Benchmark 2006 on E-commerce

May 01, 2006 9:30 PM  By

We’ve all heard that it takes money to make money. That could be why respondents to this year’s Benchmark Survey on E-commerce are spending a mean 27% more on maintaining their Website than had last year’s respondents: $185,302 vs. $145,394.

Another significant finding: More than half (54%) of this year’s survey participants said that their Website maintenance costs had increased during the past year; a mere 2% said they were spending less than they had last year. But when asked about their Website expenditures as a percentage of their company’s total budget, 54% said that the percentage had held steady. Another 44%, however, said that Website costs now accounted for a greater percentage of their total budget.

The increase in site maintenance costs does seem to be paying off with an increase in online sales. Eighty-two percent of respondents reported that their online sales volume had increased during the past 12 months; only 1% said that Web sales had declined. The mean increase in year-over-year online revenue was 33.9%. The plurality of respondents — 29% — posted an increase of 11%-25% in Web sales.

Web sales as a percentage of total direct revenue increased as well. Among this year’s respondents an estimated mean 43.4% of their direct sales came from the Web. That’s up 33% from a mean 32.5% of total direct sales among last year’s respondents.

The smaller merchants, incidentally, saw the greatest increase in Web sales as a percentage of overall direct revenue. Among survey participants with annual revenue of less than $10 million, the Web accounted for a mean 53.4% of direct sales, up 46% from 36.5% among last year’s respondents. This year’s respondents with annual sales of $10 million-$49.9 million earned a mean 38.7% of their direct sales via the Web, up 44% from a mean 26.8% of last year’s respondents. In contrast, respondents with annual revenue of at least $50 million took a mean 33.5% of their direct sales from the Web, an increase of only 7% from the mean 31.4% reported among last year’s largest participants.

What Website functions and features have multichannel merchants invested in? At this point, secure-socket connections for credit-card purchases are all but universal. Ninety-four percent of respondents (including all the largest merchants and 96% of the midsize respondents) offer secure-socket ordering. E-mail confirmation of orders is also the rule rather than the exception, with 86% of respondents doing so. Other common site features include automatic calculation of shipping and handling and sales tax (69%) and online order tracking (67%).

The use of real-time customer service, such as live chat, apparently swelled during the past year. Whereas just 9% of last year’s respondents offered it, 24% of this year’s do. Similarly, 48% of this year’s respondents offer real-time stock availability, compared with 29% of last year’s.

And a greater percentage of this year’s respondents have their e-commerce order database directly linked to their catalog fulfillment system: 58%, compared with 49% of those surveyed last year. There’s a big difference between the smallest merchants and their larger peers when it comes to adoption of this sort of integration, however. Only 29% of those with sales of less than $10 million have their e-commerce order database linked to their catalog fulfillment system, compared with 71% of the midsize merchants and 69% of the largest.

Use of site or session analysis hasn’t increased, however. In fact, only 52% of this year’s respondents said they use it, compared with 55% of last year’s.

That could explain why 68% of this year’s respondents didn’t know their approximate conversion rate of visitors to buyers. Among those who did, 68% gave a conversion rate of 1%-5%.

There hasn’t been much change in how multichannel merchants are promoting their Web catalogs. E-mail remains the most popular method, used by 73% of this year’s respondents (compared with 70% of last year’s). Search engines were the second most commonly used vehicle, used by 63% of respondents (vs. 60% last year). The only promotional methods to see a significant change in use among respondents were print advertising (used by 53% of this year’s respondents and 46% of last year’s) and banner ads on other Websites (30% this year vs. 19% last year).


On Feb. 7, Prism Business Media e-mailed 6,103 subscribers of Multichannel Merchant, selected on an nth-name basis, an invitation to an online survey. The e-mail contained an embedded URL linking the recipients to the Website where the survey was located. Respondents were offered the opportunity to be entered into a drawing for one of four $50 gift certificates. Follow-up e-mails were sent to nonrespondents on Feb. 8 and Feb. 14. By March 2, Prism Business Media had received 185 completed surveys; 919 of the outbound e-mails were undeliverable; 12 surveys were incomplete. The effective response rate was 3.6%.