Falling Sales - is there something wrong with my site

[moto]

I run an ecommerce website, but this month my sales have plummeted. All year the monthly sales have steadily climbed along with the number of visitors, until August.
The number of visitors and page views are roughly the same as July but the conversion rate is about 65% of what it was.
If anyone has an opinion or suggestion as to what may have caused this I would be very grateful.
www.moto-racing.co.uk
Many thanks in advance

[Mar]

It could just be that everyone's sitting on a beach in Spain/Florida/Australia and not thinking about buying anything. I too have noticed a slow-down in August.

M

[wallmann]

It might just be that the talking heads on the financial networks are feeding everyone a load of baloney about how well the econonmy is doing.

It's not! Oil is still high, housing prices have plummetted and housing inventory has risen once again along with interest rates.

People just can't continue to use their homes as ATMs by refinancing to pull out money to continue with their present lifestyle. The housing bubble has started to deflate and is picking up speed. It won't be easy for anybody. IMO

Larry @ Stock2Watch

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[visio]

I have noticed that August is always a slow month, specially if you have a lot of european customers, I think that over there they all go holidays in August.

[SemAdvance]

Yes Europeans and the US is in heavy vacation / holiday mode... so little sales will be seen.

Another issues is it is now back to school time and all the money is going to clothe and supply children at this point...

Even my Monte SS is complaining I have not spent as much money on her this month as I have in others

;->

[tuler]

Originally Posted by moto

The number of visitors and page views are roughly the same as July but the conversion rate is about 65% of what it was.
www.moto-racing.co.uk
Many thanks in advance

Do you know of any direct competitors? Is there any group of producst that is slower than others? If so, are they running any special promotions regarding your core products? If so, this could cause the price sensitve to buy from them.

[Trafficop]

I'm seeing the same increasing lack of buyer interest, too. House prices dropping, oil on a path of no return.. I'm getting nervous.

sorry, Moto, but this isn't exactly the answer you were perhaps seeking.

This article today articulates it better:
http://www.truthout.org/docs_2006/082406K.shtml

[bathgems]

This is an article I wrote about my ecommerce experience since the price of gas started to rise. That is when my business, bathroom fixtures, started to tank.

Business Planning In The Face Of Rising Oil Prices
By Steven Pollack
May 19, 2006, 09:30


THE HIGH PRICE OF OIL


As a retailer you have no doubt recently heard the vast whooshing sound of your customer’s disposable income being sucked up by oil companies. At $3 per gallon, instead of filling up their auto for $25 per week they now shell out $50 per car. That’s an extra $25 per week per car not being spent on other purchases.



Think about that, in a very short period, all of our customers’ annual disposable income has dropped by $1,300 to $2,600. That is, of course, assuming prices stay high and wages do not rise.



So the question to be answered is which types of purchases will take the hit? Will it be things like a daily Starbucks coffee or will larger purchases like a car be put off longer? And if this question is answerable, does it create a need for retailers to change their business plans?



THE RELATIVE DEMAND FOR YOUR PRODUCT?



This question brings back the truism that we do not only compete with others in our industry but with retailers in other industries as well for a finite amount of disposable income. The answer comes down to the elasticity of demand for particular products. Usually elasticity of demand refers to the amount of decline in demand given an increase in its price.



In this case, instead of rising prices we are evaluating the drop in a particular product’s demand given a drop in purchasing power. A drop in purchasing power is functionally equivalent to a rise in prices so the same analysis is valid.



Penicillin has a very inelastic demand because no matter what the rise in price the customers keep purchasing the same quantity. Steak has an elastic demand because people will substitute things like chicken or hot dogs if the price of steak begins to rise. So one factor influencing the elasticity of demand is the ability to substitute.



This might bode poorly for things like Starbucks, and restaurants in general, where consumers could substitute home consumption for the more expensive professional preparation. On the other hand, it is well known that certain self-spoils like movies and high end clothing can hold their own in recessions because of the basic human need to feel better in times of turmoil.



The retailer needs to evaluate if his product line will be a victim or a beneficiary of consumer’s emotional needs and substitution choices in times of declining disposable income.



CHANGES IN SAVINGS VERSUS CONSUMPTION



So the relative need for a particular product and the ability to substitute for cheaper products are two considerations. Another is the consumer’s willingness to delay gratification through savings rather than immediately consuming disposable income. As disposable income shrinks because of higher gas prices, certain hard decisions are confronted quicker than usual. Is the consumer more or less likely to delay current needs for long term purchases funded through savings?



