Red on the Web

The 4th Quarter of the Business calendar has traditionally been the rallying time for the bottom line. From the coffee-riddled shopping day “Black Friday,” to the celebration of Kris Kringle’s one day of work a year it is one of corporate America’s favorite times of the year.

But, with the downturn of the economy; scratch that-recession; this is shaping up to not be the most wonderful time of the year. Retail industry analysts are predicting consumer spending to drop by more than $100 million dollars; estimating metro and suburbanites spending to fall to roughly $830 million, a steep fall from $930 million spent in 2007.

The decrease in spending is the economic reality that we all find ourselves in. With frequent references to the Great Depression and Bailout plans, America’s steadfast capitalist are lining up at the Capital looking for their Treasury endorsed “Advance to Go” card.

There are a lot of reports about why the economic collapse has transpired. Everything from the catastrophe of the sub-prime mortgages, stifling fuel costs, and the pinch of lending has bottlenecked cash flow. Restricted lending and rising mortgage payments has all but eliminated discretionary spending. Non-essential outlets have been reduced to laying off employees, or worse, closing their doors and watching a real estate advertisement hung in their best window space.

One repeated trend that has been reported on has been the steady decline in traffic at stores nationwide. One of the key contributors to declined isle traffic is the cost of gas. Over the course of the summer, AAA reported national average of over $4.00 a gallon. People of all ages were not inclined to cruise to the mall. Though preserving in both the fuel and wallet categories is critical to personal budget stability, it is a virus to retail livelihood.

However, when traffic numbers have been on the decline at the physical locations, potential losses have been offset by online offerings.

The online shopping experience has evolved. Though the end goal has always been the same (click here, put item A in your shopping cart, enter credit card number, and proceed to checkout- Cha-Ch’ing) the presentation has become interactive. You can pick, zoom in, tailor the apparel to match your body image, listen to a song clip, watch a 30 second preview or read an excerpt. And the best part of is that all of this can be done from anywhere; from the office cube to the living room recliner and in any state; from Red Bull energy spurts to the lingering effects of tryptophan.

But this year, even the internet is poised for a substantial drop. Though there are competing figures, the general theme is RED. Specialized industries are falling victim daily. The one-time advantages of opting for running your e-commerce were low cost domain maintenance and no location lease costs have been eliminated in the time it takes to click the mouse. Even though your competitor is thousands of miles away in actual distance a simple google search and they are off with their money and your profit.

Therefore the decline in online shopping has forced a price war that is rarely seen. Companies big and small alike have concluded that volume is better than margin and that any money is good money. There is a generalized acceptance of the vaporization of profit margins to accommodate the price conscious shopper. Click on any major retailer (Wal Mart, Target, Kmart, etc.) and just look at all the promotional efforts that state “free shipping”.

This aggressive push to provide an added value service is one of the main dishes being served this year. In fact, it is likely that this issue is going to be one of the cornerstones for capturing and retaining holiday traffic. Obviously, mass retailers are in a much better position to absorb the shipping expense. So that being said- go spend an additional $10 dollars!

Revolving banners on most e-commerce sites are in full-on promotional mode. If these efforts stay consistent, the notion of ‘free shipping’ will be another branded motto that consumers will link to the online shopping experience. And if that is the case, this trend is going to stay relevant far longer than any recessional timing. Additionally, with the low expectations for an economic rebound in 2009, consumers will likely continue to expect; better demand, free shipping options for good.

So regardless if you are a business or a consumer, it is apparent that at this point in time, every dollar counts.