In the US, the ecommerce forecast looks good. ComputerWorld reports that online shopping is likely to grow by between $20 billion and $30 billion per year. This means that by 2012, ecommerce shoppers could account for between $215 billion and $335 billion each year.

Much of this growth has to do with the fact that even when the US economy slows, online shopping continues to grow. ComputerWorld reports that this has to do with the fact that online shopping is often done by those with higher incomes. The affluent are less likely to be impacted by adverse economic conditions.

Challenges to etailers

Even with the ecommerce forecast looking so favorable, there are plenty of challenges for etailers. ComputerWorld reports that online shopping is becoming more seasonal. More ecommerce shoppers are making many of their online purchases during the holiday season. Additionally, online shoppers spend less time browsing on ecommerce Web sites. It is important for etailers to design ecommerce Web sites so that customers will find them useful, prompting return purchases.

Items that can make ecommerce Web sites more attractive in terms of online shopping include:

• Product images
• Accurate product information
• Payment option flexibility
• Lower shipping costs (including offering free shipping)
• Flexible return policies
• Personalized product recommendations

More of the word’s population engaging in online shopping

The news that online shopping is increasing rapidly in the global marketplace shouldn’t surprise anyone, but a couple of the findings from Nielson’s “Global Online Survey on Internet Shopping Habits”. can help you target international customers. In their analysis of the report eMarketer points out that cash transactions are the basis in many developing economies, but that is changing. And one of the main categories to help introduce online shopping to developing nations is travel. eMarketer describes the place travel has in growing ecommerce worldwide:

“Travel is often one of the first retail categories to succeed in developing e-commerce economies,” Mr. Grau said. “Positive consumer experiences booking travel online creates confidence that can lead to purchases in other more complex e-commerce categories.”

Travel isn’t the only popular category in online shopping. Books, clothing and entertainment are even more popular categories. And once a toehold is gained in a nation, online shopping takes off, additional products and services surpassing the category that might have introduced the trend.

Nielson’s “Global Online Survey on Internet Shopping Habits” points out the dramatic growth of ecommerce worldwide. Two years ago, says the report, only 10 percent of the population of the world had bought something online. That number is now up to 40 percent.

Additionally, 85 percent of those with Internet have made an online purchase. And where are they making these purchases? Nielson says that many who engage in online shopping end up becoming repeat customers:

According to Nielsen, online shoppers tend to stick to the shopping sites they are familiar with, with 60 percent saying they buy mostly from the same site. “This shows the importance of capturing the tens of millions of new online shoppers as they make their first purchases on the Internet. If shopping sites can capture them early, and create a positive shopping experience, they will likely capture their loyalty and their money,” said Paul.

As an ecommerce Web site, it is important to utilize as many tools as possible to attract new online shoppers, and to provide a solid first impression to the shoppers you do attract. You need to know who your products and services will appeal to, and then target that audience. A large percentage of the population has not started online shopping yet. But the increasing rate of ecommerce growth worldwide indicates that many will start shopping soon. Developing countries offer the greatest potential for growth, so it is time to plan now to attract more international customers.

During the 2007 holiday shopping season, many ecommerce shoppers waited until the last minute to make their purchases from ecommerce Web sites. Late final order dates, with ecommerce retailers offering delivery in time for Christmas as late as December 22nd) may have contributed. In many cases, offering late delivery dates coincided with more online traffic.

Robin Goad at Hitwise posted a chart showing final order dates for businesses in the UK, and these ecommerce businesses’ busiest days online:

The orange dots show Web sites of brick-and-mortar retailers, while the blue are online retailers only. As you can see, there is a higher incidence of busy days for the retailers with physical locations in terms of late delivery dates. Here is one explanation that Goad offers:

This points to a possible explanation for the greater correlation of the orange dots: consumers feel that they can order with high street retailers at the last minute, because they can always pop into the shop if things go wrong.

You can see the increase in traffic in a trend as the later final order dates approach. While this information is true in Britain, it is probably also likely true here in the US. I know that I ordered all my gifts from online only retailers earlier in the month — I wanted to make sure they all arrived well before Christmas.

