Economic Climate Strikes Online Retailers

Due to increased consumer pessimism toward the economy in the wake of the recent economic meltdown, online retailers are beginning to feel the effects with a steady decline in visits. Overall traffic to retail sites has shown decline for the past eight weeks in a row with no signs of change.

The biggest hit came to online music retailers, dropping 21 percent in traffic this week. The second biggest decline in traffic was in computer retail sites, followed by ticketing sites and toys. This foreshadows a dismal holiday season for all retailers, both online and offline. Offline sales declines can be predicted based on this online traffic decrease because online research strongly influences offline purchases.

Online Advertising Holding Strong through Meltdown

In this tough economic time, safe investment options are scarce. Dwindling revenues across the board are resulting in a decrease in spending for most businesses. Online ad sales, however, continue to look promising, showing double-digit growth for the first half of the year, compared to the first half of 2007. The first half of 2008, according to data from the Interactive Advertising Bureau and PricewaterhouseCoopers, shows a 15.2% online ad growth rate. The growth includes spending on search, display (banners), rich media, and email advertising.

It is actually possible that online advertising can benefit from the current economic uncertainty. Marketers are forced to tighten up and focus their efforts on a medium that is both measurable and effective so they know that their ad spending is creating real revenue. Since online advertising provides both measurability and effectiveness, many advertisers are likely to pull the brakes on traditional marketing strategies and spend more on internet marketing.

This is not to say that online advertising and ecommerce are completely safe from economic downfall, as no business really is. The industry is, however, showing much more promise than most industries.