Black Friday is over, and retailers are breathing at least a small sigh of relief. Results were not as bleak as some feared; consumer spending rose a surprising 7% over last year. Now websites are kicking off their own holiday shopping season, and hopes for similar results are high.
Today is Cyber Monday, the day for shoppers to surf the Web for special deals. As more people feel comfortable making purchases online, Web retailers expect to draw a rising share of holiday purchases. But with the credit crunch and financial meltdown contributing to the massive pullback in spending, will Cyber Monday be an Internet boom or bust? "I would say bust," says Jon Vincent, founder of BlackFriday.info, an online-deal site. Analyst Ken Cassar of Nielsen Online is little more optimistic. "Cyber Monday will likely be disappointing," he says.
It's true that shoppers intend to spend a larger share of their holiday dollars online this year, with 36% of consumers saying they will spend half their shopping budget on the Web, up from 32% last year, according to a Nielsen Online survey. But overall budgets have shrunk, as tapped-out consumers have grown increasingly anxious about the economy. As a result, people are trading down in the stores they frequent and the number of items they buy. Case in point: the most popular product seen on BlackFriday.info's shopping lists was Wal-Mart's Batman and Spider-Man pajama sets, requested on more than 10,000 lists. The price: a mere $6.
"There was an optimism going into the holiday season that online would weather the storm a little bit better," says Jessica Ried, associate director of research for Resource Interactive, an online-marketing consultancy. "But this year in November we've seen the first online-sales decrease ever." For the first 23 days of November, holiday online spending reached $8.2 billion, a 4% decline compared with the corresponding days last year, when online sales hit $8.5 billion, according to the online-marketing research firm comScore. The firm predicts that online-shopping growth will be flat for November and December significantly lower than 2007's growth rate of 19% and below the retail e-commerce growth rate of 9% year to date in 2008. "I don't know that this is the only prediction to go by," says Ried, noting that other firms like Forrester Research expect to see online sales grow about 12% for the holiday. "But a dire prediction from an organization as big as comScore does give retailers pause."
That's why you'll see Black Fridaylevel discounts today and beyond, but with a focus on storewide sales rather than individual door-buster specials. FigLeaves.com started out with up to 50% off storewide sales and increased it to 70% in anticipation of Cyber Monday. Amazon.com has already taken as much as 65% off prices for kitchen appliances and household items. "There is more breadth of merchandise on sale for Cyber Monday," says Sucharita Mulpuru, principal analyst of e-business retail at Forrester Research. "Whereas Black Friday is limited to an assortment of items that are high-velocity drivers."
"The deals are more generic on Cyber Monday and half as good [as Black Friday]," says Vincent. Stores will make up for that with extra enticements like lower purchase minimums for free shipping or a free-shipping voucher with gift-card sales, a promotion Lands' End is having. "Free-shipping deals is a minimum cost of entry," says Cassar. "Essentially, retailers will subsidize it, with those costs coming out of their margins." In addition, sites will offer more bundles like "buy one, get 50% off another item," which help stores move two pieces of merchandise and lower their inventory levels. This year e-commerce sites have enhanced their videos, offered more customer reviews and made sure their product images are user-friendly. "We saw a lot of online retailers making the investment in their sites earlier this year so they would be ready when the season came," says Ried.
Still, as retailers head into a truncated shopping season, with five fewer shopping days (and one fewer weekend) between Thanksgiving and Christmas than there were last year, stores will have to act fast. For e-commerce it's an even tighter schedule, since people need to buy early enough to ensure that presents being shipped make it under the tree in time. "A shorter season will create a little more momentum toward Cyber Monday than we've seen before," says Cassar. Retailers are just hoping it lasts.