An overview of the Forrester research documents that cover the implications of the current downturn on eCommerce companies

1. November 14, 2008
Topic Overview: eBusiness And
The Economy
by Sucharita Mulpuru
for eBusiness & Channel Strategy Professionals
Making Leaders Successful Every Day

2. For eBusiness & Channel Strategy Professionals
November 14, 2008
Topic Overview: eBusiness And The Economy
by Sucharita Mulpuru
with Carrie Johnson and Brendan McGowan
ExECuT i v E S u M MA ry
The silver lining in the cloud of the global recession is that Web businesses are certain to fare better than
their offline counterparts as consumers continue to shift their daily activities online. Forrester analysts
have studied the overall effect of the economic downturn on consumer behavior online and the steps
that companies in industries ranging from retail to travel to financial services can do to address these
changes. For Web businesses to win, they must effectively address customer confidence issues, convey
value in their products, and focus on customer retention.
TABl E O F CO N TE NTS N OT E S & rE S O u rCE S
2 Uncertainty Dominates The Economic Outlook Forrester compiled its most pertinent research
for eBusiness and channel strategy professionals
2 Forrester’s Take For Online Businesses
in an economic downturn to provide an
3 Trends And Forecasts
overview of our research and perspectives on
4 Recommendations For Adjusting To Adverse this subject.
Economic Circumstances
4 Related Topics Related Research Documents
“Three in Five uS Online Adults Have Cut Their
5 Upcoming Research
Spending Because Of The Economy”
6 For More Information
November 3, 2008
“Outlook For uS Online Holiday Sales, 2008”
October 21, 2008
© 2008, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, RoleView, Technographics, TechRadar, and Total Economic Impact
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3. 2 Topic Overview: eBusiness And The Economy
For eBusiness & Channel Strategy Professionals
UnCERTAInTy DOMInATES THE ECOnOMIC OUTlOOk
As the global economic downturn continues to cast a pall over consumer-facing businesses, the
outlook for the coming 12 months remains mixed. American consumers feel that the national
economy will remain largely the same or worse, yet they express optimism about their personal
circumstances. While 37% of consumers do not believe the national economy will improve in the
coming year, 45% expect their personal economic situation to improve (see Figure 1). Why the
disparity? While consumers believe macroeconomic conditions are beyond their control, they have
been agile in adapting their microeconomic circumstances to the changing economy. Americans
have historically been criticized for low savings and high consumption rates, but 58% of consumers
are now reducing their overall spend levels compared with one year ago.
This reduction in spend is expected to trickle down to even sectors such as online retail, which had
historically been perceived to be more recession-resistant. US eCommerce sales were growing at a
clip of 17% earlier in the year but are expected to grow just 12% during the 2008 holiday season.1
Figure 1 Americans Are Spending less And Are Pessimistic About The National Economy
“I think the national “I think my personal financial “Because of current economic
economy will improve in situation will improve conditions, I am spending less
the next 12 months” in the next 12 months” money now than I did a year ago”
19%
23%
31%
37%
45%
58%
23%
32%
32%
Either “agree” or “strongly agree” (optimists)
Neither “agree” nor “disagree” (neutrals)
Either “disagree” or “strongly disagree” (pessimists)
Base: US online adults
Source: North American Technographics® Financial Services Online Survey, Q3 2008
Source: Forrester Research, Inc.
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FORRESTER’S TAkE FOR OnlInE BUSInESSES
The implications of the economic slowdown are widespread for both consumers and businesses.
Consumer confidence is at a historic low, caused by decreasing home values and stock market
declines, which have made consumers feel less wealthy.2 Consumer-facing businesses will
consequently be forced to prove their value to customers and shear their own cost structures to
address penny-pinching buyers. Web businesses will also be forced to adjust to accommodate these
shifts in behavior. Fortunately, these businesses are in a strong position to do so because consumer
© 2008, Forrester research, inc. reproduction Prohibited
November 14, 2008

4. 3
Topic Overview: eBusiness And The Economy
For eBusiness & Channel Strategy Professionals
behavior continues to shift online, as an ever-greater percent of consumers around the world have
broadband connectivity and use the Web as an integral part of their daily lives. The Web businesses
that will not only survive the downturn but come out ahead are those that will:
· Address customer confidence issues throughout their Web contact points. The financial crisis
and collapse of long-standing banking institutions were perhaps the biggest reasons for the
rattling of consumer sentiment. Those institutions that remain strong, such as Wells Fargo, will
take this opportunity to communicate the strength of their position and capture market share
from weaker competitors. These companies will communicate their strength on their home
pages, in their email communication, and in their inbound communication with call center
representatives.
· Explain how their products help consumers save money. Because of the drastic reduction
in overall consumer spend, businesses that best address customers’ need to save will capture
disproportionate wallet share. Wal-Mart in the US is one of the few retailers experiencing year-
over-year comparable-store sales growth, and Tesco in the UK has incorporated explicit calls to
consumers throughout its Web site to “find cheaper alternatives.”3
· Reallocate spend toward customer retention. A smaller universe of new customers means
that businesses will be forced to be particularly careful with their marketing expenses. Rather
than focus on customer acquisition tactics like search marketing that Web businesses have
traditionally relied upon, the companies that will thrive during a downturn will be more
focused on retention tactics such as email marketing and customer relationship management
(CRM) efforts that seek to find loyal, recession-resistant customers. Marriott International,
for example, announced in October that it would eliminate blackout dates from booking free
Marriott Rewards stays, effective January 2009.4
TREnDS AnD FORECASTS
Forrester offers documents outlining the prognosis for eCommerce with respect to the current
economic crisis. These perspectives take into account both consumer and business points of view.
„ eBusiness Managers’ 2008 Budget Outlook
Carrie Johnson and Elizabeth Davis
„ Marketing Cuts Budgets By 3% in A Downturn
Jaap Favier
„ The State Of retailing Online 2008: Profitability, Economy, And Multichannel report
Sucharita Mulpuru
© 2008, Forrester research, inc. reproduction Prohibited November 14, 2008

