While this shows impressive growth, over 70% of the growth came from existing online shoppers simply purchasing more. In 2010 online retail was still just 8% of total retail sales, evidence that online retail still has enormous growth potential.

Forrester states new online shopping models such as flash sales will contribute to the estimated growth. I predict even more innovation in online commerce in the next few years. Flash and one-day sales are nothing new – Woot.com was founded in 2004 and continues to show impressive growth. Private member-only websites such as Gilt are all the rage now, but really offer very little actual innovation. They simply hide product pricing behind a members-only area. I think this business model is flawed because it is dependent on low-price leaders (even in the luxury space).

You can view a summary or purchase the report on Forrester’s website, or read a bit more in their blog post about the report. Also check out Mashable’s commentary on the report.

Photo by waferboard

The cost of packing materials can add up quickly… peanuts, packing paper, bubble-wrap. There are lots of different ways to pack your orders but we discovered a secret a long time ago that has saved us thousands of dollars per year.

Newspaper End Rolls

Your local newspaper prints using large rolls of paper. These rolls of paper have to be changed out before they run out, so there is always a little paper left over. How much? Well, probably a few hundred feet (maybe even 1,000). These “end rolls” as the newspaper calls them are unprinted paper, so unlike used newspapers they won’t get ink all over your hands.

These end-rolls are cheap too. For years, our local newspaper just gave them to us for free. As demand grew, our newspaper started charging for end rolls, but they still only charge $5 per roll. A roll will last us months.

Contact your local newspaper and see if they will sell (or give) you some end-rolls for packing materials.

Packed with great tips and real data to back them up, this report offers sound advice that can help you decrease shopping cart abandonment and increase your conversion rate.

Any one of the 20 tips could save a solid percentage point off your shopping cart abandonment rate. While it’s likely you’re already doing many of the things suggested, there are lots of them you’re probably overlooking. Below are a few:

• Offer wish lists and saved carts
• Provide estimated shipping delivery dates
• Simplify headers and navigation post-cart
• Show contact information prominently

You can download the report free, though they do require you fill out a form. Don’t worry, you can just enter dummy info and still get the download link.

After seeing all the buzz over the last few days, I thought I’d check it out for my own e-commerce retailer, 2BigFeet.com. I visited the Google Commerce Search website only to discover that the starting price for the product is $50,000 per year.

Most small to medium sized e-commerce retailers don’t spend $50,000 on their entire IT system, including e-commerce software, web hosting, etc. Google has effectively priced themselves out of the market for most retailers.

Unfortunately, this is a huge disappointment coming from Google. As this is targeted towards retailers, I didn’t expect it to be a free service like Gmail, but did expect pricing to be more usage-based (like Amazon EC2 or S3 services). With a pricing beginning at $50,000 per year I wonder how many retailers will be using Google’s new service?

Packed with information collected from 4,700 emails from more than 100 top online retailers during the fourth quarter of 2009, this report has invaluable information for anyone marketing an online business.

It includes information on:

• When to send email campaigns
• What continues to work for online retailers
• What was new for 2009 shopping season
• How to stand out from the competition

This guide shows you what major online retailers are doing, how the industry is changing and will help you plan an effective online marketing strategy for this coming holiday season. Don’t hesitate, download the report and read it now.

Sometime around 11PM on July 2 an electrical short in a parking garage beneath Seattle’s Fisher Plaza caused a small fire that set off fire alarms and sprinklers. Fisher Plaza’s datacenter is home to numerous online companies including Authorize.net, one of the largest online payment gateways in the world.

The fire department cut power to the building and evacuated all personnel. The sprinklers soon flooded the datacenter’s generator rooms, leaving the building without backup power.

The outage affected hundreds of thousands of e-commerce merchants who rely on Authorize.net to process credit card payments for their websites. Some estimate the losses in the hundreds of millions.

