Will the economic slowdown affect ecommerce.

Effect of slowdown on ecommerce

[vineet21]

Are consumers going to flock ecommerce websites in order to find best possible prices for the products/services. What other factors are going to lead consumers to these sites(especially in an economic downturn).

[ByronM]

Users are unfortunately flocking to the coupon/deal sites which means the economic downturn forces many ecommerce sites to operate not only on slimmer margins but higher expenses.

So many stores have spent their competitors out of existence without realizing they've only set themselves up for failure.

In many cases though, the money simply won't be there and won't be spent either way. Whats left will be the "value" (dollar wise) bottom feeders ;)

[ectect]

Thought this might be of interest from the BBC

Online retailing is continuing to boom in the UK despite pessimism about the economy, according to a survey.

[news.bbc.co.uk...]

[Ledfish]

We have not seen any downturn in our market and in fact, we are up from last year. But for us, the bigger problem is going to controlling the costs. Everything but the rent seems to be going up, up and up as crude prices soar.

I don't think it is going to as bad for ecommerce as it will be for B&M. I think as gasoline prices continue to spike, people are going to be spending more time trying to buy what they need online rather than driving to buy it.

[jsinger]

In January, I created a model portfolio of about 20 ecommerce stocks and posted about it here. Portfolio was worth exactly $20,000 then. Current value is $22,258. But S&P 500, in general, is up a bit since my portfolio inception date.

Amazon and Blue Nile have done very well. But note that Red Envelope has gone out of business. Only one or two of the 20 stocks are down since January.

The good performance of my portfolio doesn't mean web sales are strong. Mostly it means the market was really rough on all retail stocks in January.

[ByronM]

I'm always interested in how much debt these large sites pile up when they boast about increasing market share/market size.

The way i see it these huge top 500 e-commerce sites get away with providing less and simply try and sell more. Cut costs till the costs cant be cut and hope the debt markets are cheap enough to allow you to sustain a 90 day cash flow that keeps you in the black with payroll.

[ispy]

But note that Red Envelope has gone out of business

Perhaps, but their stock is at 0.01, that means if you invested in a million shares you would still have $10,000.

[trinorthlighting]

The price of gas goes up, people drive less but still like to shop. Where do they go? The internet. We have not slowed down one bit.

[CernyM]

We're still seeing growth, though we're seeing smaller average order sizes.

There's obviously no way to prove it, but we believe strongly that our growth rate is lower because of the economic uncertainty than it would be if we were in boom times.

[ByronM]

I'm with CernyM. I have no complaints about our growth but it isn't coming without increased expenses.

Customers get more savvy and shop for absolute lowest deal. If you can compete in that niche and sustain growth more power to you.

People don't necessarily "go to the internet" just because gas prices are high. With expensive gas comes expensive utilities, expensive maintenance, expensive food, increased cost of living. So while i pay more for a tank of gas the less obvious stuff is now my average grocery bill is 4-500.00 month to eat healthy for a family of 4, utilities are jacking rates, house maintenance is getting more and more because prices of materials a HD and Lowes are increasing so on and so forth.

[dpd1]

In the first quarter we were doing great, even with the high gas cost. We sell items that revolve around a do-at-home type of hobby, so I was starting to think that maybe the gas thing would actually help sales. After investing in materials for the upswing in sales that appeared to be happening, we now in the last few weeks plummeted in sales. So not real happy right now.

[Juvie]

We've also seen sales plummet in the last two weeks. Our traffic is constant or even a little higher, but no one is buying. June is a slow month for our category, but this is something different.

[D_Blackwell]

We sell items that revolve around a do-at-home type of hobby, so I was starting to think that maybe the gas thing would actually help sales. After investing in materials for the upswing in sales that appeared to be happening, we now in the last few weeks plummeted in sales. So not real happy right now.

Us too. Typical early Summer doldrums right now though so not too worried. High gas cost is a plus for ecommerce overall I think, a selling point - at least until shipping costs get hit. Right now I can ship a customer nearly any product that we sell for less than what it would cost them to drive somewhere and buy it. Fear of a collapsing dollar is something else altogether. Too soon to say for us. The average American has no net worth, so a tanking economy could collapse non-essential product markets.