But this late delivery thing isn’t just about holiday shopping. It can boost your ecommerce traffic year-round. Late delivery dates can put your ecommerce Web site on the map as one with quick turnaround. This can be helpful for birthday and anniversary gifts, as well as for other holidays like Valentine’s Day, Easter and Mother’s and Father’s Days. When shoppers know they’ve missed the chance for delivery, the urgency to acquire the item increases. Clearly stating your delivery and order cutoff dates and times encourage procrastinators to visit your store.

Another lesson? Brick-and-mortar retailers can benefit from an online presence. Ecommerce Web sites increase the number of people you reach. There were physical presence retailers (though admittedly not many) whose traffic peaked after the final order date. Apparently shoppers were still looking for something. Ecommerce Web sites can encourage people to visit your store to buy products searched for online — even if they can’t have them delivered to their doors in time.

In an effort to combat fraud, PaypPal has purchased the Israeli software firm Fraud Sciences. At a time when the sheer volume of ecommerce customers is growing, fraud is growing as well. More automated fraud detection and management systems will be needed to combat this growth. Ecommerce Times reports on the acquisition of Fraud Sciences by PayPal, a company owned by eBay:

Integrating Fraud Sciences’ risk tools with PayPal’s sophisticated fraud management system should allow us to be even more effective in protecting eBay and PayPal’s hundreds of millions of customers around the world,” said Scott Thompson, president of PayPal.

The idea is to fix some of eBay’s problems with fraudulent users, while at the same time boosting PayPal’s appeal as a third-party payment service. Most PayPal users still use it mainly for eBay purchases, and PayPal has been trying to expand beyond that designation to service non-eBay, non-auction ecommerce Web sites.

This is especially important in terms of international ecommerce. An increasing number of ecommerce purchases are made overseas, and international fraud is more than two times as likely as domestic fraud when it comes to online shopping.

There are many changes taking place in the world of ecommerce. And one of the most important, for ecommerce businesses, is fraud management. Cybersource recently released its 2008 Fraud Report, and its results are interesting. Some of the findings of the ecommerce fraud reports include the following:

• Percent of online revenues lost to fraud is down to 1.4 percent from 1.8 percent in 2004.
• Internet revenue lost to fraud in dollars, though, is up to $3.6 billion from $2.6 billion. The growth of ecommerce results in more dollars lost, even as percentages decrease.
• International orders are more than twice as likely to be fraudulent as domestic orders.
• Manual review rates for fraud are on the rise again in 2007 to 27 percent, from 23 percent in 2006.

Ecommerce fraud management needs an efficiency increase

With manual review rates on the rise since 2006, it is clear that ecommerce fraud management is becoming increasingly important. The Cybersource reports points this out about ecommerce fraud management:

As online eCommerce sales continue to grow 15% to 20% per year, merchants face the growing problem of screening more online orders. . . Only 20% of online merchants report having budget to increase manual review staff in 2008 to cope with higher order volumes. Therefore, each year, merchants must increase fraud management efficiency approximately 20% just to keep pace.”

So, even though the percentage of ecommerce revenue lost to fraud is decreasing, the growth of ecommerce means that in numbers, there is more fraud to deal with. However, it is difficult to find the budget to provide the personnel to keep up with the need for manual review. Indeed, in 2007, Cybersource reports, ecommerce businesses increased spending on staff for manual review by around $100 million.

It is obvious that in order to keep up with the needs of fraud management efficiency many ecommerce businesses will need to turn to automation. Some sort of integration between manual review and a certain level of automated fraud risk detection will be needed. Otherwise, fraud detection and management will not be able to keep pace with ecommerce growth.

While ecommerce is definitely robust in the US, especially online holiday shopping, it doesn’t come close to equaling what is happening in the UK. In December alone, according to vnunet.com, the UK saw 50 percent ecommerce growth.

For 2007, over 2006, UK ecommerce saw 54 percent growth, as opposed to the 19% US ecommerce growth in 2007. As in the US, holiday shopping in the UK, especially during the last week of shopping before Christmas contributed to that growth.

Not only that, but online retail sales in Britain account for 15 percent of the total retail spending, reports vnunet.com:

“Online growth has proved robust and sustainable over the past year, increasing its share of UK retail from 10p in the pound to 15p,” said Anthoula Madden, vice president of consumer products in the UK at Capgemini.

While US ecommerce continues to grow, it does not have near the share of total retail purchases seen in Great Britain. One of the main drivers behind the explosive growth of UK ecommerce is an increase in broadband connections in the UK. Other factors include such items as an increased desire for competitive pricing, convenience and selection.

