The economy is not only impacting shoppers, it’s affecting online retailers, too. According to results of Shop.org’s eHoliday Study, conducted by BIGresearch, shoppers will see changes in retail marketing and promotions this holiday season in response to economic uncertainty.Consumer Spending logo

With an understanding that many of today’s shoppers use Facebook and Twitter regularly, and because these tools are more cost-effective than traditional advertising, 47.1% of retailers surveyed will be increasing their use of social media this holiday season. More than half of retailers said they have added or improved their Facebook page (60.3%) and Twitter pages (58.7%) this year, while two-thirds (65.6%) have added or enhanced blogs and RSS feeds. In addition, to provide consumers with an extra incentive to start shopping, one-third of retailers (34.3%) say they will offer holiday deals earlier this year.

As another sign of the times, free shipping offers will abound this holiday season. Four out of five online retailers (79.4%) will offer free shipping with conditions* at some point during the holiday season, while more than half (57.4%) also plan to offer free shipping without conditions. More than one-third (35.7%) said their budgets for free shipping are higher than last year, and nearly as many (30.0%) said free shipping offers will start earlier than a year ago

“Retailers know that times are tough so they have created promotions and incentives to help Americans save money this holiday season,” said Scott Silverman, Executive Director of Shop.org. “From free shipping to Facebook, online retailers are combining new initiatives with tried-and-true tactics to make their companies stand out.”

Online retailers are also compensating for the economy by making operational changes to help them protect their profits. According to the survey, 41.4% of retailers have scaled back on inventory levels and 22.9% have hired fewer people in their stores.

While online growth is expected to slow this holiday season, it remains a bright spot in retail. According to the survey, 45.8% of online retailers expect their holiday sales to increase at least 15% over last year, while one-third (33.9%) expect sales to grow up to 14%. As a testament to the economy and the maturity of online retail, just one in five online retailers (20.3%) expects sales to be flat or decline.

In addition to a strong focus on sales and free shipping, many online retailers have revamped their websites this holiday season to make it easier for people to shop. According to the survey, many retailers have added or revamped their sites’ shopping cart (45.2%), search capabilities (44.3%), suggested items (42.9%), customer ratings and reviews (40.6%), and featured sale pages (37.1%).

Largely due to the convenience of the web, more than one-fourth of online shoppers (26.7%) said they plan to spend a larger portion of their holiday budget online this year. Reasons behind why people will spend more online range from the ability to shop at all hours of the day (41.9%) to shoppers feeling it is easier to compare prices (34.0%) to Americans’ insatiable appetite for free shipping (33.1%). Others said they will spend more online because it’s simply more convenient for them (32.4%), they don’t want to fight crowds in stores (24.9%) or because it’s easier to find items (16.7%).

The small percentage of people (5.7%) who plan to spend less of their holiday budget online said that they’ll pull back due to expensive shipping charges (22.8%), because they like to see or handle items before they buy (12.5%) or because they prefer a store experience (10.8%). A fraction of shoppers said they hesitated to shop online due to concerns about security (1.1%), credit card theft (0.6%), privacy (0.1%) or concerns about retailers tracking online activity (0.1%).

“In a year where every penny counts, many people will start their holiday shopping online to find deals, search customer reviews to select products, and get gift ideas,” said Phil Rist, Executive Vice President, Strategic Initiatives, BIGresearch. “The benefits of online shopping far outweigh the drawbacks, as far as most shoppers are concerned.”

With online retailers diversifying payment options, customers have more ways than ever to pay for holiday gifts. According to the survey, two-thirds of shoppers (67.3%) will use a credit card for some online purchases this holiday season, though one-third will also use a debit card (35.6%) and PayPal (33.9%) for purchases. In addition, 11.5% of shoppers plan to use a gift card or gift certificate to pay for holiday items online this year.

“e-Holiday Study,” conducted by BIGresearch for Shop.org, a division of the National Retail Federation (NRF), October 22, 2009.  Website: www.shop.org;  www.nrf.com.