Report: E-Commerce Investments Increasing

Jul 30, 2008 10:51 PM  By

Consumers may be reluctant to spend these days, but merchants are beefing up their investments in e-commerce, according to a white paper released last week by The E-Tailing Group. And that came as a surprise for the Chicago-based e-commerce consultancy’s president, Lauren Freedman, who authored the white paper, “No Retreat! Investing in E-Commerce, Despite the Times,” sponsored by by Chicago-based IT consulting firm Acquity Group.

Freedman, who conducted the interviews for the white paper in March, thought some people would say they would consider cutting back. “But I was surprised at how few made cutbacks in e-commerce investments,” she says.

On a scale of 1 to10, Freedman reports that merchants on average scored a “very strong seven” when asked about how aggressive they will be with their e-commerce investments in 2008.

For instance, Borders, which launched its own e-commerce site this year after ending its partnership with Amazon, not surprisingly scored a 10. Ebags indicated its efforts would be a nine or 10, noting that it would not have made such an effort two years ago. And Crutchfield, which considers e-commerce to be a long-term investment, answered nine.

The big reason for aggressive investments is the growing strength of the channel. With Forrester Research predicting of a 17% increase in e-commerce spending in 2008, and gas prices passing the $4 gallon mark, Freedman says e-commerce will be an even bigger priority for retailers.

“This is where retailers are actually seeing growth, and there is pressure to go where the growth channel is,” she notes. “The reality is that the growth opportunities are online, and catalogers have to understand this.”

Also fueling the trend to spend: The legacy systems e-tailers put in place 10 years ago helped them sell product, but they can’t handle the interactive online experiences that today’s Web consumers demand.

As Stephen Carvelli, director of e-commerce for Chico’s, told Freedman, the channel is a conduit for the women’s apparel merchant to communicate with its customers about its brands. Which means that online retailing has evolved past e-commerce and has become an online community for merchants.

“The consumer has pushed the envelope,” Freedman says. “The consumer wants to do more online, and the merchant has to follow suit–much more so than they have in the past.