U.S. retailers are learning an important lesson this holiday season.
And it has nothing to do with the prices they set for Barbie dolls, video games or HDTVs.
The lesson being learned is that the successes of future Black Fridays won't be solely keyed to "door-busting discounts," or luring shoppers to stores at 3 a.m. In fact, as this year's Cyber Monday proved, U.S. consumers like to shop online. And that means that the merchants with the most enticing deals and most convenient Web sites will win the race for the dollars that U.S. shoppers drop on their online purchases.
"It's the end of the store as we know it," said Forrester Research Inc. (Nasdaq: FORR) analyst Sucharita Mulpuru.
Cyber Monday, the Monday after Thanksgiving – and a day in which bargain-hunters follow up their weekend shopping by taking advantage of Internet-only deals – experienced a sales increase of 20% this year over last, according to research firm Coremetrics.
"The consumer is shopping online in a pretty aggressive way this holiday," Scot Wingo, chief executive officer of ChannelAdvisor Corp., which helps retailers sell through online marketplaces, told Internet Retailer.
This year, online shoppers got to enjoy deals starting much earlier than Cyber Monday. Shoppers spent a whopping $1.1 billion online on Thanksgiving Day and Black Friday combined, and online retail sales for the month through Nov. 26 were up 13% from last year, reaching $11.6 billion, according to marketing researcher comScore Inc. (Nasdaq: SCOR).
The surging Internet sales results "put the retailers on notice that consumers are choosing to buy online in ways that we have never seen before," Fiona Dias, the executive vice president of e-commerce company GSI Commerce Inc. (Nasdaq: GSIC), told The Wall Street Journal.
Although Black Friday and Cyber Monday aren't the biggest days each year for online sales, the increase in Internet sales on those two days underscores that there's a new U.S. consumer to market to – a consumer who is comfortable with technology and who values convenience, as well as low prices.
Steve Nave, the general manager of Wal-Mart Stores Inc.'s (NYSE: WMT) Web site, said online sales were up "dramatically" over last year's Thanksgiving weekend. Target Corp. (NYSE: TGT) saw its online traffic jump 9% on Black Friday alone. J.C. Penney Co. Inc. (NYSE: JCP) said its Black Friday online traffic increased 500% from last year – causing Web site slowness for a short period during the day.
Online-only retailers really experienced big gains. Accessories Web site eBags.com reported Cyber Monday sales were up 51% by Monday evening. Zappos.com had to expand its warehouse to keep up with orders and will add 500 employees this week to handle the online shopping frenzy.
As retailing sees its new future unfold, retailers are starting to invest in Web site makeovers to appeal to the new online shopper through social media campaigns and product cross selling.
"We invested in a site redesign in 2010 with a goal of making the site more engaging, improving search and navigation, and streamlining checkout," said a spokeswoman for jewelry retailer Ross-Simons. "Since we launched the new site in October, we've seen a significant increase in new visitor conversion rates."
It's likely that the biggest online sales day of the year is still to come – closer to deadlines for Christmas delivery before the new and wildly popular free shipping marketing campaigns can expire. So analysts expect retailers to pay more attention to their Web sites and to online deals than to their brick-and-mortar storefronts and in-store promotions.
This brings us to next week's Money Morning "Question of the Week:" Is appealing to online shoppers the key to U.S. retailers' survival? Have Black Friday and Cyber Monday taught us that an online marketplace is the future's shopping center? As a consumer, would you benefit or suffer from this shift away from in-store shopping? As an investor, will you look to profit from online retailer stocks?
Send your answers to mailbag@moneymappress.com. We want to hear from you!
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News and Related Story Links:
- Money Morning:
Brick-and-Mortar Retailers Moving Business Online as Foot Traffic Declines - Money Morning:
Cyber Monday: The "Online Black Friday" Signals Shift in U.S. Holiday Shopping Trends - Money Morning:
U.S. Retailers Hoping Black Friday Sales, Smartphone Apps Fuel Strong Holiday Shopping Season - The Wall Street Journal:
'Cyber Monday' Sales Show Strength - The New York Times:
In a Holiday Indicator, Retailers Say Online Sales Remain Strong - Money Morning News Archive:
Question of the Week Feature
Internet shopping can be great. Search for what you want, find it, then compare prices – all from you comfy chair. Decide where to buy it based on price and shipping costs. You can even go to reviews of the product and idiot forums to help make up your mind. Most online product sales sites have a customer review section where consumers have added comments about their experience with that item. It is best to not pay attention to what they (who are these people anyway) say. I am shocked that these reviews appear on major retailer sites where there are many negative comments. I thought they wanted to sell the product. Internet shopping can be an easy way to get it done without spending a nickel on gas but you have to do some work to make sure you are getting what you want at the best price. We will always have retail stores. The internet only gives us an option for ordering certain types of things at either better prices (don't forget shipping) or more convenience. It will never replace going into a store and lookiing, seeing, touching, and ultimately deciding on what to buy. I don't see myself ordering milk, bread, and toilet paper from my Blackberry!