Cost-Cutting E-tailers Look to Retain Customers

As the souring economy persists, e-tailers are spending more attention to keeping the customers they have, turning to social media and other emerging marketing techniques.

That’s according to a new study from online retailing industry group — a unit of the National Retail Federation — and conducted by Forrester Research.

The 12th annual study, which surveyed 117 online retailers, found the number of companies focusing on customer retention has nearly doubled in the past year. According to the survey, a majority of e-tailers, 88 percent list e-mail marketing as a high priority for the year, largely to retain customers.
Of the retailers surveyed, 71 percent plan to send targeted e-mail to existing customers.

Cutting back on customer acquisitions is one way that companies are trying to pare costs.

Under pressure from the economy, nearly one-third of surveyed companies, 30 percent, are spending less than originally planned on Web retail operations this year. Among retailers cutting costs, 88 percent will scale back hiring and staffing plans and slightly 56 percent will spend less on search.

It’s not surprising that e-tailers are cutting back, given the grim revenue data seen ahead seen in recent quarters for online sales and online ad spending. In the fourth quarter of 2008, e-commerce spending declined 3 percent from the previous year, according to online metrics firm comScore. That’s a steep comedown from the growth rates of around 20 percent retailers enjoyed throughout 2007.

And earlier this year, Forrester said that U.S. online retail sales in 2009 would grow by 11 percent to $156 billion. That might not sound grim, but with the e-commerce industry used to growth at double that rate, many online sellers are feeling the pinch.

Not surprisingly, more than half of the respondents in the study, 54 percent, expect overall growth to slow during the next 12 months, while 57 percent acknowledged the economic slowdown is hurting their company’s bottom line, according to the survey.

Opportunity to grow

But others see the economy as an opportunity to increase market share and are charging ahead with new initiatives. Almost half of retailers surveyed have no plans to cut back original budgets and will spend as planned on their Web business, while 24 percent will spend more on their online business than originally planned.

Companies planning to spend more will increase investments in several areas, with 80 percent of respondents doing so in search, 65 percent budgeting more for e-mail marketing and 60 percent allotting more for social media marketing.

Overall, companies remain bullish about Web sales: Four out of five retailers surveyed said they thought the Web is better suited than other channels to withstand the recession, and one-third said the downturn has enabled them to capture greater market share.

Illustrating the resilience of the Web, retailers also reported that their conversion rates continue to hover between 3 percent and 3.5 percent as they have for years, the report found.

“Retailers everywhere are trying to get their arms around a pullback in consumer spending, and online retailers are no exception,” Scott Silverman, executive director of, said in a statement. “Online retailers are trying to weather this economic storm by doing more with less, making smart spending decisions, and leveraging effective, affordable tactics like e-mail to grow their businesses.”

New analytics tool

Given the interest in trying to expand market share while doing more with less, it’s also no surprise that a slew of new tools are making their debut, aiming to help e-tailers optimize their activities.

Today, for instance, SeeWhy launched a real-time Web site analytics tool, Abandonment Tracker Free, that’s designed to help online store owners better understand why shoppers leave the site without making a purchase, or filling out a form or registering.

Up to 70 percent of shopping carts, registrations, quotes and online forms are abandoned before they’re complete, SeeWhy founder Charles Nicholls said — making for a large audience many e-tailers aren’t targeting.

“Statistics today demonstrate that only 17 percent of companies follow up on Web site abandonment at all and only 9 percent within 24 hours. And based on an average, a medium-sized e-commerce company with revenues of $200 million a year and a shopping cart abandonment rate of 50 percent, these sites lose $10 every second to abandonment,” Nicholls told

As a result, online merchants need to consider complementing their traditional Web analytics with follow-up actions while their Web site is still fresh in their minds, Nicholls said.

His company’s application, Abandonment Tracker Free, is a hosted solution that captures the unique IDs of Web site abandoners and then e-mails those IDs to the online store owner for use in follow-up campaigns targeted to the individual.

While other Web analytics solutions such as Google Analytics report on aggregate trends to reveal conversion and abandonment problems, Abandonment Tracker Free extends traditional Web analytics with personal one-to-one contact, he said.

“In essence, it extends the investment most people already have in Web analytics, which are great at reporting data, but not at all fantastic at letting you follow up and re-market to people who abandon your site. There’s free money sitting on the table and no one can afford to leave it there,” Nicholls said.

When a visitor lands on a Web page in the conversion process, the action is sent to SeeWhy’s datacenter. If the visitor doesn’t convert, SeeWhy records the abandonment along with the details, including e-mail address, shopping cart items and amount, and stage in the conversion process at which the visitor abandoned.

Nicholls said setting up the tool on an e-commerce takes only around 20 minutes, and can begin generating data within 24 hours.

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