What Last Year’s Retail Trends Mean for 2012

In a presentation she delivered at the National Retail Federation's Annual Convention & Expo in New York City yesterday, Forrester Research's Vice President and Principal Analyst Sucharita Mulpuru reviewed four retail trends her firm identified from the recently completed holiday shopping season, along with what the findings will mean for retailers looking to get ahead in the new year. Here's a look at those trends:

1. The online pie grows. The consumer migration to shopping online continued in last year's fourth quarter. Fifteen percent of all holiday sales were transacted online in 2011, up from 6 percent in 2005 and 13 percent in 2010. Consumers are heading online in droves not only for the convenience of the channel but for the deals that can be found on the web. One such deal is free shipping, which consumers now expect as part and parcel of the online shopping experience, Mulpuru said. This phenomenon is helping spur the growth of shipping clubs (e.g., Amazon Prime, ShopRunner). In 2010, 9 percent of online shoppers were enrolled in one of these types of programs; that number swelled to 12 percent last year. These programs are adding incremental shoppers for brands, Mulpuru noted.

2. Search and email still win. While newer technologies such as mobile and social media may get all the headlines, standbys email and search marketing still produce best. The channels continue to dominate retailers' marketing spend (54 percent of their total marketing budget, on average), and for good reason. According to Forrester's State of Retailing Online 2011 report, more than 50 percent of transactions for hard goods retailers that were marketing driven had search or email as the first or last touchpoint. For soft goods retailers that number was greater than 60 percent.

3. Mobile is making a retailer's job a lot harder. Consumers increasing use of mobile devices is no secret. Consider the following: 28 percent of consumers said they shopped via a mobile device over last year's Thanksgiving weekend; just 9 percent of retailers said their company doesn't have a mobile strategy, compared to 26 percent in 2010; and 28 percent of retailers consider their mobile strategy to be "evolved" vs. just 20 percent who thought so in 2010. Direct sales are only a small part of the mobile equation at this point (accounting for $6 billion in sales in 2011, just 2 percent of all retail sales). It's the cross-channel impact of mobile marketing and commerce that retailers should be concerning themselves with, Mulpuru said. Technologies such as 3-D cameras and near field communication are great, but consumers are most frequently using their smartphones for simple tasks such as checking a store's hours, looking for the nearest retail store or looking up product information.

4. Social commerce all hype? According to Forrester's findings, social networks were a minimal source of sales during the 2011 holiday season. Very few consumers are learning of retailers' deals - let alone making purchases — via brands' social media efforts, Mulpuru said. Yet retailers aren't heeding this warning. A Forrester survey found that retailers plan to focus their social media spend in 2012 on custom stores on Facebook, despite the fact that consumers find this to be one of the least effective social media tactics. Facebook is chasing the display ad budget, not necessarily search and email, Mulpuru said.

What These Trends Mean for Retailers in 2012

• Web retail will probably soon comprise 20 percent of total holiday sales, Mulpuru forecasted.
• Deep discounts, deals and free shipping are a cost of doing business. The good news for retailers? These tactics are an accelerator to consumer e-commerce adoption.
• Email and search continue to drive traffic and conversions. This means that many retailers' Google budgets will be increasing, Mulpuru said.
• More mobile traffic means more mobile optimization of websites. Mobile analytics will remain a challenge for most retailers, however, Mulpuru noted.
• Retailers will struggle with evaluating the true return on investment for cross-channel investments. Companies are beginning to accept this as a cost of doing business - much like free delivery — Mulpuru said.
• Post-social media hype era seems to have arrived. Facebook isn't irrelevant, just smaller than retailers initially thought, Mulpuru said.
• Four companies - Amazon, Google, Facebook and Apple — loom over e-commerce. These sites are frequently gatekeepers to retail brands' traffic. The key is to follow their lead on simplicity, Mulpuru said. Focus on lower-hanging fruit that can be implemented quickly and easily that can have a positive effect on your bottom line — e.g., optimizing your site for mobile devices, offering customers the ability to write and review products. Device fragmentation necessitates a lowest common denominator approach to web design and development, Mulpuru advised.