Direct-to-Customer Commerce

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Strategic insights into the direct commerce industry, including ecommerce, direct marketing and related fields

Direct Commerce sales double since Aug 2003

Direct Commerce retail sales, reported by the US Dept of Commerce as “Electronic & Mail-Order Sales,” have doubled since Aug 2003.

The chart shows total retail sales on the blue line against the left axis.  Direct Commerce sales are the green bars against the right axis.

During this same period, Aug 2003 to Aug 2010, Total Retail Sales have risen only 18.2%.

Perhaps even more significantly, Direct Commerce Sales as a percent of Total Retail Sales has risen to 6.16%, its highest ratio, ever.

Good news, but we also need to be careful not to read too much into this.  Direct Commerce has always succeeded in large part due to its convenience, and in a major recession, those with larger incomes are more concerned with convenience and more able to continue spending.

So, this could be most the effect of the current economic conditions.

Filed under: News, Opinion, , , ,

Why have direct commerce sales held up better than overall retail sales?

First, I suppose I should document the inference in my question that direct commerce sales have held up better.  Based upon Retail Sales data from economy.com, the following facts are in evidence:

  • Current retail sales (actually, Aug 2009) are just a little below what they were in Oct 2008.  But they are also about the same as they were in Dec 2005 / Jan 2006.  Overall, a drop of 7.5 percent from their peak in Nov 2007.
  • In contrast, current direct commerce sales (Jul 2009), which also peaked in Nov 2007, are down only 2.25% from their peak.

Why?

I suggest there are two reasons:

First, the decline in retail sales driven by the general downturn in the economy has resulted is even less staff at retail stores, resulting in even poorer customer service, resulting in more customers being driven away from stores.

Second, direct commerce has always been driven more by convenience than by price.  And affluent consumers are more interested in convenience than price.  So, affluent consumers, who are less affected by the economic downturn, have sustained sales at direct commerce businesses to a greater extent than retail stores.

The Implications

My concern about this is the longer term effects, when retail managers recognize that their retail store sales will recover regardless of the poor quality of their customer relationships.  If they can get by with fewer staff now, can they get by with fewer staff later?  Maybe, maybe not.  But I bet they’re going to try.

This is just one reason why joblessness recovers more slowly than the economy.

This also explains the continuing pressure on businesses of all types to move to the internet for their core business functions — it allows them to accomplish as much if not more with the same or fewer employees.

Filed under: Uncategorized, , , , ,

Prime Time Direct Response Ads

Here’s one of the headlines in today’s Washington Post Newspaper:

New Prime-Time Ads Act Now

The article relates the plight of local TV stations where their rates for prime time advertising have dropped, in some cases as much as 75%, and there are still a lot of availability.

As the article points out, this is translating into a dramatic increase in direct response television advertising, because the spots are available and cheap.  So, DRTV merchants can afford the spots and can make money with them.

We need to watch to see if how long this trend lasts.  Certainly, it should last until the economy recovers enough for traditional advertisers to reclaim their budgets.  But it could also have the same type of impact that the internet had on print advertising.

The internet taught mainline advertisers that there was a way to measure their print advertising directly, rather than just thru “gross rating points” or “gross impressions.”  This may do the same for television  advertising — we’ll have to wait and see.

In the meantime, we may see a boom in DRTV advertising while the economy remains in the doldrums.

What fascinating times we live in!!

Filed under: Direct Commerce, News, , , ,

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