The Topic Trends on Twitter

Almost immediately after the outage began, people started posting to Twitter, a popular micro-blogging service, about the outage. Merchants vented about their frustrations and anger as they sat helpless, unable to process transactions for over 15 hours…

@xemion: Wonder what today’s Authorize.net outage will do to PayPal’s bottom line numbers today.

@dancubed: Fire takes down Authorize.net, halting e-commerce for many. I find it amazing no geo redundancy. Amateurs.

@LinhN: damn, authorize.net likely lost a bunch of customers

@paulpacek: Authorize.net mega fail this morning. Can I send you a Honda generator? I would like to get my business back up and running asap.

Authorize.net Breaks Silence

Soon, major media outlets were also covering the outage. At around 11 AM EST, Authorize.net setup an official Twitter account at @AuthorizeNet in order to respond to the massive conversation going on…

While some commend Authorize.net for using Twitter to communicate during the outage, I’d like to remind everyone that they waited 12 hours before they responded. The service was back up shortly after the account was setup.

I think this was a major failure in communication, since for almost 12 hours merchants had no way to communicate with the company about the outage that was costing them millions of dollars in lost revenues. Authorize.net was not answering phones and their website and services were down. Merchants were completely in the dark.

Where Authorize.net REALLY Failed

This incident really showed how unprepared Authorize.net and Fisher Plaza were for any kind of emergency. With all of the networking equipment and the power utilization of a datacenter, a fire is the most likely disaster to occur. Where were the failover systems? Why were sprinklers used instead of an alternative method such as Halon gas, that would not have damaged servers and equipment?

So much for a “world class” datacenter… Fisher Plaza sounds more like a bunch of servers set up in a garage. What’s more, the Fisher Plaza datacenter had a similar catastrophe in 2006. Why did they not learn from their mistakes? Could this be considered criminal negligence?

Authorize.net is just to blame, if not more, because they were undoubtedly aware of the 2006 outage and yet still continued to host their servers in the Fisher Plaza facility. Without adequate contingency plans in place, it was just a matter of time before another major outage.

With hundreds of thousands of online merchants relying on them for payment processing, it’s incomprehensible to me that Authorize.net would put all their eggs in one basket. Why was there no geo-redundancy? Authorize.net should have had operations in another datacenter, with mirrored servers, ready to go in the event of a catastrophic failure. Earthquakes, tornadoes and fires happen. Be prepared.

What can YOU do when there is an outage?

As an e-commerce merchant, what can you do to prepare for an outage? When you rely on third party vendors such as a payment gateway or shipping service, you need to have a contingency plan in place.

Manual Processing

When Authorize.net went down, hundreds of thousands of websites began giving error messages when customers tried to place orders. Some, like myself, turned off online processing. We captured information (not including CVV values, which would be against Visa/MC regulations) for offline processing later.

This allowed us to continue to operate, somewhat transparently to the customer. There is a chance that customers will enter their information incorrectly, or you’ll get some declined transactions but those can be handled case-by-case after processing resumes.

Backup Processor

Another option is to have a backup processor (or shipping carrier, etc) that you can turn to if/when your primary provider fails. There might be a slight configuration change necessary with your e-commerce software, but often times it would only take moments to switch over to an alternate processor.

Having an account with a second processor might cost $20-30 in fees every month, but that’s a valuable insurance policy against catastrophe. For just a few hundred dollars a year, you could keep from losing tens of thousands of dollars in lost revenues.

Tell Your Story

What is your Authorize.net downtime story? Tell us how the downtime affected you or your customers in the comments below.

Buy Online Marketing Inside Out at SitePoint.com

The large retailers such as Amazon have so much brand equity, and have so many processes in place to automate customer service issues, that they can often get the same conversion rates without a phone number prominent on their site. Unfortunately, most retailers (99% of them) don’t have the brand equity to do that.

There are several reasons why people will actually call you:

• Ask for product information
• Ask for estimated shipping information
• Ask for recommendations
• Customer service inquiries
• To determine whether the company is legitimate

At first, you might try to simply address these issues with a more robust website. List frequently asked questions, maybe even interactive forms. Take your product information to the next level with detailed photos, description, etc. But it’s a simple fact that providing contact phone numbers increases conversions.

