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Online Sales Are Losing Steam

     
12:02 pm on Jun 18, 2007 (gmt 0)

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Since the inception of the Web, online commerce has enjoyed hypergrowth, with annual sales increasing more than 25 percent over all, and far more rapidly in many categories. But in the last year, growth has slowed sharply in major sectors like books, tickets and office supplies.

Growth in online sales has also dropped dramatically in diverse categories like health and beauty products, computer peripherals and pet supplies. Analysts say it is a turning point and growth will continue to slow through the decade.

Online Sales Are Losing Steam [nytimes.com]

1:18 pm on Jun 18, 2007 (gmt 0)

WebmasterWorld Senior Member piatkow is a WebmasterWorld Top Contributor of All Time 5+ Year Member



With every new technology we always get this "shock horror" story as the market becomes saturated.

I can only think of one person under the age of 75 among my friends and family who has not have every day access to the net for at least the last 12 months. There is only so much each individual will buy and only a subset of that will be bought on line.

1:24 pm on Jun 18, 2007 (gmt 0)

WebmasterWorld Senior Member bwnbwn is a WebmasterWorld Top Contributor of All Time 5+ Year Member



We are doing 50% less in Health Supplements. Not that is makes me feel any better at least I know there are others in the same boat as I am.

I am now seeing established sites with good listings quit the business.

1:29 pm on Jun 18, 2007 (gmt 0)

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>> Growth in online sales has also dropped dramatically in diverse categories like health and beauty products

I doubt it. The number of spams in my inbox would have gone down a little bit at least. People who spam are just like us, they go where the money is. :)

Habtom

1:31 pm on Jun 18, 2007 (gmt 0)

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lots of reasons:

Price Disparity: Online deals aren't as common as they used to be. The old saying it was cheaper than a B&M store used to mean lower prices - isn't as much so these days.

Business: Many businesses consolidate purchasing and use corporate buying power rather than ad-hoc online purchasing by employees or departments.

Access: Many businesses restrict/prohibit online shopping.

Slow time of the year: Isn't summer usually slow?

Purchasing Power: People are spent

1:50 pm on Jun 18, 2007 (gmt 0)



Growth in online sales has dropped dramatically in diverse categories like books, health and beauty products, computer peripherals and pet supplies.

Welcome to the world of ecommerce.

In the last couple of months, I and my wife purchased a good number of things online directly from asian suppliers. They had good websites, great english, and BY FAR best prices online. We've even ordered custom chairs, $100/piece that would cost $500/piece in US online stores. I purchased PC cables and paid PENNIES, versus $15-$25 per cable locally. This is just the beginning. Ditto for books.

I monitor Home and Bath niche. In our area, the best stores for bath, tiles, shower etc. products are several ethnic-owned stores (mostly eurpoeans). They carry stuff that has a lot more class, design and modernity (is there such a word?) then any other local store. Currently they are so successfull that Home Depot opened a second store in the area (within 10 minutes drive) and built a special section of these products that looks so European, innovative and bold as one could posssibly expect from a large corporate entity. I talked to the guys who own one store, and they say they have hundreds of competitors in the area, and a large number of them went out of business in the last couple of years. They couldn't figure out why unremarkable product lines they've been carrying for 20 years no longer sell. This is market and evolution, not the "Gloom and doom in home and bath niche" :)

A reasonable guess for slowdown in pet supplies would be poison found in lots of cat/dog foods. That would turn lots of people away from the niche.

2:49 pm on Jun 18, 2007 (gmt 0)

WebmasterWorld Senior Member essex_boy is a WebmasterWorld Top Contributor of All Time 10+ Year Member



I saw a similar comment in the Daily Telegraph today, they state that online sales are around 5% of the total number of retail sales in Engalnd, which doesnt sound that bad.

From what I can see retail sale across the board are falling so maybe online sales are suffering first.

2:54 pm on Jun 18, 2007 (gmt 0)

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The New York Times report deals only with the US. Since the US were first out with online commerce, years ahead of the rest of the world, it seems reasonable that the US growth rate would start to decline at some point. But outside of the US the growth rate is still formidable, so this is not doom by far. It is not even the beginning of doom.
3:34 pm on Jun 18, 2007 (gmt 0)

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All successful new industries and new companies that start from zero post abnormally high growth rates. Sustaining 40% growth year over year is tough to do.

Now, the big boys selling their wares may not be growing as much, but they are big ships that are not as flexible as smaller companies that can adapt and change strategies quickly. Ultimately, growth of any business boils down to the ability to take market share.