If the answer is that he is less likely to save then things like home improvements, replacement of a dishwasher, and saving for their children’s college will suffer. If these savings are very important in the consumer’s mind, however, then the first hit caused by decreased spending power will be to casual purchases like toys and nights out at a restaurant.



Of course it is likely that both current consumption and future savings will take a hit but that does not mean they will be reduced in equal proportion. The retailer needs to look at his product line and decide if it represents the type of good or service that will be slightly or greatly affected by the sharpening of the consumer’s consumption versus savings choice brought on by declining spending power.



IN BOOM TIMES WE THRIVE BUT IN RECESSIONS WE SURVIVE



One response to higher oil prices, and declining disposable income, is for employees to demand higher wages and business to raise prices. The Federal Reserve, however, will cut that response off at the knees with higher interest rates. Higher interest rates slow down the economy by choking off borrowing. Consumers borrow less, and therefore spend less, which deprives business the opportunity to raise prices. (The dilemma for the Fed is that this also causes business to borrow less, thereby reducing growth and producing stagnation)



That does not mean that an individual business cannot raise prices if its particular demand remains inelastic, just that the Fed will make it difficult for everyone in the aggregate to do so because excess cash will be sopped up to avoid a negative cycle of declining spending power leading to rising prices and again leading to declining spending power.



The better strategy for retailers who are not lucky enough to sell an inelastic product is to consider doing the opposite of what was done in an expanding environment. When times were good a business typically expands the product line to gather more sales at the fringes of demand. Now it is time to consider culling the inventory back to the basic items that sell consistently well.



Unsold inventory goes bad with the seasons so even though you may be tempted to weather the storm with the bigger selection you achieved during the boom times, your cash flow is dependant on inventory turn. If only a portion of your inventory turns well, then the other inventory is tying up your capital.



By cutting back to the basics, you might find that instead of being a superstore or category killer, you will return back to operating as a niche retailer. If only your core items are moving then advertising to the broader market in order to get the fringe sales is wasteful to the degree that the fringe sales are the ones declining due to decreased spending power. The benefit is that your marketing campaign can become more focused and efficient.



Likewise, cutting back the inventory will allow for a reduction in other overhead costs. Maybe you can cut back on your space and employees to the point where you utilize these costs more efficiently and profitably. Efficient use of assets always goes hand in hand with profitability. During boom times there are opportunities to expand the operation while maintaining efficiency and therefore profitability.



When markets are declining though it is less intuitive to retreat back to a smaller position because retailers become comfortable with the status quo. The market, however, will force these changes on you so it is better to proactively retreat to a position of high efficiency and sustainable profitability than to wait until the drag of slower sales affects your profitability through the inefficient use of a bloated infrastructure.

[budneyc]

I too generally notice a slow down near the end of August (not too much this year though) and have always attributed it to families being too busy getting their kids ready for school.

We always notice a big surge in sales after the first week in September. This is especially true on higher ticket items - I find traffic doesn't really go down, so perhaps people are just making sure they have enough money for school supplies and clothes, before spending money on their hot tub!

[visio]

I think that sooner then later we will go in recession, it is quite inevitable. Now what will happen to internet marketers? - certainly some will suffer, but I’m not pessimistic, I think that people have learned that good deals can be found in the net and so perhaps even more people will use the internet to shop.
Second, if the recession becomes real bad, then people will start to look again at the internet for part-time jobs. Initially this new wave will be looking for online job opportunities, then they will be making their own web sites, looking for hosting, web design and SEO, the list is endless.
Last but not the least, the ones who will make some money, will spend a part of it on the net, so that even the bath essentials will benefit.
Now if you have a bath essentials web site, a solution is to go for the very high/expensive category, because, the low, middle range will simply not sell, recessions attack middle class most, so prepare yourself to sell to the very rich and get the right products!

[ronparrs]

I don't mean to be "cheeky" but our August MTD sales are greater than last year's. People with home products that need to be maintained -- in our case swimming pools & hot tubs -- will still maintain them.

Not to be polyanna, but here's the good news - I think... With the gas & all energy products going up, I think consumers will & are more likely to shop online in order to SAVE gas!! Why drive 20 miles in your SUV at 12 mpg & waste $3.00 gallon gas (total $6.00) - plus the food you shouldn't be eating at the mall anyway - when you can order from the peace & comfort of your easy chair for only a couple bucks more, have the stuff delivered to your home? It just makes sense.

