November 14, 2008

Topic Overview: eBusiness And
The Economy
by Sucharita Mulpuru
for eBusiness & Channel Strategy Profess...
For eBusiness & Channel Strategy Professionals


              November 14, 2008
             Topic Overview: eBusiness An...
2   Topic Overview: eBusiness And The Economy
    For eBusiness & Channel Strategy Professionals




    UnCERTAInTy DOMIn...
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                                                                Topic Overview: eBusiness And The Economy
              ...
4   Topic Overview: eBusiness And The Economy
    For eBusiness & Channel Strategy Professionals




              „ uS iT...
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                                                              Topic Overview: eBusiness And The Economy
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6   Topic Overview: eBusiness And The Economy
    For eBusiness & Channel Strategy Professionals




    “Why Innovation M...
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E Business And The Economy

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An overview of the Forrester research documents that cover the implications of the current downturn on eCommerce companies

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E Business And The Economy

  1. 1. November 14, 2008 Topic Overview: eBusiness And The Economy by Sucharita Mulpuru for eBusiness & Channel Strategy Professionals Making Leaders Successful Every Day
  2. 2. For eBusiness & Channel Strategy Professionals November 14, 2008 Topic Overview: eBusiness And The Economy by Sucharita Mulpuru with Carrie Johnson and Brendan McGowan ExECuT i v E S u M MA ry The silver lining in the cloud of the global recession is that Web businesses are certain to fare better than their offline counterparts as consumers continue to shift their daily activities online. Forrester analysts have studied the overall effect of the economic downturn on consumer behavior online and the steps that companies in industries ranging from retail to travel to financial services can do to address these changes. For Web businesses to win, they must effectively address customer confidence issues, convey value in their products, and focus on customer retention. TABl E O F CO N TE NTS N OT E S & rE S O u rCE S 2 Uncertainty Dominates The Economic Outlook Forrester compiled its most pertinent research for eBusiness and channel strategy professionals 2 Forrester’s Take For Online Businesses in an economic downturn to provide an 3 Trends And Forecasts overview of our research and perspectives on 4 Recommendations For Adjusting To Adverse this subject. Economic Circumstances 4 Related Topics Related Research Documents “Three in Five uS Online Adults Have Cut Their 5 Upcoming Research Spending Because Of The Economy” 6 For More Information November 3, 2008 “Outlook For uS Online Holiday Sales, 2008” October 21, 2008 © 2008, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, RoleView, Technographics, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each figure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. To purchase reprints of this document, please email clientsupport@forrester.com
  3. 3. 2 Topic Overview: eBusiness And The Economy For eBusiness & Channel Strategy Professionals UnCERTAInTy DOMInATES THE ECOnOMIC OUTlOOk As the global economic downturn continues to cast a pall over consumer-facing businesses, the outlook for the coming 12 months remains mixed. American consumers feel that the national economy will remain largely the same or worse, yet they express optimism about their personal circumstances. While 37% of consumers do not believe the national economy will improve in the coming year, 45% expect their personal economic situation to improve (see Figure 1). Why the disparity? While consumers believe macroeconomic conditions are beyond their control, they have been agile in adapting their microeconomic circumstances to the changing economy. Americans have historically been criticized for low savings and high consumption rates, but 58% of consumers are now reducing their overall spend levels compared with one year ago. This reduction in spend is expected to trickle down to even sectors such as online retail, which had historically been perceived to be more recession-resistant. US eCommerce sales were growing at a clip of 17% earlier in the year but are expected to grow just 12% during the 2008 holiday season.1 Figure 1 Americans Are Spending less And Are Pessimistic About The National Economy “I think the national “I think my personal financial “Because of current economic economy will improve in situation will improve