Practical Ecommerce

Survey: Ecommerce Merchants Report Extremes in Sales Growth

Online shopkeepers willing to indicate how their sales were doing in 2009 generally reported extremes, with sales either rising or falling by more than 10 percent, according to a new Practical eCommerce survey.

Practical eCommerce asked a group of its readers how their 2009 sales had fared compared to the first quarter of 2008. By April 7, 2009, 34.6 percent of those responding had seen a 10 percent or greater increase in sales for the first three months of 2009 compared to the same 2008 quarter. Some individuals indicated sales growth of 30 percent or more. Unfortunately, another 28.8 percent of respondents said that their sales had fallen 10 percent or more in the first three month of 2009 compared to the same 2008 period. One merchant said sales were off by more than 50 percent.

The Trend Could be Related to Business Size

The extremes in ecommerce sales growth and decline could simply be a function of the fact that most Practical eCommerce readers represent small-to medium-sized ecommerce businesses, which may be more volatile than larger concerns. As evidence of this, a survey conducted in November 2008 by Practical eCommerce discovered that 47.7 percent of its readers were relatively small businesses with sales of less than $100,000 annually; 23 percent had annual sales of $100,000 to $500,000; and another 18.7 percent had yearly sales between $500,000 and $5 million.

Smaller ecommerce businesses can be more volatile because of tighter cash flows, smaller marketing budgets, and just because of the size of their total revenues.

“Due to the economic situation, I’ve put off purchasing replacement inventory and new inventory. I also put off attending the NYC Toy Fair which is ‘the’ show to attend in my industry,” said one retailer whose sales had fallen 52 percent compared to the first quarter of 2008.

When sales drop for smaller retailers there is rarely a large reserve of capital. Cash flow constricts and even vital business functions like purchasing inventory get postponed. When a product is out of stock, it cannot be sold, and sales fall. Tight budgets can also mean that smaller merchants are likely to stop advertising before their larger cousins, again leading to a dramatic decline in total sales.

The Trend Could Be Tied to Brick-and-Mortar Sales

A second potential reason for the dual trends could be related to brick-and-mortar sales. Nearly one fifth of Practical eCommerce readers operate both a physical retail outlet and an online store. Sales at so-called brick-and-mortar stores are generally believed to be trailing ecommerce sales, meaning that some of the survey’s respondents might be weighed down with lackluster location sales and fixed, brick-and-mortar overhead.

“Brick-and-mortar sales are stagnant,” said one respondent. “The [economic] ‘atmosphere’ has kept customers away from in-store shopping,” said another survey respondent.” Those who do shop make purchases and then have them shipped to their residence to keep their purchases on the ‘down-low’ from the public eye.”

The Trend Could Be Industry Related

The seemingly extreme differences in how well an ecommerce business was doing in 2009 might also have been the result of which industry a merchant was serving. As an example, of those businesses that had experienced a 10 percent or more growth in sales in the first quarter of 2009, 22 percent were in the home, furniture, or garden segment.

As one retailer pointed out, more customers might be looking for do-it-yourself supplies, and they are finding them cheaper online.

No Clear Resolution

Unfortunately, the survey tended to raise more questions than it answered. But it was clear that in spite of almost constant concerns about the economy several merchants are experiencing sales growth.

Armando Roggio

Armando Roggio

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