In a year where retail industry sales are expected to experience sluggish growth, Americans will continue to flock to the Internet for clothing, computers, and even cars. According to The State of Retailing Online 2008, the 11th annual Shop.org study conducted by Forrester Research of 125 retailers, online retail will continue to be a bright spot in the industry with retail sales rising 17% this year to 204 billion. Apparel (26.6 billion), computers (23.9 billion), and autos (19.3 billion) will be the largest three sales categories.
As the number of people new to the Internet begins to wane, online retailers are constantly struggling between investing in strategies that retain current customers or those that attract new ones. According to the report, online retailers allocate 53% of their marketing budgets to online customer acquisition and 21% of marketing dollars to online customer retention. However, retailers are finding that traditional acquisition programs such as search engine or affiliate marketing may also serve as retention tools that attract existing customers as well as new shoppers.
According to the survey, retailers report that search engine marketing continues to be the most effective way to reach new customers, citing 35% of sales coming from that initiative. As a result, nearly all online retailers surveyed (90%) use pay-for-performance search placement, and 79% said they will make this tactic an even greater priority this year. Companies are also using offline marketing tactics to drive customers to the web, with catalogs and other direct mail pieces taking priority over methods like television and newspaper advertising.