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Posted on Sun, Nov 28, 2010 : 6 a.m.

Online retail grows to $52B in 2010 as Cyber Monday promotions attract shoppers

By Nathan Bomey

Tree_Town_Toys_warehouse_TreeTownToys.JPG

Brady Soule packages toys for shipping at the Tree Town Toys warehouse in Pittsfield Township.

Lon Horwedel | AnnArbor.com

The Internet is alternately retailers’ best friend and, in some circumstances, their worst enemy. Depends on the day.

As the holiday shopping season takes hold, retailers are jockeying to grab a greater share of online sales, which are expected to rise 16 percent to $52 billion in 2010, according to Forrester Research.

But the influence of the Web is far greater than just direct purchases. It’s also giving consumers the ability to conduct extensive research - sometimes on their smart phones while standing in the aisle of a store - and ask their friends about products on social networking sites like Facebook.

Say, do those Sing-A-Ma-Jigs toys really work?

“One of the trends we’re seeing is every purchase has been a more considered purchase, more researched,” said Larry Freed, CEO of Ann Arbor-based ForeSee Results, which conducts some 1 million surveys a month for its online retail clients.

“At the end of the day, the consumer is smarter than they’ve ever been before. They’re more in control than they’ve ever been before, and they’re holding retailers accountable for a great experience.”

Summary: It’s not that hard to figure out whether the Sing-A-Ma-Jigs are worth the buy. (For those not in the know, Sing-A-Ma-Jigs are one of the hot toys of the holiday season - a singing stuffed animal of sorts.)

In online retail, the gap between the massive global players and the small, niche sellers is widening. The big guys are battling for customers by aggressively discounting goods and offering ubiquitous shipping discounts, or even free shipping in some cases.

That competition intensifies on Cyber Monday, the Monday after Thanksgiving - in this case Nov. 29 - in which retailers often compete for business by offering huge discounts for web-only purchases.

But that doesn’t mean there’s not room for the little guy.

In fact, some retailers in the Ann Arbor region are carving out a digital niche even as the big players, like Amazon.com and big-box stores, are dominating a large chunk of the online sales market.

Tree Town Toys, for example, is never going to compete with Amazon.com. But Hans and Tricia Masing - owners of the Ann Arbor toy shop, which sells products out of its Plymouth Road store and online through a warehousing operation in partnership with independent retailers throughout the country - are fine with that.

“Amazon is the go-to place for online purchases, but that’s not our market,” Hans Masing said. “We found that our best bet, as a mom-and-pop business, is really to try to maintain that quality relationship with the customers we do have. The customers that are focusing only on price are not necessarily the customers we’re going to have a long-term relationship with.”

Through its Dragonfly Depot, Tree Town Toys manages shared inventory and online sales for a network of independent toy and gift stores throughout the U.S. Tree Town Toys develops search engine marketing campaigns to draw in customers for those clients - all part of a strategy that helps the independent stores manage their web sales efforts.

Meanwhile, social media is becoming increasingly critical to draw customers to stores - and convince them to make online purchases, too.

Holiday online retail facts

  • Online sales will rise 16 percent to $52 billion, compared to a 2.3 percent increase for total holiday sales.
  • 37 percent of holiday purchases will be made online.
  • 18 percent of adults said they would use a mobile digital device to compare prices.
  • 88.2 percent of retailers will offer promotions on Cyber Monday (Nov. 29).
  • 54.5 percent of American workers will shop online from the office.
Sources: Forrester Research, National Retail Federation and Shop.org

“It’s about creating, building and cultivating a relationship with our customers,” Masing said.

ForeSee Results’ research indicates that only 1 percent of visitors to online retail websites got there by clicking on a link from a social media site like Facebook or Twitter. However, 20 percent of people visiting the retailers’ websites said their shopping was influenced by what they saw on social media.

In addition, the shoppers who said they were influenced by social media had a larger average order size than other shoppers.

Right now, it’s tough for retailers to get an accurate gauge of the kind of return on investment they’re getting from social media efforts. That’s why ForeSee has released its “social media value benchmark” tool, which helps retailers assess whether their social media campaigns are working.

Small retailers recognize they need to figure out social media, but the task can be intimidating.

Roger Pothus, owner of downtown luxury clothing shop Renaissance, said the next person he hires for his store would be responsible for handling the store’s Facebook and Twitter accounts, among other things.

“I want somebody who grew up with computers,” Pothus said.

Renaissance is not selling products website but is trying to drive traffic to its store by offering gift certificate specials online.

Pothus recognizes that the web can drive interest in his brick-and-mortar store, but he’s not losing the focus he’s always maintained.

“Our business,” he said, “is service, service, service.”

Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.

Comments

Soothslayer

Sun, Nov 28, 2010 : 7:25 p.m.

Great, more lost productivity on Monday chasing virtual doorbusters just so we can further increase our trade deficit. A double whammy for the states. Go TEAM!