5. 4 Topic Overview: eBusiness And The Economy
For eBusiness & Channel Strategy Professionals
„ uS iT Market Outlook: Q3 2008
Andrew Bartels
„ Why uS B2C eCommerce Will Weather The Economic Downturn Well
Sucharita Mulpuru
RECOMMEnDATIOnS FOR ADjUSTIng TO ADvERSE ECOnOMIC CIRCUMSTAnCES
Forrester analysts have authored numerous documents that provide frameworks and prescriptive
measures for Web businesses to effectively adjust to changing economic circumstances. These
documents address various disciplines within an eCommerce organization: content management,
interactive marketing, and product development.
„ Brand-Building Online Content Matters For eBusiness And Channel Strategy in A
recession
Henry H. Harteveldt
„ Driving Consumer Product Strategies in A Global recession
Paul Jackson
„ Eight Steps For Keeping Customer Experience Momentum During An Economic
Downturn
Bruce D. Temkin
„ Fight The recession With An in-House Agency
Jaap Favier
„ Strategies For interactive Marketing in A recession
Josh Bernoff
„ Technographics® insight: Finding uS retail Spenders in A recession — They’re young
And Spending Online
Ted Schadler
RElATED TOpICS
Many Forrester analysts have also explored the impact of the economic downturn on specific
industries, including travel, financial services, and retail. Forrester has written several pieces that
address particular verticals.
„ Airlines: Prepare To Server Fewer, And More upscale, Passengers
Henry H. Harteveldt
© 2008, Forrester research, inc. reproduction Prohibited
November 14, 2008

6. 5
Topic Overview: eBusiness And The Economy
For eBusiness & Channel Strategy Professionals
„ The Financial Crisis Spawns One-Stop Shops
Bill Doyle
„ How To Win retail Deposits in The Credit Crisis
Alexander Hesse and Benjamin Ensor
„ How uS Consumers Choose A Bank in A Crisis
Brad Strothkamp
„ The impact Of The Economic Crisis On eCommerce Technology investment
Brian K. Walker
„ Outlook For uS Online Holiday Sales, 2008
Sucharita Mulpuru
„ Ten Ways Financial eBusiness Executives Can Weather The recession
Bill Doyle and Brad Strothkamp
„ uS Online Travelers’ Outlook On The Economy And Spending
Henry H. Harteveldt
„ The uS recession’s impact On Travel eBusiness
Henry H. Harteveldt
„ uS Travelers And The recession: A Glance Ahead To 2009
Henry H. Harteveldt
UpCOMIng RESEARCH
Forrester will continue to provide insights and recommendations for eBusiness executives as the
economic crisis unfolds. Several documents are slated for release in the coming weeks:
“Direct Marketing And Analytics Shine In A Recessionary Environment”
Dave Frankland and Suresh Vittal
Q4 2008
“How The Financial Crisis Will Affect Bank Customer Loyalty”
Bill Doyle
Q4 2008
“The Ultra Low-Cost PC Response To The Downturn Economy”
J.P. Gownder
Q4 2008
© 2008, Forrester research, inc. reproduction Prohibited November 14, 2008

7. 6 Topic Overview: eBusiness And The Economy
For eBusiness & Channel Strategy Professionals
“Why Innovation Matters In A Recession”
Cindy Commander
Q4 2008
“Winning Email Subscribers In A Down Economy”
Julie M. Katz
Q4 2008
FOR MORE InFORMATIOn
Research Help Desk
Research specialists in Forrester’s Research Help Desk collaborate with Forrester analysts to compile
these Topic Overviews for selected areas of Forrester’s coverage. If you have additional questions
about this topic, please contact us at researchhelpdesk@forrester.com, and we will respond to your
question within 36 hours.
Research Alerts
To be notified when a new document is published about eBusiness and channel strategy
professionals in an economic downturn or by any of the analysts listed above, set up a Research
Alert.
EnDnOTES
Source: North American Technographics® Benchmark Survey, 2007, and JupiterResearch Internet Shopping
1
Model, October 2008.
The Survey of Consumers executed by Thomson Reuters and the University of Michigan showed that
2
survey respondents exhibited the largest decline in consumer confidence in the survey’s history in October
2008. Source: Reuters / University of Michigan Surveys of Consumers (http://www.sca.isr.umich.edu/).
Tesco’s “Cheaper alternatives” advertisement is an example of its campaign to emphasize low costs for
3
consumers. See http://www.tellyads.com/show_movie.php?filename=TA7178.
Source: “Marriott Rewards Introduces No Blackout Dates,” Marriott International press release, October 21
4
2008 (http://www.marriott.com/news/detail.mi?marrArticle=361110).
© 2008, Forrester research, inc. reproduction Prohibited
November 14, 2008

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