conditions, I am spending less the next 12 months” in the next 12 months” money now than I did a year ago” 19% 23% 31% 37% 45% 58% 23% 32% 32% Either “agree” or “strongly agree” (optimists) Neither “agree” nor “disagree” (neutrals) Either “disagree” or “strongly disagree” (pessimists) Base: US online adults Source: North American Technographics® Financial Services Online Survey, Q3 2008 Source: Forrester Research, Inc. 47583 FORRESTER’S TAkE FOR OnlInE BUSInESSES The implications of the economic slowdown are widespread for both consumers and businesses. Consumer confidence is at a historic low, caused by decreasing home values and stock market declines, which have made consumers feel less wealthy.2 Consumer-facing businesses will consequently be forced to prove their value to customers and shear their own cost structures to address penny-pinching buyers. Web businesses will also be forced to adjust to accommodate these shifts in behavior. Fortunately, these businesses are in a strong position to do so because consumer © 2008, Forrester research, inc. reproduction Prohibited November 14, 2008
  4. 4. 3 Topic Overview: eBusiness And The Economy For eBusiness & Channel Strategy Professionals behavior continues to shift online, as an ever-greater percent of consumers around the world have broadband connectivity and use the Web as an integral part of their daily lives. The Web businesses that will not only survive the downturn but come out ahead are those that will: · Address customer confidence issues throughout their Web contact points. The financial crisis and collapse of long-standing banking institutions were perhaps the biggest reasons for the rattling of consumer sentiment. Those institutions that remain strong, such as Wells Fargo, will take this opportunity to communicate the strength of their position and capture market share from weaker competitors. These companies will communicate their strength on their home pages, in their email communication, and in their inbound communication with call center representatives. · Explain how their products help consumers save money. Because of the drastic reduction in overall consumer spend, businesses that best address customers’ need to save will capture disproportionate wallet share. Wal-Mart in the US is one of the few retailers experiencing year- over-year comparable-store sales growth, and Tesco in the UK has incorporated explicit calls to consumers throughout its Web site to “find cheaper alternatives.”3 · Reallocate spend toward customer retention. A smaller universe of new customers means that businesses will be forced to be particularly careful with their marketing expenses. Rather than focus on customer acquisition tactics like search marketing that Web businesses have traditionally relied upon, the companies that will thrive during a downturn will be more focused on retention tactics such as email marketing and customer relationship management (CRM) efforts that seek to find loyal, recession-resistant customers. Marriott International, for example, announced in October that it would eliminate blackout dates from booking free Marriott Rewards stays, effective January 2009.4 TREnDS AnD FORECASTS Forrester offers documents outlining the prognosis for eCommerce with respect to the current economic crisis. These perspectives take into account both consumer and business points of view. „ eBusiness Managers’ 2008 Budget Outlook Carrie Johnson and Elizabeth Davis „ Marketing Cuts Budgets By 3% in A Downturn Jaap Favier „ The State Of retailing Online 2008: Profitability, Economy, And Multichannel report Sucharita Mulpuru © 2008, Forrester research, inc. reproduction Prohibited November 14, 2008
  5. 5. 4 Topic Overview: eBusiness And The Economy For eBusiness & Channel Strategy Professionals „ uS iT Market Outlook: Q3 2008 Andrew Bartels „ Why uS B2C eCommerce Will Weather The Economic Downturn Well Sucharita Mulpuru RECOMMEnDATIOnS FOR ADjUSTIng TO ADvERSE ECOnOMIC CIRCUMSTAnCES Forrester analysts have authored numerous documents that provide frameworks and prescriptive measures for Web businesses to effectively adjust to changing economic circumstances. These documents address various disciplines within an eCommerce organization: content management, interactive marketing, and product development. „ Brand-Building Online Content Matters For eBusiness And Channel Strategy in A recession Henry H. Harteveldt „ Driving Consumer Product Strategies in A Global recession Paul Jackson „ Eight Steps For Keeping Customer Experience Momentum During An Economic Downturn Bruce D. Temkin „ Fight The recession With An in-House Agency Jaap Favier „ Strategies For interactive Marketing in A recession Josh Bernoff „ Technographics® insight: Finding uS retail Spenders in A recession — They’re young And Spending Online Ted Schadler RElATED TOpICS Many Forrester analysts have also explored the impact of the economic downturn on specific industries, including travel, financial services, and retail. Forrester has written several pieces that address particular verticals. „ Airlines: Prepare To Server Fewer, And More upscale, Passengers Henry H. Harteveldt © 2008, Forrester research, inc. reproduction Prohibited November 14, 2008
