The recession has hit the economy big time but that does not mean everyone has been badly affected. One of the groups who are least likely to be hit by the recession are the online retailers. Here are some of the reasons why they maybe insulated from the financial downslide.
Lower ongoing costs
Unlike the offline retailers who need to spend a fortune on their monthly rent as well as utilities, the online retailers actually need to spend very less to maintain their visibility quotient online. Most online retailers just require to pay up the basic hosting expenses every month in order to be visible to their customers. Apart from this they simply require to keep taking new orders and completing shipments in order to tide over this crisis.
Impact on fresh web development projects
As most companies start going on a cost-cutting spree it is likely that web development and new design on websites may take a back seat. More and more online retailers are stepping back from giving their sites a new look and feel. So we may get to see most websites with the same look they had couple of months before.
More offline selling
A lot of online retailers may also choose to keep offline selling as a backup option just in case their website fails to garner sales. Thus, we may find more e-tailers selling from their own homes and backyards and ending up getting far more sales than expected online.
Growing online retail segment
Inspite of the massive downfall across financial markets, it is surprising that most online retail sites have reported substantial growth in sales statistics. Even in the last year there was a whopping 22% growth across online retail sites while offline retail grew only around 3.5%. Even this year, inspite of the financial crisis, most online retail sites are expected to see a major growth.
Failure across larger companies
The bigger online retail players would most likely have a larger share of debts and expenses, which would need clearing up. Hence, such companies are less likely to bounce back quickly in these trying financial times. In such a scenario, the smaller online retail companies, who have a smaller turnover each year and have fewer expenses, are more likely to shine in these poor economic times. This might just be a great time for such kind of companies to prosper and get a lead in the competition. By the time the economy clears up these companies may just be ahead of the race, leaving the older and larger companies with more competition ahead.
Convenience and zero hassle
Online shopping has been growing, if past statistics are anything to go by and it has been predicted that even during this holiday season shopping is expected to grow dramatically. The major reason for this trend is because of the ease that online shopping presents. There is no need to visit a store or wait in a queue to make the payment. Online shopping is fast, secure and easy. With more and more online retailers making their checkout processes simple and hassle-free, online shoppers are keen to finish their holiday purchases online. In addition, many of the online stores have expedited shipping and delivery times, making such a mode of shopping the preferred choice.
Zero marketing costs
Another reason why online retailers are expected to flourish in this economic crisis is because of their relatively low marketing costs. Most of the marketing can easily be accomplished via blogging, press release and article marketing and manual submission to article and PR directories online. These modes of marketing are mostly free of cost and tend to achieve good results. Thus, traffic inflows will not be a problem if the retail sites are consistent with their marketing methods. In comparison, most regular, offline stores will need to spend a large amount to garner publicity. Apart from investing in advertisements and hoardings offline they may also need to spend more on their marketing methods like sending pamphlets, or mailing customers about new offers. All of this is bound to prove far more expensive than marketing incorporated by online retailers.
Thus, even in these trying financial times, while everyone is cutting back on expenses, the clear winners seem to be the online retailers. In fact, this might be their best time to prosper and gain in more traffic, revenues and sales. With negligible marketing costs, minimal costs to maintain visibility and more consumers preferring online shopping, the online retail segment is only expected to grow.
I definitely agree with a part of your story. Smaller online retailers have the edge over larger players in this turbulent times. During boom periods, large players are able to raise funds from PE investors easily and hence have huge funds to deploy. To cope up with expected sales, they tend to build fixed overheads that pull then down during turbulent times.
Further, online retailers acquired most of their customers through Sponsored links. During a boom period, there is huge money flowing to acquire the same customers, pushing up prices of sponsored links on search engines. At this point of time, smaller players have to wait and watch as their budgets are limited and the competition is expanding. The tables turn upside down during a bear phase. The fund raising capacity of any player dies down and the larger players have to cut cost to sustain themselves. The cost cutting exercise begins with Marketing costs followed by Employees and rentals. Smaller players operate more or less similarly irrespective of the market condition. They now have an edge to outdo the competition.
We, hindglobal.in, have seen tremendous growth in sales after the bear phase. A partly because the larger players are raising product prices to cover their overheads, hence making other smaller sites more competitive. The marketing budget of large players die down and hence customers get evenly distributed.
Your comments would be welcomed. You can write to me at vivek@hindglobal.in
Regards
Vivek Jain
http://www.hindglobal.in
Bringing a sea change in online retail
I completely agree with your point. Smaller players always have a distinct edge especially in the lean financial period. Prices remain competitive, budgeting remains almost the same even though market conditions may have become tougher. Therefore, consumers will definitely purchase and leverage services of the smaller retailers compared to the bigger players.
It’s great to know your company has experienced a surge in sales in such times. We hope many more companies are able to capitalize on this opportunity!
Can you provide more information on this?
We have provided some basic pointers in this article. You can check online for more in-depth information about the subject. Thanks.
the last quarter of 2009 seems promising as we have seen lots of signs of econic recovery against the massive economic recession. i hope that in 2010 all our economies would be back on track. recession really sucks.
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