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It's a make-it or break it time for retailers. The holiday selling season is always a critical time for retailers, but this year this may be even more true. With several retailers already falling victim to a drop in consumer spending, and filing for bankruptcy, retailers will be navigating through some tricky waters. Consumers are strapped for cash due to high energy and food prices, and unemployment is rising. The recent credit crunch has made it more challenging for retailers and consumers to borrow.

This blog will look at the winners and losers in the retail space. Who has the right strategy to capture consumer dollars? It also will look for trends in consumer spending and how that will impact the economy.

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Apr.08

6:03 PM ET

Tuesday, 8 Apr 2008

What's Driving Online Retail?

Posted By:Margaret Brennan

Sectors:Media | Retail

Is online retail the only avenue of real growth in this sector? Keep in mind that this part of the market still only represents 7 percent of overall sales.

That said, it does seem that online retail is bigger than ever. Internet sales are benefitting from the same headwinds that that are hurting sales at brick-and-mortars.

High gas prices help convince consumers to consolidate trips to malls and helps stores to cut back on costly bulk shipments to malls (inventory management).

Online buying lends itself to consumers hunting and pecking--rather than hitting the malls at a time when we're not seeing much fashion newness to drive demand into brick-and-mortar stores. Online sales are forecast to be up 17 percent at $204 billion this year, according to a study out today from NRF/Forrester Research.

What is interesting to me are the different ways that Internet stores are reaching customers to bring them "in store"--online.

One of the most effective ways is also one of the cheapest: Forrester's study shows that e-mails sent to repeat customers by stores involves the cheapest marketing cost ($6.85 is the average cost per order), while yielding a high average order value ($120.27 average order value.)

Search engine shopping is also among the cheapest ($8.63 average cost per order) while yielding a high return ($109.73 average order value.) These cheap marketing tools are helping retailers maximize profits.

Another standout: the untested social networking sites are among the costliest/lowest-yielding marketing methods ($50.11 cost per order on an average order value of $168.80). Online banners are even more expensive.

Which lead me to a question: Are Google [GOOG Loading... () ] and other search engines truly the main beneficiaries of the growth in retail? Is this "retail trade" really more of a "tech play"?