After September begins, I think all etailers are in for a pretty good Christmas Holiday season.

[Keimos]

Hi moto,

There is always a seasonal trend, and in the UK it is generally August. As you keep going longer you will be able to compare each year. It is a simple fact that late July to end of August is school holidays.

Live with it, as most of your customers are probably away to some exotic location. Get worried if it continues into Sept and beyond.

Keimos

[Seminole386]

One month does not make a pattern. The dollar was weak and the governments of Japan and China told the Fed to strengthen it or they didn’t really want anymore. That is what happens when one country buys too much from others. The rate increases made short term money much more expensive and the economy slowed. Gas prices are a tax that applies to every product. As most products require four or more moves from raw material to finished product to point of sale gas prices are a multiple tax. Add this to the news reports and you get a period of hesitation. Housing is down but we are having the third best year in history. Housing is not increasing in double digits but its still returning a higher rate of returns than bonds or CDs. It’s not the doom and gloom you read in the papers or hear on the media.

I sell real estate and manage several Internet directories that market Realtors. Before 9/11 I was doing $6M per month in referrals. After 9/11 I didn’t do a referral for nine months. Last October the housing market started slowing and inventories started to rise. Inventory is at record levels but most of the excess inventory is investor related and so far they have shown no signs of lowering prices to move inventory. Builders are a different story but their price per sq ft is way above the price of resale’s and therefore has room to drop without hurting the builder who must pay off his note. I predict the market will start up again before the end of this year.

August (back to school) is always the worst month except for back to school related items. The point of all this is be patient. If your traffic remains strong sales will level out and your year to year business should be positive. Like I said, I sell real estate and I have already made more money this year than in any previous year and I still have a little over four months to go.

Keep in mind the middle-east was a little disrupted the past 30+ days and this kind of uncertainty makes people a little conservative until they either get accustomed to the problem or it passes. I live in Florida and gas went to $2.99 for regular. Today I filled up at $2.72. The major retailers offer sales when times get slow. If things don’t change offer free shipping on orders over x amount and see what happens.

[edhan]

Yes. I too notice everything seems to slow down this month. I do believe it is a cycle like the stock market. Some months are good for me whereas some months are a bit slow moving. Maybe should think of some kind of promotion during the down cycle.

[abayly]

Hello,

I would agree with several members when they point out that many people are on holday during August. Of course, if you are in the tourist industry, it's the most lucrative period!

In France, business almost closes down in July and August but things are slowly changing since the Socialists introduced the 35-hour week. People are now tending to split up their vacations more!

Best wishes

[HostEBiz]

I wouldn't worry about it just yet. As I understand it it's only been for a month. I'm sure that can happen, especially during the holiday season (even McDonald's experiences a slump in sales now and then).

[chrisJumbo]

Bathgems, I liked the, maybe, unintended pun about going into the tank.

Others have pointed out (at least for America), the rise in rates has eatin into peoples "extra" cash because so many people are spending beyond their means. The rates on credit cards, home eqs, etc, has gone up dramatically.

The good news is, it probably isn't your site. The traffic to our site remains strong, but in our industry people want to wait until the next Fed Meeting and then the next, etc. Once people can catch their breath, things will turn around.

[chrison600]

Originally Posted by ronparrs

I think... With the gas & all energy products going up, I think consumers will & are more likely to shop online in order to SAVE gas!! Why drive 20 miles in your SUV at 12 mpg & waste $3.00 gallon gas (total $6.00) - plus the food you shouldn't be eating at the mall anyway - when you can order from the peace & comfort of your easy chair for only a couple bucks more, have the stuff delivered to your home? It just makes sense.

After September begins, I think all etailers are in for a pretty good Christmas Holiday season.

Not sure I agree with you. Higher fuel prices affect carrier costs/shipping as well. I personally have ratcheted back on Internet purchases because freight costs exceeded the savings, or made the difference negligible. And that was really prior to the recent crude price jumps.

One-off or unusual items, maybe. Staples, consumables, maintenance items - I'll drive. Also, a common purchase model was for a buyer to comparison shop at local brick-and-mortar merchants, yet price shop and buy from the lowest source online. I speculate that the model will flip - buyers will conserve fuel by researching online, accumulating a mass of purchases they will complete on a single shopping trip around the area.

Sensitivity to fuel costs and loss of disposable income will make buyers more closely scrutinize details like shipping costs vs driving costs. This will present a challenge to online retailers who will need to negotiate deeper discounts or reduce margins.

Let the games begin!

Chris