  6. 6. 5 Topic Overview: eBusiness And The Economy For eBusiness & Channel Strategy Professionals „ The Financial Crisis Spawns One-Stop Shops Bill Doyle „ How To Win retail Deposits in The Credit Crisis Alexander Hesse and Benjamin Ensor „ How uS Consumers Choose A Bank in A Crisis Brad Strothkamp „ The impact Of The Economic Crisis On eCommerce Technology investment Brian K. Walker „ Outlook For uS Online Holiday Sales, 2008 Sucharita Mulpuru „ Ten Ways Financial eBusiness Executives Can Weather The recession Bill Doyle and Brad Strothkamp „ uS Online Travelers’ Outlook On The Economy And Spending Henry H. Harteveldt „ The uS recession’s impact On Travel eBusiness Henry H. Harteveldt „ uS Travelers And The recession: A Glance Ahead To 2009 Henry H. Harteveldt UpCOMIng RESEARCH Forrester will continue to provide insights and recommendations for eBusiness executives as the economic crisis unfolds. Several documents are slated for release in the coming weeks: “Direct Marketing And Analytics Shine In A Recessionary Environment” Dave Frankland and Suresh Vittal Q4 2008 “How The Financial Crisis Will Affect Bank Customer Loyalty” Bill Doyle Q4 2008 “The Ultra Low-Cost PC Response To The Downturn Economy” J.P. Gownder Q4 2008 © 2008, Forrester research, inc. reproduction Prohibited November 14, 2008
  7. 7. 6 Topic Overview: eBusiness And The Economy For eBusiness & Channel Strategy Professionals “Why Innovation Matters In A Recession” Cindy Commander Q4 2008 “Winning Email Subscribers In A Down Economy” Julie M. Katz Q4 2008 FOR MORE InFORMATIOn Research Help Desk Research specialists in Forrester’s Research Help Desk collaborate with Forrester analysts to compile these Topic Overviews for selected areas of Forrester’s coverage. If you have additional questions about this topic, please contact us at researchhelpdesk@forrester.com, and we will respond to your question within 36 hours. Research Alerts To be notified when a new document is published about eBusiness and channel strategy professionals in an economic downturn or by any of the analysts listed above, set up a Research Alert. EnDnOTES Source: North American Technographics® Benchmark Survey, 2007, and JupiterResearch Internet Shopping 1 Model, October 2008. The Survey of Consumers executed by Thomson Reuters and the University of Michigan showed that 2 survey respondents exhibited the largest decline in consumer confidence in the survey’s history in October 2008. Source: Reuters / University of Michigan Surveys of Consumers (http://www.sca.isr.umich.edu/). Tesco’s “Cheaper alternatives” advertisement is an example of its campaign to emphasize low costs for 3 consumers. See http://www.tellyads.com/show_movie.php?filename=TA7178. Source: “Marriott Rewards Introduces No Blackout Dates,” Marriott International press release, October 21 4 2008 (http://www.marriott.com/news/detail.mi?marrArticle=361110). © 2008, Forrester research, inc. reproduction Prohibited November 14, 2008
  8. 8. Making leaders Successful Every Day Headquarters Research and Sales Offices Forrester Research, Inc. Israel Australia 400 Technology Square Japan Brazil Cambridge, MA 02139 USA Korea Canada Tel: +1 617.613.6000 The Netherlands Denmark Fax: +1 617.613.5000 Switzerland France Email: forrester@forrester.com United Kingdom Germany Nasdaq symbol: FORR United States Hong Kong www.forrester.com India For a complete list of worldwide locations, visit www.forrester.com/about. For information on hard-copy or electronic reprints, please contact Client Support at +1 866.367.7378, +1 617.613.5730, or clientsupport@forrester.com. We offer quantity discounts and special pricing for academic and nonprofit institutions. Forrester Research, Inc. (Nasdaq: FORR) is an independent research company that provides pragmatic and forward- thinking advice to global leaders in business and technology. Forrester works with professionals in 19 key roles at major companies providing proprietary research, consumer insight, consulting, events, and peer-to-peer executive programs. For more than 25 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. For more information, visit www.forrester.com. 47583

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