FREEDyourMind

How Will the Economy Affect E-Business?

From RIS News:

 “It is a sign of tough economic times. Retail store closings are up in 2008 by 25 percent year-over-year as the national economy continues to deteriorate. The International Council of Shopping Centers estimates there will be 5,770 store closings in 2008 compared to 4,603 in 2007. Surging gas prices, higher food costs and powerful inflationary forces are squeezing consumers and retailers alike.”

 And from the San Jose Mercury News:

Electronic commerce has grown about 22 percent in the past two years, said Hal Varian, [Google’s chief economist], who spoke at a forum on the state of the Internet economy at Google's new  Washington office. Ed Garrubbo, chairman of the Electronic Retailing Association, said online sales jumped 17 percent in the first quarter of this year. 

"The lesson here is that the economic slowdown is not an Internet slowdown," Varian said. "The Internet is looking pretty strong compared to other sectors."

I wonder if the slow down for brick-and-mortar retail is actually a boon for the e-commerce industry.

Research published in Claes Fornell’s recent book, The Satisfied Customer: Winners and Losers in the Battle for Buyer Preference, he proves that a customer’s ability to spend is not necessarily a predictor of his willingness to spend. The best predictor, as crazy as it may sound, is whether or not that customer is satisfied. A satisfied customer will spend even if they don’t have the money.

Study after study shows that the online channel is the bright spot in any industry in terms of customer satisfaction. In the February release of the ACSI, we saw online retail (81.6 on the ACSI’s 100-point scale) trounce offline retail, which scored 74.2. Our study with Forbes about online financial services showed that customer satisfaction with online banking (82) outpaced satisfaction with banking overall (78).

So, in general, websites satisfy people more than other channels. Add that to increasing gas prices, and I think we have a few good reasons for people to move more and more of their business online. They can conduct business anytime, anywhere, and they don’t have to worry about inconsistency in service. And if the companies they interact with online are doing a good job satisfying customers, it might not even matter how much money they have!

My bet is that we will continue to see growth in the online channels of industries that are starting to feel the pinch of tough economic times, gas prices, and inflation.

Online Banking Outperforms Other Financial Services Industries

Our latest research with Forbes.com shows that online banking is vastly outperforming other online financial services industries. Banks scores an 82 on the ACSI's 100-point scale (up 12% or 9 points from the 2003 score of 73), while investing and credit card websites were both at 75. The online banks are clearly setting a high bar. A score of 82 makes online banking the bright spot in the industry overall (offline banking scored a 78 when measured by the ACSI in late 2007).

Most notably, we found that highly satisfied online banking customers are 31 percent more likely to buy additional services from the bank and 54 percent more likely to recommend the bank to others.

You can read more about the study in BusinessWeek or download the full report here.

New Google Search Feature

Internet Retailer had a story earlier this week about a new search feature at Google:

“Google has launched Search Within a Site, a feature that enables searchers to conduct site searches of content, retail and other web sites from a Google results page. A search of “Newegg,” for example, brings up the Newegg.com home page as the first result. Previously, the results page would present listings of links to any number of sites that include references to Newegg. Now, the results page still brings up all those listings, but a search window labeled “Search newegg.com” appears immediately below the first listing, the retailer’s home page, enabling searchers on Google to conduct a new search that focuses not on the web at large but exclusively on Newegg.com.”

It’s controversial because 1) on the Google results page for a site search, a competitor’s ad might show up. 2) it seems unlikely that Google can present a search as thorough as going to the site itself and doing a search from there.

It’s just the next step (one we probably should have been expecting) in building loyalty to Google instead of the retailer/auto dealer/ manufacturer’s site. We’ve done a lot of research on the value of different methods of customer acquisition (promo emails, shopping search engines, referrals, etc) and our research shows that search engines drive people who are substantially less loyal and less likely to buy.

What do you think? Is Google going too far? If you run a site, do you think this will help you or hurt you?