Spending trends over the holiday season are important to all sellers, so AuctionBytes will be tracking the data and keeping you up to date with our Online Holiday Spending Trends series throughout the next few months.
Last week CNN reported off-line retailers were marking down items early in the season to catch buyers who would otherwise go online. Traditionally retailers have waited until the last minute to discount items, sometimes as much as 75% off, to shift the remaining inventory. This article from Reuters reports that Walmart's early mark-downs has put pressure on other retailers to do the same (http://news.yahoo.com/s/nm/20061115/lf_nm/retail_usa_pricewars_dc).
It makes sense to cut prices now with Thanksgiving weekend upon us and two traditionally big shopping days: Black Friday (the day after Thanksgiving) and Cyber Monday (the first Monday after Thanksgiving). Last year, $924 million was spent online (not including eBay sales) over the four day weekend, and an additional $484 million was spent on Cyber Monday, according to ComScore Networks. This week, CNN Headline News reported that 1.37 million shoppers will hit the stores this weekend. ComScore Networks predicts $1.15 billion of the sales will be online, with an additional $600 million being spent online on Cyber Monday. That would give Cyber Monday higher sales than any day in the 2005 holiday season.
Rumor has it that Black Friday, which is traditionally the start of the holiday spending season, has been renamed "Sleep In Friday" because you don't have to get up early to hit the stores if you shop online. I like that idea, and with the extreme cold weather being felt across the country, I have a feeling other people will be hitting snooze rather than hitting the stores too.
One of the things that can keep buyers away from online sites is high shipping costs. Interestingly, CNN reported this morning that 83% of online retailers are not charging shipping this year. This may be something eBay sellers should consider to remain competitive with other online retailers. You can see which large retailers are offering this and their terms at http://www.cybermonday.com/shopping/sh____.htm.
It's not surprising that off-line retailers want to get buyers back in their stores. Last year, $19.6 billion was spent online between Nov 1 and Dec 31. That was a 25% increase over the previous year. This year ComScore Networks predicts a 24% increase over the 2005 figures. That's an additional $4.7 billion, bringing the total non-auction, non-travel online spending prediction to $24.3 billion. They actually underestimated the 2005 figure by 1%, and we've already seen a 23% increase in November sales, so I am confident they are on the mark with this prediction.
It's quite clear from the following table that in-store sales have been steadily decreasing at the same rate that online sales have been increasing over the last few years.
| |
2002 |
2003 |
2004 |
2005 |
2002 vs.
2005 |
In-Store |
78% |
74% |
72% |
68% |
- 10% |
Online |
16% |
20% |
22% |
27% |
+ 10% |
There has been a lot of press about eBay this year. Some of it good, some bad, some indifferent. Whatever the type of press, it is increasing awareness about eBay and what you can find there. Most people now know that eBay is THE place to get those difficult to find items (Playstation 3, Nintendo Wii, TMX Elmo, etc.)
For the first time ever, I received a print catalog from eBay via regular mail showing the average prices of popular holiday items. It looked like a regular mail catalog except it was shorter, printed on much higher quality paper, and looked far more professional. This "holiday catalog" was sent out to four million households according to Gary Briggs, senior Vice President and Chief Marketing Officer for eBay.
Sending out glossy catalogs, product targeted direct mail, TV advertising, and developing eBay Express all make eBay seem more like a regular online retailer rather than an auction site. Incentives from PayPal, including free shipping and cash rebates, put the icing on the cake.
Google Checkout responded with cash rebate incentives of its own (http://www.google.com/press/annc/checkout_holiday.html), but keep in mind Google Checkout is not an approved payment service for eBay purchases.
Still, it's not all good news. Thirty-two percent of respondents to a recent BuySAFE/Insight Express survey said they would spend a greater percentage of their holiday shopping budget online if they had greater trust in the retailer. So it looks like seller feedback and third-party trust seals may be even more important during this season.
Seventy-six percent of respondents said they would purchase more frequently from independent online retailers if there was a way to guarantee every online purchase (i.e., you get what you bought or get your money back). So, allowing returns, and being PayPal verified (so the buyer can receive PayPal Buyer Protection) seem to be important too.
In a recent press release, BuySAFE's CEO, Jeff Grass, said, "The most successful merchants this holiday shopping season will be the ones that can create a trusted experience that makes shoppers comfortable buying from them."
The following table shows the amount of online sales over the past three years including the predictions made by ComScore Networks for 2006:
Year |
$ Amount
of Online Sales |
Percentage
Increase from Previous Year |
2003 |
$12.3
billion |
- |
2004 |
$15.7
billion |
29% |
2005 |
$19.6
billion |
25% |
2006
- PREDICTED |
$24.3
billion |
24% |
By the end of the 2006 holiday season it is predicted that online sales will have increased 78% over four years. This does not include eBay sales, which totaled $44 billion for 2005, so the percentage increase could be considerably higher.
So what can eBay sellers do to cash in on the huge sales this year? Here are some ideas to consider:
- Consider offering free shipping.
- Make sure your customer service is impeccable so you build a lot of positive feedback.
- Consider becoming a member of SquareTrade or BuySAFE so you can display a trust seal.
- Offer PayPal and make sure your items qualify for PayPal Buyer Protection.
- Make your listings International buyer friendly to cash in on the good exchange rate for overseas buyers.
- As December approaches, consider using Get It Fast so buyers don't have to wait for their items.
http://www.comscore.com:80/press/release.asp?press=1072
-----
Lissa McGrath is a full-time freelance writer and the author of 20 Questions To Ask Before Selling On eBay (Career Press, 2006). She is also the copy editor of 6 other eBay related books. http://www.lissamcgrath.com
