E-Commerce in the Economic Upswing

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

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

"E-commerce is still in a growth phase of about 5 to 10 percent per month," Forrester Research analyst Carrie Johnson told the E-Commerce Times. "It is just a question of how much [it will grow this year]."

Still, retailers that maximize their use of multiple sales channels and focus on investment returns stand to benefit the most from the economic upswing.

What Downturn?

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

"Consumers did not stop spending," GartnerG2 research director David Schehr told the E-Commerce Times. "It was more of a business-to-business recession than a business-to-consumer recession."

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

Swell for Dell

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

"We expect that online computer buying will keep pace with or exceed the rate of overall computer purchases," Dell senior manager of consumer e-business Sam Decker told the E-Commerce Times.

Retailers like Dell encouraged spending and survived the recession by offering widespread discounts, according to Forrester Research (Nasdaq:FORR) analyst James Crawford.

"This will make pent-up demand less than it might have been after previous recessions," Crawford told the E-Commerce Times.

Proceed with Caution

In the rebound's early stages, retailers likely will hedge on their budget ramp-ups, waiting six to nine months to accelerate investments in critical areas like infrastructure and integration, Johnson said.

"E-tailers will keep a lid on spending as much as possible and will keep the nice-to-haves at bay for a while," added Schehr.

"Need-to-haves" -- like multichannel sales and marketing 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 with front-end Web technologies," according to Dell's Decker.

"Others who have cut back to sustain their business may now realize the benefit of updating their site's design and functionality," he said.

Check Out Channels

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

For instance, merchants should work to optimize inventory recovery costs by liquidating unused or overstocked 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), where shoppers are fairly affluent."

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

On the marketing front, e-tailers must spend ample time sustaining consumer awareness, according to Schehr. "Consumers are not skipping merrily through the Internet anymore," he said.

For Hire

E-commerce managers soon will look to fortify their ranks with new hires as the economy improves, but those decisions will endure strict scrutiny, said analysts.

"Those that can have a high return on investment will be hired back first," Johnson noted, "such as those that have experience in managing marketing integration deals."

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

"Companies will expand their e-commerce headcounts as cautiously as they are approaching IT investments," said Decker. "Spending and hiring decisions are met with 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.