Online retailers continue to shift toward Internet-based marketing

With the holiday buying season heating up, a large number of online retailers have shifted their marketing focus away from television and print ads in favor of targeted online marketing programs and are taking greater steps to keep their customers happy, according to a survey released today.

Shop.org, a Silver Spring, Md.-based trade association of online retailers, and The Boston Consulting Group (BCG) published the study, the latest in a series of quarterly surveys that they're conducting to track e-commerce companies. The third-quarter findings are based on responses from 94 online retailers, according to Shop.org.

Survey respondents said they spent an average of 64% of their marketing budgets on online media campaigns such as targeted e-mail advertisements during the third quarter -- up from 59% during this year's second quarter. Only 4% of the third-quarter respondents said they had increased their spending on TV advertising.

Meanwhile, 54% of the retailers who took part in the latest survey said they plan to offer electronic and paper gift certificates to entice shoppers during this year's holiday season. Seventy percent said they had redesigned their Web sites to improve navigation or include holiday-specific content.

In addition, 65% said they've increased their order-fulfillment capabilities in an effort to avoid the late shipment problems that plagued some big-name online retailers last December. Those difficulties led the U.S. Federal Trade Commission to fine seven online retailers a total of $1.5 million last summer and to issue warnings about on-time deliveries to more than 100 Web sites this month.

James Vogtle, director of e-commerce research at Boston-based BCG, said during a teleconference today that customer satisfaction has been the top priority of online retailers for the better part of this year. "The focus has really been on getting the basics right," said Vogtle, who characterized the increased focus on customer service and fulfillment as "dramatic."

Despite the apparent retreat from off-line advertising, during the last quarter, retailers managed to attract more new customers to their Web sites at a reduced per-shopper cost, according to the most recent survey. Online retailers that participated in both the Q2 and Q3 surveys reported a 28% average increase in new customers, despite a 34% decrease in their customer-acquisition spending.

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