Tags: US ecommerce, UK ecommerce, ecommerce growth, ecommerce,
online shopping, ecommerce trends, holiday shopping

The USC Annenberg School Center for the Digital Future recently released the 7th Digital Future report. While you have to pay for the full report, even the summary offers some interesting insights into ecommerce and online shopping behavior.

Ecommerce affects offline shopping more than previously

The Digital Future reports points out that 67 percent of respondents said that online shopping reduced their traditional retail purchasing. This is an increase from 65 percent as compared to 2006. This is very interesting. It speaks to the fact that consumers are finding more of what they want — whether it is in terms of price, selection, quality or other factors — online than they are offline.

Interestingly, though, while online shopping cuts into traditional retail purchasing, it doesn’t stop consumers from going to the store. 71 percent of ecommerce shoppers said that they “sometimes or often” browse local stores before making an online purchase. The wise etailer could benefit from this information. Consumers are not finding exactly what they want locally in some cases — this is most likely in many cases for specialty or niche items.

Even those who still engage in traditional retail purchasing behaviors do a little online browsing. Internet search for products is very popular, even if the shopper buys offline at a local store. The is still good for ecommerce. It means that you can be noticed through your product offerings. A consumer may buy offline this time, but if s/he remembers that your ecommerce Web site was useful in the search, you could get the sale next time.

Interesting fact: The New York Times reports that 52 percent of people shopping online do product research at Amazon. But that still leaves nearly half for everyone else. And don’t forget that Amazon has programs that allow ecommerce businesses to sell products through the site.

Privacy is an issue for online shopping

Many ecommerce shoppers are concerned about privacy. They want to know that their information is safe. 57 report a high level of concern with regard to giving out credit card information. This will likely contribute to the increased popularity of third-party checkout options such as Amazon Pay Now, PayPal and Google Checkout. These services limit the number of places credit card and other personal information is stored. Ecommerce businesses that offer these, and other security measures, are more likely to attract shoppers.

That 57 percent, however, represents a number that is stabilizing. Ecommerce shoppers are not becoming more uncomfortable with giving out their credit card numbers. That indicates that online shopping is becoming accepted as a reasonably secure way to shop.

However, privacy remains an issue over all, reports the study:

The percentage of all respondents who reported the highest level of concern increased in 2007, and overall concern was the highest since the first year of the Digital Future Project.

Other points of interest from the Digital Future report:

• The number of ecommerce shoppers has increased 16 percent since 2006.
• 60 percent of Internet users at least 18 years of age bought online (spending less than $100 per month).
• The average number of online purchases during the year for those 18 and older is 36.

Tags: ecommerce, ecommerce shoppers, ecommerce businesses, Digital Future report,
privacy online shopping, online shopping, retail purchasing

One of the growing trends in ecommerce is social shopping. Social shopping is a way for consumers to “shop together” by sharing products, tips, bookmarks and reviews. Social shopping goes beyond Web sites that offer comparison shopping and actually moves into a dynamic shopping experience that consumers can share with others, all from the comfort of their homes. eBay Neighborhoods is an example of social shopping, as is kaboodle. (Get Elastic has a very good list of social shopping Web sites to get you started.)

But until now, most social shopping has been done through bookmarks and bookmarklets and other similar tools. Not any more. Sosign Interactive, a Canada-based company, aims to help etailers make social shopping a truly social experience with Clavardon. Ecommerce-guide.com offers this explanation of the new social shopping application:

The main features include: co-browsing, co-scrolling, co-highlighting and chat. Clavardon also provides a way for visitors to meet friends by e-mail and invite other visitors to co-browse. (The name of the tool comes from the French Clavarder, to chat.)

This means that online shoppers interested in social shopping can do so together. It’s the online equivalent of a trip to the mall with your friends. Consumers can browse products together and talk about them, even consulting with each other before making a purchase decision.

Integration onto ecommerce Web sites is supposed to be simple, and Sosign has packages that range from free to monthly subscriptions. It’s an interesting idea. Consumers are always interested in what others think about products (that’s why online customer product reviews are so popular), and this interactive social shopping experience may provide a user-friendly way for consumers to make connections with others online.

