Off on Holiday?

Not likely. Seasonal sales will be stronger than ever. Is your site ready for the rush?
This story appears in the December 2002 issue of Entrepreneur. Subscribe »

Despite a relatively gloomy business year, netpreneurs should brace themselves for another strong online holiday season. Year-to-year sales growth will probably come in below the 25 percent year-to-year increase logged last year, but still on the upside. "The rate of growth continues to decline," says Ken Cassar, senior analyst at Jupiter Media Metrix in New York City. "But online sales continue to grow."

With less of a holiday rush to deal with and armed with the lessons learned from rushes past, most e-tailers are expected to be more or less prepared for the influx of holiday shoppers. That should translate into a smooth shopping season this year.

One business that's worked hard to be prepared is Smeetch.com, an Anaheim, California, company that sells DVDs, videocassettes, video games, books and audiobooks solely on the Internet. Smeetch.com, which has four employees, made $1.4 million in sales last year.

According to 33-year-old founder Sean Lundgren, "The holiday season is huge for us. It accounts for more than one-third of sales each year, and this year we are expecting an increase of almost 10 percent in sales, which is what we saw last year."

For Lundgren, gearing up has meant working closely with his distribution partners to make sure they're ready to handle an influx of orders. He's also beefed up his customer service staff to accommodate the expected flood of questions from customers and visitors. "We're geared up for customer service in a big way," he says. "This year, we will always have someone on the other end of a phone to answer questions as quickly as possible." Last year, one rep and three temps handled it all. Not this year-he's already arranged for two or three in-house customer service reps and four temps to work the phones.

Unfortunately, though, more customers usually means more fraud. To protect its business this year, Smeetch.com has made online fraud prevention a top priority. "We have seen online fraud incidences triple at our company since we started in 1999," Lundgren says. However, he would not reveal exactly what he's doing for fear that fraudulent consumers would find ways to subvert his efforts. For some tips on what you can do to protect your site this holiday season, log on to www.scambusters.com or www.fraud.org.

Holiday Marketing Smarts

Smart e-tailers are also investing in marketing this season, but they're making an effort to spend their dollars more efficiently by going after those valuable customers that buy from them regularly. "Opt-in, targeted e-mail has become an essential holiday promotional tool, one that is being used with more sophistication by online retailers," says Lisa Ann Strand, director and chief analyst of e-commerce at audience measurement firm NetRatings in Milpitas, California.

When putting together your program, think value-based promotions. Lower consumer confidence, combined with disproportionately strong growth in the number of lower-income households shopping online, means consumers will seek value on the Internet this season.

"The early days of e-commerce were more about convenience, but the tides are turning to people coming online to get more value for their dollar and stretch their dollars as much as possible," says Strand. "As a result, promotions, large-order incentives and other merchandising tactics used in the offline world are translating effectively to the online world this season."

According to Strand, this trend began last year after shoppers noticed signs of a recession. It means that discounted merchandise and products may prove to be a more attractive lure than free shipping offers. "While online shoppers are indeed price-sensitive, product price is a stronger driver of purchase than shipping costs," she says.

Following the trends in sales spikes during the month of December will help netpreneurs know when it's best to promote sales. For instance, past trends indicate sites offering goods prone to inventory shortfalls--such as toys and consumer electronics-show a concentration of traffic in early December. Those that pride themselves on quick and hassle-free shipping, however--such as sites that sell books, music and videos--draw larger audiences at the end of the month. So toy retailers, for example, should hold off on e-mail marketing until near the end of the month. Says Strand, "Organizing promotions this way is particularly important for small businesses, because it will help them manage their inventories."

And of course, last-minute discount promotions could help you unload as much merchandise as possible this year. Says Strand, "The 2001 holiday season was rife with last-minute deals for all those panicked procrastinators, and they worked well for e-tailers."

Melissa Campanelli is a marketing and technology writer in Brooklyn, New York.

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