For instance, one of my clients sells one of those categories mentioned in the article, computer peripherals. Year over year, we are averaging 110% growth. Is this sustainable? No. Are we taking market share? Yes.

Interestingly, the article doesn't point out the growth rate high-speed internet adoption, or the continued growth of internet connections. More connections means more potential customers.
justablink

3:54 pm on Jun 18, 2007 (gmt 0)

WebmasterWorld Senior Member jomaxx is a WebmasterWorld Top Contributor of All Time 10+ Year Member



I read this article in my local newspaper this morning, and all it said was that growth was previously 25% a year and had slowed sharply. Hardly illuminating.

But this version of the article comes with a graphic that the most recent growth rate is "only" 20%. This is exactly the sort of pattern any normal person would expect. You really have to work hard to spin this as a problem for online retailing.

4:31 pm on Jun 18, 2007 (gmt 0)

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Speaking as someone who has been in the jewelry industry online and offline for the past 10 years, I've seen so many traditional B&M jewelry stores close shop because they refused to compete with online jewelry.

However in the past few years I've seen a lot of B&M stores that also have started to compete with the e-tailers, especially with loose diamond prices which took the biggest hit since they are so easily listed on a website and sorted by price. They've shrunk profit margins substantially, are now buying up higher in the production chain and are getting much leaner and are competing better with the online stores. Some chain stores are coming out with their own branded/patented diamonds, etc to differentiate themselves from the e-tailers.

So the B&M stores are fighting back, no question about it. However I still see a lot of growth in online sales in general, even jewelry.

5:12 pm on Jun 18, 2007 (gmt 0)

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The 2 digit annual growth can not go on forever. Ecommerce is obviously not going to replace offline shopping so I'm thankful that people do shop a lot online.
5:22 pm on Jun 18, 2007 (gmt 0)

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I don't think I buy into the conclusions there.

You can only sustain high growth rates for so long. For example, once you reach 100%, it is really really hard to reach 101%.

Without knowing what the baseline is or was, just saying that "growth" has stopped is meaningless. Once you reach saturation you simply are not going to grow any more.

5:25 pm on Jun 18, 2007 (gmt 0)

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For every action, there is a reaction...

The retailers that have started in-store pickup programs, like Sears and REI, have found that customers who choose the hybrid model are more likely to buy additional products when they pick up their items.

While online sales may be declining in certain sectors, what about sales at the traditional level? Are they in turn going up and accounting for the loss in online sales? Are more people "window shopping" online and then purchasing at the local level?

It may also "just be" a sign of the times. For as far back as I can remember, there has been an Ebb and Flow in sales.

The report states that sales were down in certain sectors while they were up in others. I guess it is all going to come down to who can market their products/services the best at all levels.

Also, the whole ecommerce experience has become so convoluted with this feature, and that feature, that the user can be sometimes overwhelmed. Larger stores are guilty of this. There is just too much going on for some online consumers. If they are going back to the traditional level, that means the current ecommerce model is failing. Time to make some changes, eh?

5:36 pm on Jun 18, 2007 (gmt 0)

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Growth is only half the equation. At a certain point every business matures and its growth rate will slow as compared to prior years.

The other part of the equation is operating costs. Most business should be able to trim their operating costs as they mature. Less need for development, improved operational processes, better targeted marketing, etc....

I was with a company that went from 50 million to 150 million in online over 6 years. At a certain point it was not realistic to expect 25% growth year over year because there is finite demand. We also went from 150 employees to 75 in that time, so lower growth did not hurt us.

7:25 pm on Jun 18, 2007 (gmt 0)

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Must be a slow news day.

You really have to work hard to spin this as a problem for online retailing.
- Agreed

The author of this article must have slept through math class.

7:38 pm on Jun 18, 2007 (gmt 0)

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Overall there was a slight slowdown in rate of growth for the US economy as a whole. It is a bit myopic for the authors of this article to conclude that ecommerce is trending towards a downhill slide. To take a snapshot in time and analyze it in a vacuum is typical when trying to make the news than report it.

Spin, spin, spin.

2007 will likely be a bad year for most too, but for the economy as a whole and not just online retailers. Too many bad things going on...housing bust, sky high gasoline, devaluation of the dollar, escalating food prices, etc.

