In pursuit of higher profits, retailers balance surge in online sales with spend management

Americans are increasingly spending money online, according to recent data. The uptick in online sales illustrates how companies are implementing procurement best practices in an effort to drive earnings.

Thus far this holiday shopping season, consumers have spent $18.7 billion on purchases made through e-commerce sites. That figure represents a 15 percent uptick from the same period the year prior, and companies are reworking their business models as they endeavor to overhaul strategic sourcing and adhere to business cost reduction initiatives.

The New York Times Bits Blog reports that many retailers are offering free shipping at record levels. Online consumers have become accustomed to such benefits, but some businesses are struggling to balance customer expectations with their bottom lines. According to research agency comScore, nearly 65 percent of purchases made in the weeks preceding and following Thanksgiving included free shipping.

Robust sales, however, could belie consumer confidence, according to economists. Some analysts contend that sales could rise and fall depending on the kinds of discounts offered by retailers on any given day. If retailers continue to offer aggressive deals, they will have to rework spend management and supply chain management to forestall slumping profits, according to comScore chairman Gian Fulgoni.

"Cyber Monday kicked the week off with a bang as consumers opened their wallets to the tune of $1.25 billion, but it was only the beginning of a very strong week of online holiday spending," he said in a statement. "As the deals from this week expire, it will be important to see the degree to which consumers return to the same retailers to continue their holiday shopping, thereby helping improve retailers’ profit margins, or if we experience a pullback in consumer spending – which has occurred in previous years – before promotional offers and spending intensity pick back up in earnest around mid-December."

Still, a strong economic recovery remains uncertain, and U.S. consumers are carefully monitoring their holiday spending this year, economists say. As a result, retailers are facing a precarious and challenging shopping season. Consumers who purchase items online have grown accustomed to free shipping, with 36 percent of respondents in a recent comScore survey affirming they would not make such a purchase without it.

With only 19 days until Christmas, retail chains are scrambling to entice customers to their stores. Nonetheless, they are pushing not only for higher sales, but also for increased profits.