Conflicting reports about the prospect or fact of a recession in the United States abound. Either way, the above factors will likely continue to pressure the American consumer for some time. And the media continues to emphasize the extremes of the situation, ratcheting up negative consumer perception.

In fact, according to a recent JupiterResearch consumer survey 36 percent of online users plan to reduce their spending online this year. On average they plan to reduce their spending by 5 percent. Though these figures show the impact of the overall economic situation on the consumer perception, we have not seen reduced online spending behavior materialize in aggregate, to date. Jupiter firmly believes that the overall online retail arena will remain health, growing 15 percent over last year.

Recent retailer earnings reports bear this out. A few examples of online only company that have reported first quarter results are: Amazon (net sales up 37%), eBay (24% increase in net revenue, 12% increase in GMV), Bluefly (14% increase in revenue with a 2% increase in AOV and 12% increase in the number of transactions). Overstock (25% increase in GMV). Furthermore, anecdotal evidence from retailers and vendors serving online retailers shows that across the board retailers are not experiencing overall softness in their online sales. .

Not all retailer news is rosy. An exception to this sustained performance arises in a category that is perhaps particularly sensitive to challenging economic conditions: fine jewelry. Bluenile, generally a retail website that exhibits best practices, has seen increased sales this year, but not at the same pace as in years past. Bluenile reports 5% increase in Q1 net sales, vs. 34% and 30% Q1 increases in 2007 and 2006 respectively. But, the overall picture remains positive as evidenced by the US census bureau Estat (www.census.gov) numbers show a 14% increase in year over year sales for first quarter 2008.
By Patti Freeman Evans, Vikram Sehgal

Some might say that these new rules will squeeze out little sellers. Sadly, small sellers get squeezed no matter what. But I don't think that eBay's small seller base is inherently being victimized here. A small seller does not build a business by providing feedback to buyers, they build business by meeting or exceeding buyer expectations and providing unique products. These rules don't hinder that ability. Further, getting exposure has always been a bit of a numbers game, with bigger sellers able to get more eyeballs. The changes do up the thresholds for power seller status, but that should not affect the smaller sellers either. The challenge is for small sellers to be visible in a more controlled environment. Again, they can do this by excelling in their product presentation, service and delivery execution. These actions will result in higher feedback scores and thus more visibility. It is tough, but when you want to compete with bigger sellers, you need to differentiate to stand out. And sadly, we can’t cry to our parents about the big kids getting too much attention when we are out of high-school.

But there is a bigger picture issue here, even beyond the state of retail site search experiences. And that issue is that retailers will continue to face an arena that is increasingly diffused. Meaning that customers will have more and more easy-to-access avenues to discover, learn about, price compare and buy products. See our report about this issue: <em>Multichannel Retail: Understanding an Increasingly Complex and Competitive Market Google's new search feature is just another step along that path. As customers become more accustomed to non-traditional interactions as they shop, retailers will have to adjust. So, improving their own site search is a start. Also, optimizing their search terms, especially in organic search is critical. But, also, retailers should realize that this secondary search experience might send a more qualified customer and thus have a positive impact on conversion. So, retailers should watch how customers are interacting with this secondary search to understand how to better serve them when they do actually get on to their site. Because, after all, even though many shoppers use Google as part of their process, the most common reason they buy from any site is previous experience with that site. So take what ever you and learn from this Google tool and apply it to your site to reinforce customer loyalty and mitigate the impact of competitive ads.

Some bright spots are likely due to this shift in spending. Wal-Mart increased, as did Costco and Target. JC Penny and Nordstrom were down even though they said apparel categories were relatively strong. And we are hearing conflicting reports about the upscale and luxury markets. Saks did well, increasing by 3.4% across same stores, but Burt Tansky from Neiman Marcus said he was seeing softening from his top customers.

Still online fares pretty well, with many retailers reporting very strong growth. We don't expect online growth will be too severely impacted by this difficult market unless a recession becomes very deep and very long. Newness and high end customers will bolster online sales through a slow down most likely.

Around my neighborhood I see kids walking to school laden with backpacks as big as they are and that sag under the weight of all the books they carry. In fact one kid was struggling so badly that her dad, in exasperation, finally just grabbed her backpack from her and heaved it over his own shoulder. I wonder if the Kindle, or perhaps Sony's version, aren't the type of tool that will alleviate this extreme burden from school kids and save their backs from certain lumbago.

The store itself is lovely and exhibits the same clean design as the other stores in Manhattan and the cool glass spiral staircase similar to the 5th Avenue location. One thing I found to be impressive was the third floor. It is totally devoted to training and service. So one third of the store's total floor space is devoted to non-selling (or at least not directly) activities. This approach is clearly about long-term customer care and loyalty driving tactics. Quite impressive when you think about sales per square foot calculations that store-based retailers rely on as a key metric. Kudos to Apple. I do think that getting people fully engaged and proficient (the ultimate sampling opportunity) with the product is the ultimate in customer engagement and retention. Plus, there is some element of acquisition opportunity too. Just think about trying to buy a computer and assume one needs help getting started or optimizing system use, a key consideration is how to find that type of service. Having a local store with a service like this Apple service might motivate your to buy there rather than from another seller.