E-Commerce in the Economic Upswing

E-tailers may be the only businesses not betting theirlivelihoods on an imminent economic recovery.

Online consumer spending is predicted to increase this yearregardless of economic conditions, according to analysts.

“E-commerce is still in a growth phase of about 5 to10 percent per month,” Forrester Research analystCarrie Johnson told the E-Commerce Times. “It is justa question of how much [it will grow this year].”

Still, retailers that maximize their use ofmultiple sales channels and focus on investmentreturns stand to benefit the most from the economicupswing.

What Downturn?

Indeed, Internet buying is not likely to spike in thecoming months because it has been on a steady upswingthroughout the recession.

“Consumers did not stop spending,” GartnerG2 research director David Schehr told the E-Commerce Times. “Itwas more of a business-to-business recession than abusiness-to-consumer recession.”

Since the Internet has become a mass-marketphenomenon, online spending will grow in the recovery,making up an increasingly consistent proportion of overallretail buying, Schehr noted.

Swell for Dell

Multichannel PC giant Dell Computer (Nasdaq: DELL), for example, is counting on online buying trackingclosely with overall buying trends.

“We expect that online computer buying will keep pacewith or exceed the rate of overall computerpurchases,” Dell senior manager of consumer e-businessSam Decker told the E-Commerce Times.

Retailers like Dell encouraged spending and survivedthe recession by offering widespread discounts,according to Forrester Research (Nasdaq:FORR) analyst JamesCrawford.

“This will make pent-up demand less than it might havebeen after previous recessions,” Crawford told theE-Commerce Times.

Proceed with Caution

In the rebound’s early stages, retailers likely willhedge on their budget ramp-ups, waiting six to ninemonths to accelerate investments in critical areaslike infrastructure and integration, Johnson said.

“E-tailers will keep a lid on spending as much aspossible and will keep the nice-to-haves at bay for awhile,” added Schehr.

“Need-to-haves” — like multichannel sales andmarketing integration with supporting infrastructure– should garner the most urgent investments, he noted.

“Some companies may need to improve their plumbing,integrating their back-end business processes withfront-end Web technologies,” according to Dell’s Decker.

“Others who have cut back to sustain their businessmay now realize the benefit of updating their site’sdesign and functionality,” he said.

Check Out Channels

In terms of investments and other operational decisions,retailers must leverage the synergies of multiplesales and marketing channels to guard against future economic vagaries, analysts agreed.

For instance, merchants should work to optimize inventory recovery costs by liquidating unused oroverstocked goods through efficient online channels,Johnson said.

“[Most companies] had some serious inventory gaps,with too much or incorrect merchandise,” she said.”They should try out eBay (Nasdaq: EBAY), whereshoppers are fairly affluent.”

Other liquidation sites include Overstock.com and SmartBargains,but these businesses do not allow sellers to collect customerdata, preventing them from acquiring new customers.

On the marketing front, e-tailers must spend ampletime sustaining consumer awareness, according to Schehr.”Consumers are not skipping merrily through theInternet anymore,” he said.

For Hire

E-commerce managers soon will look to fortify theirranks with new hires as the economy improves, butthose decisions will endure strict scrutiny, saidanalysts.

“Those that can have a high return on investment willbe hired back first,” Johnson noted, “such as thosethat have experience in managing marketing integrationdeals.”

Indeed, many retailers already have invested large sums of money tooptimize third-party marketing agreements.

“Companies will expand their e-commerce headcounts ascautiously as they are approaching IT investments,”said Decker. “Spending and hiring decisions are metwith greater rigor than in the past.”

As some firms look to add or improve functionality,opportunities in project and program management,design and Web development might increase, he added.

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