I-merchants Focusing More on Customer Retention, Tightening Belts

The economy is forcing online retailers to change their marketing tactics in order to acquire and retain customers, according to findings from The State of Retailing Online 2009, the 12th annual Shop.org study conducted by Forrester Research.

The survey of 117 online retailers shows that the number of companies focusing on customer retention has nearly doubled in the past year, many retailers see the recession as an opportunity to capture market share from weakened competition.

According to the survey, half of respondents (54%) expect overall retail growth to slow during the next 12 months and 57% acknowledge the economic slowdown is hurting their company’s bottom line.

As a result, the i-merchants polled said they are bullish about Web operations: four out of five retailers think the Web is better suited than other channels to withstand the recession, and one-third say the downturn has enabled them to capture greater market share.

Nearly one-third of companies (30%) are spending less than originally planned on Web retail operations this year. Among retailers cutting costs, 88% will scale back hiring and staffing plans and 56% will spend less on search.

Others see the economy as an opportunity to increase market share and are charging ahead with new initiatives. Almost half of retailers surveyed (46%) have no plans to cut back original budgets and will spend as planned on their Web business, while 24% will spend more on their online business than originally planned.

Companies planning to spend more will increase investments in several areas, including search (80% of respondents), e-mail (65%), and social marketing (60%).

Despite the focus on customer retention, many retailers — primarily multichannel retailers — say their efforts at customer acquisition will be higher this year than last year. But for those retailers that operate primarily online, customer retention (which has historically been a distant second goal for this group) is now critical.

According to the survey, a majority of retailers (88%) list e-mail as a high priority for the year, largely to retain customers. Nearly three-fourths of retailers (71%) plan to send segmented e-mails to customers based on stated preferences or purchase data. In addition, 55% will use e-mails that highlight new product availability, 55% will extend invitations to participate in surveys or garner customer feedback, and 53% will feature online-only promotions.

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