Online retailers had high expectations for the 2011 holiday shopping season. Based on the analysis of data from the Chase Paymentech Pulse Index, it appears e-retailers made wise choices, capitalizing on what turned out to be a very successful extended holiday shopping season.

 

For the retailers included in the Pulse Index, customers turned to e-commerce in record numbers for their holiday shopping, with year-over-year growth rates far outpacing forecasts. For the full 2011 holiday shopping season, online sales grew 25% and transaction volume increased a staggering 37%.

 

Looking at growth rates by themselves, however, only scratches the surface when it comes to understanding how e-commerce is changing. By digging into the Pulse Index data, we can identify some clear trends and develop strategies to leverage the changes.

 

E-commerce has joined the mainstream as a holiday shopping option and we can no longer think of e-commerce as an "emerging" channel. For multi-channel retailers, the lines between online and physical stores are blurring with improved integration, promotions and logistics.

 

Over the past several years, the online share of retail sales has risen steadily and has increased sharply in the critical fourth quarter. This increase is surprising and demonstrates that consumers are shifting their gift buying to the Web at growing rates, driven by price, selection, convenience and their own positive experiences.

 

Encouraged by strong retail promotions, Cyber Monday was once again the biggest single online shopping day of the year for the Pulse Index in 2011. But the fact remains that every Monday during the holidays is almost as important. Consumers have consistently made Monday the day they are most likely to do their e-commerce holiday shopping.

While Monday is important, every week is not the same. Monday may be the peak day, but online shopping does not stop for the rest of the week. The Pulse Index has consistently shown that throughout December, Tuesday, Wednesday and Thursday can have sales volume that rival Monday. This is especially true as the end of the season approaches.

 

Just as stores seem to begin preparing for the holiday season earlier and earlier, consumers are doing some of their online shopping earlier as well. E-retailers began heavy promotional activity well before Black Friday. Consumers responded, driving rapid double digit growth rates throughout November.

 

Early season growth rates were surprising, but not as surprising as the momentum they created to generate the season-long demand. Following a better-than predicted November, with Pulse retailers online sales growing 26% and transactions up 40%, many industry watchers wondered if the momentum could be sustained.

 

By early December, it was clear that the early season momentum was not going away. Stores lured customers with heavy promotions focused on "Green Monday" and "Free Shipping Friday." These incentives, combined with the overall strength of the sector, kept growth rates high and sales in record territory.

 

Some quick-thinking consumers have been taking advantage of Black Friday promotions on Thanksgiving Day, while the brick-and-mortar stores are still closed. Whether the customers are web-savvy or just crowd-averse, this activity can represent a significant head start on the peak season for retailers.

 

Stores with a brick-and-mortar presence may have led the way in leveraging e-commerce for Black Friday, but online-only retailers have not ceded the market. Black Friday promotions have become increasingly common for online stores and the data confirms that consumers are responding.

 

The "mainstreaming" of e-commerce is not only seen in how much we spend, but in what we buy. Consumers are spending more of their gift dollars online, but spreading across more, lower-priced transactions. This lower ticket behavior is driven by several factors:

 

• The secular shift to digital media is pushing up the number of low-dollar transactions.

• The cost of many high ticket items is coming down.

• The increasing use of free shipping as a promotion reduces average ticket by eliminating not only the cost of shipping, but also the incentive for consumers to fill carts in order to reach a free shipping threshold.

 

It is important to note, however, that the declining ticket trend is not true across all segments. Apparel and footwear tickets rose 6% and toys rose 10%.

 

Armed with an understanding of how the industry has changed and where it is headed, retailers can begin thinking about the 2012 holiday season and leverage lessons learned.