Online Retail Spend and Sales Forecast for 2009 (Framing the Conversation: Part 1 of 2)

Posted by Michael Conway, Program Manager (Paid Search)

2009 being the year of the ox in the Chinese animalistic calendar seems somehow appropriate.   People will be grinding the year trying to keep their job, pay their mortgage and/or save money in order to make up the gap in their net worth left by the aftermath of the stock market crash and housing price dump.  This presents a challenge if you’re not a retailer named Wal-Mart or Dollar Store.  Nonetheless, all is not lost: with gas prices recently around a five year low, money being pumped into banks and a big stimulus package being written, some economists are optimistically predicting the US to limp out of recession in the middle of 2009.  So what does this mean for e-commerce?

It means investment should be increased in performance based advertising initiatives like paid search.  eMarketer is still forecasting a 4.1% increase in overall e-commerce retail sales, even though retail overall may not grow at all in 2009.  There will be considerable pressure to justify advertising budgets, thus forcing retailers to divert less measurable advertising dollars to concrete ROI driven programs.   

Recommendation: increase your paid search budget and lower the ROI goal.  Online shoppers will continue to increase as adoption from retail stores and Internet access increase albeit at a slower rate.  So there is opportunity out there to increase market share efficiently.  Nevertheless, each transaction will likely be smaller and shoppers will spend more time searching before they convert.   Therefore, the return will be smaller and the investment greater. 

In this environment, those in charge of signing off on budgets will feel better about investing in something that gives a measurable ROI and an opportunity to grow.

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