source of new customers.

This isn’t to say that social networking doesn’t have a role in retail. It does. Moreover, not participating in social networking means that you’re not a part of conversations about YOUR BRAND. Additionally, for now, social networking and interactive marketing overall can be more cost effective than traditional advertising for building your brand and deepening relationships with customers. Unfortunately, with most retail organizational structures, the people with the expertise in how to use social networking and interactive marketing to build a brand, do not have the resources – either the time or budget – to put these tools to work.

At Shop.org’s 2008 Online Marketing Workshop on a panel discussion about the role of interactive media in retail, I asked the 200 or so online marketing professionals in the room if, in their organization, they felt that the people with the expertise about online marketing also have the resources needed for branding efforts. One person raised their hand! Why? Among e-commerce marketing folks, branding takes a back seat to efforts where margin contribution can be precisely measured. And, the store marketing team is focused on traditional media for branding frequently defer all online media to the e-commerce team.

In Carrie Johnson’s excellent “Search Is” keynote address at the Marketing Workshop, she pointed out that today, consumers spend 29% of their media time online, but interactive media is only 8% of total advertising. This was across all industries. I suspect that the gap would be even greater in retail.

If this were The Sopranos, the e-commerce and traditional marketing teams at retailers would be asked to attend a “sit down” to figure this out. I believe that Shop.org, along with its parent organization, the National Retail Federation, have the opportunity to facilitate such a dialogue (in the back of a pork shop, if necessary).

I welcome suggestions on how retail marketing can break through this issue and find ways to take advantage of the Internet not just to sell things online, but to build brands.

This year marks the third anniversary of Cyber Monday, a term coined by Shop.org. It’s had quite an active life in its first three years. I am a proud supporter of Cyber Monday because I think it’s good for the online retail industry. It creates excitement about the online holiday shopping season and it supports Shop.org’s Ray M. Greenly Scholarship Fund. And, as long as the data support the Monday after Thanksgiving as an important day for online retail, I plan to support and, if necessary, defend Cyber Monday.

As background, Shop.org coined the term Cyber Monday in 2005 based on the results of our eHoliday survey in which 77% of retailers told us that their sales increased noticeably the Monday after Thanksgiving. We gave it the Cyber Monday name and were as surprised as anyone at the media coverage that has followed the past three years.

Cyber Monday has come to represent the ceremonial kick-off of the online holiday season marked by many online retailers offering specials and promotions. It was selected as the “kick off” day because it represents the first significant spike in online holiday spending.

Yet, each year, Cyber Monday faces naysayers, who I like to call Cyber Monday grinches. These Cyber Monday grinches include columnists, reporters, bloggers, Wikipedia contributors, researchers and others. Why they are inspired to discredit Cyber Monday is a mystery to me. But, I thought I would use the Shop.org blog to dispel some of the common criticisms of Cyber Monday.

Criticism #1 – Cyber Monday is *not* the biggest day for online shopping.
This is absolutely correct. If anyone can tell me who has made this claim, I’d like to hear from them to understand why they believe this. Fortunately, this criticism has been mostly clarified. I saw a number of Cyber Monday stories this year clarifying that the biggest online shopping day comes later in the season.

Criticism #2 – Cyber Monday is an outdated concept because there is no reason to shop at work when so many people have broadband Internet access in their homes.
This is a logical argument. However, based on the data from our BIGresearch study, the percent of people planning to shop online at work during the holiday season is increasing despite more broadband access in homes. This year, according to a BIGresearch survey conducted for Shop.org, 54.5 percent of office workers with Internet access, or 68.5 million people, will shop for holiday gifts from work, up substantially from 50.7 percent in 2006 and 44.7 percent in 2005.

Critcism #3 – Thanksgiving and Black Friday, not Cyber Monday, are the “real” first spikes in online holiday spending.
According to comScore, Cyber Monday’s $733 million in online sales this year were 28% higher than Black Friday and 171% higher than Thanksgiving.

Criticism #4 – Increased shopping on Cyber Monday or any Monday is a “myth” because online shopping is stronger in the middle of the week.
Looking at comScore data again, this doesn’t seem to be the case. Two of the top three days of online retail spending in 2006 were Mondays. The biggest day was Wednesday, December 13, which was merely 1% higher than the second biggest day. The second and third biggest days were, respectively, Monday, December 11 and Monday, December 4.

Criticism #5 - Cyber Monday diminishes worker productivity because people are shopping at their computers when they should doing work.
There’s a great article from the Washington Post last November that provides a good perspective on this issue. The article argues that as work increasingly blends into employees personal lives via Blackberrys and home email access, employers have found that doing personal work, such as shopping, at work, helps increase productivity.

Perhaps I need of a good hobby, but I find free shipping fascinating. According to a research paper written by Wharton marketing professor David Bell, “a free shipping offer that saves a customer $6.99 is more appealing to many than a discount that cuts the purchase price by $10.” If you didn’t get your fill of math formulas from Good Will Hunting or you’re suffering from insomnia, then you’ll want to read Dr. Bell’s 31 page research paper to understand the math behind this claim.

According to the Shop.org/BizRate Research eHoliday Mood Study, 83 percent of online retailers this year were planning to offer free shipping with conditions. And, 36 percent of online retailers planned to offer free shipping without conditions. I wonder how many of these retailers wish they didn’t have to offer such promotions? Based on the conversations I’ve had, most retailers lament the advent of free shipping. While it’s great for shoppers, free shipping is certainly not free to online retailers. Moreover, a strong argument can be made that shoppers are getting free shipping when they would have paid for it anyway.

So, would the industry be better off (or at least more profitable) if free shipping didn’t exist? I don’t think so. For most retailers, promotions are part of their business - whether it’s a sale, door buster special, purchase with purchase or something else. If, as Dr. Bell has proven, a retailer can spend less money on a free shipping promotion than other promotions, then what’s the problem? Also, how do you take into account the power of the free shipping promotions that are so prominent in marketing emails and on the home pages of online retailers? Free shipping is arguably one of the most compelling promotions an online retailer can offer. In the eHoliday Mood Study, shipping costs consistently ranks as the most popular reason online shoppers cite when asked what prevents them from purchasing more online. Free shipping gives customers what they want. Still not convinced? Think about what makes store pick-up so popular. My guess is that not paying for shipping is one of the top reasons for store pick-up representing 30 percent of the online orders of retailers who offer it. If anyone has conducted research on store pick-up, please share the results.

Have I convinced you? If not, it doesn’t matter because more than 8 out of 10 online retailers are already offering some type of free shipping during the holiday season. But, maybe it’s worth considering during other times of the year? And, if you haven’t done so already, some detailed analysis of when to offer free shipping and pricing thresholds could result in free shipping strategies that deliver (no pun intended) more revenue and higher margins.