Wednesday, September 03, 2008

Where Will Buyers Shop This Christmas?

According to recent surveys from Forrester Research and others
"Consumers plan to cut back their online purchases to only the most essential items, say separate reports by eBillme, an electronic payment service; market tracker Forrester Research (NasdaqGS:FORR - News); and PriceGrabber, an online comparison shopping service.

The message is clear, says Ron LaPierre, president of PriceGrabber.

"The economy is such that people don't have as much to spend this year as they did last year," he said. "Christmas will be very interesting."

Web retailers likely will fight harder than ever this year to claim a greater share of consumer retail dollars, says Sucharita Mulpuru, a Forrester Research analyst.

"There is no way people are going to be spending more in this bad economy," she said. "It's more about where they are shifting their spending to." (bold is mine)

So in this sour economy consumers will still be spending, but online retailers are going to have to fight for those dollars, putting pressure on prices and profits. If you look at the financial results of major online retailers from the 2nd Quarter, you will see that Amazon is the only marketplace that continues to accelerate, flying much higher and faster than ecommerce, while other sites like eBay and Overstock stagnate.

Now, my personal experience is that I am seeing no change in buying behaviour for my items on Amazon, in fact I've seen a slight uptick beginning with this past Labor Day weekend. I sell used media items, that would not be classified as essential items, but I'm also hearing from several other sellers that their Amazon sales are better than ever. So, if consumers are cutting back on purchases, they must be doing it at other sites or marketplaces. 

If the share of the ecommerce pie, is going to be the battlefield this holiday season, then Amazon is where online merchants should concentrate their inventory. In years past you could evenly distribute your inventory across multiple marketplaces and channels but with the reduction in online spending, it is imperative that online merchants get their product in front of those consumers who are spending money.

Of course you don't want to miss out on sales at eBay, Overstock, and Buy.com but when it comes to your inventory, you want the lion's share of it at the marketplace where you have the best opportunity to sell it; or at your own website where you make the most profit. 
  • eBay is undergoing more changes and still charges a listing fee, so even though the risk of not selling an item has been shifted to the FVF (Final Value Fee) on the sale. There is still a risk that you will list something that does not sell. My suggestion for your eBay dedicated inventory is to sell only those items you have a solid track record for sales on that platform. I truly believe there will be a demand problem on eBay this holiday season.
  • Overstock is a different type of marketplace where merchants serve as the wholesaler and drop-shipper. My suggestion with this marketplace is to commit only those SKU's that are sufficiently deep and have a high likelihood of a sale.
  • Buy.com is a relatively new marketplace and more likely for incremental sales but when you think about committing inventory to any marketplace consider which one will give you the most bang for your buck.
I highly recommend strategizing about where you will commit your inventory, as I said in a recent post, inventory management is key to a great buying experience, so you don't want to commit inventory to a marketplace that is not ideal -- Nobody wants to be sitting on much inventory at the end of the year.

Just my 15%

1 comment:

Johnny Doom said...

i work with major bands and so sometimes get several copies of an album as part of my pay. i had several copies of the new pepper, cd which was in the amazon top 200 4 weeks ago. They also great had great pre-sales with the distributors since they are on a major tour this summer that has been sold out, did the vans warped tour last summer, that also sold out and have plenty of airplay on terrestrial (kroq,etc) and satellite radio. i put one cd on ebay at $4.99, half of what buy.com was selling it for and my shipping was less. IT DID NOT SELL ON EBAY. I put all the others on Amazon.com, for $9.49 up to almost 11. All gone in 2 days.
eBay is dying. period. i hear it everywhere, my job is popular culture, i have sell almost a 100 million records. I have been hearing a huge groundswell of Negative Opinions about eBay from the general public every where i go this year. It reminds me of the exact opposite of the positive's i used to hear about items like google, ps3 or barrack obama before either were ever really rolled out, advertised or publicized. eBay has dug themselves in a hole. popular culture is how i make my money and eBay is not popular anymore.