Online Investment

In the most recent issue of Internet Retailer (July 2008), the Publisher’s Letter (written by Kurt Peters) talks about Moody’s Investor Services recent move to more heavily weigh a retailer’s online revenues when rating their debt. “A Strong online presence is considered a ratings positive more frequently than in the past because it represents such an important channel of distribution and can mitigate declining comparable-store sales trends,” according to Moody’s.

There were a couple points driven home in this article that new and existing multi-channel retailers should keep in mind as they assess their own online investments. But first, take these numbers into account:

Moody’s has a 40% share of the worldwide credit ratings market

First quarter 2008 online sales grew 13.6% year over year versus retail sales growth of 2.8% for the same period

Online sales growth has been very strong for several years as the shift of consumer spending from bricks and mortar to online continues. As this growth continues the percentage increase will decline because the revenue base continues to grow. Taking the news from Moody’s, you can bet companies are taking this seriously and looking very hard at how they invest resources into their online business.

For smaller retailers this is an opportunity to carve out niches and leverage growth to compete effectively and take market share over time. If you don’t have a large budget, carefully spend your money in those areas that will grow your business and areas that will support that growth. There are a lot of great tools out there that generate incremental revenue, but, that increase may not be worth the investment of your limited resources.

Focus on areas that grow your build your brand, generate sustainable revenue and increase market share. Look at your customer service. Are you taking care of customers to the fullest and increasing the profitability of the relationship? Look at your fulfillment…are you cutting unnecessary costs and finding ways to encourage sales conversions? Look at your site…is it efficiently converting visitors into customers?

As mobile commerce becomes more of a reality with devices such as the iPhone and Blackberry its up to the retailer to step up and take their piece of the pie. As a consumer, I have a web app loaded on my iPhone to compare prices when I go shopping at stores. On several occasions, I have gone into a store (i.e. Target, Barnes and Noble) and used this app to find better prices online and even completed the transaction before leaving the store. This is going to happen more and more as people have better mobile devices and want more convenience in their hectic lives.

Mobile commerce is going to quickly become a reality for some of our retailers in the coming weeks and we’re excited to see the growth. For these partners, they will be the first in their respective industries to have a mobile optimized site. These sites will be mentioned after going live.

I suggest you take a few moments to assess your online investments and determine where you’re headed. If you’re in a rut, you need to quickly rejuvenate as the holiday season approaches. Speaking of holiday, you should be acquiring more new customers than at any other time of the year and you need to groom that relationship. Every order that leaves your door is an opportunity to create or nurture a relationship. Do simple things over the holiday to make your customers feel appreciated. Include a simple holiday card in a box thanking the customer and wishing them a great holiday season. If the order is a gift for someone else, make sure that package contains everything it needs to and everything looks perfect because it’s about to go to a potential new customer. Start early and you’ll be thankful later.