Shop.org/Forrester out with new ecommerce data...

We spend a lot of time at ChannelAdvisor following the various datapoints and thoughts around e-commerce and today Forrester research (Sucharita Mulpuru is the analyst) came out with a joint report/survey with the great folks at Shop.org (I/we are an active member FYI).

The headlines of the report are good news for internet retailers:

• Forrester sees e-commerce growing at 17% y/y in the US (This is good because comscore is starting to talk about 14% and maybe lower).  I'm an optimist and think that in early 09 the pundits will update the data to be more like 20%
• This puts e-commerce at $208B for 2008, up from $174 in 07
• e-commerce represents 7% of retail.
• search engine marketing (what I call paid-search) drove 35% of sales and is still the top channel for retailers
• 65% of retailers are experimenting with social networks
• Forrester is predicting that growth will be driven by the computer, CE, auto and apparel categories.
• Retailers spend $.50/click on average for paid-search and see $8.47 in incremental revenue (that's a weird metric)

I downloaded the report and what's neat is that shop.org/Forrester are finally seeing and reporting on the multi e-commerce channel trends we've been talking about for years.  For example, they have this figure from the survey section that covers the top channels for retailers (note these would be larger retailers, primarily with brick-and-mortar operations as well I would assume):

Another interesting datapoint they have from the survey is they asked retailers for a variety of e-commerce channels what the cost per order for the channel is and the average selling price.  I've found that most retailers like to look at channel costs either as a ROAS (return on ad spend) or an 'Effective Take Rate' (ETR), which is more of a cost of sales kind of model which helps for margin-planning/forecasting.  So I took the Forrester data and splatted it into a spreadsheet to calculate the ETR.  I also added eBay and Amazon as marketplaces with their ETR's and ordered the channels from lowest ETR to highest and this is the result: (Amazon/eBay are highlighted to indicate I added them)

Since this blog is targeted to primarily smaller retailers that are on-eBay/Amazon and going multi-channel, this is an interesting set of data.  The good news is if you are on eBay/Amazon you are already in two of the most efficient channels out there.  If you add affiliate (I haven't seen many SMBs successful with this), SEO and email you have most of the lower-cost channels around.

The only datapoint on here that looks unusual to me is the CSE data, usually we would see this more in-line with paid-search so I'm going to go look at our data and see if there's anything noteworthy there.  Not to toot our own horn here, but my guess is the retailers surveyed aren't watching their CSE programs very closely or using ShoppingAdvisor to optimize their CSE channel.

If you'd like to learn more, there are several news items out today covering the report:

• InfoWeek
• AP
• CNBC video

Seeking Alpha disclaimer: I am long Google.

Comments

[Brian]

Scot,

You left the average order value for Amazon and eBay off the chart. Our analysis shows that for the exact same product, the ASP on eBay is generally 10-20% below what an item sells for on Amazon or on a retailer's own web-site.

Presenting percentage of ETR out of context skews the analysis by implying eBay seems "better" than Amazon. If you compare the two using Average Sales Price for the same item WITH the percent of ETR -- the advantage dramatically skews to Amazon. I recognize you probably don't have that data, but it is important for readers to put the numbers in the right context.

One additional point -- which does NOT fit easily into the chart but is equally critical -- is the cost of handling each order on each platform. The customer service costs for handling an average eBay order versus one from Amazon or your own website is a magnitude higher.

Net/net: The measures in the chart are nice, but the best measure is the operating margin differences between various platforms and marketing channels. Operating margins (and volumes) are extremely different between these and it seems appropriate to point those out as caveats. For instance, without a doubt, email marketing to your own house-list is the most profitable source of revenue. Stated alone, that seems very impressive -- but when put in context by showing the volumes that can be expected to be sold via a house email program compared to the volumes sold through a site like eBay or Amazon -- the analysis takes on an entirely different meaning.

I know your post is basically about multi-channel sales (and you have long been the champion of that strategy) -- but as sellers start to think multi-channel, they also need to begin thinking along these multiple variables. It would be best if they are constantly reminded that going multi-channel is like moving from checkers to 3-D chess. The variables you need to consider are dramatically more complex.

Brian

[Roy]

Scot,
I think you need to adjust the AMZN take rate. That 15% includes payment processing. I don't believe your eBay number does nor would the other channels. That is probably a 2.5% to 3.0% adjustment down for comparability.

Regards,
Roy