What do retailers need to think about to make sure that their online trading goes off without a hitch this Christmas, asks Joanna Perry

It’s a swelteringly hot 30 degrees in London as this article is being written. But anyone who thinks it is too early to be contemplating their trading online this Christmas will suffer for their short-sightedness.

Within the next day or two search engines will already be recording an upturn in shoppers researching their Christmas purchases and by the end of September many major retailers will see their websites locked down for peak trading.

Predictions for growth in spending on the internet this Christmas are restrained, but it’s certain that retailers will see many more site visitors and also more transactions than they have in previous years.

Shopping.com UK country manager David Mackenzie doesn’t think that this Christmas will break all records online, as prices are falling compared with last year even if visitor numbers are up.

This is backed by internet analysts, including Nielsen Online communications director Alex Burmaster, who says: “In terms of visitors we are expecting it to be the biggest Christmas yet, but it is difficult to say on volume and value.”

However, as the internet audience figure is still rising and people are keen to save money, Burmaster predicts that there will be much more research. Mackenzie says: “We certainly see peaks on Mondays. I don’t think we’ll see anything different this year, but the other days will lift if people do more research.” Retailers need to ready their web infrastructure to cope with these peaks.

Hitwise UK research director Robin Goad says it is feasible that this could be the year that sales growth stalls. He says: “It was about 10% last year depending on who you speak to, but I think there will be less than 10% year-on-year growth this year.”

Brand Alley chief executive Rob Feldmann is more bullish. He thinks that online retail will take an increasing share of Christmas shopping spend and with more consumers using broadband sales will be well up on last year.

Meeting demand

Feldmann is used to peaks in demand on his site with its private sale business model. His focus in the run-up to Christmas is getting the products it sells right to attract gift shoppers, which he expects to lead to an uptick in sales from existing Brand Alley members as well as leading to new customers turning into repeat purchasers.

Google retail industry leader Peter Fitzgerald agrees, saying: “There is going to be a lift year on year. I’m very confident in that. The average order value has trended downwards for a long time, but sometimes this just means consumers are purchasing more often.”

Increasing consumer expectations will benefit retailers with the slickest online operations, rather than sending shoppers back to the high street, according to Fitzgerald. He explains: “If there is a shift it will go to those that do it well. In every product category there are a number of choices.”

What they all agree is that consumers will leave it later to make their purchases and will expect online retailers to fulfil those orders.

Goad continues: “Historically the online peak has been the last week of November and the first week of December, but it could push further into December this year.”

Home Delivery Network (HDNL) operations director Paul Mohan outlines the forecasts the fulfilment business is working to. He says: “Last year we found that Christmas came sharper and later. In the last four weeks of 2008 we delivered about 500,000 more parcels than in the previous year. The busiest week was a week later and the busiest day was four days later than the year before.”

This year, HDNL expects its peak to be week 43, a week later than last year.Mohan adds: “In the last 10 weeks prior to Christmas we delivered more than 22 million parcels, and we expect to deliver between 10% and 15% more in the same period this year.”

The expectation is that more retailers will begin their January clearance Sales on Christmas Day. “Because of the VAT change a lot of consumers will bring forward purchases,” Feldmann says.

Burmaster says that the number of people who shopped online on Christmas day last year marked something of a watershed in terms of retailers trading on what traditionally has not been a shopping day.

Watch and learn

There is also agreement that retailers need to closely monitor their online operation on a daily basis and make changes quickly. Fitzgerald says that the best online retailers do forecasting on a daily basis in the six weeks up to Christmas to prevent out-of-stocks.

Mohan points out that it is critical to share as much information with delivery partners to enable planning to meet capacity and service requirements. Mohan says: “We need the volumes forecast and we need them regularly. We were getting three-day, five-day and two-week forecasts from retailers last year. The most important lesson learned from last year is that a partnership approach is needed to deliver a better service.”

And Burmaster adds that an ongoing approach is also required for online marketing decisions. “Savvy retailers will adapt their SEO and pay-per-click strategies over the Christmas period because it is a very dynamic – if not on a daily then a weekly basis,” he says.

Product ratings and reviews are now common on retailers’ sites, but comparison sites such as Shopping.com also offer merchant reviews. So retailers must also quickly respond to negative comments if they want to pick up first time customers online.

Despite the improvements retailers are making, it is certain that some will fail to deliver on the demand from consumers – whether it means their sites fall over, or they cannot cope with the pressure on order fulfilment and customer service.

Sales growth may well be less spectacular than in previous years, but there are many factors that mean the peak trading season will still be a minefield for online retailers that are unprepared.

Need to know Christmas online

  • Christmas day falls on a Friday – an opportunity for retailers to offer delivery and in-store collection up to the last minute, competing with the high street
  • Plan for a Monday morning transactions surge following a weekend of online research from home. 35% of online UK retail spending is from work locations, though only 25% of total webactivity happens there, according to research company comScore
  • Retailers are more likely to begin their Christmas Sales on December 25 after the high level of transactions seen that day last year and the scheduled 2.5 percentage point VAT chang
  • Online research for Christmas shopping began in August last year and really ramped up through September, according to Google
  • 73% of consumers say they are more likely to shop online if a retailer has its full product range on the site, according to the GSI Commerce Etail Report 2009
  • Also according to the GSI report, 94% of consumers cited free delivery and 45% of consumers said a specified delivery time would influence a purchase decision between two sites sellingthe same product at the same price
  • If you even suspect you might hold one-day Sales online, tell everyone who supports your business now, not a week before the Sale goes live
  • Streamline the registration and checkout process as much as possible to make it easy and attractive for new customers to buy from you
  • Consider the level of sales on UK retail sites that are going overseas, and forecast a peak for this too based on your overseas delivery cut-off
  • As well as increasing warehouse and call centre manpower, think about in-store resources to deal with click-and-collect and reserve-and-collect, as well as unwanted web orders being returned to stores
  • Break the peak trading period down into chunks, and modify your paid and natural search engine marketing activity accordingly. For instance, Google says that the top 10 retail searches for the week after Christmas last year all contained the word “sale” as well as retail or brand names
  • Supply comparison shopping sites with as much info as possible to make your offer stand out. Mackenzie says Shopping.com is adding more attributes that can be searched on such as sale price and delivery times as well as more detailed product information


Year-on-year growth in parcels HDNL expects to deliver in the 10 weeks to Christmas 2009

Week 43

Peak Christmas trading week is expected a week later than last year