California Apparel News

E-tail may be facing some growing pains this holiday season.

E-commerce has enjoyed steady growth during recent holiday seasons, with online sales increasing every year. However, this year’s economic downturn and nervous consumers have many e-tail Web sites turning to sales and promotions—as well as customer loyalty—to move merchandise.

Most e-tailers are taking a wait-and-see approach as to how this holiday season will pan out. But a recent survey conducted by the National Retail Federation’s Shop.org with price-comparison Web site Shopzilla (www.shopzilla.com) gave some insight into e-tail site owners’ expectations for the holiday season. In the annual “eHoliday Study,” released Nov. 5, Shop.org and Shopzilla found that many e-tailers expect to see an increase in holiday sales—a little more than 56 percent of online retailers said they expect sales to increase at least 15 percent over last year—but sales projections are lower than in previous years. In 2007, more than three-fourths of retailers surveyed expected their sales to grow more than 15 percent.

While expectations remain relatively optimistic, the current anemic economy has not spared e-tail, with retail sales at their lowest in years. In October, e-commerce retail sales grew 1 percent over the same period last year, according to Reston, Va.–based Internet market researcher comScore Inc. It is the lowest monthly growth since comScore began tracking e-commerce in 2001.

“Online retailers are resilient, but not immune, to the challenges of this holiday season,” said Scott Silverman, executive director of Shop.org. “Retailers will be heavily promotional to attract shoppers on a budget but have also invested in new site features to improve the online buying experience.”

Deep discounts

Online consumers enjoy the benefit of coupon codes year-round, but some e-tailers plan to be especially liberal with promotions during the holiday season. Early sales and promotions can be found on several e-tail sites well before the traditional holiday season kickoff of post-Thanksgiving “Black Friday” for bricks-and-mortar stores and the Web’s “Cyber Monday”—named for the day that shoppers look online for items they could not find during the weekend sales at department stores and shopping malls.

More than one-third of online merchants expect to allocate between 11 percent and 20 percent of their year’s promotional budget to the holiday season, and 45 percent of merchants are spending more on free- shipping promotions this year than last, according to Helen Malani, online-shopping expert for Shopzilla.

“We have definitely started promotions earlier than usual this season,” said Carol McCracken, co-owner of Costa Mesa, Calif.–based fashion site Pink Mascara (www.pinkmascara.com). “Nobody knew the economy would be in the state it is six months ago, so everybody is being extremely aggressive in moving merchandise.” Pink Mascara kicked off a 48-hour sale onNov. 17 at 6 a.m. with 40 percent off on all merchandise, excluding a few brands, using a special code. The site is also offering free shipping on orders of $150 or more.

According to Shopzilla’s Malani, more than 70 percent of online retailers will still offer free shipping at some point during the holiday season, which is consistent with last year’s levels, but more than 20 percent of those retailers will require a higher purchase amount for the free shipping. Retailers are compensating for increased shipping costs by renegotiating terms with shipping providers, closely managing company headcount and reducing other promotions.

Free shipping and discount codes can be important services that attract customers, but some e-tailers are resistant to offering the customer too much of a discount and risk cutting into their profits. Mary Helen Shashy, owner of Glendale, Calif.–based online boutique Hotter Than Hollywood (www.hotterthanhollywood.com), offers free shipping, but says that offering free return shipping can encourage returns.“You have to make choices for your store. You have to balance encouraging customers to buy and not give things away,” Shashy said. “I must think of other things to give customers a reason to stay with me, which is why I don’t need to get into a bidding war with other stores.”

Some e-tailers said free shipping and discounts can cause competition between sites. “I understand that all stores are over-bought right now and we all need to convert inventory into cash, but sales and discounts are now getting more competitive,” said Marty Bebout, co-owner of Santa Barbara, Calif.–based BlueBee (www.bluebee.com). “Competing for price is not going to get us anywhere. We are a specialty e-tailer, so we should be offering our customers special things.”

Site enhancements

In addition to promotional discounts, many e-tail fashion sites are pulling out the stops to enhance the online shopping experience.

San Francisco–based Tobi (www.tobi.com) introduced a new feature to its site. Customers who employ the service of a Tobi stylist receive a 25 percent discount. The25 percent discount can be used on purchases from Tobi’s list of contemporary brands, including Mason by Michelle Mason, LnA, Vince and J Brand. The site is also offering free gift-wrapping on purchases of more than $250 starting Dec. 5.

Tanya Zilinskas Naouri, owner and founder of San Francisco–based Maneater Threads (www.manshy;eaterthreads.com), said she plans to host sample sales, increase the frequency of e-mail newsletters and offer free gift-wrapping options to entice holiday shoppers.

Blogging and social-networking tools may also play a part in e-tailers’ holiday promotions. According to a survey of consumers released Nov. 10 by Marina del Rey, Calif.–based Web-marketing firm Guidance and Chicago-based market researcher Synovate, nearly 30 percent of online shoppers said the best way to find discounts online is through link forwarding, peer comments or social sites. Consumers said they learn about products through e-mail forwards, comments on e-tail sites via product reviews and feedback mechanisms, and from friends through social-networking Web sites such as Facebook and Twitter.

The exclusivity of product has kept many customers coming back, according to some merchants. Jaye Hersh, owner of West Hollywood, Calif.–based bricks-and-mortar boutique Intuition and e-tail site ShopIntuiton (www.shopintuition.com), said her online sales are holding steady, and she credits this accomplishment to the shame-free, inconspicuous shopping that the Web provides. ShopIntuition extended the dates of its first online warehouse sale due to a positive response from customers, said Hersh, and the site will continue to offer free shipping throughout the month of November.

Greg Selkoe, owner of Boston-based streetwear site Karmaloop.com, said he is remaining “cautiously optimistic” this holiday season and is not changing his game plan with any early promotions. He said he believes that carrying unique items from brands such as Cheap Monday, BB Dakota and Luxirie by LRG has kept customers loyal to his site.