After the Holidays: E-Commerce Seeks Springboard Into 2006

For many e-commerce companies, the temptation to revel in the success of the 2005 holiday season is a powerful one.

Many sites saw strong double-digit growth, with more shoppers than ever buying more online than ever before, helping to extend the e-commerce shopping season later than in the past. It all came with few, if any, complaints about the way sites performed amid the crush.

However, with sales still being counted, many in the e-commerce sector are already looking ahead -- seeking ways to build on the recent success by doing more of what worked and improving on things that could have been done better.

E-commerce companies emerged from the holidays with plenty of ideas for keeping the string of double-digit growth years going strong -- from boosting the use of gift cards to extending the holiday season -- in both directions -- and beefing up back-end systems to track inventory in real-time.

Flying Higher

A significant trend that emerged late in 2005 was the continued rapid growth of apparel as a key online category. One of the beneficiaries was Bluefly.com, which sells fashion clothing and accessories.

Bluefly Chief Executive Officer Melissa Payner told the E-Commerce Times that one major takeaway was to keep the holiday spirit alive longer.

"We learned that the holiday period begins much earlier and extends later than it ever did historically," Payner said. "Many e-tailers slow down the week after Christmas; this is an oversight. The holiday season really extends into early January."

Bluefly saw 45 percent growth in the fourth quarter, which Payner said was in line with expectations and was the result of several marketing efforts on television and in print: a handbag giveaway sweepstakes to build traffic to the site and a holiday "2 for me, 1 for you" campaign that sought to boost sales by offering 10 percent discounts when three or more items were purchased.

"We learned that our customers tend to buy for themselves when they buy for others, so this initiative was extremely successful," she added.

One advantage that online retail has is the increasing difficulty of buying offline, Payner believes. "Shopping in stores has gotten progressively more difficult: limited inventory, less personal attention, huge crowds, general inconvenience." Bluefly tries to capitalize on that shopper frustration by offering a liberal return policy and free shipping on returns.

Bluefly also intends to make the most of another trend in 2006. "We would probably build out our gift-card offering given the success of gift cards this season," Payner said.

Returns (on Investment) Accepted

Another lesson from the holidays is that investments in Web infrastructure pay off in terms of better conversion rates, higher sales and increased profits, according to Bob LaGarde, the chief executive officer of software and service firm LaGarde, whose StoreFront platform runs some 50,000 Web sites worldwide.

LaGarde said a survey of its merchants found 90 percent reporting at least 10 percent growth and 40 percent saying sales grew by more than 30 percent over the 2004 holiday season.

Heading into 2006, LaGarde is seeing "a lot of investment in systems integration work" to link e-commerce operations with back-office, warehouse and other functions.

"Merchants are coming to the realization that if they're going to do significant volume online, it makes sense to invest in fulfillment, inventory control, point of sale and accounting to get the maximum efficiency," LaGarde said. "It helps them better manage the overall selling experience -- make sure you can execute."

Bolstering e-commerce sites with "complementary content" that addresses how to use products is another trend that LaGarde expects to take hold this year. The hot sales of high-end tech gear -- such as plasma TVs -- have led many consumers to electronics stores for help, he noted, which they could also get alongside their original purchase.

"Our merchants are doing a lot more with rich content in the front end," he said. Another potential valuable lesson is how to best link promotional efforts. "I think you'll see them start to do a lot of the same things in other seasons," he said, with some sites already moving Valentine's Day promotions into place in early January.

Running Like a Top

Major Web-monitoring companies, including Gomez and Keynote Systems, reported no major slowdowns at critical times for e-tailers.

The fact that many sites stood up under the crush of heavy traffic and record-smashing sales is good news, of course.

The potentially bad news, however, is that consumer expectations about the speed of e-commerce purchases, the around-the-clock availability of sites, and the overall efficiency of buying online continue to rise. In other words, the stakes will be even higher in 2006, according to James P. DeBlasio, president and CEO of traffic-routing company Internap, which counts Overstock.com among its clients.

"Customers expect a smoother, quicker and more reliable online-shopping experience to guarantee repeat visits," DeBlasio told the E-Commerce Times. "Retailers need to pay close attention to Web-site availability and response time, in particular, as more customers transition towards online shopping; become loyal, regular shoppers at certain sites; and purchase items more frequently."

Ensuring performance is key, he added, because without it, all other efforts -- from search engine marketing to free shipping promotions and other attempts to boost sales -- may be lost.