E-Commerce's Growth Spurt


Online retail sales in the US are expected to  reach $414 billion in 2018, up from $263 billion last year, according to Forrester Research. This constitutes a compound annual growth rate of 9.5%. Electronic sales will also continue to grow as proportion of overall retail sales, reaching 11% in 2018, from 8% in 2013. Earlier, Forrester had predicted e-tail sales of $370 billion for 2017, a figure that has now been revised up to $385 billion.



A report on the state of online retail and marketing for 2013 from Forrester found that paid search and email marketing were the dominant techniques used by online retailers. However, an increasing number were focusing on mobile email optimization since a growing proportion of their email opens were done from a mobile device. Strategically speaking, the focus of attention was on multichannel marketing to reach consumers across digital channels.

In its study, Forrester used data from 65 online retailers, of which around a half were established brands with more than a decade in the business, and a third were large retailers making over $100 million in sales. The average digital marketing budget of the participants was $7 million. Asked about what their priorities in digital advertising were, most said that their top one is paid search. This came as a result from the increased fragmentation of mobile device usage plus Google’s algorithm change which made natural search optimization difficult. Also, according to the sample, search engine optimization as a whole was the best driver for customer acquisition in the digital world.

E-tailers also started in 2012 dedicating portions of their budgets for Google’s product listing ads. Previously free, the shopping listings in the search engine were considered good exposure, and cheap, which is why many retailers disliked the change but nevertheless started paying for PLAs in order to keep the traffic to their websites.

Although paid search and email top the list of priorities, social media also features largely in brands’ marketing mix. More than half of respondents said they were increasing their Facebook spend in 2013 from 2012 and a third were spending more on Pinterest. Around ¼ said they were increasing their budget for marketing efforts on Twitter, Instagram and YouTube. While social networks are not a major source of direct sales revenue, they are a valuable tool for improving brand awareness, ultimately adding new customers and expanding sales.


Another trend in e-commerce marketing is the growing importance of big data. Big data has permeated most, if not all, industries, and e-retail is no exception. With the advent of numerous sales channels, devices for online access, customer touchpoints and usability tests, brands in the e-commerce sector are realizing they need new skill sets for dealing with this new environment and putting this big data into use. Around 40% of respondents said they have opened special positions for marketing analysts; this is the biggest number of open positions in marketing in general.



And then there is mobile, whose importance has been growing significantly. Mobile traffic to many e-commerce websites doubled between 2012 and 2013, which made retailers pay much greater attention to the channel. Some 45% of the retailers Forrester surveyed said they are optimizing their marketing campaigns for mobile, both for the channel itself and based on usage patterns displayed by mobile device owners. Retailers are linking mobile with the top two priorities, paid search and email, to boost their performance, too.

Mobile optimization in paid search is one of the paths that online retail brands are following, given that 20% of their traffic now comes from mobile devices. An average 7% of search marketing budgets were allocated for mobile search on smartphones and 6% of the budget were set aside for search on tablets. Most of the respondents, over 70%, said that by the end of 2013 they would have in place specific search programs for smartphone and tablet search.

In regards to email, online retailers are unanimous that email is their biggest source of mobile traffic. It is one of the most often used smartphone functions, which has added to the already significant effectiveness of email marketing. According to survey participants, the average rate of email opens on smartphones was 28% of all emails, and that on tablets was 16%. Mobile optimization is on the table for all e-tailers, but the biggest ones are the most likely to take advantage of the trend quickly, adapting their email campaigns for mobile devices. Naturally, this refreshed importance of email is driving up investments in this channel. Almost half of Forrester survey participants said they are already optimizing their email tactics for mobile and 38% said they will be doing it by the end of 2013. In fact, when it comes to short-term priorities, email is the top one for the majority of online retailers. With this come more job openings in the segment – the figure exceeds open positions in both social network functions and in paid search.

Despite its rising popularity, e-tailers seem reluctant to do more than mobile optimization for email and paid search. In 2013, most were not very enthusiastic about things like mobile coupons, QR codes, bar codes and location-based programs. Mobile coupons offer retailers a great way to target customers with personalized marketing content and save on printing costs but they are still skeptic about the tactic. What’s more, the rates of redemption of such coupons among consumers are very low, in the single-digit range which additionally discourages their adoption. As for QR codes, the majority of e-tailers that have experimented with them use them to just direct the mobile device user to a website, rather than offering them any interactive content. Some have decided to pass on that particular tactic altogether. Location-based marketing is also in its infancy and few e-tailers plan to exploit it in the short term, with more than half saying they will not be doing either geofencing or check-in programs for the time being.

Asked about their merchandising priorities for 2013, many placed at the top multichannel exposure and improved visibility. They also prioritize improvements in their product detail pages, especially video information. Video seems to be gaining in prominence, with an increasing number of e-tailers planning to start including product videos in the product pages and also integrating video in photo shoots. Aside from making it easier for customers to decide on a buy, video content is not just constrained to the retail website, it can gain popularity on channels such as YouTube.



Personalization is another priority for online retail brands. They have already seen the effectiveness of personalized ad targeting based on the tons of data on consumer behavior and preferences that brands now have at their disposal. As a result, they are starting to work towards providing visitors to their websites with more personalized homepages and marketing modules that are based on a particular customer’s preferences.

A yet another priority for online retailers is website testing. Although its effectiveness has been proven, testing has not been used to its full potential historically. The two main reasons for this are the lack of creative resources and the absence of frameworks that allow for easy testing. But brands have started using routine testing programs, sometimes setting up usability labs to support their function, which has had a clearly measurable beneficial effect on their performance.

In the “recommendations” section of the report, Forrester analyst Sucharita Mulpuru, who authored the report, lists three main focal points: PLAs, email and mobile. According to the findings of the survey, developments in PLAs need to be monitored closely in order for marketers to see how effective they are before deciding whether they should dedicate more of their marketing budgets to this tool. Another priority should be the continued focus on email, in view of its growing importance with the advent of the mobile channel. There have been reports of email’s death in recent years, but they have invariably proven to be exaggerated. When it comes to mobile, marketers would be smart to keep a close eye on developments in the area, taking note of others’ experiments, as it becomes clear which mobile tactics work and which don’t. Forrester considers mobile coupons to be a winning tactic and is now keeping tabs on any technology that could make the adoption of this tool speedier.



The main drivers behind this growth, according to analyst Sucharita Mulpuru, will be increased use of smarthones and tablets for shopping purposes and the growing online spending by the so-called digital natives, who grew up with the Internet and are now entering their prime spending years. A further factor contributing to the anticipated development is e-retailers’ strategies of aggressive advertising, appealing prices and active customer acquisition tactics.



Among the challenges that Mulpuru identified for e-retailers are their website’s performance and execution, and timely deliveries. She suggested online retailers should make sure they make the checkout process as short and easy as possible and be extra careful not to lose their customers’ trust with botched deliveries, especially during the crucial holiday season in the last months of the year.

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