• by August 31, 2000

A profitable dot-com? What a concept! Apparently it's no longer an anomaly, though. According to the latest research from Shop.org and The Boston Consulting Group Online, retailers are marginally improving their performance while taking concrete steps to increase overall profitability in the first quarter on 2000.

And according to the survey, those concrete steps are focused on shifting away from expensive television advertising to online advertising and marketing, at least in part.

Although 40% of surveyed businesses re-negotiated or cancelled their portal deals, online advertising actually increased to 59% of total marketing spending. Researchers said that retailers most likely re-directed their spending towards more targeted approaches.

Survey responses from 66 North American online retailers, show that customer acquisition costs continue to decline from a high of $71 during Q4 1999, to $45 in Q1 2000, to $40 in Q2. Shop.org said that online retailers are spending less of their marketing budgets on pure brand awareness and are now focusing more on customer retention.

As Kate Delhagen, chairman of Shop.org's Committee on Internet Shopping Research, said, the average online retailer requires three purchases to break even on the acquisition cost of each new customer, so this strategy is beginning to pay off as almost half of their revenues in Q2 came from repeat buyers, up significantly from 1999.

Overall, this trend (if it is indeed a trend) does not bode well for us media buyers, but it may be comforting to some to know that in contrast to the recent media emphasis on dot-com layoffs, only 11% of survey participants have exercised this option as a way to improve profitability.