[dpd1]

USPS just raised their rates 'officially' a while back, and I noticed they've done some unofficial numbers juggling lately to boost prices... Seems like the coastal zones keep moving inland. I'm not sure if they could pull-off doing another raise so soon, but I guess they can do anything they want when it comes down to it. Higher shipping costs is a hard thing to justify to customers. You deal with it every day as a seller, but some consumers are living in the stone age when it comes to shipping prices. I have a feeling the gas thing will start to get worked out one way or another, because it's pretty much a thorn in the side of the entire civilized world at this point. It's one thing to just tick off the US, but pretty much everybody has had it now. Politicians can only make excuses for so long... Eventually they're going to have to justify why one industry is allowed to bring the world to it's knees economically. But sometimes I wonder how much all of this is just psychological... Once the media gets into gloom and doom mode, it scares the crap out of people. It doesn't help sales when every night you turn on the news and they're telling you how screwed up everything is. Kind of like a self fulfilling prophecy.

Dave

[D_Blackwell]

The product and niche can make a huge difference. If you are fortunate enough to have a good ticket average that packs in a Flat Rate or Large Flat Rate box it is like a Teflon coating and shipping is darn near cheap. We are on the East coast, ship a very large percentage of orders to the west coast, and the flat rate cost is an easy sell.

We really push the limits on the Flat Rate Envelopes as well. I don't know if there is a maximum thickness on them technically, but we certainly abuse the system. Have sent thousands and not a single problem, so if there is a thickness standard it is not enforced. If it fits in an FRE it only costs $4.75 to west coast instead of the $9.30 that it would cost on larger items. Pack a 96L box, stuff it an FRE, one strip of Priority tape across the top and off it goes.

I can't believe that it's technically legit, but never a question. Ditto for internationals. Pack the order in a 96L, stuff it in an FRE, and shipping is next to free.

[dpd1]

The USPS has always been weird about pricing. Stuff they should worry about they let people get away with murder, and then other things that aren't even important, they'll fixate on. I'm unfortunately mainly sending items that are 60" or longer. Our shortest is 38". So using the normal offices is a nightmare, because they have no clue. As soon as you walk through the door they start thinking in their minds there's no way something that size is under $30, but it is. Then they look for every excuse there is to try and disallow it. I've had guys measure stuff like 4 times trying to figure out what to do. After a while you just want to reach over the counter and strangle them. Thankfully I have a contractor station that takes all of our stuff and couldn't care less. But all that said... Sending something that girth to Europe is about $30 postal. Sending it UPS is about $130 or more. I've been quoted 'excess size' on stuff through UPS well over $200 international. Only problem is that a lot of countries are under my max size for USPS. In that situation I just lose the sale. I envy people that sell merchandise that fits in a regular size box. That would be a dream.

[experienceads]

Most of the ecommerce affiliate programs I manage are seeing strong sales and EPCs over the past few months. I personally think people will be getting in their SUVs and going down to the mall and instead buying online which benefits affiliates and merchants.

[Christi]

There's no limit (so far, knock wood) on the thickness of the flat-rate envelopes for USPS. We ship a lot of product outside the U.S. in those FREs and have saved a mess o' postage because of them.

Still, we were forced to raise the postage rates, by a mere 95 cents, and are now the same as everybody else in our niche. We do a June special; our competitors came back a week ago with double off that of our special. We're getting killed. All in the last week.

[dpd1]

Unfortunately there's a steady enough supply of 'sell the farm' type businesses online to make everybody that has only fair prices miserable. I have a competitor right now that's been gaining popularity. I see how much business he does and what he charges, and I know for a fact he's barely making 5 figures a year. But he continues on, and many people that probably would have bought my stuff, bought his simply because it's cheap. I think there's a lot of businesses online that just don't do the math. They think as long as stuff is going out the door, they're doing OK. It's extremely easy to miscalculate your actual profits, especially when you're making your own products. I have a cost sheet for every single thing we make, some of which have maybe 200 pieces. With prices constantly changing between different vendors, shipping charges changing, our prices changing... it's a full-time job just keeping up with it. But if you don't, you could be getting killed and not even know it, because every dime you miss adds up. I think there's a lot of people that just don't have it together enough to know how much they're really making. Or not making. It may take a few years for them to finally realize they're not making it. In the meantime, they've outsold a bunch of other businesses that were just trying to sell items for fair prices. I think all you can do is build as good a reputation as possible and just hope there's people out there that will respect that, and not just dump you for the cheaper price.

Dave

[Christi]

Dave, you have an excellent point about reputation. I do think people (some people, anyway) like to know who they're dealing with. We distinguished ourselves with fast turnaround time, excellent customer service, worldwide shipping and the like. This new competitor has come and ripped the language right off our site.

This "supermarket mentality," as I think of it, may hurt them in the long run, as you suggest, or it may just force us all in this niche to take slimmer profit margins. I just hope it doesn't force us out of business.