Tags: social shopping, ecommerce, ecommerce businesses, ecommerce trends,
ecommerce ecommerce, Get Elastic, social shopping bookmarks

Google has just released a tool that let’s you compare and gain insight into what people are buying and selling online. Google Checkout Trends aggregates the sales data of Google Checkout merchants and displays a rich graph with the results (revenue), filterable by date range and price. An online merchant is now able to determine how ‘hot’ a certain item is and compare with other products.

Check it out for yourself. Google Checkout Trends is an invaluable tool for online merchants. We’ll post a more extensive review once we’ve had more time to play with it.

Via Official Google Checkout Blog

Even though behavior targeting has been around almost as long as the Internet, it had a resurgence of popularity last year. Many in the ecommerce world became enamored with the idea of being able to offer product recommendations based on immediate behavior. Ecommerce Times explains behavior targeting (BT) this way:

BT tracks a Web visitor’s browser clickstreams — typically in the last six visits — to predict what the visitor may want in the future, and to target ads, content or products based on those “personalized” past behaviors.

This can be an effective tool on your ecommerce Web site if used properly. You can suggest additional products that a consumer might enjoy, or you can create ads specifically target toward a certain consumer. You can even pay to have these come up when potential customers do certain searches online. 2007 saw behavioral targeting on a sophisticated level not seen previously. But there are issues that go with behavioral targeting. Ecommerce Times points out the of two big ones: privacy and quality.

Privacy

In a world where the fastest growing crime is identity theft, privacy issues are strong. While proponents of BT insist that all information collected and tracked — and used to craft suggestions and ads that target consumers — is kept anonymous, the Ecommerce Times article points out how anonymity can be lost:

In addition, with so much information about us on the Web, an anonymous individual on one site can quickly become a known/named user on another site once BT starts to compare and contrast user behaviors across multiple sites. So, our private information can spread out very quickly without us even knowing it.

Personally, I’m not sure how much of a concern this is for the coming generations. Generation X is already more comfortable with the sort of privacy invasions in the name of consumer convenience that many in the previous generation still can’t stomach. Generations Y and beyond seem to think nothing of living in a world where their every action is scrutinized. Blogs, MySpace, Facebook and Twitter prove that. For the rest of the world, some are proposing a “Do Not Track” list that would work similar to the “Do Not Call” registry.

Quality

Of bigger concern, from an ecommerce perspective, is the quality of product recommendations and targeted ads. Set up a “profile” of someone, and you may get several different behaviors. This is because humans are contextual. I may shop for a Disney Princess gift for my niece, but the last thing I want when I go to buy a movie for myself is a recommendation that I might enjoy Snow White or that I should buy tickets to see Enchanted at the theater. Ecommerce Times points this out about humans and their various roles:

This is the pitfall of profiles. In a given month, an individual will have thousands of roles. Knowing my past is not necessarily a better way to predict my future. In fact, this phenomenon has been known by psychologists and other scientists for years — humans are animals of context and situations, much less than of historical profiles or roles.

Consumers want product recommendations, but they become annoyed if the behavioral targeting doesn’t get it right. In fact, offering poor product recommendations and targeted ads can be more damaging than offering none at all. Although offering none at all won’t win you very many points in an ecommerce business environment that relies increasingly on convenience and “on demand” availability.

Intent-based targeting goes beyond the current ecommorce methods

Ecommerce Times points out that the solutions to these two problems of privacy and quality could come in the form of the next step in ecommerce business marketing: Intent-based targeting. Ecommerce Times reports on what intent-based targeting is all about:

This approach relies exclusively on the collective wisdom of like-minded peers who have demonstrated interests or engagement with similar content and contexts.

The concept of profiles is completely removed in this case. Instead, through understanding expressed or implied intent, content appropriate to the user’s current mindset can be delivered.

This is an interesting concept. Somewhat similar to Amazon.com’s “others who bought this also bought…” line, I think. The idea is to gather information on the consumer’s intent as he or she searches, rather than relying on what he or she has done in the past. This means that recommendations are more likely to be appropriate for the current time, rather than based on a previous need. And it keeps users more anonymous and private. A rather interesting idea. It will be even more interesting to how “they” pull it off.

Tags: ecommerce, ecommerce business, behavioral targeting, intent-based targeting,
ecommerce marketing, ecommerce trends