'Tis the Season
It's not December quite yet, but now's the time to start getting ready for the holiday shopping season. And it's going to be a busy one: Last year, online holiday shoppers spent a record $18.5 billion during the 2003 holiday season, a 35 percent increase from $13.7 billion in 2002, according to the "eSpending Report" released in January 2004 from investment banker Goldman, Sachs & Co.; market research and consulting firm Harris Interactive; and Web traffic analysis firm Nielsen//NetRatings. And online retail sales in general are expected to grow 27 percent this year to $144 billion, according to "The State of Retailing Online 7.0," an annual study of 150 retailers by online retailers association Shop.org and tech research firm Forrester Research. The study, released in May 2004, says online sales should reach 6.6 percent of total retail sales in 2004, an increase from 5.4 percent in 2003.
"Online retail is growing at record rates, and I predict this [holiday season] will be a record," says Donna L. Hoffman, professor and co-director of the Sloan Center for Internet Retailing at Vanderbilt University in Nashville, Tennessee. "All the numbers are showing very clearly that online just continues to grow."
Each year, sophisticated consumers expect more from their online shopping experience-and this year will be no exception. That's why it's so important that e-tailers make sure their Web sites are up to the task. "The Web site has to offer a premier customer experience," says Hoffman. All elements of the sale must work properly, from navigation to the shopping-cart function to customer service. "[Your site must] be able to withstand a very sophisticated group of consumers that will be online in droves this holiday season. There's so much competition out there that you only get one chance."
That means you'd better not neglect the back end. Fulfillment and inventory management operations should be running as smoothly as possible during the holiday rush. Get up-to-date on the latest online fraud scams now, and make sure secure systems are in place. Experiment with digital marketing strategies, such as search engine marketing, e-mail marketing, viral marketing and online merchandising strategies. And do it before the holiday rush, or the costs of failure will be higher.
One business gearing up for a busy holiday season is Home Office Solutions Group in Glenview, Illinois, which sells ergonomic seating and products for the home and office through retail stores and its Web sites, including www.homeofficesolutions.com, www.officedesigns.com and www.ultimatebackstore.com. Last year, the company had sales of $17 million, with 95 percent of sales online. This year, the company expects sales to reach $22 million.
December is the company's busiest month, and in 2003, its Web site had 88 percent more sales over the prior holiday season. A similar increase is expected this year, so to keep up with demand, the company will be moving to a new warehouse, 25,000 square feet in size, that can accommodate more inventory than its current 10,000-square-foot warehouse. The new facility will help the company operate in a streamlined, organized fashion. "We don't expect to be able to handle the Christmas season with the warehouse we're currently in," says Marc Levin, founder and CEO of Home Office Solutions.
The business will also be hiring more help this season-last year's was so busy that Home Office Solutions' five vice presidents had to work the night shift, picking and packing products to get them out as soon as possible to meet the company's 48-hour delivery guarantee. Also in the works: expanding its product line, increasing its marketing programs, and upgrading its sales and fulfillment software.
Says Levin, 46, "We want to have the software up and running with the bugs worked out by November 1."
No matter how much preparing you do, however, things sometimes go wrong during the hectic holiday season. Last year, for example, one of Levin's main suppliers decided to do a technology upgrade in December, which ended up causing some technical problems. As a result, the supplier's products didn't actually arrive at Home Office Solutions until January-even though about 25 customers were expecting to get them in their homes by Christmas.
To assuage the problem, Home Office Solutions' vice president of marketing contacted each one of the customers with a personal apology. Then, as soon as the shipment came in, the company sent the product to them, along with a Blockbuster gift card and a clever note indicating that the customer should "have a movie on us." While customers were pleased, this kind of problem can be avoided by communicating with your suppliers. "Find out if they're doing any technology upgrades during your busy season," Levin says. "Or, if they are going to do it, to advise you about it. We weren't advised of it."
Levin says had his company known about this, "we would have been more diligent in making sure that the orders were processed." The business would have increased its inventory levels earlier, rather than trying to get product from the supplier in December to ship in December. Additional tips from Levin include: contacting your shipping companies to ensure you know when they'll arrive to pick up product, making sure you have enough packaging equipment and supplies, and always having 25 percent more inventory on hand than what you think you're going to sell-as long as you can afford it, and assuming the merchandise will sell after the holidays. Last year, for instance, Home Office Solutions put extra merchandise in a warehouse off-site in November. "We weren't going to be caught short of products," says Levin. As you can see, the holiday season requires a lot of preparation and planning. Are you up to the challenge?
Melissa Campanelli is a marketing and technology writer in New York City.