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Survival of the Fittest for Online Retailers

The recession is creating a dog eat dog environment for e-tailers.
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A small segment of online retailers are taking advantage of the economic downturn by snatching market share from smaller, less aggressive competitors, according to a recent study.

Cambridge, Mass.-based market research firm Forrester surveyed 117 e-tailers and found them bracing for slow sales over the next 12 months. More than half, 54 percent, expect overall retail growth to slow, and 57 percent admit the recession's hurting their bottom line.

But while 30 percent are cutting spending this year, including pulling back on hiring, 46 percent have no plans to cut back. Almost one in four, 24 percent, plan to increase spending, investing in strategies such as boosting their search rankings (80 percent), e-mail marketing (65 percent), and social marketing (60 percent).

This ambitious group is making a grab for a bigger piece of the market, Forrester analyst Sucharita Mulpuru explains. "This spells trouble for their weaker competitors."

"Small unbranded companies are going to have a tough time staying in business," she says. "The powerhouses will get stronger because they will grab market share and they have the coffers to fund aggressive promotions."

Companies are also honing their customer retention strategies. A large majority of respondents—88 percent—say e-mail marketing will be a high priority for the year. But instead of sending mass promotions, 71 percent will send e-mails segmented according to consumer preferences or purchase history.

"Before, customer retention was just about batch blasting e-mails, but now it's a bit more deliberate—it's about segmenting the best customers and sending them relevant offers," Mulpuru says.




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