E-Commerce Redefines Marketing--Now And Forever

Elusive consumers are being pursued with wild abandon by television networks, while newspapers and online advertising networks are kicking into high gear. The holidays are the ultimate showtime: online and in-store lines. The emerging trends provide a map for the bumpy media road ahead.

Amid mixed signals about how an economic slowdown and higher gas prices will impact consumer spending, media and marketing executives are finding meaningful signs of life. comScore projects that retail e-commerce spending will increase 20%, and will reach $30 billion in November and December. The encouraging forecast is based on a 17% gain in online retail spending during the first 18 days of the holiday season, topping $7 billion.

Nielsen was more guarded in a Nov. 20 report--noting that convenience, not price, will spur more consumers than ever to shop online, where they will commit half their holiday budgets. "The fact that consumers expect to allocate the same share of what may be a shrinking overall holiday budget to the Web suggests that online sales growth may not live up to the 20% annual growth rates we have seen in years past," said Nielsen Online Vice President Ken Cassar.



Hitwise was more upbeat heading into the Thanksgiving weekend-- pointing to a 145% increase in custom category advertiser Web sites for the week ending Nov. 17 from the prior week, up 45% from the prior year. Online visitors, comparison shoppers and spenders are overwhelmingly female and age 25 to 34, and are especially enticed by free shipping, online discounts and reassuring payment security. Although remains the most-visited Web site, brick-and-mortar retailers such as Wal-Mart aren't far behind, with Circuit City posting the largest one-year gains.

e-Marketer also is predicting an 18.5% increase in online holiday spending to $31 billion--off from last year's 25% growth rate but still superior to the overall retail industry's low single-digit growth. And there is no telling what the week leading up to Christmas will hold, since last year's online spending unexpectedly surged 45% the week before Christmas.

But general and specialized retailers--from Wal-Mart to Nordstrom and Starbucks to Best Buy--are not waiting for sales to materialize. Retailers are making innovative use of text messages to regular customers' cell phones and PDAs to draw attention to timely discounts, favorable comparison pricing and electronic coupons and codes. Some are even providing wake-up calls to early-morning shoppers.

Such first-time practices underscore advertisers' increasing comfort level with and constructive use of new interactive media and technology. Try as they might, newspapers and television networks will never be able to match that value proposition unless they creatively work through their own Web sites. That presents a curious setback for traditional media at a time when it is most vulnerable--plagued by a writers' strike and declining user support. Starbucks resorting to its inaugural national television campaign to counter a first-time drop in store foot traffic reinforces the notion that advertisers still can rely on the mass media reach of television, even with its declining viewer ratings, to impact overall sales.

Still, a perfect storm of conditions will prompt many retailers to move more of their marketing online, where they can immediately secure an interactive return on their investment with transactions, real-time consumer profiling and measured accountability. Jupiter Research points out that retailers are increasingly looking past the quick sale to building trust, value and long-term customer relationships. In a strange but appropriate way, television will become an adjunct to a marketing mix anchored by an interactive core. That is the catalyst behind a surge in full-service, customized, even social-branded Web sites for everything from pet lovers to baking with friends.

However, even a robust online shopping season will do little to abate looming concern about waning consumer strength in 2008 as credit tightens and housing values and sales continue to fall. The Federal Reserve was quick to release its first detailed forecast just before the Thanksgiving weekend, summarizing its changing grim predictions. Although the Fed expects unemployment to rise only slightly and inflation to creep lower, it now says that overall economic growth will slow sharply in 2008. With consumers driving 70% of the U.S. economy and 12% of the global economy, a potential 2% to 3% pullback in spending--or as much as $300 billion in personal income, as suggested by some economists--would have a severe impact on all ad-supported media.

Everything that marketing and media executives learn during the holiday rush can help them make the most of a bad situation and the challenging times ahead. In fact, interactive marketing will provide the only true growth platform--tripling to $61 billion by 2012 and growing at an annual compounded 27%, according to Forrester Research. It will be driven by all of the emerging formats that advertisers are still learning about: search marketing, display advertising, online video, mobile marketing and social marketing.

Those kinds of overwhelming metrics should stimulate static media to devise fast, creative ways into the interactive space--not simply as an extension of their backbone advertising, but as a parallel track to their long-held practices of tossing high-priced pitches into the masses and hoping that some stick. Attracting a consumer once no longer has the cachet that is now held by keeping, tracking and mining consumers through the most difficult economic times. Traditional media's greatest risk is not holiday shopping levels or next-quarter ad spending levels. It's whether it can keep pace with consumers and marketers in an interactive marketplace in which connections--not just commerce--define their existence.

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