According to an Elastic path report, 60% of e-commerce retailers provide a contact phone number during checkout. Many online retailers report 10-20% of their business comes from phoned-in orders. In addition, simply having a phone number displayed on your website can increase conversions by simply making your website look more legitimate, increasing trust.

If you have a phone number listed on your website, make sure it is prominently displayed, especially on key pages such as the shopping cart or product detail pages where people will be more likely to have questions. If you don’t currently display a phone number on your website, I’d suggest adding a phone number prominently. Run an A/B split test to see if the conversion rate increases due to the number being displayed, and track how many phone calls you get and how many you are able to convert into customers. I think you’ll be pleasantly surprised!

Pros

• Start slow. No need to hire employees, lease a facility, or invest in supply chain management.
• Simplify. Most fulfillment services can integrate into your current order management. Simply click a button and send the order to be picked, packed, and shipped to your customer.
• Value-added features. Some e-fulfillment services also provide other services, such as call centers for phoned in orders, returns processing, and the ability to insert sales/marketing material into your boxes while being picked/packed.
• Location. You can choose fulfillment centers near your customers. Many fulfillment companies have multiple warehouses so you can pick the best location (or use all of them).

Cons

• Expensive. The biggest drawback to outsourced fulfillment is the cost. Paying someone else is always more expensive than just doing it yourself
• No control. You can’t control someone else’s facility, or their employees. This means you and your expensive inventory are at the mercy of your fulfillment company. Lost or damaged merchandise, delayed shipments, and errors are just some of the problems that can occur.
• Flexibility. If a customer calls at 5 PM and just has to have a product the next day, chances are you’re out of luck. If you have your inventory in a warehouse or the garage, you can make exceptions as long as UPS is still open, but by outsourcing you’re at the mercy of a third party. There are typically pretty early cutoff times for same-day shipping, and shipments can be delayed even more during the peak holiday season.

Tips for Choosing a Fulfillment Service

• Location – Find a location that’s centrally located, or use multiple locations to ensure all your customers are served equally.
• Price – Do some calculations based on your number of individual SKUs and your average number of orders to determine the approximate costs, and compare several fulfillment services. Some are better suited for small, uniform items (like books or electronics), while others can handle palletized products and irregularly shaped merchandise.
• Shipping Costs – Many fulfillment companies use shipping surcharges as a major profit center. Ask if you can use your shipper account numbers to charge actual shipping costs directly to your account. If not, make sure they pass at least some of their shipping savings onto you, as paying “counter” rates for shipping is very expensive!
• Proven Track Record – Ask for testimonials and a client list. Google their return shipping address to find other retailers using their service, and call them to get their opinion. Ask them if they are happy with their fulfillment service, ask them about the speed of both shipments and responses to inquiries.
• Insurance – Ask for proof of insurance, and ask about policies regarding damaged or stolen merchandise. Make sure you can request a full inventory at any time (even if there are costs involved).
• Turnaround Time – Get a guaranteed turnaround time for order processing and shipping.

Popular Fulfillment Services

ShipWire – Their simplified pricing structure makes outsourcing fulfillment easy, but means that they aren’t a good fit for all products.

Fulfillment by Amazon – Warehousing with Amazon has its benefits, like being able to sell on Amazon.com and offer “Prime” shipping to customers.

eFulfillmentService – A fairly small company, they’re more flexible and more likely to work with you if you have odd requests such as large or specialty products.

The book is a complete overview of the entire landscape of online marketing and covers a wide range of topics including:

• The changing face of online marketing
• Search Engine Optimization
• Search Engine Marketing & Pay Per Click
• Social Media and PR
• Email Marketing
• Affiliate marketing
• Much more

The book is aimed at business owners, entrepreneurs and traditional marketing managers who want a practical introduction to online marketing. The Art & Science of Online Marketing is scheduled to be released in May, 2009.