E-Commerce Update 6/17/07

Posted by joy


Two stories from the E-commerce world that I thought were interesting.

The first story from today’s NY Times alarmingly discusses the fact that E-commerce growth has slowed greatly in the past year. E-commerce as a whole will only be about 5% of total retail sales and is expected to grow to about 7%. This trend does not surprise me at all.

In the past, E-commerce grew because we had all of these players entering the field, trying out some new paradigm changing business model and watching what would stick. We saw clever business models, such as Amazon and not so clever ones.

But what goes hand in hand with a business model and what I think many online retailers initially ignored is that E-commerce works when there is a need that can’t be fulfilled or is hard to fulfill in a local store. Think about it, to shop online, you need to log on, then research a couple of stores, then choose your items and put them in the shopping cart and then reach for your credit card and checkout. Oh, and lets not forget the tracking and waiting for the shipment. Tasks that are time consuming.

In addition, E-commerce sites have to fight the perception that they are more expensive that traditional retailers because of shipping prices. As I’ve noted before, the most effective E-commerce promotion is Free Shipping.

Because of the perceptions of time and expense, E-commerce is indeed a different animal than a traditional retail store. In the E-commerce B2C sector where I worked, our best sellers time and time again, were the hard to find items that weren’t usually stocked anywhere else. And let’s not forget the sales we had from some sweet, sweet Search Engine Optimization. (Indeed, just because we were first in the search engine result pages for certain keywords, we got sales.) In addition, we always saw spikes around the gift-giving holidays for third party ship to orders.

The other interesting trend for the larger retailers is the local store pick up option, which definitely makes sense if you’re comparison shopping for a specific item and need it immediately.

Getting a little bit more technical, I was intrigued by this article in EWeek chronicling the dilemma that E-commerce sites have when testing credit card systems. The article states that many sites use old customer data to test merchant systems, which is scary.

You see the conundrum is that the merchant payment gateways don’t provide test data for retailers and if you’re testing real time card processing systems - online as well as offline, you want to see where the data goes (in this case where the money goes) before taking your systems live.

There are dummy credit card numbers you can use to test your systems, so you can see the numbers go through the gateway system but these are invalid numbers which won’t test bank processing.


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