Retailers Learning from Past Web Woes

Michael Singer

Updated · Dec 11, 2001

Many retailer’s online operations are proving to be surprisingly
effective, according to research by and The Boston Consulting Group (BCG) and an
increase in efficient online marketing may get the credit.

The survey, which examined 63 retailers of various sizes in several
categories, found that both multichannel and Web-based retailers have
learned from past marketing missteps and many are now taking a much more
considered approach to promotions. Instead of offering steep discounts
to attract customers, retailers are finding ways to offer the minimum
discounts necessary to increase sales volume, and to deliver targeted
promotions to the more than 100 million consumers expected to use the
Internet over the holiday season.

“The key to retailer success over the holidays is a question of focus.
Retailers now know that the most valuable customer is the multichannel
customer — the customer who researches and purchases products online
and in stores or through catalogs. The online channel is an important
avenue to reach these customers and achieve a larger share of their
wallets,” said Peter Stanger, a vice president at BCG. “Retailers who
deliver merchandising and promotions through online and offline channels
targeted at the biggest spenders in any given category will emerge as
the winners this holiday season. On the other hand, an undifferentiated,
heavily discounted offering will lead to low margins and losses.”

If the 2000 holiday season was the year offline retailers dominated
e-commerce traffic, then the survey suggests the 2001 season will mark
the year those offline retailers learned how to incorporate online
marketing into their efforts. In the third quarter of 2001, only 22
percent of marketing spending by the companies in the survey went to
offline media. The 2000 average for offline spending was 46 percent; in
1999 it was 62 percent.

Online vs. Offline Media

Share of Marketing Spend (%)
Quarter Online
Q1 2000 49% 51%
Q2 2000 59% 41%
Q3 2000 64% 36%
Q4 2000 55% 45%
Q1 2001 61% 39%
Q2 2001 71% 29%
Q3 2001 78% 22%

Of the 78 percent of marketing money going online, portals are received
28 percent in the third quarter (up from 23 percent in the second
quarter) and banner accounted for 22 percent (up from 13 percent in the
second quarter). The only significant offline spending went to catalogs
in the third quarter, which accounted for 12 percent. Expensive, less
efficient marketing programs, such as television (which accounted for
less than 1 percent of third quarter dollars), print and newspaper
inserts are out.

Other findings from the Study include:

  • Acquisition costs in the third quarter were 40 percent lower than in the
    third quarter 2000 — falling to $12 from $20.

  • Retention costs declined by almost 50 percent since first quarter
    2001 — to $5 from $9.

  • Catalogs were the only significant offline medium used to promote
    online offerings.

  • Repeat customers and shopping cart abandonment are virtually unchanged
    from second quarter. The only exception was order conversion rates,
    which experienced a modest decline to 2.0 percent from 2.2 percent in
    the second quarter, but which are still higher the the 1.8 percent in
    the third quarter of 2000.

“Since the dot-com correction and through the current recession,
retailers have learned to be better marketers online, which is helping
to put them in stronger financial shape than last holiday season,” said
Elaine Rubin, chairman of, which is the online arm of the National Retailing Federation. “As retailing on the Web has
matured, the bar measuring online success has also been raised and
competition between retailers and across channels has intensified.
Perhaps the most notable developments were the steps many retailers took
to integrate their sales channels. That’s due to the fact that in this
challenging environment, one of the most effective ways for retailers to
increase their share of the consumer’s wallet is to focus on
cross-channel coordination.”

As retailers focus on deepening their share of wallet of multichannel
customers, the study found increasing numbers of marketers making efforts to enhance the level of coordination in marketing and transactions.

Two examples are the use of catalog “quick order” features online (51
percent of retailers surveyed) and providing in-store Internet terminals
that allow customers or staff to place orders and locate out-of-stock
items (29 percent of retailers surveyed). In addition, many retailers
are increasing the level of in-store and catalog promotions for their
online initiatives, and they increasingly use Web sites to promote
stores and offer catalogs. This year also marks a widening effort to
collect customer email addresses during in-store and catalog
transactions for use in later promotions.

The result has been not only an increase in the number of consumers
walking into stores with Web-site printouts of what they intend to buy,
but also an increasing willingness among online shoppers to contact
customer service when a problem arises, rather than abandon the

“These are examples of how online shopping is no longer an experiment
for consumers,” Stanger said. “The mass market now uses online channels
to browse, research and compare. That means the competition for a
consumer’s wallet often begins, and sometimes ends, before they enter a

Michael Singer
Michael Singer

Michael Singer is a career coach, podcast host, and author to help you step into a career you're excited about. Currently, He is a coach and trainer helping entrepreneurs and executives achieve business and leadership success. He is also an award-winning business journalist focused on the intersection of technology, Big Data, Cloud, SaaS, SAP, and other trending technology.

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