Despite rosy national forecasts that robust orders will fill online retailers’ stockings with cash, the Christmas selling season has been mixed at Southwest Washington Web-based merchants.
Forrester Research Inc. expects online sales will reach $52 billion nationwide by the end of this year, a 16 percent increase over 2009.
Craig Bowen, co-founder and CEO of Vancouver-based GiftTree.com, said the holiday season is netting his company sales growth “at least double” that national forecast.
But business is slower at Woodland-based The Pearl Outlet Inc., which sells pearl jewelry such as necklaces. Co-owner Terry Shepherd said his holiday sales are down 18 percent from last year. He attributes the drop in sales to high unemployment that has left fewer dollars in the pockets of consumers.
As the experiences of these two online retailers show, a lot depends on what you’re selling and whether enough people are shrugging off the economic doldrums to fire up their laptops and click “add to cart.” What’s more, even the low-overhead world of online retailers is seeing the cost of doing business increase in certain cases.
At GiftTree.com, Bowen attributes a strong selling season to his company’s niche selling high-quality, high-end products to people who are willing to open their wallets.
The company, which has 60 full-time employees, staffed up to 150 to prepare for the holidays.
“Luxury items are doing very well this year,” Bowen said. “We are a luxury retailer. That’s our position. That’s what we try to do in the market.”
Indeed, consumers with high incomes were expected to spend this holiday season, according to Forrester Research’s report “U.S. Online Holiday Retail Forecast, 2010.” About 87 percent of U.S. online buyers with a household income of $100,000 or more said they planned to spend the same or more online this year than last year, according to the report. Just 13 percent said they planned to spend less.
“Consumers are showing a willingness to spend this season,” Sucharita Mulpuru, a principal analyst with Forrester, said in a news release.
But the recession hasn’t gone away for some consumers.
With “a lot of people out of work, there are fewer buyers in the market.” said Shepherd, whose Pearl Outlet specializes in selling pearl jewelry at discount prices.
And some of the buyers who are still in the market are choosing to purchase something a “little more practical” as a Christmas gift, Shepherd said, rather than purchasing a pearl necklace.
That’s not to say The Pearl Outlet hasn’t reached out to a variety of customers. The average consumer spends $300 to $400 with the company, Shepherd said, and the company creates products ranging in price from $15 to $20,000 for a single piece. “We try to cover the whole gamut,” he said.
Shepherd said his company has responded to the downturn in sales by limiting inventory and setting up just-in-time supply chains with its overseas distributors.
“Thank God for FedEx,” Shepherd said. If orders were stronger, the company could experiment more in the marketing and advertising of its products, he said. Nowadays, The Pearl Outlet focuses strictly on what it knows will sell well.
While he worries about the long-term health of the economy, Shepherd said his company, with about eight full-time employees, has already taken steps to deal with weak consumer demand and is ready for 2011.
“There’s still a consumer base out there,” Shepherd said. “Right now, it’s still possible to do business, to make a profit, to run just a little leaner.”
Though revenue is up, Bowen said GiftTree.com has also seen one trend pinching profits: “We found our marketing costs are up significantly.”
While he declined to share cost and revenue figures, Bowen said he’s rethinking how much to spend on online advertising, where big competitors are bidding up prices. He questions whether the company is getting a good return on its investment in online ads. The company could use the money it spends on online ads to hire extra sales staff for a couple months, Bowen said, or place ads in catalogs for less money.
Oddly enough for an online company, Bowen said, print advertising is “becoming more attractive to us.”
