Dodging a Recession’s Red Lights at the Pink Palace

That’s it. Dim the lights and start counting your pennies — if you haven’t already begun. We’re officially in a recession, according to Warren Buffett, or headed into one, as everyone and their mothers seem to be saying.

E-tailers shouldn’t panic when conducting business during slower economic periods, caution PayPal andJupiterResearch, which are hosting a five-city Thought Leadership Series to address merchant concerns. The series recently kicked off with a breakfast event at the Beverly Hills Hotel — locally known as the “Pink Palace” — and continues with gatherings this month in San Francisco, New York, Chicago and Dallas.

Taking Action

PayPal likely realized that its customers would be starting to sweat right about now about the economy, and it took action to provide some guidance. The result was an event worth attending, according to the merchants I spoke to — includingMyMedicalRecords.com CFO Naj Allana andLinkyo Webmaster Will Luong — and I agree.

The event featured presentations by Patti Freeman Evans, a senior analyst at JupiterResearch, and Paul Hollowell, e-commerce marketing manager for the global apparel firmGuess. PayPal distributed a report called “Confidence, Convenience and Choice: Using the 3Cs of Online Consumer Buying Behavior to Accelerate Sales and Build Customer Loyalty.”

Later, Freeman Evans, Hollowell and Kathleen Allen, a professor in the University of Southern California’s Marshall School of Business, conducted a panel discussion on how to grow sales in a slowing economy.

Insightful Research

Among Freeman Evans’ observations:

• U.S. online retail spending is expected to increase by 19 percent in 2008 and have a compound annual growth rate of of 10 percent through 2012.
• E-commerce is expected to be insulated from any economic downturn within the next two to three years.
• By 2012, more than half of U.S. retail sales will be influenced by consumers going online to research, even though they buy the products offline. “Consumers [still] love to go to the store.”
• Online grocery sales aren’t expected to skyrocket when compared with brick-and-mortar sales — surprise, surprise. “Do we want to have a moment of silence for Webvan?” she joked. “You want the product today. You want to pick your steaks, your tomatoes.”

Despite an increase in customer interest in free shipping, there is little growth in incremental purchases from free shipping, according to Jupiter. However, “people are working harder to get things they want online with free shipping,” buying products they didn’t plan to buy to not pay the extra shipping fees.

• “People are still scared [of security holes].” Of Jupiter’s surveyed consumers, 36 percent said they were concerned about ID theft, and 35 percent were worried about viruses.

Offering Advice

Based on these details (and a ton of other information) in the Jupiter report, Freeman Evans advised the 30-or-so merchants in attendance to optimize all elements of the consumer experience. Merchants should recognize and highlight acceptance of their customers’ evolving payment preferences, offer a transparent experience, and display policies (such as payment options) to customers before they reach the shopping cart.

Sound advice. When I shop online, if I feel just a tiny bit uncomfortable with my purchasing decision (regarding security, trust, etc.) before I click submit on order, forget it — I’m gone.

E-tailers should also focus on the incremental return on ad spend, suggested Hollowell, who led Guess to one of its most successful holiday seasons online last year. Customer convenience and peace of mind were some of the benefits of leveraging Guess.com’s partnership with PayPal, he pointed out.

Meanwhile, Allen urged merchants to “drive revenues through innovation. It’s time to really think about major innovation.”

Lastly, get cozy with customers, she advised. “[It’s about] moving in with the customer” and understanding where their pain points are.

Click here to e-mail Rachelle Crum.