7:55 pm on Jun 18, 2007 (gmt 0)

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cool down sales will not drop just the growth will
8:36 pm on Jun 18, 2007 (gmt 0)

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I'm in one of those industries and we're having our best year ever. We're one of the leaders in our niche. What we noticed over the last 3 years was the rise of a lot of small guys thinking they could compete in our industry. They basically underpriced us as a way of getting market share. Finally, we've seen them burning out over the last 9 months. We just had so much more historical data and established systems that we could fight them to the penny in places where we made money and let them "win" the losing strategies. In the end it looks like a lot of them are burning out their capital. As this continues we're picking up their customers and seeing a decent growth rate (more than this article would have you assume).
I also disagree with this article's claim that online shopping is a chore - and offline isn't. If you enjoy spending the day at the mall then great, but I don't think that desire is universal to all shoppers. I still think there are many areas to overcome in making online shopping easier, certainly there are in my industry. As we develop solutions to those issues I think we'll see even more growth.
9:06 pm on Jun 18, 2007 (gmt 0)

WebmasterWorld Administrator skibum is a WebmasterWorld Top Contributor of All Time 10+ Year Member



Keep the bad press coming, e-commerce is no longer a growth industry, those entrenched in it will be able to make even more money as people turn their attention elsewhere.
9:08 pm on Jun 18, 2007 (gmt 0)

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someone run for president, raise the tariffs and import taxes and such, give "corporate America" a "perk" to high American citizens, then we can bring the jobs back inside the U.S. and we won't have to compete with the europeans on sales...

just a suggestion

9:18 pm on Jun 18, 2007 (gmt 0)

WebmasterWorld Senior Member jomaxx is a WebmasterWorld Top Contributor of All Time 10+ Year Member



aeramas, not everyone reading this forum is in the US, not to mention that not everyone in the US is a Lou Dobbs protectionist.

Anyway, as far as online shopping goes, one of the most important points to be made is that it's a fundamentally different animal from instore shopping. Probably most of what I buy online is not available for sale anywhere in my city; it's mostly long-tail products, virtual products, and not infrequently one-of-a-kind items.

In other words, local retailers may be competing for my purchasing dollars in general, but are usually not competing for specific purchases.

10:09 pm on Jun 18, 2007 (gmt 0)

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Keep the bad press coming, e-commerce is no longer a growth industry, those entrenched in it will be able to make even more money as people turn their attention elsewhere.

Amen!

10:30 pm on Jun 18, 2007 (gmt 0)

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Ditto.

e-commerce has only just begun.

11:06 pm on Jun 18, 2007 (gmt 0)

WebmasterWorld Senior Member pageoneresults is a WebmasterWorld Top Contributor of All Time 10+ Year Member



e-commerce has only just begun.

e-commerce Phase I has just come to a head. Now we move into Phase II. ;)

12:54 am on Jun 19, 2007 (gmt 0)

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A decrease in growth rate does not mean a decrease in growth. Who needs math when you have sensationalism.
1:26 am on Jun 19, 2007 (gmt 0)

WebmasterWorld Senior Member vincevincevince is a WebmasterWorld Top Contributor of All Time 10+ Year Member



We've yet to see most of the benefits e-commerce will bring. So far we've seen little more than the recreation of a offline store online.

The bulk of e-bay is now fuelled by the commerical and semi-commerical sector, based upon creating a hyper-competitive market along with a one-stop-shop.

I expect the future major players in the e-commerce sector to be delivering exactly what consumers want: the very cheapest price for goods of sufficient quality which are delivered in a reasonable timeframe. It will be, in short, a dropshipper's market.

1:37 am on Jun 19, 2007 (gmt 0)

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watching my brother-in-law, I have learned one thing...he will run out to best buy and buy whatever he can, for 200% of my cost. I have an IT Consulting Firm and I am just now delving into websites. I get pc hardware and such for almost half retail price. I have offered him to buy products through me, at my cost, but he won't do it. He doesn't want to drive an hour and half to Dallas to get it, or wait for it to be shipped the next day, he wants it RIGHT THEN! How can we "trap" this "compulsive buying" to benefit ecommerce?
3:52 am on Jun 19, 2007 (gmt 0)

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Online sales are fine and grow each year. In 2005 it was something like 81 Billion and expected to be 144 Billion in 2010. That will only increase each and every year as it has every single year. People who shop online and have a good experience will continue. New people shop online every day. Also generations coming up today are brought up with computers/internet in the home and school. They are very comfortable with computers which will be even better once they get credit cards in their hands.
1:08 pm on Jun 19, 2007 (gmt 0)

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"Also generations coming up today are brought up with computers/internet in the home and school."

Probably a very important key. Once these people reach major buying levels, it's only obvious they will replace older generations that were #*$!tish in buying online.

skit-tish

[edited by: LostOne at 1:09 pm (utc) on June 19, 2007]

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